-----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, NxGZHQkhs1iXENCZXXbuWDuUJWK3Q+yLavV2vwo00fB37yg+n6sA6h8KxfGp7Es+ j1zvQ9CYnmelpShEskvdxQ== 0000355948-97-000002.txt : 19970115 0000355948-97-000002.hdr.sgml : 19970115 ACCESSION NUMBER: 0000355948-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970114 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-12906 FILM NUMBER: 97505367 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 November 30, 1996 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 or organization)(I.R.S. Employer Identification No.) 40W267 Keslinger Road, 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 January 8, 1997, there were outstanding 8,651,747 shares of Common Stock, $.05 par value, and 3,243,081 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 14 pages. An exhibit index is at page 13. (1) RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES FORM 10-Q For the Quarter Ended November 30, 1996 INDEX Page ---- PART I - FINANCIAL INFORMATION Consolidated Condensed Balance Sheets 3 Consolidated Condensed Statements of Income 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 8 PART II - OTHER INFORMATION 12 (2) PART I - FINANCIAL INFORMATION RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) November 30 May 31 1996 1996 --------- --------- (Unaudited) (Audited) ASSETS - ------ Current assets: Cash and equivalents $ 8,934 $ 6,784 Receivables,less allowance of $1,338 and $1,461 49,861 48,232 Inventories 100,490 94,327 Other 9,505 8,062 --------- --------- Total current assets 168,790 157,405 Investments 2,168 2,190 Property, plant and equipment, net 17,107 16,054 Other assets 6,360 4,509 --------- --------- Total assets $ 194,425 $ 180,158 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 14,342 $ 14,503 Accrued expenses 11,360 9,751 --------- --------- Total current liabilities 25,702 24,254 Long-term debt 99,699 92,025 Deferred income taxes 1,800 1,087 Stockholders' equity: Common stock, $.05 par value; issued 8,652 shares at November 30, 1996 and 8,562 at May 31, 1996 433 428 Class B common stock, convertible, $.05 par value; issued 3,243 shares at November 30, 1996 and 3,244 at May 31, 1996 162 162 Additional paid-in capital 52,988 52,185 Retained earnings 14,730 12,430 Foreign currency translation adjustment (1,089) (2,413) --------- --------- Total stockholders' equity 67,224 62,792 --------- --------- Total liabilities and stockholders' equity $ 194,425 $ 180,158 ========= ========= See notes to consolidated condensed financial statements. (3) RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended November 30 November 30 -------------------- -------------------- 1996 1995 1996 1995 --------- --------- --------- --------- (Unaudited) (Unaudited) Net sales $ 62,167 $ 61,669 $ 119,711 $ 118,870 Costs and expenses: Cost of products sold 43,429 43,735 84,190 83,798 Selling, general and administrative expenses 14,051 13,175 27,385 26,486 --------- --------- --------- --------- 57,480 56,910 111,575 110,284 --------- --------- --------- --------- Operating income 4,687 4,759 8,136 8,586 Other (income) expense: Interest expense 1,950 1,739 3,719 3,243 Investment income (102) (376) (167) (887) Other, net 57 86 (91) 260 --------- --------- --------- --------- 1,905 1,449 3,461 2,616 --------- --------- --------- --------- Income before income taxes 2,782 3,310 4,675 5,970 Income taxes 850 1,070 1,450 2,000 --------- --------- --------- --------- Net Income $ 1,932 $ 2,240 $ 3,225 $ 3,970 ========= ========= ========= ========= Net income per share $ 0.16 $ 0.19 $ 0.27 $ 0.34 ========= ========= ========= ========= Average shares outstanding 12,121 11,909 12,165 11,809 ========= ========= ========= ========= See notes to consolidated condensed financial statements. (4) RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (in thousands)(unaudited) Six Months Ended November 30 ------------------------ 1996 1995 --------- --------- Operating Activities: Net income $ 3,225 $ 3,970 Non-cash charges to income: Depreciation 1,292 1,319 Amortization of intangibles and financing costs 219 170 Deferred income taxes 817 1,053 Contribution to employee stock ownership plan 800 500 --------- --------- Total non-cash charges 3,128 3,042 --------- --------- Net income adjusted for non-cash charges 6,353 7,012 Changes in working capital, net of effects of currency translation and business acquisitions: Accounts receivable (335) (2,445) Inventories (3,289) (7,872) Other current assets (1,535) 1,350 Accounts payable (800) (5,009) Other liabilities 1,486 (692) --------- --------- Net changes in working capital (4,473) (14,668) --------- --------- Net cash provided by (used in) operating activities 1,880 (7,656) --------- --------- Financing Activities: Proceeds from borrowings 7,674 -- Proceeds from stock options exercised 9 1,100 Payments on debt -- (929) Cash dividends (925) (905) --------- --------- Net cash provided by (used in) financing activities 6,758 (734) --------- --------- Investing Activities: Sales of investments 2,240 8,325 Purchase of investments (2,200) (3,222) Capital expenditures (2,272) (1,359) Business acquisitions (4,181) -- Other (75) (112) --------- --------- Net cash provided by (used in) investing activities (6,488) 3,632 --------- --------- Increase (decrease) in cash and equivalents 2,150 (4,758) Cash and equivalents at beginning of year 6,784 11,151 --------- --------- Cash and equivalents at end of period $ 8,934 $ 6,393 ========= ========= See notes to consolidated condensed financial statements. (5) RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Three- and Six-Month Periods Ended November 30, 1996 (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 year ended May 31, 1996. The marketing and sales operations of the Company are organized in four strategic business units (SBUs): Electronic Device Group (EDG), Solid State and Components (SSC), Display Products Group (DPG) and Security Systems Division (SSD). References hereinafter are to the acronyms noted parenthetically. Note B -- Income Taxes The income tax provisions for the three- and six-month periods ended November 30, 1996 are based on the estimated effective tax rate of 31% for fiscal 1997 income. The effect of expected state income taxes is offset by the utilization of foreign net operating loss carryforwards and by U.S. foreign sales corporation tax benefits. The income tax provision for the six-month period ended November 30, 1995 was based on the estimated effective tax rate of 34% for fiscal 1995 income. The effect of expected state income taxes in 1996 was offset by U.S. foreign sales corporation tax benefits. The second quarter tax rate in fiscal 1995 was 32%. Note C - Long-Term Debt On December 18, 1996 the Company offered to exchange a minimum of $25 million and up to $40 million (subject to waiver by the Company) of new 8 1/4% (6) RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Three- and Six-Month Periods Ended November 30, 1996 (Unaudited) convertible debentures for its outstanding 7 1/4% convertible debentures. The new debentures would be payable at maturity in June 2006. The new debentures would be convertible to common stock at $18.00 per share, compared to $21.14 for the old debentures. The offer will expire on midnight, January 31, 1997. If less than the amount tendered is accepted for exchange, the amount of debentures accepted will be exchanged on a pro-rata basis. (7) MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Three- and Six-Month Periods ended November 30,1996 (Unaudited) Results of Operations - --------------------- Net sales for the second quarter of fiscal 1997 were $62.2 million, up 1% from last year's second quarter of $61.7 million. Sales for the six-month period were $119.7 million, a 1% increase from $118.9 million in the prior year. Adjusting for the effect of the Company's fiscal calendar, which included 14 weeks in the first quarter of fiscal 1996, but only 13 weeks in the first quarter of fiscal 1997, sales increased in the current six-month period compared to the prior year by 5%. 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 --------------------------- ---------------------------------- 1997 1996 % 1997 GM% 1996 GM% --------- --------- ---- -------- ----- -------- ----- Second Quarter EDG $ 28,779 $ 28,421 1% $ 8,617 29.9% $ 8,430 29.7% SSC 18,380 17,834 3% 5,672 30.9% 5,440 30.5% DPG 7,593 8,730 -13% 2,611 34.4% 3,252 37.3% SSD 7,415 6,684 11% 1,547 20.9% 1,412 21.1% Corporate - - - 291 (600) --------- --------- ---- -------- ----- -------- ----- Total $ 62,167 $ 61,669 1% $ 18,738 30.1% $ 17,934 29.1% ========= ========= ======== ======== Six Months EDG $ 56,180 $ 55,230 2% $ 16,587 29.5% $ 16,647 30.1% SSC 33,763 33,777 0% 10,430 30.9% 10,411 30.8% DPG 15,177 17,602 -14% 5,314 35.0% 6,440 36.6% SSD 14,591 12,261 19% 3,011 20.6% 2,575 21.0% Corporate - - 179 (1,001) --------- --------- ---- -------- ----- -------- ----- Total $ 119,711 $ 118,870 1% $ 35,521 29.7% $ 35,072 29.5% ========= ========= ======== ======== In November, 1995, a major semiconductor supplier disengaged SSC's North American franchise. Comparisons of current to prior year quarter and six-month revenues were affected by this event, amounting to $3.0 million and $5.5 million, respectively in lost product sales. Adjusted to exclude this disengaged franchise from reported results, SSC's revenues grew 27% and 23% in the quarter and six-month comparisons. Development of new and expansion of existing franchises, including agreements with Ericsson Components AB, Siemens (8) MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Three- and Six-Month Periods ended November 30,1996 (Unaudited) and M/A-Com, have substantially replaced the lost revenues. DPG's sales were affected by temporary supply shortages for several types of color CRT's and the loss of one major customer in Europe. On a geographic basis, the Company achieved sales growth of 4% in North America and 9% in the Rest of World area during the second quarter. Sales declined 13% in Europe in the second quarter, reflecting the DPG supply shortages and lost customer described above, as well as competitive conditions in EDG markets. Sales, percentage change from the prior year, gross margins and gross margin percent of sales by SBU are summarized in the following table. Provisions for LIFO, manufacturing charges and other costs are included under the caption "Corporate" (in thousands). Sales Gross Margin --------------------------- ---------------------------------- 1997 1996 % 1997 GM% 1996 GM% --------- --------- ---- -------- ----- -------- ----- Second Quarter North America $ 36,466 $ 34,913 4% $ 10,737 29.4% $ 10,303 29.5% Europe 13,750 15,776 -13% 4,369 31.8% 5,190 32.9% Rest of World 11,951 10,980 9% 3,341 28.0% 3,041 27.7% Corporate 291 (600) --------- --------- ---- -------- ----- -------- ----- Total $ 62,167 $ 61,669 1% $ 18,738 30.1% $ 17,934 29.1% ========= ========= ======== ======== Six Months North America $ 69,757 $ 69,192 1% $ 20,336 29.2% $ 20,487 29.6% Europe 27,429 28,803 -5% 8,698 31.7% 9,678 33.6% Rest of World 22,525 20,875 8% 6,308 28.0% 5,908 28.3% Corporate 179 (1,001) --------- --------- ---- -------- ----- -------- ----- Total $ 119,711 $ 118,870 1% $ 35,521 29.7% $ 35,072 29.5% ========= ========= ======== ======== Gross margins for the second quarter were 30.1%, compared to 29.1% in the prior year, reflecting lower inventory provision requirements, improved manufacturing production performance and lower warranty claims. Selling, general and administrative expenses increased $876 or 7% as the Company invested in additional sales staff to capitalize on growth opportunities for SSC, SSD and the EDG medical market. The Company also opened new sales offices in Thailand, Korea and Vietnam. Non-operating expenses increased by $456 as higher interest expense and lower investment income were partially offset by foreign exchange gains. Higher net (9) MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Three- and Six-Month Periods ended November 30,1996 (Unaudited) interest costs were attributable to additional borrowings needed to finance working capital growth and several business acquisitions. Net income for the second quarter was $1.9 million or $.16 per share, compared to $2.2 million or $.19 per share in the prior year. For the six-month period, net income was $3.2 million or $.27 per share compared to the prior year net income of $4.0 million or $.34 per share. Liquidity and Capital Resources - ------------------------------- Cash provided by operations, exclusive of working capital requirements, was $6.4 million in the first half of fiscal 1997, compared to $7.0 million for the first half of last year. Investments in the first six months in additional working capital of $4.5 million and $14.7 million in 1997 and 1996, respectively, capital expenditures, business acquisitions and dividend payments were funded primarily by cash generated by operations and additional borrowings. Interest payments for the first half of fiscal 1997 were $3.4 million and $3.1 million in 1996. Working capital requirements include inventory investments of $3.3 million in fiscal 1997 and $7.9 million in fiscal 1996. Accounts payable increased $.8 million in 1997 and $5.0 million in 1996, reflecting the timing of inventory purchases. Investment activity in the current year second quarter included the acquisition of Compucon Distributors, a distributor of interconnect devices operating in the Northeastern United States, as well as the acquisition of two smaller companies operating in the wireless communications and medical diagnostic imaging markets. In the first quarter the Company amended its $25 million senior revolving credit note agreement due November 30, 1998 to increase the credit line to $35 million. The loan bears interest at 100 basis points over LIBOR, which at November 30 resulted in a weighted average rate of 6.6%. The Company borrowed an additional $4.0 million for business acquisitions and working capital in the second quarter of fiscal 1997. $6.2 million was available at November 30, 1996 (10) MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Three- and Six-Month Periods ended November 30,1996 (Unaudited) under this agreement for future working capital or other corporate requirements. On December 18, 1996, the Company announced an offer to exchange $25 million to $40 million of new 8 1/4% convertible debentures for its outstanding 7 1/4% convertible debentures (see Note C). The principal purpose of the offer is to improve the Company's future liquidity and capital position by substantially reducing sinking fund payments on the old debentures. 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 November 30, 1996. In addition, certain of the current agreements contain restrictions relating to the purchase by the Company of treasury stock or the payment of cash dividends. At November 30, 1996, $14.5 million was available for such transactions. 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. 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. (11) MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Three- and Six-Month Periods ended November 30,1996 (Unaudited) 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, 1996. ITEM 2. CHANGES IN SECURITIES On December 18, 1996 the Company offered to exchange a minimum of $25 million up to $40 million of new 8 1/4% convertible debentures for its outstanding 7 1/4% convertible debentures. The new debentures would be payable at maturity in June 2006. The new debentures would be convertible to common stock at $18.00 per share, compared to $21.14 for the old debentures. The offer will expire on midnight, January 31, 1997. If less than the amount tendered is accepted for exchange, the amount of debentures accepted will be exchanged on a pro-rata basis. The principal purpose of the offer is to improve the Company's future liquidity and capital position by substantially reducing sinking fund payments on the old debentures. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. (12) PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 27 - Financial Data Schedule - page 14. (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: January 13 , 1997 By: \s\ William J. Garry -------------------- William J. Garry Vice President and Chief Financial Officer (13) EX-27 2
5 1000 6-MOS MAY-31-1997 NOV-30-1996 8934 0 51199 1338 100490 168790 45069 27962 194425 25702 99699 433 0 162 66629 194425 119711 119711 84190 84190 0 (162) 3719 4675 1450 3225 0 0 0 3225 .27 .27
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