10-Q 1 fy01q3.htm Richardson Electonics, LTD. Quarter Report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

<Table of Contents>

 

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 28, 2001

 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[  ] 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE

 

 

 

 

ACT OF 1934

 

 

 

 

 

 

 

 

 

 

 

 

For the transition period ended

to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Commission file number

0-12906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RICHARDSON ELECTRONICS, LTD.

 

 

 

 
(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delaware

36-2096643

 

 

 

 
(State of incorporation or organization)

(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 Sec-

 

 

tions 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 11, 2001, there were outstanding 10,154,636 shares of Common Stock, $.05 par value,

 

 

and 3,231,562 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 17.

 

 

 

 

(1)

Richardson Electronics, Ltd. and Subsidiaries

Form 10-Q

For the Three- and Nine-Month Periods

Ended February 28, 2001 and 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

11

PART II - OTHER INFORMATION

17

(2)

Richardson Electronics, Ltd. and Subsidiaries

Consolidated Condensed Balance Sheets

(in thousands)

February 28

May 31

       2001       

       2000       

(Unaudited)

ASSETS

Current assets:

Cash and equivalents

$ 15,882

$ 11,832

Receivables, less allowance of $3,141 and $2,991

97,199

77,821

Inventories

151,180

119,224

Other

       16,419

      13,346

Total current assets

280,680

222,223

Property, plant and equipment

70,114

64,091

Less accumulated depreciation

     (42,207)

    (38,240)

Property, plant and equipment, net

27,907

25,851

Other assets

       22,167

      16,851

Total assets

$ 330,754

$ 264,925

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$ 35,042

$ 30,882

Accrued expenses

16,619

14,452

Notes payable and current portion of long-term debt

             409

         2,619

Total current liabilities

52,070

47,953

Long-term debt, less current portion

159,568

117,643

Deferred income taxes and other noncurrent liabilities

10,328

5,336

Stockholders' equity:

Common stock, $.05 par value; issued 11,906 at

February 28, 2001 and 11,670 at May 31, 2000

595

583

Class B common stock, convertible, $.05 par value; issued

3,232 at February 28, 2001 and at May 31, 2000

162

162

Additional paid-in capital

88,374

84,514

Common stock in treasury, at cost; 1,752 shares at

February 28, 2001 and 1,915 at May 31, 2000

(10,328)

(11,045)

Retained earnings

46,667

34,184

Foreign currency translation adjustment

(16,682)

(14,405)

Total stockholders' equity

     108,788

      93,993

Total liabilities and stockholders' equity

$ 330,754

$ 264,925

See notes to consolidated condensed financial statements.

(3)

Richardson Electronics, Ltd. and Subsidiaries

Consolidated Condensed Income Statements

For the Three- and Nine-Month Periods

Ended February 28, 2001 and February 29, 2000

(unaudited) (in thousands, except per share amounts)

Three Months

Nine Months

2001

2000

2001

2000

Net sales

$ 125,472 

$   98,874 

$ 376,657 

$ 292,016 

Cost of products sold

93,123 

73,094 

278,514 

214,007 

Gross margin

32,349 

25,780 

98,143 

78,009 

Selling, general and administrative

expenses

23,271 

20,369 

69,295 

59,998 

Operating income

9,078 

5,411 

28,848 

18,011 

Other (income) expense:

Interest expense

2,903 

2,202 

8,027 

6,644 

Investment income

(124)

(248)

(232)

(665)

Other, net

87 

(131)

109 

(66)

2,866 

1,823 

7,904 

5,913 

Income before income taxes

6,212 

3,588 

20,944 

12,098 

Income taxes

2,040 

1,060 

6,900 

3,600 

Net income

$     4,172 

$     2,528 

$   14,044 

$     8,498 

Net income per share - basic:

Net income per share

$         .31 

$         .20 

$       1.05 

$          .67 

Average shares outstanding

13,372 

12,680 

13,312 

12,650 

Net income per share - diluted:

Net income per share

$          .29

$         .20 

$          .95 

$          .67 

Average shares outstanding

17,591 

12,848 

17,583 

12,764 

Dividends per common share

$         .04 

$         .04 

$          .12 

$          .12 

Comprehensive income:

Net income

$    4,172 

$     2,528 

$   14,044 

$     8,498 

Foreign currency translation

869 

(1,153)

(2,277)

(1,541)

Comprehensive income

$    5,041 

$     1,375 

$   11,767 

$     6,957 

See notes to consolidated condensed financial statements.

(4)

Richardson Electronics, Ltd. and Subsidiaries

Consolidated Condensed Statements of Cash Flows

For the Three- and Nine-Month Periods

Ended February 28, 2001 and February 29, 2000

(unaudited) (in thousands)

    2001    

    2000

Operating Activities:

Net income

$    14,044 

$     8,498 

Non-cash charges to income:

   Depreciation

4,344 

3,459 

   Amortization of intangibles and financing costs

634 

557 

   Deferred income taxes

(53)

1,328 

   Contribution to employee stock ownership plan

1,310 

-  

      Total non-cash charges

6,235 

5,344 

Changes in working capital, net of effects of

   currency translation and business acquisitions:

      Accounts receivable

(16,031)

(10,200)

      Inventories

(31,324)

(7,154)

      Other current assets

(2,801)

(161)

      Accounts payable

1,884 

10,730 

      Other liabilities

1,636 

1,924 

Net changes in working capital

(46,636)

(4,861)

Net cash (used in) provided by

   operating activities

(26,357)

8,981 

Financing Activities:

Proceeds from borrowings

53,881 

7,077 

Payments on debt

(13,084)

(6,618)

Proceeds from stock issuance

3,278 

461 

Cash dividends

(1,561)

(1,459)

Net cash provided by (used in)

   financing activities

42,514 

(539)

Investing Activities:

Capital expenditures

(6,329)

(5,140)

Business acquisitions

(7,166)

(920)

Investments, notes receivable and other

1,388 

(1,056)

Net cash used in investing activities

(12,107)

(7,116)

Increase in cash and equivalents

4,050 

1,326 

Cash and equivalents at beginning of year

11,832 

12,569 

Cash and equivalents at end of period

$    15,882 

$    13,895 

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 28, 2001 and 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 reflected 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, 2000.

          The Statements are presented for the third quarter and first nine months of fiscal 2001 (periods ended February 28, 2001) compared to third quarter and first nine months of fiscal 2000 (periods ended February 29, 2000). The Company accounts for its results of operations on a 52/53 week period ending on the Saturday nearest May 31 each year. Results for the first nine months include 39 weeks in fiscal 2001 and 40 weeks in fiscal 2000. Results for the third quarter include 13 weeks in both years.

 

 

 

 

 

Note B -- Income Taxes

          The income tax provisions for the nine-month periods ended February 28, 2001 and February 29, 2000 are based on the estimated annual effective tax rates of 33% and 30%, respectively. The effective rate is less than the U.S. federal statutory rate of 34% due to U.S. foreign sales corporation tax benefits and utilization of previously unrecognized foreign net operating loss carryforwards, partially offset by state income taxes. The effective tax rate in fiscal 2001 is higher than in fiscal 2000 because the U.S. Federal statutory rate increases from 34% to 35% on pretax income levels above $10 million and, additionally, tax benefits become proportionately less as pre-tax income increases.

 

 

 

 

 

Note C -- Calculation of Earnings per Share

          Basic earnings per share is calculated by dividing net income by the weighted average number of Common and Class B Common shares outstanding. Diluted earnings per share is calculated by dividing net income (adjusted for interest savings, net of tax, on assumed bond conversions) by the actual shares outstanding and share equivalents that would arise from the exercise of stock options and the assumed conversion of convertible bonds. Out-of-the-money (exercise price higher than market price) stock options are excluded from the calculation because they are anti-dilutive.

 

 

 

 

(6)

Richardson Electronics, Ltd. and Subsidiaries

Notes to Consolidated Condensed Financial Statements

Three- and Nine-Month Periods

Ended February 28, 2001 and February 29 , 2000

(Unaudited)

 

 

 

 

The Company's 8 1/4% and 7 1/4% convertible debentures are excluded from the calculation in fiscal 2000 as assumed conversion would be anti-dilutive. The per share amounts presented in the Consolidated Condensed Income Statement are based on the following amounts:

 

Third Quarter

Nine Months

FY 2001

FY 2000

FY 2001

FY 2000

Numerator for basic EPS:

Net income

$   4,172 

$   2,528 

$ 14,044 

$   8,498 

Denominator for basic EPS:

Beginning shares outstanding

13,378 

12,674 

12,987 

12,623 

Additional shares issued

7 

6 

329 

27 

Restricted shares cancelled

(13)

-  

(4)

-  

Average shares outstanding

13,372 

12,680 

13,312 

12,650 

Numerator for diluted EPS:

Net income

$   4,172 

$   2,528 

$ 14,044 

$   8,498 

Interest savings, net of tax, on

assumed conversion of bonds

865 

-  

2,595 

-  

Adjusted net income

$   5,037 

$   2,528 

$ 16,639 

$   8,498 

Denominator for diluted EPS:

Average shares outstanding

13,372 

12,680 

13,312 

12,650 

Effect of dilutive stock options

539 

168 

591 

114 

Assumed conversion of bonds

3,680 

-  

3,680 

-  

Average shares outstanding

17,591 

12,848 

17,583 

12,764 

 

 

 

 

 Note D -- Industry and Market Information         

         The Company completed the reorganization of its marketing and sales structure into five strategic business units (SBU's) in the fourth quarter of fiscal 2000. Historical data for fiscal 2000 has been restated to conform to the new organizational structure. The new units are: RF & Wireless Communications Group (Wireless), Industrial Power Group (Industrial), Medical Systems Group (Medical), Security Systems Division (Security) and Display Systems Group (Display).

          Wireless serves the rapidly expanding wireless voice and data telecommunications industry and radio and television broadcast industry. Industrial serves a broad range of customers including the steel, automotive, textile, plastics, semiconductor, marine and avionics industries. Medical serves the medical imaging market, providing system upgrade and integration services in addition to a wide range of diagnostic imaging components. Security provides security systems and related design services with an emphasis on closed circuit television (CCTV). Display provides system integration and custom product solutions for the public information display, financial, point-of-sale and general data display markets.

 

 

(7)

Richardson Electronics, Ltd. and Subsidiaries

Notes to Consolidated Condensed Financial Statements

Three- and Nine-Month Periods

Ended February 28, 2001 and February 29 , 2000

(Unaudited)

 

 

 

 

          SBUs 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, some of the regional sales force is shared and, accordingly, is not included in direct expenses. Inter-segment 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 expense and financing costs are not identifiable by SBU. Operating results for the three- and nine-month periods ended February 28, 2001 and February 29, 2000 and identifiable assets as of the end of the respective periods by SBU are summarized in the following tables (in thousands):

 

Third Quarter

Sales

Margin

Contribution

Assets

FY 2001

Wireless

$    64,450

$    16,435

$    11,175

$  129,904

Industrial

21,230

7,256

5,721

48,144

Medical

9,684

2,084

837

26,369

Security

19,844

4,520

1,643

35,107

Display

10,264

2,425

1,118

22,275

Total

$  125,472

$    32,720

$    20,494

$  261,799

FY 2000

Wireless

$    39,593

$    10,150

$     6,991

$    82,494

Industrial

20,775

7,247

5,715

40,986

Medical

9,413

1,869

1,005

26,174

Security

20,550

4,795

1,867

33,799

Display

8,543

2,285

1,206

18,930

Total

$    98,874

$    26,346

$    16,784

$  202,383

(8)

Richardson Electronics, Ltd. and Subsidiaries

Notes to Consolidated Condensed Financial Statements

Three- and Nine-Month Periods

Ended February 28, 2001 and February 29 , 2000

(Unaudited)

Nine months

Sales

Margin

Contribution

Assets

FY 2001

Wireless

$   185,455

$    48,437

$    33,090

$   129,904

Industrial

67,057

23,434

19,070

48,144

Medical

29,941

6,580

3,426

26,369

Security

62,488

14,429

5,670

35,107

Display

31,716

7,494

3,734

22,275

Total

$   376,657

$   100,374

$    64,990

$   261,799

FY 2000

Wireless

$   105,958

$    28,197

$    18,579

$    82,494

Industrial

63,185

22,386

17,360

40,986

Medical

30,157

5,889

3,217

26,174

Security

62,349

14,702

6,132

33,799

Display

30,367

8,152

4,822

18,930

Total

$   292,016

$    79,326

$    50,110

$   202,383

 

          Reconciliations of gross margin, direct operating contribution and assets to the relevant consolidated amounts follow. (Other assets includes miscellaneous receivables, manufacturing inventories and sundry assets.) (in thousands):

 

Third Quarter

Nine Months

FY 2001

FY 2000

FY2001

FY2000

Gross margin - segments total

$   32,720 

$   26,346 

$ 100,374 

$   79,326 

Manufacturing variances and other costs

(371)

(566)

(2,231)

(1,317)

Gross margin

$   32,349 

$   25,780 

$   98,143 

$   78,009 

Segment profit contribution

$   20,494 

$   16,784 

$   64,990 

$   50,110 

Manufacturing variances and other costs

(371)

(566)

(2,231)

(1,317)

Regional selling expenses

(4,107)

(3,504)

(12,378)

(10,276)

Administrative expenses

(6,938)

(7,303)

(21,533)

(20,506)

Operating income

$    9,078 

$    5,411 

$   28,848 

$   18,011 

Segment assets

$ 261,799 

$ 202,383 

Cash and equivalents

15,882 

13,895 

Other current assets

19,798 

9,439 

Net property

27,907 

24,712 

Other assets

5,368 

4,974 

Total assets

$ 330,754 

$ 255,403 

 

          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.

 

 

(9)

Richardson Electronics, Ltd. and Subsidiaries

Notes to Consolidated Condensed Financial Statements

Three- and Nine-Month Periods

Ended February 28, 2001 and February 29 , 2000

(Unaudited)

 

 

 Note E -- Derivative Financial Instruments

         The Company is exposed to potential changes in interest rates under its revolving credit agreements. The Company uses interest rate swap agreements to manage its exposure to interest rate changes.

          In June 1998, the FASB issued statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by FASB Statements Nos. 137 and 138. The Company is required to adopt this statement on June 1, 2001. The Company does not expect adoption of this statement to have a significant impact on its financial position or results of operations.          

 

 

 

(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 28, 2001 and February 29 , 2000

 (Unaudited)

 

 

 

 

Results of Operations

 

 

 

 

 

Sales and Gross Margin

 

 

 

 

 

          Net sales for the third quarter of fiscal 2001 were $125.5 million. Sales increased 26.9% over last year's third quarter of $98.9 million. Sales for the nine-month period were $376.7 million, an increase of 29.0%. 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 2001

FY2000

Change

FY2001

Sales

FY2000

Sales

Third Quarter

Wireless

$   64,450

$   39,593

62.8%

$16,435 

25.5%

$10,150 

25.6%

Industrial

21,230

20,775

2.2%

7,256 

34.2%

7,247 

34.9%

Medical

9,684

9,413

2.9%

2,084 

21.5%

1,869 

19.9%

Security

19,844

20,550

-3.4%

4,520 

22.8%

4,795 

23.3%

Display

10,264

8,543

20.1%

2,425 

23.6%

2,285 

26.7%

Corporate

-  

-  

(371)

(566)

Total

$ 125,472

$   98,874

26.9%

$32,349 

25.8%

$25,780 

26.1%

Nine Months

Wireless

$  85,455

$105,958

75.0%

$48,437 

26.1%

$ 28,197

26.6%

Industrial

67,057

63,185

6.1%

23,434 

34.9%

22,386 

35.4%

Medical

29,941

30,157

-0.7%

6,580 

22.0%

5,889 

19.5%

Security

62,488

62,349

0.2%

14,429 

23.1%

14,702 

23.6%

Display

31,716

30,367

4.4%

7,494 

23.6%

8,152 

26.8%

Corporate

-  

-  

(2,231)

(1,317)

Total

$ 376,657

$ 292,016

29.0%

$ 98,143 

26.1%

$ 78,009 

26.7%

 

          Wireless' third quarter sales increased 62.8% from fiscal 2000 levels, based upon increased demand for RF / microwave components to support the expansion of the cellular infrastructure and deliveries under a telematics contract for an original equipment manufacturer. Telematics is a new technology used in automobiles for all types of wireless communications. The sales level for the nine-month period reflects similar trends as the quarter results. The gross margin rate declined slightly to 26.1% from 26.6%, reflecting a large sales contract at a lower margin rate.

          Sales growth for Industrial slowed to 2.2% in the third quarter as 41.0% growth in DC power semiconductors and passive components was offset by declines in electron tube sales.

 

 

 

 

(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 28, 2001 and February 29 , 2000

 (Unaudited)

 

 

 

 

The gross margin rate declined slightly to 34.2% from 34.9% due to product mix. Sales growth for the nine-month period was 6.1%, reflecting gains in DC power semiconductors and passive components (up 34.0%), silicon rectifiers (up 24.0%) and CW microwave generators (up 11.4%), offset by a 4.9% decline in electron tube sales.

          Sales of the Medical SBU in the third quarter increased 2.9% over the prior year as sales of high resolution monitors increased 106%, offset by declines of 18.4% in x-ray tubes and image intensifiers and 41.0% in medical logistics services. Gross margin increased to 21.5% of sales in fiscal 2001 compared to 19.9% in the third quarter of fiscal 2000. The margin improvement reflects better operating efficiencies in tube reloading and lower customer return levels. Certain low-margin sales contracts also affected fiscal 2000 margins. The nine-month results reflect the same sales and margin trends, but gains in monitor sales did not fully offset the decline in other sales.

          Security sales declined by 3.4% for the third quarter 2001 from fiscal 2000 levels. Gross margins declined slightly to 22.8% from 23.3%, reflecting competitive pressure. The nine-month sales results were essentially flat, with a trend in gross margins similar to the third quarter.

          Third quarter sales for Display increased 20.1% in fiscal 2001 from 2000 levels on strong growth in integrated dispay systems (up 198%) and monitors (up 42.1%), offset by a 24.3% decline in cathode ray tube (CRT) sales. Gross margins declined to 23.6% from 26.7% due to the shift in sales from CRT's to monitors and integrated systems. Sales for the nine-month period were 4.4% above the prior year, as the first half of fiscal 2000 included two contracts which aggregated $4.8 million. Gross margins trends for the nine-month period were similar to the third quarter.

          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. Provisions for LIFO, manufacturing charges and other costs are included under the caption "Corporate" (in thousands).

 

 

 

 

(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 28, 2001 and February 29 , 2000

 (Unaudited)

 

Sales

Gross Margin

%

GM% of

GM% of

FY 2001

FY2000

Change

FY2001

Sales

FY2000

Sales

Third Quarter

North America

$   77,749

$   65,034

19.6%

$  19,808 

25.5%

$  16,714 

25.7%

Europe

25,856

19,030

35.9%

7,111 

27.5%

5,426 

28.5%

Asia / Pacific

12,631

8,023

57.4%

3,234 

25.6%

2,464 

30.7%

Latin America

6,331

4,331

46.2%

1,759 

27.8%

1,133 

26.2%

Other

2,905

2,456

18.3%

808 

27.8%

609 

24.8%

Corporate

-   

-   

(371)

(566)

Total

$  125,472

$   98,874

26.9%

$  32,349 

25.8%

$  25,780 

26.1%

Nine Months

North America

$ 238,370

$ 191,341

24.6%

$  61,106 

25.6%

$  49,324 

25.8%

Europe

71,078

56,430

26.0%

20,317 

28.6%

16,795 

29.8%

Asia / Pacific

37,983

23,604

60.9%

10,970 

28.9%

7,645 

32.4%

Latin America

19,290

13,931

38.5%

5,316 

27.6%

3,866 

27.8%

Other

9,936

6,710

48.1%

2,665 

26.8%

1,696 

25.3%

Corporate

-   

-   

(2,231)

(1,317)

Total

$ 376,657

$ 292,016

29.0%

$  98,143 

26.1%

$  78,009 

26.7%

Fiscal 2000 historical data has been restated to conform to the fiscal 2001 reporting classifications.

 

          North American sales growth of 19.6% in the third quarter and 24.6% year-to-date reflect growth in all of the Company's strategic business units except Security, led by demand for Wireless products. European sales gains of 35.9% for the quarter and 26.0% year-to-date are due to Wireless sales growth. Period-to-period sales comparisons in Europe were adversely affected by the decline in the euro relative to the U.S. dollar. The change in exchange rates reduced reported sales for Europe by approximately 10% for year-to-date comparative purposes.

          Asia Pacific sales increased by 57.4% in the third quarter and 60.9% year-to-date, primarily benefiting from growth in the sale of Wireless products. Latin American sales grew 46.2% for the quarter and 38.5% year-to-date, benefitting primarily from broadcast equipment sales by the Wireless group and growth in both Security and Medical product sales.

 

 

 

 

 

Selling, General, and Administrative Expenses

 

 

 

 

 

          Selling, general and administrative expenses improved as a percentage of sales, declining to 18.5% in the third quarter of fiscal 2001 from 20.6% in the same period last year, reflecting the strong sales growth and the Company's continued emphasis on its program to maximize operating efficiencies.

 

 

 

 

(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 28, 2001 and February 29 , 2000

 (Unaudited)

 

 

 

 

Interest and Other Expenses

 

 

 

 

 

          Interest costs in the first nine months of fiscal 2001 increased 20.8% compared to fiscal 2000 due to increased borrowing levels and higher interest rates on borrowings tied to LIBOR.

 

 

 

 

 

Net Results

 

 

 

 

 

          Net income for the third quarter was $4.2 million, up 65.0% over the prior year. Earnings per share, diluted, was $.29, an increase of 45.0%. Net income for the nine month period was $14.0 million, up 65.3% over the prior year. Earnings per share, diluted, was $.95, an increase of 41.8%. Growth in earnings per share was not equivalent to the gains in net income due to the inclusion of convertible debentures in fiscal 2001. The debentures were not included in the fiscal 2000 calculation of earnings per share because they were anti-dilutive.

 

 

 

 

 

Liquidity and Capital Resources

 

 

 

 

 

          Cash used in operations was $26.4 million in the first nine months of fiscal 2001, compared to cash provided by operations of $9.0 million in the prior year period. To fund the 29.0% increase in sales, the Company increased its investment in working capital by $46.6 million in the current year compared to a $4.9 million increase last year. While days sales outstanding were consistent in year-to-year comparisons at 59 days, accounts receivable increased $16.0 million in 2001 and $10.2 million in 2000, reflecting the growth in sales. Inventory turnover remained essentially constant in the first nine months of fiscal 2001. The increase in inventories of $31.3 million in fiscal 2001, primarily for product line expansion, compared to an increase of $7.2 million in 2000. Accounts payable increased by $1.9 million in fiscal 2001, compared to $10.7 million in fiscal 2000.

          On July 28, 2000, the Company refinanced its revolving credit facility and Canadian credit agreement with an $85 million multi-currency revolving credit facility. The facility was increased to $105 million in February, 2001. The agreement matures in July 2004 and bears interest at applicable LIBOR rates plus a margin, presently 150 basis points. In addition, the Company entered into certain interest rate swap arrangements for the term of the facility, fixing the interest rate on $33.9 million at an average rate of 8.3%.

          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 28, 2001.

 

 

 

 

(14)

 Richardson Electronics, Ltd. and Subsidiaries

 Management's Discussion and Analysis

 of Results of Operations and Financial Condition

 Three- and Nine-Month Periods

 Ended February 28, 2001 and February 29 , 2000

 (Unaudited)

 

 

 

 

           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 countries 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.

          The Company has modified its transaction processing systems to accommodate the Euro 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 has not been significant.

 

 

 

 

 

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 Company'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

 

 

 

 

 

  • Technological changes may affect the marketability of inventory on hand.

 

 

 

 

(15)

 Richardson Electronics, Ltd. and Subsidiaries

 Management's Discussion and Analysis

 of Results of Operations and Financial Condition

 Three- and Nine-Month Periods

 Ended February 28, 2001 and February 29 , 2000

 (Unaudited)

 

 

 

 

  • 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 businesses 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.

 

 

 

 

 

  • 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 control 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.

 

 

 

 

 

 

 

(16)

 

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, 2000.

 

 

 

 

 

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 - None

 

 

(b)     Reports on Form 8-K - None

 

 

 

 

 

 

 

 

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 11 , 2001

By     /S/     William J. Garry

 

 

 

 

 

William J. Garry

 

 

 

Senior Vice President and

 

 

 

Chief Financial Officer

 

 

 

 

 

(17)