-----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, L7QL0NOPRhdMghklJnPhzcPzYAsgYuh9MC98YOadda/CYTUBZrNxfkmJ2cDF1Om7 SkLrZRPgFVtC4G6l6B797A== 0000355948-98-000005.txt : 19980304 0000355948-98-000005.hdr.sgml : 19980304 ACCESSION NUMBER: 0000355948-98-000005 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980303 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/A SEC ACT: SEC FILE NUMBER: 000-12906 FILM NUMBER: 98556255 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/A 1 10-Q 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, 1997 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, 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 9, 1998 there were outstanding 8,943,929 shares of Common Stock, $.05 par value,and 3,242,515 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 42 pages. An exhibit index is at page 12. Page 1 RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES FORM 10-Q For the Quarter Ended November 30, 1997 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 Page 2 Part I - Financial Information Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Balance Sheets (in thousands) November 30 May 31 1997 1997 --------- --------- (Unaudited)(Audited) ASSETS - ------- Current assets: Cash and equivalents $ 8,382 $ 10,012 Receivables, less allowance of $1,845 and $2,102 59,410 53,333 Inventories 92,740 92,194 Other 10,877 10,497 --------- --------- Total current assets 171,409 166,036 Investments 2,658 2,152 Property, plant and equipment 48,094 45,969 Less accumulated depreciation (29,863) (28,443) --------- --------- Property, plant and equipment, net 18,231 17,526 Other assets 8,674 6,800 --------- --------- Total assets $200,972 $192,514 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 18,360 $ 12,766 Accrued expenses 13,115 12,449 --------- --------- Total current liabilities 31,475 25,215 Long-term debt, less current portion 104,317 107,275 Deferred income taxes 1,525 434 Stockholders' equity: Common stock, $.05 par value; issued 8,944 at November 30, 1997 and 8,721 at May 31, 1997 448 437 Class B common stock, convertible, $.05 par value; issued 3,243 at November 30, 1997 and May 31, 1997 162 162 Additional paid-in capital 55,388 53,512 Retained earnings 12,689 9,082 Foreign currency translation adjustment (5,032) (3,603) --------- --------- Total stockholders' equity 63,655 59,590 --------- --------- Total liabilities and stockholders' equity $200,972 $192,514 ========= ========= See notes to consolidated condensed financial statements. Page 3 Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Statements of Income For the Three- and Six-Month Periods Ended November 30, 1997 and 1996 (in thousands, except per share amounts) (unaudited) Three Months Six Months -------------------- -------------------- 1997 1996 1997 1996 --------- --------- --------- --------- Net sales $ 78,646 $ 62,167 $150,246 $119,711 Cost of products sold 56,298 43,429 107,260 84,190 --------- --------- --------- --------- Gross margin 22,348 18,738 42,986 35,521 Selling, general and administrative expenses 16,706 14,051 32,516 27,385 --------- --------- --------- --------- Operating income 5,642 4,687 10,470 8,136 Other (income) expense: Interest expense 2,190 1,950 4,209 3,719 Investment income (195) (102) (279) (167) Other, net (291) 57 22 (91) --------- --------- --------- --------- 1,704 1,905 3,952 3,461 --------- --------- --------- --------- Income before income taxes 3,938 2,782 6,518 4,675 Income taxes 1,198 850 1,970 1,450 --------- --------- --------- --------- Net income $ 2,740 $ 1,932 $ 4,548 $ 3,225 ========= ========= ========= ========= Net income per share $ .22 $ .16 $ .37 $ .27 ========= ========= ========= ========= Average shares outstanding 12,575 12,121 12,401 12,165 ========= ========= ========= ========= Dividends per common share $ .04 $ .04 $ .08 $ .08 ========= ========= ========= ========= See notes to consolidated condensed financial statements. Page 4 Part I - Financial Information Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Statements of Cash Flows For the Six-Month Periods Ended November 30, 1997 and 1996 (unaudited) 1997 1996 --------- --------- Operating Activities: Net income $ 4,548 $ 3,225 Non-cash charges to income: Depreciation 1,860 1,292 Amortization of intangibles and financing costs 181 219 Deferred income taxes 1,403 817 Contribution to employee stock ownership plan 285 800 --------- --------- Total non-cash charges 3,729 3,128 --------- --------- Changes in working capital, net of effects of currency translation and business acquisitions: Accounts receivable (4,485) (335) Inventories 750 (3,289) Other current assets 254 (1,535) Accounts payable 5,516 (800) Other liabilities 447 1,486 --------- --------- Net changes in working capital 2,482 (4,473) --------- --------- Net cash provided by operating activities 10,759 1,880 --------- --------- Financing Activities: Proceeds from borrowings 10,531 7,674 Payments on debt (13,166) - Proceeds from sale of common stock 1,436 9 Cash dividends (941) (925) --------- --------- Net cash (used in) provided by financing activities (2,140) 6,758 --------- --------- Investing Activities: Sales of investments 1,872 2,240 Purchases of investments (2,378) (2,200) Business acquisitions (6,262) (4,181) Capital expenditures (2,454) (2,272) Other (1,027) (75) --------- --------- Net cash used in investing activities (10,249) (6,488) --------- --------- (Decrease) increase in cash and equivalents (1,630) 2,150 Cash and equivalents at beginning of year 10,012 6,784 --------- --------- Cash and equivalents at end of period $ 8,382 $ 8,934 ========= ========= See notes to consolidated condensed financial statements. Page 5 Richardson Electronics, Ltd. and Subsidiaries Notes to Consolidated Condensed Financial Statements Three- and Six-Month Periods Ended November 30, 1997 (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, 1997. 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 quarter and six-month periods ended November 30, 1997 and November 30, 1996 are based on the estimated effective tax rates of 30% for fiscal 1998 and 31% for fiscal 1997. The estimated effective tax rates are lower than the statutory rate of 34% as a result of U.S. foreign sales corporation benefits, partially offset by expected state income taxes. Note C - Security Service International, Inc. Acquisition Effective August 14, 1997, the Company acquired the assets and liabilities of Security Service International, Inc. (SSI), a Canadian distributor of security systems with annual sales of $20.0 million. The acquisition was accounted for by the purchase method, and accordingly, the results of operations of SSI since the date of acquisition have been included in the Consolidated Condensed Statement of Income. Page 6 Richardson Electronics, Ltd. and Subsidiaries Notes to Consolidated Condensed Financial Statements Three- and Six-Month Periods Ended November 30, 1997 (unaudited) Note D - Earnings per Share The Financial Accounting Standards Board issued SFAS No. 128, Earnings per Share, which establishes new guidelines for the calculation and presentation of earnings per share data, but prohibits use of the new guidelines prior to December 15, 1997. The purpose of the new rule is to make reporting in the United States consistent with international practices. Under SFAS 128, net income per share as currently reported will be replaced by two disclosures: basic earnings per share, which excludes all common stock equivalents, and diluted earnings per share, which includes all dilutive common stock equivalents. Earnings per share for the first two quarters of fiscal 1998 using these guidelines do not differ significantly from amounts presented in the accompanying Consolidated Condensed Statements of Income. Page 7 Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Six-Month Periods Ended November 30, 1997 (unaudited) Results of Operations Net sales for the second quarter of fiscal 1998 were $78.6 million, up 27% from last year's second quarter of $62.2 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 ------------------------- --------------------------------- FY 1998 FY 1997 % FY 1998 GM% FY 1997 GM% --------- --------- ---- --------- ----- --------- ----- Second Quarter EDG $ 29,683 $ 28,779 3% $ 9,245 31.1% $ 8,617 29.9% SSC 22,497 18,380 22% 6,365 28.3% 5,672 30.9% DPG 7,581 7,593 0% 2,621 34.6% 2,611 34.4% SSD 18,885 7,415 155% 4,386 23.2% 1,547 20.9% Corporate - - (269) 291 --------- --------- --------- --------- Total $ 78,646 $ 62,167 27% $ 22,348 28.4% $ 18,738 30.1% ========= ========= ========= ========= Six Months EDG $ 58,708 $ 56,180 4% $ 18,467 31.5% $ 16,587 29.5% SSC 43,057 33,763 28% 12,527 29.1% 10,430 30.9% DPG 15,223 15,177 0% 5,068 33.3% 5,314 35.0% SSD 33,258 14,591 128% 7,736 23.3% 3,011 20.6% Corporate - - (812) 179 --------- --------- --------- --------- Total $150,246 $119,711 26% $ 42,986 28.6% $ 35,521 29.7% ========= ========== ========= ========= Sales growth was led by SSD, with increases of 155% for the second quarter and 128% for the first half. SSD's sales growth includes the acquisition of Burtek Systems Inc. in the third quarter of fiscal 1997 and Security Service International, Inc. in August, 1997. Without the contribution from these acquisitions, SSD's internally generated sales growth was 27% in the second quarter and 25% for the first half. Gross margin as a percent of sales improved to 23.2% for the quarter and 23.3% for the first half, up 2.3 and 2.7 percentage points, respectively. This strong improvement is largely due to the higher margins of acquired operations and the overall focus on improving levels of profitability. SSC sales increased 22% in the second quarter and 28% for the first half. Excluding the effect of a September, 1997 acquisition, sales gains were 19% for the quarter and 20% for the first half. Gross margins as a percent of sales were 28.3% for the quarter and 29.1% for the first half, compared to 30.9% for both periods last year. The margin change is primarily due to product mix and competitive pressures. Page 8 Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Six-Month Periods Ended November 30, 1997 (unaudited) EDG sales increased 3% for the second quarter and 4% for the first half, primarily due to medical products sales gains. Gross margin as a percent of sales improved from 29.9% to 31.1% for the quarter and from 29.5% to 31.5% for the first half, reflecting pricing policy changes, product mix, and higher tube reloading efficiencies. On a geographic basis, the Company achieved sales growth of 35% in North America, 20% in Europe, and 8% in the Rest of World for the second quarter. Excluding the effect of the aforementioned acquisitions, North America achieved internally generated sales growth of 15%. Sales, percentage change from the prior year, gross margins and gross margin percent of sales by area 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 ------------------------- -------------------------------- FY 1998 FY 1997 % FY 1998 GM% FY 1997 GM% --------- --------- ---- --------- ----- --------- ----- Second Quarter North America $ 49,255 $ 36,466 35% $ 13,775 28.0% $ 10,737 29.4% Europe 16,453 13,750 20% 5,048 30.7% 4,369 31.8% Rest of World 12,938 11,951 8% 3,794 29.4% 3,341 28.0% Corporate - - (269) 291 --------- --------- --------- --------- Total $ 78,646 $ 62,167 27% $ 22,348 28.4% $ 18,738 30.1% ========= ========= ========= ========= Six Months North America $ 92,919 $69,757 33% $ 26,564 28.6% $ 20,336 29.2% Europe 32,161 27,429 17% 9,830 30.6% 8,698 31.7% Rest of World 25,166 22,525 12% 7,404 29.4% 6,308 28.0% Corporate - - (812) 179 --------- --------- --------- --------- Total $150,246 $119,711 26% $ 42,986 28.6% $ 35,521 29.7% ========= ========= ========= ========= Overall gross margins for the second quarter were 28.4%, compared to 30.1% in the prior year. Gross margin comparisons were most significantly affected by changes in product mix, particularly SSD's larger contribution to total sales. Higher corporate provisions for customer returns, warranty costs, and LIFO reduced margins by approximately 0.9%. Page 9 Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Six-Month Periods Ended November 30, 1997 (unaudited) Selling, general and administrative (S,G&A) expenses for the second quarter increased 19% to $16,706, primarily for operating expenses of recent acquisitions. As a percentage of sales, S,G&A reduced to 21.2% from 22.6%, reflecting management's continuing initiatives to contain costs. The six-month results reflect similar trends. Non-operating expenses for the second quarter decreased by $201,000, as foreign exchange gains offset higher interest expense. Higher interest expense reflects increased borrowing levels due to business acquisitions. Foreign exchange gains were $197,000, compared to a loss of $58,000 in the prior year. Non-operating expenses for the first half increased $491,000, due to higher interest expense. Net income for the second quarter was $2.7 million or $.22 per share, compared to $1.9 million or $.16 per share in the prior year. Net income for the first half was $4.5 million, or $.37 per share, compared to $3.2 million, or $.27 per share in the prior year period. Liquidity and Capital Resources Cash provided by operations for the first half was $10.8 million in fiscal 1998, compared to $1.9 million in 1997. Working capital changes provided $2.5 million, compared to cash usage of $4.5 million last year. Accounts payable increased $5.5 million in 1998 and declined $0.8 million in 1997, reflecting the timing of inventory purchases. Accounts receivable increased $4.5 million in the current year, as a result of higher sales levels. Business acquisitions, capital expenditures and dividend payments were funded primarily by cash generated by operations. Interest payments for the first half were $4.1 million in fiscal 1998 and $3.4 million in 1997. In August 1997, the Company acquired substantially all of the assets of SSI, a Canadian distributor of security products. To complete the acquisition, the Company's Canadian subsidiary amended its revolving credit and term loan agreement from $6.0 million to $12.4 million. Page 10 Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Three- and Six-Month Periods Ended November 30, 1997 (unaudited) In November, 1997, the Company amended its floating-rate bank term loan, originally due in November, 1998, extending the maturity to November, 1999. The Company's loan agreements contain various financial and operating covenants which place restrictions on dividends and 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, 1997. The Company's 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. Page 11 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, 1997. 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 10 - Second Amended Agreement made as of November 28, 1997 between Richardson Electronics, Ltd. as Borrower and American National Bank and Trust Company as Lender. - page 14 Exhibit 27 - Financial Data Schedule - page 41 . (b) Reports on Form 8-K - None Page 12 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 January 13 , 1998 By /S/ William J. Garry Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----