-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O8nTI9v38hCOHzmMHWJmlRCUvgmlPo70SsHC/9f95w26MH95zTRedCcNG77iCUsU GBq8tcA/OIjQTdOujfZ2LA== 0000355948-00-000012.txt : 20000417 0000355948-00-000012.hdr.sgml : 20000417 ACCESSION NUMBER: 0000355948-00-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RICHARDSON ELECTRONICS LTD/DE CENTRAL INDEX KEY: 0000355948 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 362096643 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12906 FILM NUMBER: 601085 BUSINESS ADDRESS: STREET 1: 40W267 KESLINGER RD CITY: LAFOX STATE: IL ZIP: 60147 BUSINESS PHONE: 7082082200 MAIL ADDRESS: STREET 1: 40W267 KESLINGER ROAD CITY: LAFOX STATE: IL ZIP: 60147 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 29, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-12906 RICHARDSON ELECTRONICS, LTD. (Exact name of registrant as specified in its charter) Delaware 36-2096643 (State of incorporation) (I.R.S. Employer Identification No.) 40W267 Keslinger Road, PO Box 393,LaFox, Illinois 60147 (Address of principal executive offices and zip code) (630) 208-2200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 April 13, 2000, there were outstanding 9,497,776 shares of Common Stock, $.05 par value, and 3,231,675 shares of Class B Common Stock, $.05 par value, which are convertible into Common Stock on a share-for-share basis. This Quarterly Report on Form 10-Q contains 17 pages. An exhibit index is at page 15. (1) Richardson Electronics, Ltd. and Subsidiaries Form 10-Q For the Three- and Nine-Month Periods Ended February 29, 2000 INDEX Page ---- PART I - FINANCIAL INFORMATION Consolidated Condensed Balance Sheets 3 Consolidated Condensed Income Statements 4 Consolidated Condensed Statements of Cash Flows 5 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of Results of Operations and Financial Condition 9 PART II - OTHER INFORMATION 15 (2) Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Balance Sheets (in thousands) February 29 May 31 2000 1999 --------- --------- (Unaudited) (Audited) ASSETS ------- Current assets: Cash and equivalents $ 13,895 $ 12,569 Receivables, less allowance of $2,734 and $2,584 72,478 62,448 Inventories 116,184 107,724 Other 12,960 12,817 --------- --------- Total current assets 215,517 195,558 Property, plant and equipment 62,225 57,543 Less accumulated depreciation (37,513) (34,496) --------- --------- Property, plant and equipment, net 24,712 23,047 Other assets 15,174 17,073 --------- --------- Total assets $ 255,403 $ 235,678 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY ----------------------------------- Current liabilities: Accounts payable $ 32,168 $ 21,829 Accrued expenses 11,774 10,259 Notes payable and current portion of long-term debt 1,617 1,830 --------- --------- Total current liabilities 45,559 33,918 Long-term debt, less current portion 114,393 113,658 Deferred income taxes 5,189 3,798 Stockholders' equity: Common stock, $.05 par value; issued 11,493 at February 29, 2000 and 11,390 at May 31, 1999 574 570 Class B common stock, convertible, $.05 par value; issued 3,232 at February 29,2000 and 3,233 at May 31, 1999 162 162 Additional paid-in capital 82,965 82,309 Common stock in treasury, at cost; 2,020 shares at February 29, 2000 and 2,000 at May 31, 1999 (11,732) (11,532) Retained earnings 30,083 23,044 Foreign currency translation adjustment (11,790) (10,249) --------- --------- Total stockholders' equity 90,262 84,304 --------- --------- Total liabilities and stockholders' equity $ 255,403 $ 235,678 ========= ========= See notes to consolidated condensed financial statements. (3) Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Statements of Income For the three- and Nine-Month Periods Ended February 29, 2000 and February 28, 1999 (unaudited) (in thousands, except per share amounts) Three Months Nine Months -------------------- -------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Net sales $ 98,874 $ 77,092 $292,016 $235,362 Cost of products sold 73,094 55,704 214,007 169,000 --------- --------- --------- --------- Gross margin 25,780 21,388 78,009 66,362 Selling, general and administrative expenses 20,369 18,331 59,998 52,226 --------- --------- --------- --------- Operating income 5,411 3,057 18,011 14,136 Other (income) expense: Interest expense 2,202 2,073 6,644 5,476 Investment income (248) (150) (665) (383) Other, net (131) 151 (66) (200) --------- --------- --------- --------- 1,823 2,074 5,913 4,893 --------- --------- --------- --------- Income before income taxes 3,588 983 12,098 9,243 Income taxes 1,060 290 3,600 2,770 --------- --------- --------- --------- Net income $ 2,528 $ 693 $ 8,498 $ 6,473 ========= ========= ========= ========= Net income per share - basic: Net income per share $ .20 $ .05 $ .67 $ .46 ========= ========= ========= ========= Average shares outstanding 12,680 13,866 12,650 14,148 ========= ========= ========= ========= Net income per share - diluted: Net income per share $ .20 $ .05 $ .67 $ .45 ========= ========= ========= ========= Average shares outstanding 12,848 14,039 12,764 14,411 ========= ========= ========= ========= Dividends per common share $ .04 $ .04 $ .12 $ .12 ========= ========= ========= ========= Comprehensive income: Net income $ 2,528 $ 693 $ 8,498 $ 6,473 Foreign currency translation (1,153) (3,309) (1,541) (2,314) --------- --------- --------- --------- Comprehensive income $ 1,375 $ (2,616) $ 6,957 $ 4,159 ========= ========= ========= ========= See notes to consolidated condensed financial statements. (4) Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Statements of Cash Flows For the Nine-Month Periods Ended February 29, 2000 and February 28, 1999 (in thousands) (unaudited) 2000 1999 --------- --------- Operating Activities: Net income $ 8,498 $ 6,473 Non-cash charges to income: Depreciation 3,459 2,632 Amortization of intangibles and financing costs 557 456 Deferred income taxes 1,328 708 Shares contributed to employee stock ownership plan -- 485 --------- --------- Total non-cash charges 5,344 4,281 --------- --------- Changes in working capital, net of effects of currency translation: Accounts receivable (10,200) (4,234) Inventories (7,154) (12,702) Other current assets (161) (2,161) Accounts payable 10,730 701 Other liabilities 1,924 (1,588) --------- --------- Net changes in working capital (4,861) (19,984) --------- --------- Net cash provided by (used in) operating activities 8,981 (9,230) --------- --------- Financing Activities: Proceeds from borrowings 7,077 28,564 Payments on debt (6,618) (1,348) Proceeds from stock issuance 461 73 Purchases of Common Stock for treasury -- (6,136) Cash dividends (1,459) (1,661) --------- --------- Net cash (used in) provided by financing activities (539) 19,492 --------- --------- Investing Activities: Capital expenditures (5,140) (3,677) Business acquisitions (920) (2,460) Investments, notes receivable and other (1,056) (3,278) --------- --------- Net cash used in investing activities (7,116) (9,415) --------- --------- Increase in cash and equivalents 1,326 847 Cash and equivalents at beginning of year 12,569 8,031 --------- --------- Cash and equivalents at end of period $ 13,895 $ 8,878 ========= ========= See notes to consolidated condensed financial statements. (5) Richardson Electronics, Ltd. and Subsidiaries Notes to Consolidated Condensed Financial Statements Three- and Nine-Month Periods Ended February 29, 2000 (Unaudited) Note A -- Basis of Presentation The accompanying unaudited Consolidated Condensed Financial Statements (Statements) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the periods covered have been re- flected in the Statements. Certain information and footnotes necessary for a fair presentation of the financial position and results of operations in conformity with generally accepted accounting principles have been omitted in accordance with the aforementioned instructions. It is suggested that the Statements be read in conjunction with the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1999. The accompanying interim consolidated condensed financial statements are presented for the third quarter and first nine months of fiscal 2000 (periods ended February 29, 2000) compared to third quarter and first nine months of fiscal 1999 (periods ended February 28, 1999). Note B -- Income Taxes The income tax provisions for the three- and nine-month periods ended February 29, 2000 and February 28, 1999 are based on the estimated annual effective tax rate of 30%. The effective rate is less than the U.S. federal statutory rate of 34% due to U.S. foreign sales corporation tax benefits, partially offset by state income taxes. Note C - Industry and Market Information The marketing and sales structure of the Company is organized into four strategic business units (SBU's): Electron Device Group (EDG), Solid State and Components (SSC), Display Products Group (DPG) and Security Systems Division (SSD). EDG's principal products, electron tubes, are used to control, switch, oscillate or amplify electrical power. This technology had been used for more than 80 years throughout the industrialized world. EDG serves a multitude of industries including automotive, avionics, communications, marine, plastics, rubber, steel, textile, medical imaging and wafer fabrication for semiconductors. EDG's products are largely for replacement markets. SSC's products include radio frequency and microwave components and power semiconductors. These products are used in wireless communication and industrial applications, serving many of the same customers and industries as EDG. SSC's products are in most cases used in original equipment applications. (6) Richardson Electronics, Ltd. and Subsidiaries Notes to Consolidated Condensed Financial Statements Three- and Nine-Month Periods Ended February 29, 2000 (Unaudited) DPG's products include cathode ray tubes, monitors and related systems integration. Typical users include hospitals, airports, brokerage offices, financial institutions, television studios, utilities and assembly lines. DPG's products are largely for replacement applications and system upgrades. SSD serves the commercial security and surveillance industry, with em- phasis on closed circuit television systems, components and related design and integration services. SSD's customer base includes industrial endusers and system installers. SBU's are managed by Vice Presidents and General Managers who report to the President and Chief Operating Officer. The President evaluates performance and allocates resources, in part, based on the direct operating contribution of each SBU. Direct operating contribution is defined as gross margin less product management and direct selling expenses. In North America and Europe, the sales force is organized by SBU and, accordingly, these costs are included in direct expenses. In Latin America, Asia / Pacific and the rest of the world, the regional sales force is shared and, accordingly, is not included in direct expenses. Intersegment sales are not significant. Accounts receivable, inventory, goodwill and certain notes receivable are identified by SBU. Cash, net property and other assets are not identifiable by SBU. Accordingly, depreciation, amortization expense and financing costs are not identifiable by SBU. Operating results for the three- and nine-month periods ended February 29, 2000 and February 28, 1999 and identifiable assets as of the end of the respective periods by SBU are summarized in the following tables (in thousands): EDG SSC DPG SSD Total --------- --------- --------- --------- --------- Third Quarter Fiscal 2000 Sales $ 29,240 $ 38,463 $ 10,620 $ 20,551 $ 98,874 Gross margin 8,571 10,287 2,700 4,826 26,384 Contribution 6,095 7,309 1,631 2,340 17,375 Assets 74,893 66,420 20,682 33,229 195,224 Fiscal 1999 Sales $ 28,312 $ 21,957 $ 9,040 $ 17,783 $ 77,092 Gross margin 8,723 6,455 2,662 4,030 21,870 Contribution 6,098 3,666 1,688 1,279 12,731 Assets 86,859 53,225 21,656 31,681 193,421 (7) Richardson Electronics, Ltd. and Subsidiaries Notes to Consolidated Condensed Financial Statements Three- and Nine-Month Periods Ended February 29, 2000 (Unaudited) EDG SSC DPG SSD Total --------- --------- --------- --------- --------- Nine Months Fiscal 2000 Sales $ 91,136 $101,549 $ 36,981 $ 62,350 $292,016 Gross margin 27,161 28,063 9,407 14,733 79,364 Contribution 19,522 18,772 6,111 7,297 51,702 Fiscal 1999 Sales $ 89,106 $ 67,362 $ 28,075 $ 50,819 $235,362 Gross margin 27,353 19,049 8,947 11,906 67,255 Contribution 20,266 11,129 6,165 4,879 42,439 A reconciliation of gross margin, direct operating contribution and assets to the relevant consolidated amounts is as follows. (Other assets includes mis- cellaneous receivables, manufacturing inventories and sundry assets.) (in thou- sands): Third Quarter Nine Months -------------------- -------------------- FY 2000 FY 1999 FY 2000 FY 1999 --------- --------- --------- --------- Gross margin - segments total $ 26,384 $ 21,870 $ 79,364 $ 67,255 Manufacturing variances and other costs (604) (482) (1,355) (893) --------- --------- --------- --------- Gross margin $ 25,780 $ 21,388 $ 78,009 $ 66,362 ========= ========= ========= ========= Segment profit contribution $ 17,375 $ 12,731 $ 51,702 $ 42,439 Manufacturing variances and other costs (604) (482) (1,355) (893) Regional selling expenses (3,627) (3,426) (10,612) (9,901) Administrative expenses (7,733) (5,766) (21,724) (17,509) --------- --------- --------- --------- Operating income $ 5,411 $ 3,057 $ 18,011 $ 14,136 ========= ========= ========= ========= Segment assets $195,224 $193,421 Cash and equivalents 13,895 8,878 Other current assets 12,960 11,793 Net property 24,712 20,002 Other assets 8,612 1,194 --------- --------- Total assets $255,403 $235,288 ========= ========= The Company sells its products to companies in a wide range of industries and performs periodic credit evaluations of its customers' financial condition. Terms are generally on open account, payable net 30 days in North America and Latin America, and vary throughout Europe and the Far East. Estimates of credit losses are recorded in the financial statements based on periodic reviews of outstanding accounts. (8) Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Nine-Month Periods Ended February 29, 2000 (Unaudited) Results of Operations Sales and Gross Margin Net sales for the third quarter of fiscal 2000 were a record $98.9 million, up 28.3% from last year's third quarter of $77.1 million. Sales, percentage change from the prior year, gross margins and gross margin percent of sales by SBU are summarized in the following table. Gross margins for each SBU include provisions for returns and overstock. Provisions for LIFO, manufacturing charges and other costs are included under the caption "Corporate" (in thousands). Sales Gross Margin ---------------------------- -------------------------------- % GM % of GM % of FY 2000 FY 1999 Change FY 2000 Sales FY 1999 Sales --------- --------- ------ --------- ----- --------- ----- Third Quarter EDG $ 29,240 $ 28,312 3.3% $ 8,571 29.3% $ 8,723 30.8% SSC 38,463 21,957 75.2% 10,287 26.7% 6,455 29.4% DPG 10,620 9,040 17.5% 2,700 25.4% 2,662 29.4% SSD 20,551 17,783 15.6% 4,826 23.5% 4,030 22.7% Corporate - - (604) (482) --------- --------- --------- --------- Total $ 98,874 $ 77,092 28.3% $ 25,780 26.1% $ 21,388 27.7% ========= ========= ========= ========= Nine Months EDG $ 91,136 $ 89,106 2.3% $ 27,161 29.8% $ 27,353 30.7% SSC 101,549 67,362 50.8% 28,063 27.6% 19,049 28.3% DPG 36,981 28,075 31.7% 9,407 25.4% 8,947 31.9% SSD 62,350 50,819 22.7% 14,733 23.6% 11,906 23.4% Corporate - - (1,355) (893) --------- --------- --------- --------- Total $292,016 $235,362 24.1% $ 78,009 26.7% $ 66,362 28.2% ========= ========= ========= ========= EDG's third quarter sales increased 3.3%, primarily in microwave gen- erators and industrial products. SSC's third quarter sales increased 75.2% from fiscal 1999 levels, lead by 81.6% growth in microwave wireless and interconnect products. Gross margins as a percent of sales were 26.7% in fiscal 2000 compared to 29.4% in fiscal 1999. Current quarter margins were reduced by 1.3 percentage points related to start- up inefficiencies and component shortages on an engineering design and assembly contract. These issues were resolved by the end of the quarter. Margins were also affected by several large sales at lower rates and increased sales of Motorola product. The third quarter fiscal 1999 gross margin rate was 1.0 percentage point higher than the historical rate for this business, primarily as a result of favorable variances on value-added operations. Nine month results reflect similar trends. (9) Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Nine-Month Periods Ended February 29, 2000 (Unaudited) Third quarter sales for DPG increased 17.5% in fiscal 2000 from 1999 levels. Growth was attributable to new initiatives in both flat-panel and conventional monitor sales, as well as related systems integration revenues for medical imaging, financial services and industrial markets. Gross margins as a percent of sales decreased to 25.4% in fiscal 2000 from 29.4% in fiscal 1999, reflecting the shift in product mix. Sales for the nine-month period increased 31.7%, with a similar shift in product mix and gross margins. SSD's sales increased 15.6% for the third quarter reflecting product and geographic expansion. Gross margins improved to 23.5% from 22.7%. Sales for the nine-month period increased 22.7%, benefiting from growth in Canadian, U.S. and European operations, as well as the acquisition of Adler Video in December, 1998. Sales, percentage change from the prior year, gross margins and gross margin percent of sales by geographic area are summarized in the following table. Prior year amounts have been restated to be comparable to the current year's classifications. The caption, "other", includes sales to export distributors and to countries where the Company does not have offices, including Eastern Europe and the Middle East. Provisions for LIFO, manufacturing charges and other costs are included under the caption "Corporate" (in thousands). Sales Gross Margin ---------------------------- -------------------------------- % GM % of GM % of FY 2000 FY 1999 Change FY 2000 Sales FY 1999 Sales --------- --------- ------ --------- ----- --------- ----- Third Quarter North America $ 64,589 $ 49,302 31.0% $ 16,361 25.3% $ 13,264 26.9% Europe 18,692 15,849 17.9% 5,374 28.8% 4,965 31.3% Asia/Pacific 7,685 6,100 26.0% 2,494 32.5% 1,981 32.5% Latin America 4,331 3,610 20.0% 1,196 27.6% 1,014 28.1% Other 3,577 2,231 60.3% 959 26.8% 646 29.0% Corporate - - (604) (482) --------- --------- --------- --------- Total $ 98,874 $ 77,092 28.3% $ 25,780 26.1% $ 21,388 27.7% ========= ========= ========= ========= Nine Months North America $190,513 $150,375 26.7% $ 49,178 25.8% $ 41,030 27.3% Europe 55,460 48,750 13.8% 16,453 29.7% 15,443 31.7% Asia/Pacific 22,961 15,707 46.2% 7,461 32.5% 4,938 31.4% Latin America 13,931 12,856 8.4% 3,867 27.8% 3,614 28.1% Other 9,151 7,674 19.2% 2,405 26.3% 2,230 29.1% Corporate - - (1,355) (893) --------- --------- --------- --------- Total $292,016 $235,362 24.1% $ 78,009 26.7% $ 66,362 28.2% ========= ========= ========= ========= North American, European and Asia / Pacific sales growth in the quarter and year-to-date results reflect the growth in each of the Company's strategic business units, led by demand for SSC's RF wireless products. Latin American sales increased 20.0% in the third quarter, comparing favorably to the 8.4% growth in the nine-month period, primarily benefiting from growth in the sale of broadcast products. (10) Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Nine-Month Periods Ended February 29, 2000 (Unaudited) Selling, General, and Administrative Expenses Selling, general and administrative expenses improved as a percentage of sales, declining to 20.6% from 23.8% in the third quarter comparisons and to 20.5% from 22.2% for the first nine months, reflecting the strong sales growth and the Company's continued emphasis on its program to maximize operating efficiencies. In the fourth quarter of fiscal 1999, the Company recorded a $500,000 provision for potential losses on certain Latin American accounts re- ceivable. During fiscal 2000, the Company recorded additional provisions of $469,000 as prospects for a partial recovery on these receivables diminished. These accounts are now fully reserved. Interest and Other Expenses Interest costs in fiscal 2000 compared to fiscal 1999 reflect higher bor- rowing levels resulting from the Company's repurchase of 2.0 million shares of Common Stock in the second half of fiscal 1999 and higher interest rates on the Company's revolving credit debt. Other expenses included foreign exchange gains of $107,000 in the third quarter of fiscal 2000, compared to foreign exchange losses of $201,000 in the prior year period. Net Results Net income for the quarter was $2.5 million or $.20 per share, assuming dilution, compared to $693,000 or $.05 per share in the prior year. Net income for the first nine months was $8.5 million or $.67 per share, assuming dilution, compared to $6.5 million or $.45 per share. Earnings per share comparisons are favorably affected by the reduction in average shares outstanding (see "Liquidity and Capital Resources). Liquidity and Capital Resources Cash provided by operations was $9.0 million in the first nine months of fiscal 2000, compared to cash used in operations of $9.2 million in the prior year period. The Company increased its investment in working capital by $4.9 million in the current year compared to a $20.0 million increase last year. Accounts receivable increased $10.2 million in 2000 and $4.2 million in 1999 reflecting the increase in sales from the prior year. Inventory turnovers improved in the third quarter of fiscal 2000 to 2.66 from 2.06 a year ago as the Company continued its program to improve asset utilization. The increase in inventories of $7.2 million in fiscal 2000, primarily for product line (11) Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Nine-Month Periods Ended February 29, 2000 (Unaudited) expansion, compared to an increase of $12.7 million in 1999. Accounts payable increased by $10.7 million in fiscal 2000 due to the timing of inventory purchases. In the prior year, the Company repurchased 2.0 million shares of its Common Stock on the open market at an average cost of $5.76 per share. Inter- est payments for the first nine months were $7.7 million, compared to $6.7 mil- lion in the first nine months of fiscal 1999. The Company's loan agreements contain various financial and operating covenants which set benchmark levels for tangible net worth, debt / tangible net worth ratio and annual debt service coverage. The Company was in compliance with these covenants at February 29, 2000. Cash reserves, investments, funds from operations and credit lines are expected to be adequate to meet the operational needs and future dividends of the Company. The policy regarding payment of dividends is reviewed periodically by the Board of Directors in light of the Company's operating needs and capital structure. Euro Currency Conversion On January 1, 1999, eleven member states of the European Union began conversion to a common currency, the euro. From January 1, 1999 until January 1, 2002, companies operating in Europe must be able to process business transactions either in legacy currencies or in Euros. After January 1, 2002, all transactions will be processed only in Euros. These changes could have signifi- cant impacts on transaction processing costs, pricing policies and foreign cur- rency exchange risk management. The Company has verified that its transaction processing systems can ac- commodate the euro currency and dual currency processing requirements without significant additional costs. While the exact impact on pricing is indeterminable, the Company believes that since most of its pricing is based on U.S. dollar costs, the effect of conversion to the euro will not be significant. The Company expects to adopt the euro as the functional currency for each of its subsidiaries within the European Union. While it is possible that this change may result in reduced volatility of reported results due to foreign currency translation, this benefit cannot be quantified at this time. (12) Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Nine-Month Periods Ended February 29, 2000 (Unaudited) Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 Investors should consider carefully the following risk factors, in addition to the other information included and incorporated by reference in this quarterly report on Form 10-Q. All statements other than statements of historical facts included in this report are statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. The words "expect," "estimate," "anticipate," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations; (ii) the Company's financing plans; (iii) the Com-pany's business and growth strategies, including potential acquisitions; and (iv) other plans and objectives for future operations. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those predicted in the forward-looking statements or which may be anticipated from historical results or trends. In addition to the information contained in the Company's other filings with the Securities and Exchange Commission, factors which could affect future performance include, among others, the following: - - Competitive pressures may increase or change through industry consolidation, entry of new competitors, marketing changes or otherwise. There can be no assurance that the Company will be able to continue to compete effectively with existing or potential competitors. - - Technological changes may affect the marketability of inventory on hand. - - General economic or business conditions, domestic and foreign, may be less favorable than expected, resulting in lower sales or lower profit margins than expected. - - Changes in relationships with customers or vendors, the ability to develop new relationships or the business failure of several customers or vendors may affect sales or profitability. - - Political, legislative or regulatory changes may adversely affect the busi- nesses in which the Company operates. - - Changes in securities markets, interest rates or foreign exchange rates may adversely affect the Company's performance or stock price. (13) Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Nine-Month Periods Ended February 29, 2000 (Unaudited) - - The failure to obtain or retain key executive or technical personnel could affect future performance. - - The Company's growth strategy includes expansion through acquisitions. There can be no assurance that the Company will be able to successfully complete further acquisitions or that past or future acquisitions will not have an adverse impact on the Company's operations. - - The potential future sale of Common Stock shares, possible anti-takeover measures available to the Company, dividend policies, as well as voting con- trol of the Company by Edward J. Richardson, Chairman of the Board and Chief Executive Officer may affect the stock price. - - The continued availability of financing on favorable terms can not be assured. (14) PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No material developments have occurred in the matters reported under the category "Legal Proceedings" in the Registrant's Report on Form 10-K for the fiscal year ended May 31, 1999. 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) Exhibit 27 - Financial Data Schedule - page 17. (b) Reports on Form 8-K - None (15) PART II - OTHER INFORMATION SIGNATURE 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. RICHARDSON ELECTRONICS, LTD. Date April 13, 2000 By _______________________ William J. Garry Senior Vice President and Chief Financial Officer EX-27 2
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