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 December 3, 2005

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 or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

40W267 Keslinger Road, P.O. Box 393 LaFox, Illinois 60147-0393

(Address of principal executive offices)

Registrant’s telephone number, including area code: (630) 208-2200

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

As of January 10, 2006, there were outstanding 14,322,003 shares of Common Stock, $.05 par value, inclusive of 1,328,961 shares held in treasury, and 3,103,190 shares of Class B Common Stock, $.05 par value, which are convertible into Common Stock of the registrant on a share for share basis.

TABLE OF CONTENTS

		Page
Part I.	Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of December 3, 2005 and May 28, 2005	1
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three-Month and Six-Month Periods Ended December 3, 2005 and November 27, 2004	2
	Condensed Consolidated Statements of Cash Flows for the Three-Month and Six-Month Periods Ended December 3, 2005 and November 27, 2004	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
Part II.	Other Information
Item 1.	Legal Proceedings	30
Item 4.	Submission of Matters to a Vote of Security Holders	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
Signatures		32
Exhibit Index		33

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Richardson Electronics, Ltd.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

	Unaudited December 3, 2005			May 28, 2005
Assets
Current assets:
Cash and cash equivalents	$	15,972		$	24,530
Receivables, less allowance of $1,826 and $1,934		108,584			106,928
Inventories		112,012			102,272
Prepaid expenses		4,193			3,293
Deferred income taxes		7,090			6,644
Total current assets		247,851			243,667
Other assets:
Property, plant and equipment, net		31,838			31,821
Goodwill		12,430			6,149
Other intangible assets, net		2,268			1,018
Non-current deferred income taxes		423			428
Assets held for sale		160			—
Other assets		4,686			4,735
Total other assets		51,805			44,151
Total assets	$	299,656		$	287,818
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	49,332		$	39,305
Accrued liabilities		24,041			22,731
Current portion of long-term debt		23,426			22,305
Total current liabilities		96,799			84,341
Non-current liabilities:
Long-term debt, less current portion		94,698			98,028
Non-current liabilities		1,009			1,401
Total non-current liabilities		95,707			99,429
Total liabilities		192,506			183,770
Stockholders’ equity:
Common stock, $.05 par value; issued 15,644 shares at December 3, 2005 and 15,597 shares at May 28, 2005		782			780
Class B common stock, convertible, $.05 par value; issued 3,110 shares at December 3, 2005 and 3,120 shares at May 28, 2005		155			156
Preferred stock, $1.00 par value, no shares issued		—			—
Additional paid-in capital		120,492			121,591
Common stock in treasury, at cost; 1,329 shares at December 3, 2005 and 1,332 shares at May 28, 2005		(7,876	)		(7,894	)
Accumulated deficit		(7,906	)		(9,942	)
Accumulated other comprehensive income (loss)		1,503			(643	)
Total stockholders’ equity		107,150			104,048
Total liabilities and stockholders’ equity	$	299,656		$	287,818

See notes to condensed consolidated financial statements.

1

Richardson Electronics, Ltd.

Condensed Consolidated Statements of Operations

and Comprehensive Income

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

	Three Months Ended						Six Months Ended
	December 3, 2005			November 27, 2004			December 3, 2005			November 27, 2004
Statements of Operations
Net sales	$	155,837		$	151,274		$	313,982		$	289,721
Cost of sales		116,199			114,320			235,528			219,238
Gross margin		39,638			36,954			78,454			70,483
Selling, general and administrative expenses		32,234			32,048			65,301			61,264
Gain on disposal of assets		(22	)		(17	)		(162	)		(27	)
Operating income		7,426			4,923			13,315			9,246
Other (income) expense:
Interest expense		2,320			2,184			4,641			4,441
Investment income		(23	)		—			(131	)		—
Foreign exchange (gain) loss		3,819			(3,299	)		3,682			(2,398	)
Other, net		131			(89	)		175			(52	)
Total other (income) expense		6,247			(1,204	)		8,367			1,991
Income before income taxes		1,179			6,127			4,948			7,255
Income tax provision		705			2,082			2,912			2,404
Net income	$	474		$	4,045		$	2,036		$	4,851
Net income per share, as restated:
Net income per share – basic:
Common stock	$	0.03		$	0.24		$	0.12		$	0.30
Common stock average shares outstanding		14,293			14,126			14,284			13,420
Class B common stock	$	0.02		$	0.21		$	0.11		$	0.27
Class B common stock average shares outstanding		3,110			3,158			3,110			3,158
Net income per share – diluted:
Common stock	$	0.03		$	0.23		$	0.12		$	0.29
Common stock average shares outstanding		17,462			17,479			17,475			16,801
Class B common stock	$	0.02		$	0.21		$	0.11		$	0.26
Class B common stock average shares outstanding		3,110			3,158			3,110			3,158
Dividends per common share	$	0.040		$	0.040		$	0.080		$	0.080
Dividends per Class B common share	$	0.036		$	0.036		$	0.072		$	0.072
Statements of Comprehensive Income
Net income	$	474		$	4,045		$	2,036		$	4,851
Foreign currency translation		82			1,225			2,024			1,673
Fair value adjustments on investments, net of income tax effect		191			(15	)		123			59
Cash flow hedges, net of income tax effect		—			—			—			41
Comprehensive income	$	747		$	5,255		$	4,183		$	6,624

See notes to condensed consolidated financial statements.

2

Richardson Electronics, Ltd.

Condensed Consolidated Statements of Cash Flows

(Unaudited) (in thousands)

	Three Months Ended						Six Months Ended
	December 3, 2005			November 27, 2004			December 3, 2005			November 27, 2004
Operating activities:
Net income	$	474		$	4,045		$	2,036		$	4,851
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization		1,515			1,193			2,997			2,540
Gain on disposal of assets		(22	)		(17	)		(162	)		(27	)
Deferred income taxes		(507	)		2,348			(484	)		2,654
Receivables		(6,153	)		(5,047	)		(1,299	)		(4,245	)
Inventories		1,063			(769	)		(6,478	)		(11,359	)
Accounts payable and accrued liabilities		2,957			(375	)		9,722			2,458
Other liabilities		87			2,650			(332	)		(2,271	)
Other		3,220			(2,519	)		1,784			(2,693	)
Net cash provided by (used in) operating activities		2,634			1,509			7,784			(8,092	)
Investing activities:
Capital expenditures		(1,604	)		(2,400	)		(2,673	)		(4,682	)
Proceeds from sale of assets		33			12			274			12
Business acquisitions, net of cash acquired		(309	)		—			(6,833	)		(545	)
Proceeds from sales of available-for-sale securities		335			990			736			1,134
Purchases of available-for-sale securities		(335	)		(990	)		(736	)		(1,134	)
Other		—			(211	)		—			(301	)
Net cash used in investing activities		(1,880	)		(2,599	)		(9,232	)		(5,516	)
Financing activities:
Proceeds from borrowings		67,827			16,500			90,097			36,500
Payments on debt		(70,663	)		(11,037	)		(94,183	)		(49,793	)
Proceeds from issuance of common stock		197			22			283			27,915
Cash dividends		(684	)		(680	)		(1,366	)		(1,359	)
Other		(1,066	)		(326	)		(1,338	)		(326	)
Net cash provided by (used in) financing activities		(4,389	)		4,479			(6,507	)		12,937
Effect of exchange rate changes on cash and cash equivalents		(678	)		1,181			(603	)		1,072
Increase (decrease) in cash and cash equivalents		(4,313	)		4,570			(8,558	)		401
Cash and cash equivalents at beginning of period		20,285			12,758			24,530			16,927
Cash and cash equivalents at end of period	$	15,972		$	17,328		$	15,972		$	17,328

See notes to condensed consolidated financial statements.

3

RICHARDSON ELECTRONICS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts and except where indicated)

Note A – Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-K. Accordingly, they do not include all the information and notes required by United States generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the results of interim periods have been made and such adjustments were of a normal and recurring nature. The results of operations and cash flows for the three-month and six-month periods ended December 3, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ended June 3, 2006.

The Company’s fiscal quarter ends on the Saturday nearest the end of the quarter ending month. The first six months of fiscal 2006 contains 27 weeks, and the first six months of fiscal 2005 contains 26 weeks. The additional week occurred in the first quarter of fiscal 2006.

The financial information contained in this report should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended May 28, 2005. Certain amounts in prior periods’ financial statements and related notes have been reclassified to conform with the fiscal 2006 presentation. Customer cash discounts were reclassified from selling, general and administrative expenses to net sales. The reclassifications had no impact on net income or stockholders’ equity for any reportable period presented.

Note B – Investment in Marketable Equity Securities

The Company’s investments are primarily equity securities, all of which are classified as available-for-sale and are carried at their fair value based on the quoted market prices. Proceeds from the sale of the securities were $335 and $736 during the second quarter and first six months of fiscal 2006, respectively, and $990 and $1,134 during the same periods of fiscal 2005, all of which were subsequently reinvested. Gross realized gains on those sales were $50 and $101 for the second quarter and first six months of fiscal 2006, respectively, and $88 and $110 for the same periods of fiscal 2005. Gross realized losses on those sales were $42 and $43 for the second quarter and first six months of fiscal 2006, respectively, and $31 and $48 for the same periods of fiscal 2005. Net unrealized holding gains of $191 and $511 for the second quarter and first six months of fiscal 2006, respectively, and $735 and $1,182 for the same periods of fiscal 2005 have been included in accumulated comprehensive income (loss) for fiscal 2006 and 2005.

The following table is the disclosure under Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, for the investment in marketable equity securities with fair values less than cost basis:

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	Marketable Security Holding Length
	Less Than 12 Months				More Than 12 Months				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 3, 2005
Common Stock	$	267	$	14	$	342	$	40	$	609	$	54
May 28, 2005
Common Stock	$	2,044	$	33	$	—	$	—	$	2,044	$	33

Note C – Assets Held for Sale

On August 4, 2005, the Company entered into a contract to sell approximately 1.5 acres of real estate and a building located in Geneva, Illinois for $3,000. The contract is subject to a number of conditions, including inspections, environmental testing, and other customary conditions. Although the sale of the real estate and building is expected to close within one year from the date of the agreement, the Company cannot give any assurance as to the actual timing or successful completion of the transaction.

Note D – Goodwill and Other Intangible Assets

The Company performed its annual impairment test during the fourth quarter of fiscal 2005. The same methodology was employed in completing the annual impairment test as in applying transitional accounting provisions of SFAS No. 142, Goodwill and Other Intangible Assets. The Company did not find any indication that additional impairment existed, and therefore, no additional impairment loss was recorded as a result of completing the annual impairment test.

The table below provides changes in carrying value of goodwill by reportable segment which includes RF, Wireless & Power Division (RFPD), Electron Device Group (EDG), Security Systems Division (SSD), and Display Systems Group (DSG):

	Goodwill
	Reportable Segments
	RFPD		EDG			SSD		DSG			Total
Balance at May 28, 2005	$	245	$	881		$	1,577	$	3,446		$	6,149
Additions		—		—			—		6,534			6,534
Foreign currency translation		6		(5	)		140		(394	)		(253	)
Balance at December 3, 2005	$	251	$	876		$	1,717	$	9,586		$	12,430

The addition to goodwill in the first six months of fiscal 2006 represents the acquisition of A.C.T. Kern GmbH & Co. KG (Kern) located in Germany, effective June 1, 2005. The cash outlay for Kern was $6,583, net of cash acquired. Kern is one of the leading display technology companies in Europe with world wide customers in manufacturing, OEM, medicine, multimedia, IT trading, system houses, and other industries.

5

The following table provides changes in carrying value of other intangible assets not subject to amortization:

	Other Intangible Assets Not Subject to Amortization
	Reportable Segments
	RFPD		EDG		SSD		DSG		Total
Balance at May 28, 2005	$	—	$	9	$	278	$	—	$	287
Foreign currency translation		—		—		26		—		26
Balance at December 3, 2005	$	—	$	9	$	304	$	—	$	313

Intangible assets subject to amortization, as well as amortization expense are as follows:

	Intangible Assets Subject to Amortization
	December 3, 2005				May 28, 2005
	Gross Amounts		Accumulated Amortization		Gross Amounts		Accumulated Amortization
Deferred financing costs	$	4,266	$	2,314	$	2,968	$	2,241
Patents and trademarks		478		475		478		474
Total	$	4,744	$	2,789	$	3,446	$	2,715

Deferred financing costs increased during the first six months of fiscal 2006 primarily due to the issuance of the Company’s 7 ³/4% convertible senior subordinated notes (7 ³/4% notes) and the 8% convertible senior subordinated notes (8% notes).

Amortization expense for the three-month and six-month periods ended December 3, 2005 and November 27, 2004 is as follows:

	Amortization Expense for Second Quarter				Amortization Expense for Six Months
	FY 2006		FY 2005		FY 2006		FY 2005
Deferred financing costs	$	71	$	129	$	116	$	171
Patents and trademarks		—		4		1		7
Total	$	71	$	133	$	117	$	178

The amortization expense associated with the intangible assets subject to amortization is expected to be $317, $391, $391, $390, $302, $242, and $43 in fiscal 2006, 2007, 2008, 2009, 2010, 2011, and 2012, respectively. The weighted average number of years of amortization expense remaining is 7.53.

Note E – Restructuring Charges

As a result of the Company’s fiscal 2005 restructuring initiative, a restructuring charge, including severance and lease termination costs of $2,152, was recorded in selling, general and administrative expenses (SG&A) in the third quarter of fiscal 2005. During the fourth quarter of fiscal 2005, the employee severance and related costs were adjusted, resulting in a $183 decrease in SG&A due to the difference between estimated severance costs and the actual payouts. Severance costs of $1,108 were paid in fiscal 2005. During the first six months of fiscal 2006, severance and lease termination costs of $639 were paid. During the first six months of fiscal 2006, the employee severance and related costs were adjusted resulting in a $110 decrease in SG&A due to the difference between estimated severance costs and

6

the actual payouts. The remaining balance payable during fiscal 2006 has been included in accrued liabilities. Terminations affected over 60 employees across various business functions, operating units, and geographic regions. As of December 3, 2005, the following table depicts the amounts associated with the activity related to restructuring by reportable segment:

	Restructuring Liability May 28, 2005		For the six months ended December 3, 2005								Restructuring Liability December 3, 2005
			Reserve Recorded		Payment			Adjustment to Reserve
Employee severance and related costs:
RFPD	$	318	$	—	$	(262	)	$	(19	)	$	37
EDG		183		—		(71	)		(112	)		—
SSD		25		—		(22	)		(3	)		—
DSG		230		—		(183	)		—			47
Corporate		70		—		(66	)		24			28
Total		826		—		(604	)		(110	)		112
Lease termination costs:
SSD		35		—		(35	)		—			—
Total	$	861	$	—	$	(639	)	$	(110	)	$	112

Note F – Warranties

The Company offers warranties for specific products it manufactures. The Company also provides extended warranties for some products it sells that lengthen the period of coverage specified in the manufacturer’s original warranty. Terms generally range from one to three years.

The Company estimates the cost to perform under its warranty obligation and recognizes this estimated cost at the time of the related product sale. The Company reports this expense as an element of cost of sales in its Condensed Consolidated Statements of Operations. Each quarter, the Company assesses actual warranty costs incurred, on a product-by-product basis, as compared to its estimated obligation. The estimates with respect to new products are based generally on knowledge of the products, are extrapolated to reflect the extended warranty period, and are refined each quarter as better information with respect to warranty experience becomes known.

Warranty reserves are established for costs that are expected to be incurred after the sale and delivery of products under warranty. The warranty reserves are determined based on known product failures, historical experience, and other currently available evidence.

Changes in the warranty reserve for the first six months ended December 3, 2005 were as follows:

	Warranty Reserve
Balance at May 28, 2005	$	1,439
Accruals for products sold		545
Utilization		(216	)
Change in estimate		(946	)
Balance at December 3, 2005	$	822

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During the second quarter of fiscal 2003, DSG provided a three-year warranty on some of its products. As the extended warranty on the first products sold under the warranty program expired during the second quarter of fiscal 2006, along with additional warranty experience available during the first six months of fiscal 2006, the Company revised its estimate of the warranty reserve to reflect the actual warranty experience to date. As a result, a change in estimate of $946 was recorded during the second quarter of fiscal 2006.

Note G – Debt

Long-term debt consists of the following:

	December 3, 2005			May 28, 2005
8 1/4% convertible debentures, due June 2006	$	17,538		$	17,538
7 1/4% convertible debentures, due December 2006		4,753			4,753
7 3/4% convertible notes, due December 2011		44,683			44,683
8% convertible notes, due June 2011		25,000			—
Floating-rate multi-currency revolving credit agreement, due October 2009 (4.41% at December 3, 2005)		24,989			53,314
Other		1,161			45
Total debt		118,124			120,333
Less: current portion		(23,426	)		(22,305	)
Long-term debt	$	94,698		$	98,028

At December 3, 2005, the Company maintained $94,698 in long-term debt, primarily in the form of two issuances of convertible notes and a multi-currency credit agreement. The Company maintained two issuances of convertible debentures in short-term debt at December 3, 2005 in the amount of $17,538 and $4,753 for the 8 ¹/4% convertible senior subordinated debentures (8 ¹/4% debentures) and the 7 ¹/4% convertible subordinated debentures (7 ¹/4% debentures), respectively. This short-term classification resulted from the amended and restated credit agreement requiring the 8 ¹/4% and 7 ¹/4% debentures to be refinanced prior to February 28, 2006. On August 24, 2005, the Company executed an amendment to the amended and restated credit agreement which extended the refinancing requirement for the 8 ¹/4% and 7 ¹/4% debentures to June 10, 2006.

On November 21, 2005, the Company sold $25,000 in aggregate principal amount of 8% convertible senior subordinated notes (8% notes) pursuant to an indenture dated November 21, 2005. The 8% notes bear interest at a rate of 8% per annum. Interest is due on June 15 and December 15 of each year. The 8% notes mature on June 15, 2011. The 8% notes are convertible at the option of the holder, at any time on or prior to maturity, into shares of the Company’s common stock at a price equal to $10.31 per share, subject to adjustment in certain circumstances. In addition, the Company may elect to automatically convert the 8% notes into shares of common stock if the trading price of the common stock exceeds 150% of the conversion price of the 8% notes for at least 20 trading days during any 30 trading day period subject to a payment of three years of interest if the Company elects to convert the 8% notes prior to December 20, 2008.

The indenture provides that on or after December 20, 2008, the Company has the option of redeeming the 8% notes, in whole or in part, for cash, at a redemption price equal to 100% of the principal amount of the 8% notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Holders may require the Company to repurchase all or a portion of their 8% notes for cash upon a change-of-control event, as described in the indenture, at a repurchase price equal to 100% of the principal amount of the 8% notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding the repurchase date. The 8% notes are unsecured and subordinate to the Company’s existing and future senior

8

debt and senior to the Company’s existing 7 ¹/4% debentures and 8 ¹/4% debentures. The 8% notes rank on parity with the Company’s existing 7 ³/4% notes.

The Company used the net proceeds from the sale of the 8% notes to repay amounts outstanding under its amended and restated credit agreement. The Company redeemed all of the outstanding 8 ¹/4% debentures on December 23, 2005 in the amount of $17,538 and redeemed all of the outstanding 7 ¹/4% debentures on December 30, 2005 in the amount of $4,753 by borrowing amounts under the amended and restated credit agreement to effect these redemptions.

In October 2004, the Company renewed its multi-currency revolving credit agreement with the current lending group in the amount of approximately $109,000 (varies based on fluctuations in foreign currency exchange rates). The agreement matures in October 2009, when the outstanding balance at that time will become due. At December 3, 2005, $24,989 was outstanding under the amended and restated credit agreement. The amended and restated credit agreement is principally secured by the Company’s trade receivables and inventory. The amended and restated credit agreement bears interest at applicable LIBOR rates plus a margin, varying with certain financial performance criteria. At December 3, 2005, the applicable margin was 2.25%. Outstanding letters of credit were $2,166 at December 3, 2005, leaving an unused line of $81,536 under the total amended and restated credit agreement; however, this amount was reduced to $29,173 due to maximum permitted leverage ratios. The commitment fee related to the amended and restated credit agreement is 0.25% per annum payable quarterly on the average daily unused portion of the aggregate commitment. The Company’s multi-currency revolving credit agreement consists of the following facilities as of December 3, 2005:

	Capacity		Amount Outstanding		Interest Rate
US Facility	$	70,000	$	1,300	6.75	%
Canada Facility		14,607		7,358	4.25	%
Sweden Facility		7,932		7,932	3.63	%
UK Facility		7,793		4,156	6.62	%
Euro Facility		5,868		2,582	4.19	%
Japan Facility		2,491		1,661	1.85	%
Total	$	108,691	$	24,989	4.41	%

Note: Due to maximum permitted leverage ratios, the amount of the unused line cannot be calculated on a facility-by-facility basis.

On August 24, 2005, the Company executed an amendment to the amended and restated credit agreement. The amendment changed the maximum permitted leverage ratios and the minimum required fixed charge coverage ratios for each of the first three quarters of fiscal 2006 to provide the Company additional flexibility for these periods. In addition, the amendment also provided that the Company will maintain excess availability on the borrowing base of not less than $23,000 until the 8 ¹/4% and 7 ¹/4% debentures were redeemed, at which time the Company will maintain excess availability of the borrowing base of not less than $10,000. The applicable margin pricing was increased by 25 basis points. In addition, the amendment extended the Company’s requirement to refinance the remaining $22,291 aggregate principal amount of the Company’s 7 ¹/4% debentures and the 8 ¹/4% debentures from February 28, 2006 to June 10, 2006.

At September 3, 2005, the Company was not in compliance with its amended and restated credit agreement covenants with respect to the tangible net worth covenant due solely to the additional goodwill recorded as a result of the Kern acquisition. On October 12, 2005, the Company received a waiver from its lending group for the default and executed an amendment to the amended and restated credit agreement. The amendment changed the minimum tangible net worth requirement to adjust for the goodwill associated with the Kern acquisition. At December 3, 2005, the Company was in compliance with its amended and restated credit agreement covenants.

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Note H – Income Taxes

The effective income tax rates for the second quarter and first six months of fiscal year 2006 were 59.8% and 58.9%, respectively, as compared with 34.0% and 33.1% for the second quarter and first six months of fiscal 2005, respectively. The difference between the effective tax rates as compared to the U.S. federal statutory rate of 34% primarily results from the Company’s geographical distribution of taxable income or losses, and, in the three and six months ended December 3, 2005, subject to valuation allowances related to net operating losses. For the six months ended December 3, 2005, the tax benefit primarily related to domestic net operating losses was limited by the requirement for a valuation allowance of $2,204, which increased the effective income tax rate by 44.5%. The first six months of fiscal 2006 includes an income tax provision of $344 for income tax exposures related to prior years recorded in the first quarter of fiscal 2006. In addition, during the second quarter of fiscal 2006, income tax reserves of approximately $1,000 for certain income tax exposures were reversed because the statute of limitations with respect to these income tax exposures expired.

In May 2005, the Company was informed by one of its foreign subsidiaries that its records may not be adequate to support the taxable revenues and deductions included within tax returns previously filed for the tax years 2003 and 2004. At this time, the Company has not received notification from any tax authority regarding this matter. In December 2005, the Company determined its income tax exposure for the tax year 2003 is less than $100. During the second quarter of fiscal 2006, the Company increased its income tax reserve for this potential exposure, and no additional exposure is anticipated with respect to the tax year 2003. The Company expects to complete its investigation for the tax year 2004 prior to the third quarter ending March 4, 2006. As of January 12, 2006, for the tax year 2004, based on the conclusions reached for the tax year 2003, any material liability is considered to be remote and therefore, no liability with respect to the tax year 2004 has been recorded.

Note I – Calculation of Earnings Per Share

The Company has authorized 30,000 shares of common stock, 10,000 shares of Class B common stock, and 5,000 shares of preferred stock. The Class B common stock has ten votes per share. The Class B common stock has transferability restrictions; however, it may be converted into common stock on a share-for-share basis at any time. With respect to dividends and distributions, shares of common stock and Class B common stock rank equally and have the same rights, except that Class B common stock is limited to 90% of the amount of common stock cash dividends.

The Company has determined that, under Emerging Issues Task Force (EITF) Issue No. 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share,” a two-class method of computing earnings per share is required. According to the EITF Issue No. 03-6, the Company’s Class B common stock is considered a participating security requiring the use of the two-class method for the computation of basic and diluted earnings per share. The two-class computation method for each period reflects the cash dividends paid per share for each class of stock, plus the amount of allocated undistributed earnings per share computed using the participation percentage which reflects the dividend rights of each class of stock. Basic and diluted earnings per share reflect the application of EITF Issue No. 03-6 and was computed using the two-class method. Prior periods have been restated to reflect this change. The shares of Class B common stock are considered to be participating convertible securities since the shares of Class B common stock are convertible on a share-for-share basis into shares of common stock and may participate in dividends with common stock according to a predetermined formula (90% of the amount of common stock cash dividends).

Diluted earnings per share is calculated by dividing net income, adjusted for interest savings, net of tax, on assumed conversion of convertible debentures and notes, by the actual shares outstanding and share equivalents that would arise from the exercise of stock options, certain restricted stock awards, and the assumed conversion of convertible debentures and notes when dilutive. The Company’s 8 ¹/4% and 7 ¹/4% debentures and its 7 ³/4% and 8% notes are excluded from the calculation for the second quarter and first six months of fiscal 2006, and the Company’s 8 ¹/4% and 7 ¹/4% debentures are excluded from the calculation for the second quarter and first six months of fiscal 2005, as assumed conversion and the effect of the interest savings would be anti-dilutive. The per share amounts presented in the Condensed Consolidated Statements of Operations for the second quarter and first six months of fiscal 2006 and 2005 are based on the following amounts:

	Second Quarter					Six Months
	FY 2006			FY 2005		FY 2006		FY 2005
Numerator for basic and diluted EPS:
Net income	$	474		$	4,045	$	2,036	$	4,851
Less dividends:
Common stock		572			565		1,143		1,130
Class B common stock		112			114		224		228
Undistributed earnings (losses)	$	(210	)	$	3,366	$	669	$	3,493
Common stock undistributed earnings (losses)	$	(176	)	$	2,802	$	559	$	2,883
Class B common stock undistributed earnings (losses) – basic		(34	)		564		110		610
Total undistributed earnings (losses) – common stock and Class B common stock – basic	$	(210	)	$	3,366	$	669	$	3,493
Common stock undistributed earnings (losses)	$	(176	)	$	2,809	$	560	$	2,891
Class B common stock undistributed earnings (losses) – diluted		(34	)		557		109		602
Total undistributed earnings (losses) – Class B common stock – diluted	$	(210	)	$	3,366	$	669	$	3,493
Denominator for basic and diluted EPS:
Denominator for basic EPS:
Common stock weighted average shares		14,293			14,126		14,284		13,420
Class B common stock weighted average shares, and shares under if-converted method for diluted earnings per share		3,110			3,158		3,110		3,158
Effect of dilutive securities:
Unvested restricted stock awards		4			15		4		17
Dilutive stock options		55			180		77		206
Denominator for diluted EPS adjusted weighted average shares and assumed conversions		17,462			17,479		17,475		16,801
Earnings Per Share (as restated):
Common stock – basic	$	0.03		$	0.24	$	0.12	$	0.30
Class B common stock – basic	$	0.02		$	0.21	$	0.11	$	0.27
Common stock – diluted	$	0.03		$	0.23	$	0.12	$	0.29
Class B common stock – diluted	$	0.02		$	0.21	$	0.11	$	0.26

As of the second quarter and first six months of fiscal 2006, 1,922 common stock options and 1,900 common stock options, respectively, were anti-dilutive and were not included in the dilutive earnings per common share calculation. As of the second quarter and first six months of fiscal 2005, 1,524 common stock options and 1,499 common stock options, respectively, were anti-dilutive and were not included in the dilutive earnings per common share calculation.

The restated per share amounts for the first quarter of fiscal 2006 and 2005 are based on the following amounts:

	First Quarter
	FY 2006		FY 2005
Numerator for basic and diluted EPS:
Net income	$	1,562	$	807
Less dividends:
Common stock		571		565
Class B common stock		112		114
Undistributed earnings (losses)	$	879	$	128
Common stock undistributed earnings (losses)	$	734	$	105
Class B common stock undistributed earnings (losses) – basic		145		23
Total undistributed earnings (losses) – common stock and Class B common stock – basic	$	879	$	128
Common stock undistributed earnings (losses)	$	735	$	105
Class B common stock undistributed earnings (losses) – diluted		144		23
Total undistributed earnings (losses) – Class B common stock – diluted	$	879	$	128
Denominator for basic and diluted EPS:
Denominator for basic EPS:
Common stock weighted average shares		14,264		12,703
Class B common stock weighted average shares, and shares under     if-converted method for diluted earnings per share		3,120		3,169
Effect of dilutive securities:
Unvested restricted stock awards		4		21
Dilutive stock options		100		231
Denominator for diluted EPS adjusted weighted average shares and assumed conversions		17,488		16,124
Earnings Per Share (as restated):
Common stock – basic	$	0.09	$	0.05
Class B common stock – basic	$	0.08	$	0.04
Common stock – diluted	$	0.09	$	0.05
Class B common stock – diluted	$	0.08	$	0.04

As of the first quarter of fiscal 2006, 1,619 common stock options were anti-dilutive and were not included in the dilutive earnings per common share calculation. As of the first quarter of fiscal 2005, 1,268 common stock options were anti-dilutive and were not included in the dilutive earnings per common share calculation.

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Note J – Stock-Based Compensation

The Company accounts for its stock option plans and stock purchase plan in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. However, the exercise price of all grants under the Company’s option plans has been equal to the fair market value on the date of grant. SFAS No. 123, Accounting for Stock-Based Compensation, requires estimation of the fair value of options granted to employees. Had the Company’s option plans and stock purchase plan been treated as compensatory under the provisions of SFAS No. 123, the Company’s net income and net income per share for the second quarter and first six months of fiscal 2006 would have been affected as follows:

	Second Quarter						Six Months
	FY 2006			FY 2005			FY 2006			FY 2005
Net income, as reported	$	474		$	4,045		$	2,036		$	4,851
Add: Stock-based compensation expense included in reported net income, net of income tax		2			51			3			102
Deduct: Stock-based compensation expense determined under fair value-based method for all awards, net of income tax		(184	)		(216	)		(367	)		(431	)
Pro-forma net income	$	292		$	3,880		$	1,672		$	4,522
Net income per share, as reported (as restated):
Common stock – basic	$	0.03		$	0.24		$	0.12		$	0.30
Class B common stock – basic	$	0.02		$	0.21		$	0.11		$	0.27
Common stock – diluted	$	0.03		$	0.23		$	0.12		$	0.29
Class B common stock – diluted	$	0.02		$	0.21		$	0.11		$	0.26
Net income per share, pro forma (as restated):
Common stock – basic	$	0.02		$	0.23		$	0.10		$	0.28
Class B common stock – basic	$	0.02		$	0.21		$	0.09		$	0.25
Common stock – diluted	$	0.02		$	0.22		$	0.10		$	0.27
Class B common stock – diluted	$	0.02		$	0.20		$	0.09		$	0.24

Had the Company’s option plans and stock purchase plan been treated as compensatory under the provisions of SFAS No. 123, the Company’s net income and net income per share (restated using the two-class method of calculating earnings per share, see Note I) for the first quarter of fiscal 2006 would have been affected as follows:

	First Quarter
	FY 2006			FY 2005
Net income, as reported	$	1,562		$	807
Add: Stock-based compensation expense included in reported net income, net of income tax		1			51
Deduct: Stock-based compensation expense determined under fair value-based method for all awards, net of income tax		(183	)		(216	)
Pro-forma net income	$	1,380		$	642
Net income per share, as reported (as restated):
Common stock – basic	$	0.09		$	0.05
Class B common stock – basic	$	0.08		$	0.04
Common stock – diluted	$	0.09		$	0.05
Class B common stock – diluted	$	0.08		$	0.04
Net income per share, pro forma (as restated):
Common stock – basic	$	0.08		$	0.04
Class B common stock – basic	$	0.07		$	0.03
Common stock – diluted	$	0.08		$	0.04
Class B common stock – diluted	$	0.07		$	0.03

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Note K – Segment Information

During the second quarter of fiscal 2006, the Company implemented a reorganization plan encompassing the Company’s RF & Wireless Communications Group (RFWC) and Industrial Power Group (IPG) business units. Effective for the second quarter of fiscal 2006, IPG has been designated as Electron Device Group (EDG) and RFWC has been designated as RF, Wireless & Power Division (RFPD). The reorganization was implemented to increase efficiencies by integrating IPG’s power conversion sales and product management into RFWC, improving the geographic sales coverage and driving sales growth by leveraging RFWC’s larger sales resources. In addition, the Company believes that EDG will benefit from an increased focus on the high-margin tube business with a simplified global sales and product management structure to work more effectively with customers and vendors. The data presented has been reclassified to reflect the reorganization.

The following disclosures are made in accordance with the SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. The Company’s strategic business units (SBUs) in fiscal 2006 are: RF, Wireless & Power Division (RFPD), Electron Device Group (EDG), Security Systems Division (SSD), and Display Systems Group (DSG).

RFPD serves the voice and data telecommunications market and the radio and television broadcast industry predominately for infrastructure applications, as well as the industrial power conversion market.

EDG serves a broad range of customers including the steel, automotive, textile, plastics, semiconductor manufacturing, and broadcast industries.

SSD provides security systems and related design services which includes such products as closed circuit television, fire, burglary, access control, sound, and communication products and accessories.

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DSG provides system integration and custom display solutions for the public information, financial, point-of-sale, and medical imaging markets.

Each SBU is directed by a Vice President and General Manager who reports 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.

Accounts receivable, inventory, and goodwill are identified by SBU. Cash, net property, and other assets are not identifiable by SBU. Operating results for each SBU are summarized in the following table:

	Sales		Gross Margin		Direct Operating Contribution		Assets
Second Quarter Fiscal 2006
RFPD	$	79,547	$	18,728	$	11,787	$	95,796
EDG		24,629		7,761		5,327		57,905
SSD		28,268		7,155		2,412		38,095
DSG		21,894		6,118		2,631		33,523
Total	$	154,338	$	39,762	$	22,157	$	225,319
Second Quarter Fiscal 2005
RFPD	$	74,705	$	17,706	$	10,165	$	109,571
EDG		23,957		7,482		4,434		42,244
SSD		27,360		7,304		2,832		38,317
DSG		23,562		5,298		2,783		27,877
Total	$	149,584	$	37,790	$	20,214	$	218,009

	Sales		Gross Margin		Direct Operating Contribution		Assets
Six Months Fiscal 2006
RFPD	$	160,799	$	37,409	$	23,382	$	95,796
EDG		48,372		15,292		9,838		57,905
SSD		55,172		14,169		4,660		38,095
DSG		46,344		12,133		5,425		33,523
Total	$	310,687	$	79,003	$	43,305	$	225,319
Six Months Fiscal 2005
RFPD	$	146,513	$	34,433	$	20,002	$	109,571
EDG		46,223		14,532		8,882		42,244
SSD		53,121		13,802		5,409		38,317
DSG		40,542		9,431		4,590		27,877
Total	$	286,399	$	72,198	$	38,883	$	218,009

A reconciliation of net sales, gross margin, direct operating contribution, and assets to the relevant consolidated amounts is as follows. Other assets not identified include miscellaneous receivables, manufacturing inventories, and other assets.

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	Second Quarter						Six Months
	FY 2006			FY 2005			FY 2006			FY 2005
Segment net sales	$	154,338		$	149,584		$	310,687		$	286,399
Corporate		1,499			1,690			3,295			3,322
Net sales	$	155,837		$	151,274		$	313,982		$	289,721
Segment gross margin	$	39,762		$	37,790		$	79,003		$	72,198
Manufacturing variances and other costs		(124	)		(836	)		(549	)		(1,715	)
Gross margin	$	39,638		$	36,954		$	78,454		$	70,483
Segment contribution	$	22,157		$	20,214		$	43,305		$	38,883
Manufacturing variances and other costs		(124	)		(836	)		(549	)		(1,715	)
Regional selling expenses		(4,646	)		(4,880	)		(10,034	)		(9,419	)
Administrative expenses		(9,983	)		(9,592	)		(19,569	)		(18,530	)
Gain on disposal of assets		22			17			162			27
Operating income	$	7,426		$	4,923		$	13,315		$	9,246
	December 3, 2005			May 28, 2005
Segment assets	$	225,319		$	203,620
Cash and cash equivalents		15,972			24,530
Other current assets		19,303			21,953
Net property		31,838			31,821
Other assets		7,224			5,894
Total assets	$	299,656		$	287,818

Geographic net sales information is primarily grouped by customer destination into five areas: North America, Europe, Asia/Pacific, Latin America, and Corporate. Europe includes sales to the Middle East and Africa. Net sales to Mexico are included as part of Latin America. Corporate consists of freight and non-area specific sales.

Net sales and gross margin by geographic region are presented in the table below:

	Second Quarter						Six Months
	FY 2006			FY 2005			FY 2006			FY 2005
Net Sales
North America	$	79,219		$	79,765		$	161,340		$	154,105
Europe		34,925			33,664			67,731			63,166
Asia/Pacific		34,793			31,776			71,993			60,565
Latin America		5,980			4,983			11,980			9,848
Corporate		920			1,086			938			2,037
Total	$	155,837		$	151,274		$	313,982		$	289,721
Gross Margin
North America	$	21,052		$	20,767		$	42,541		$	39,736
Europe		9,173			9,195			18,783			17,622
Asia/Pacific		8,221			7,740			17,359			14,456
Latin America		1,627			1,432			3,149			2,726
Corporate		(435	)		(2,180	)		(3,378	)		(4,057	)
Total	$	39,638		$	36,954		$	78,454		$	70,483

The Company sells its products to companies in diversified industries and performs periodic credit evaluations of its customers’ financial condition. Terms are generally on open account, payable net 30 days

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in North America, and vary throughout Europe, Asia/Pacific, and Latin America. Estimates of credit losses are recorded in the financial statements based on periodic reviews of outstanding accounts, and actual losses have been consistently within management’s estimates.

Note L – Recently Issued Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) revised SFAS No. 123, Accounting for Stock-Based Compensation. This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) is effective at the beginning of the next fiscal year that begins after June 15, 2005, or the Company’s fiscal year 2007. The Company is evaluating the impact of the adoption of SFAS No.123(R) on the financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in thousands, except per share amounts and except where indicated)

Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements relating to future events, which involve certain risks and uncertainties. Further, there can be no assurance that the trends reflected in historical information will continue in the future.

Investors should consider carefully the following risk factors, in addition to the other information included and incorporated by reference in the 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 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 Exchange Commission, factors that could affect future performance include, among others, the following:

• The Company has had significant operating and net losses in the past and may have future losses.

• The Company maintains a significant investment in inventory and has incurred significant charges for inventory obsolescence and overstock, and may incur similar charges in the future.

• If the Company does not maintain effective internal controls over financial reporting, it could be unable to provide timely and reliable financial information.

• Because the Company derives a significant portion of its revenue by distributing products designed and manufactured by third parties, it may be unable to anticipate changes in the marketplace and, as a result, could lose market share.

• The Company has exposure to economic downturns and operates in cyclical markets.

• The Company has significant debt, which could limit its financial resources and ability to compete and may make it more vulnerable to adverse economic events.

• The Company’s ability to service its debt and meet its other obligations depends on a number of factors beyond its control.

• The Company’s success depends on its executive officers and other key personnel.

• The Company’s amended and restated credit agreement and the indentures for its outstanding debentures and notes impose restrictions with respect to various business matters.

• The Company was not in compliance with certain financial covenants of its amended and restated credit agreement for the quarters ended May 28, 2005 and September 3, 2005, and may not be able to comply with these financial covenants in the future.

• Recent changes in accounting standards regarding stock option plans could limit the desirability of granting stock options, which could harm the Company’s ability to attract and retain employees, and could also negatively impact its results of operations.

• The Company faces intense competition in the markets it serves and, if it does not compete effectively, it could significantly harm its operating results.

• The Company may not be able to continue to make the acquisitions necessary for it to realize its growth strategy or integrate acquisitions successfully.

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• If the Company does not continue to reduce its costs, it may not be able to compete effectively in its markets.

• The Company’s Electron Device Group is dependent on a limited number of vendors to supply it with essential products.

• Economic, political, and other risks associated with international sales and operations could adversely affect the Company’s business.

 •  The Company is exposed to foreign currency risk.

• Because the Company generally does not have long-term contracts with its vendors, it may experience shortages of products that could harm its business and customer relationships.

• The Company may have underpaid taxes in a foreign country where it has operations.

• The Company is exposed to highly variable income tax expense due to its unpredictable geographic distribution of taxable income or losses and its valuation allowances related to net operating losses.

For more discussion of such risks, see “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on August 26, 2005.

These risks are not exhaustive. Other sections of this report may include additional factors, which could adversely affect the Company’s business and financial performance. Moreover, the Company operates in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictions of actual results.

Investors should also be aware that while the Company does, from time to time, communicate with securities analysts, it is against the Company’s policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts, or opinions, such reports are not the responsibility of the Company.

Overview

Description of Business

The Company is a global provider of engineered solutions and a distributor of electronic components to the radio frequency (RF), wireless and power conversion, electron device, security, and display systems markets. Utilizing its core engineering and manufacturing capabilities, the Company is committed to a strategy of providing specialized technical expertise and value-added products, or “engineered solutions,” in response to customers’ needs. These solutions consist of products which the Company manufactures or modifies and products which are manufactured to its specifications by independent manufacturers under the Company’s own private labels. Additionally, the Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, and logistics for its customers’ end products. Design-in support includes component modifications or the identification of lower-cost product alternatives or complementary products.

The Company’s products include RF and microwave components, power semiconductors, electron tubes, microwave generators, data display monitors, and electronic security products and systems. These products are used to control, switch or amplify electrical power or signals, or as display, recording, or alarm devices in a variety of industrial, communication, and security applications.

The Company’s marketing, sales, product management, and purchasing functions are organized as four strategic business units (SBUs): RF, Wireless & Power Division (RFPD), Electron Device Group (EDG),

17

Security Systems Division (SSD), and Display Systems Group (DSG), with operations in the major economic regions of the world: North America, Europe, Asia/Pacific, and Latin America.

During the second quarter of fiscal 2006, the Company implemented a reorganization plan encompassing the Company’s RF & Wireless Communications Group (RFWC) and Industrial Power Group (IPG) business units. Effective for the second quarter of fiscal 2006, IPG has been designated as Electron Device Group (EDG) and RFWC has been designated as RF, Wireless & Power Division (RFPD). The reorganization was implemented to increase efficiencies by integrating IPG’s power conversion sales and product management into RFWC, improving the geographic sales coverage and driving sales growth by leveraging RFWC’s larger sales resources. In addition, the Company believes that EDG will benefit from an increased focus on the high-margin tube business with a simplified global sales and product management structure to work more effectively with customers and vendors. The data presented has been reclassified to reflect the reorganization.

Results of Operations

Net Sales and Gross Margin Analysis

During the second quarter of fiscal 2006, consolidated net sales increased 3.0% to $155,837 due to higher sales in wireless, security, and electron device products over the prior year. During the first six months of fiscal 2006, consolidated net sales increased 8.4% to $313,982, from $289,721 in the same period in the prior year, as all four SBUs increased net sales over the prior year’s first six months with strong demand for custom displays and wireless products. In addition, effective June 1, 2005, the Company acquired A.C.T. Kern GmbH & Co. KG (Kern), a leading display technology company in Europe. Net sales for Kern, included in DSG and the Europe region, in the second quarter and first six months of fiscal 2006 were $3,540 and $6,929, respectively. The first six months of fiscal 2006 contained 27 weeks as compared to 26 weeks for the first six months of fiscal 2005. The additional week occurred in the first quarter of fiscal 2006. Net sales by SBU are presented as follows (in thousands):

Net Sales
	FY 2006		FY 2005		% Change
Second Quarter
RFPD	$	79,547	$	74,705	6.5	%
EDG		24,629		23,957	2.8	%
SSD		28,268		27,360	3.3	%
DSG		21,894		23,562	(7.1	%)
Corporate		1,499		1,690
Total	$	155,837	$	151,274	3.0	%
Net Sales
	FY 2006		FY 2005		% Change
Six Months
RFPD	$	160,799	$	146,513	9.8	%
EDG		48,372		46,223	4.6	%
SSD		55,172		53,121	3.9	%
DSG		46,344		40,542	14.3	%
Corporate		3,295		3,322
Total	$	313,982	$	289,721	8.4	%

Note: The fiscal 2005 data has been reclassified to conform with the fiscal 2006 presentation. The modification includes reclassifying customer cash discounts from selling, general and administrative expenses to net sales and the reorganization of RFPD (formerly RFWC) and EDG (formerly IPG) in the second quarter of fiscal 2006. Corporate consists of freight, other non-specific net sales, and customer cash discounts.

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Consolidated gross margins increased 7.3% to $39,638 and 11.3% to $78,454 in the second quarter and first six months of fiscal 2006, respectively, as compared with $36,954 and $70,483 in the same periods last fiscal year due mainly to an increase in sales volume. Consolidated gross margin as a percentage of net sales increased to 25.4% and 25.0% in the second quarter and first six months of fiscal 2006, respectively, versus 24.4% and 24.3% in the second quarter and first six months of fiscal year 2005, respectively. As a percentage of sales, gross margin improved in fiscal 2006 due primarily to favorable excess and obsolete inventory and warranty experience. Gross margin for each SBU and gross margin as a percentage of net sales are presented in the following table. Gross margin reflects the distribution and manufacturing product margin less manufacturing variances, customer returns, scrap and cycle count adjustments, engineering costs, inventory overstock charges, and other provisions. Gross margin on freight, general inventory obsolescence provisions, and miscellaneous costs are included under the caption “Corporate.”

Gross Margin
Second Quarter	FY 2006			% of Net Sales		FY 2005			% of Net Sales
RFPD	$	18,728		23.5	%	$	17,706		23.7	%
EDG		7,761		31.5	%		7,482		31.2	%
SSD		7,155		25.3	%		7,304		26.7	%
DSG		6,118		27.9	%		5,298		22.5	%
Corporate		(124	)				(836	)
Total	$	39,638		25.4	%	$	36,954		24.4	%
Six Months	FY 2006			% of Net Sales		FY 2005			% of Net Sales
RFPD	$	37,409		23.3	%	$	34,433		23.5	%
EDG		15,292		31.6	%		14,532		31.4	%
SSD		14,169		25.7	%		13,802		26.0	%
DSG		12,133		26.2	%		9,431		23.3	%
Corporate		(549	)				(1,715	)
Total	$	78,454		25.0	%	$	70,483		24.3	%

Note: The fiscal 2005 data has been reclassified to conform with the fiscal 2006 presentation. The modification includes reclassifying customer cash discounts from selling, general and administrative expenses to net sales and the reorganization of RFPD (formerly RFWC) and EDG (formerly IPG) in the second quarter of fiscal 2006. Corporate consists of freight, other non-specific gross margins, and customer cash discounts.

Net sales and gross margin trends are analyzed for each strategic business unit in the discussion below.

RF, Wireless & Power Division

RFPD net sales increased 6.5% and 9.8% in the second quarter and first six months of fiscal 2006, respectively, to $79,547 and $160,799 as compared with $74,705 and $146,513 in the same periods last fiscal year. The net sales growth for the second quarter of fiscal 2006 was due mainly to an increase in sales of the network access and passive/interconnect product lines with growth of 24.1% and 6.9% to $30,831 and $14,051, respectively, versus $24,850 and $13,150, in the same period last fiscal year. The increase in the network access product lines was driven by semiconductor product sales in all geographic areas, with the largest growth coming from Asia/Pacific. North America also experienced strong network access product sales growth, where cellular infrastructure and military/defense are the primary markets. Sales of the passive product lines increased due to the addition of two new global, exclusive franchise suppliers. The network access and passive/interconnect product sales increase was partially offset by lower net sales of infrastructure products. Infrastructure product lines sales were lower in the second quarter of fiscal 2006 primarily due to order schedule changes required by specific original equipment manufacturing (OEM) infrastructure customers in Asia/Pacific. The net sales growth for the first six months of fiscal 2006 was mainly due to an increase in sales of the network access and the infrastructure product lines with growth of

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24.2% and 6.4% to $61,446 and $39,357, respectively, from $49,463 and $37,000 in the same period of last fiscal year. Similar to the network access sales for the second quarter, the first six months of fiscal 2006 sales growth was generated in Asia/Pacific. Infrastructure product sales experienced a strong first quarter in fiscal 2006, a 22.2% increase compared to the first quarter of the previous fiscal year. This first quarter growth was primarily from OEM customers in Asia/Pacific. The first six month net sales growth for network access and infrastructure was partially offset by lower net sales of the passive/interconnect product lines. The interconnect product line sales of passive/interconnect were down 4.4% compared to the first six months of fiscal 2005. This was primarily due to fiscal 2005 sales of interconnect products to emergency cellular infrastucture North American customers not repeating in fiscal 2006 as the technology rollout is nearing completion. The net sales growth was the main contributor to the gross margin increase of 5.8% and 8.6% to $18,728 and $37,409 for the second quarter and first six months of fiscal 2006, respectively; however, RFPD gross margin percentage decreased slightly versus the same periods last year. The increase in Asia/Pacific sales for RFPD reduced the overall RFPD gross margin percentage due to lower gross margins in Asia/Pacific than other geographic regions. The decrease in gross margin percentage resulting from higher Asia/Pacific sales was offset by favorable excess and obsolete inventory experience during the second quarter of fiscal 2006.

Electron Device Group

EDG net sales increased 2.8% and 4.6% in the second quarter and first six months of fiscal 2006, respectively, to $24,629 and $48,372, as compared with $23,957 and $46,223 in the second quarter and first six months of fiscal 2005, respectively, in part due to refocusing the EDG sales team after the realignment. Tube sales increased 1.5% and 5.6% in the second quarter and first six months of fiscal 2006, respectively, to $18,092 and $35,639 versus $17,832 and $33,737 in the same periods last fiscal year, as several new lines were added. Semiconductor fabrication equipment sales grew 45.0% and 24.7% to $4,058 and $7,327, as compared with $2,799 and $5,876 in the same periods last fiscal year as new replacement parts were introduced into the Asia/Pacific market, partially offset by lower net sales of power components. Gross margin for EDG increased 3.7% and 5.2% to $7,761 and $15,292 due to higher sales and an improved product mix in the second quarter and first six months of fiscal 2006, respectively, while gross margin percentage increased slightly from the second quarter and first six months of fiscal 2005.

Security Systems Division

Net sales for SSD increased 3.3% and 3.9% in the second quarter and first six months of fiscal 2006, respectively, to $28,268 and $55,172, as compared with $27,360 and $53,121 in the second quarter and first six months of fiscal 2005, respectively. Net sales of private label products increased 9.4% and 15.1% to $9,096 and $17,580 in the second quarter and first six months of fiscal 2006, respectively, as compared with $8,314 and $15,270 in the same periods last fiscal year. The increase was due in part to specific marketing programs designed to support the private label products as well as additional marketing support in the U.S. from the SSD Canadian operations. Gross margin for SSD decreased 2.0% during the second quarter of fiscal 2006 to $7,155 mainly due to an adjustment to the reserve for excess and obsolete inventory, however, for the first six months of fiscal 2006, gross margin increased by 2.7% to $14,169. Gross margin as a percent of net sales decreased to 25.3% and 25.7% for the second quarter and first six months of fiscal 2006, respectively, as compared with 26.7% and 26.0% during the same time periods of last fiscal year due to an increase to the reserve for excess and obsolete inventory during the second quarter of fiscal 2006.

Display Systems Group

DSG net sales during the second quarter of fiscal 2006 decreased 7.1% to $21,894, as compared with $23,562 in the second quarter of fiscal 2005. However, during the first six months of fiscal 2006, net sales for DSG grew 14.3% to $46,344, as compared with $40,542 during the first six months of fiscal 2005. The decrease in net sales for the second quarter of fiscal 2006 compared to the second quarter in the prior year was due in part to a 40% reduction in second quarter of fiscal 2006 shipments to the New York Stock Exchange compared to second quarter of fiscal 2005. The sales decrease for the second quarter of fiscal 2006 was

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also due to the delay in closing project business which is expected to be shipped over the balance of the year, partially offset by an increase in the custom displays product line due to the Kern acquisition. Sales in the custom display product lines were also negatively affected by the relocation of the U.S. DSG integration facility in the second quarter of fiscal 2006. The sales growth for the six-month period was mainly due to the Kern acquisition and an increase in sales of the custom display product line which increased 13.7% to $11,984 in fiscal 2006 from $10,538 in fiscal 2005. DSG gross margin increased 15.5% and 28.7% to $6,118 and $12,133 during the second quarter and first six months of fiscal 2006, respectively, from $5,298 and $9,431 for the same time periods last year. The gross margin percentage increased to 27.9% and 26.2% from 22.5% and 23.3% during the second quarter and first six months of fiscal 2006 and 2005, respectively. The gross margin improvement was due mainly to improved product mix and lower warranty expense.

Sales by Geographic Area

On a geographic basis, the Company categorizes its sales by destination: North America, Europe, Asia/Pacific, Latin America, and Corporate. Net sales and gross margin, as a percent of net sales, by geographic area are as follows (in thousands):

Net Sales
Second Quarter	FY 2006		FY 2005		% Change
North America	$	79,219	$	79,765	(0.7	%)
Europe		34,925		33,664	3.7	%
Asia/Pacific		34,793		31,776	9.5	%
Latin America		5,980		4,983	20.0	%
Corporate		920		1,086
Total	$	155,837	$	151,274	3.0	%
Six Months	FY 2006		FY 2005		% Change
North America	$	161,340	$	154,105	4.7	%
Europe		67,731		63,166	7.2	%
Asia/Pacific		71,993		60,565	18.9	%
Latin America		11,980		9,848	21.6	%
Corporate		938		2,037
Total	$	313,982	$	289,721	8.4	%

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Gross Margin
Second Quarter	FY 2006			% of Net Sales		FY 2005			% of Net Sales
North America	$	21,052		26.6	%	$	20,767		26.0	%
Europe		9,173		26.3	%		9,195		27.3	%
Asia/Pacific		8,221		23.6	%		7,740		24.4	%
Latin America		1,627		27.2	%		1,432		28.7	%
Corporate		(435	)				(2,180	)
Total	$	39,638		25.4	%	$	36,954		24.4	%
Six Months	FY 2006			% of Net Sales		FY 2005			% of Net Sales
North America	$	42,541		26.4	%	$	39,736		25.8	%
Europe		18,783		27.7	%		17,622		27.9	%
Asia/Pacific		17,359		24.1	%		14,456		23.9	%
Latin America		3,149		26.3	%		2,726		27.7	%
Corporate		(3,378	)				(4,057	)
Total	$	78,454		25.0	%	$	70,483		24.3	%

Note: The fiscal 2005 data has been reclassified to conform with the fiscal 2006 presentation. The modification includes reclassifying customer cash discounts from selling, general and administrative expenses to net sales. Europe includes sales and gross margins to Middle East and Africa. Latin America includes sales and gross margins to Mexico. Corporate consists of freight and other non-specific sales and gross margins.

Net sales in North America decreased 0.7% to $79,219 in the second quarter of fiscal 2006, as compared with $79,765 in the second quarter of fiscal 2005. However, net sales in North America for the first six months of fiscal 2006 increased by 4.7% to $161,340 from $154,105 in the first six months of fiscal 2005. The sales decline in the second quarter of fiscal 2006 was due mainly to lower demand for display systems in the U.S. and Canada, partially offset by increases in wireless products in the U.S. The sales increase in the first six months of fiscal 2006 was mainly due to increases in demand for security systems in Canada and wireless products in the U.S. In addition, net sales in Canada experienced an overall gain of 9.9% to $41,340 in the first six months of fiscal 2006 versus $37,617 in the prior fiscal year. An increase in net sales of higher margin products resulted in gross margin improvement in North America to 26.6% and 26.4% for the second quarter and first six months of fiscal 2006, respectively, as compared with 26.0% and 25.8% in fiscal 2005.

Net sales in Europe grew 3.7% and 7.2% in the second quarter and first six months of fiscal 2006, respectively, to $34,925 and $67,731 from $33,664 and $63,166 in the same periods a year ago due to the Kern acquisition. Gross margin in Europe decreased to 26.3% and 27.7% from 27.3% and 27.9% during the second quarter and first six months of fiscal 2006 and 2005, respectively, primarily due to shifts in product mix.

Net sales in Asia/Pacific increased 9.5% and 18.9% to $34,793 and $71,993 in the second quarter and first six months of fiscal 2006, respectively, versus $31,776 and $60,565 in the same periods last fiscal year, led by continued strong demand for wireless products in the infrastructure, semiconductor fabrication and broadcasting markets. Net sales in Korea increased 29.9% and 41.7% to $8,964 and $20,939 in the second quarter and first six months of fiscal 2006, respectively, due mainly to higher sales of wireless products related to the third generation (3G) infrastructure rollout in Korea. Gross margins increased in all strategic business units in Asia/Pacific for the second quarter and first six months of fiscal 2006, as compared with last fiscal year due mainly to shifts in product mix focused on design registration programs and the reduction of lower margin programs.

Net sales in Latin America improved 20.0% and 21.6% to $5,980 and $11,980 in the second quarter and first six months of fiscal 2006, respectively, as compared with $4,983 and $9,848 in the second quarter and first six months of fiscal 2005, respectively. The net sales growth was mainly driven by an increase in

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sales of security products/systems integration, refocusing the EDG sales team after the realignment, and strong bookings of RFPD products which compensated for the decline in the defocused transmitter sales from the same fiscal period last year. Gross margin in Latin America declined to 27.2% and 26.3% in the second quarter and first six months of fiscal 2006, respectively, versus 28.7% and 27.7% in the year ago period primarily due to shifts in product mix.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) were relatively flat in the second quarter of fiscal 2006 as compared with the same period last year. SG&A increased 6.6% to $65,301 in the first six months of fiscal 2006 as compared with $61,264 in the same period last fiscal year. The increase in expenses for the first six months of fiscal 2006 as compared with the first six months of fiscal 2005 was primarily due to the acquisition of Kern. For the second quarter and first six months of fiscal 2006, total SG&A decreased to 20.7% and 20.8% of net sales, respectively, compared with 21.2% and 21.1% in last fiscal year’s second quarter and first six months, respectively.

Other (Income) Expense

In the second quarter and first six months of fiscal 2006, other (income) expense decreased to an expense of $6,247 and $8,367, respectively, from income of $1,204 and expense of $1,991 during the second quarter and first six months of fiscal 2005, respectively. Other (income) expense included a foreign exchange loss of $3,819 and $3,682 during the second quarter and first six months of fiscal 2006, respectively, as compared with a foreign exchange gain of $3,299 and $2,398 during the same periods last fiscal year. The foreign exchange variance was due to the strengthening of the U.S. dollar, primarily related to receivables due from foreign subsidiaries to the U.S. parent company and denominated in foreign currencies. Interest expense increased to $2,320 and $4,641 for the second quarter and first six months of fiscal 2006, respectively, as compared with $2,184 and $4,441 during the same periods of last fiscal year due to higher interest rates related to the Company’s amended and restated credit agreement.

Income Tax Provision

The effective income tax rates for the second quarter and first six months of fiscal year 2006 were 59.8% and 58.9%, respectively as compared with 34.0% and 33.1% for the second quarter and first six months of fiscal 2005, respectively. The difference between the effective tax rates as compared to the U.S. federal statutory rate of 34% primarily results from the Company’s geographical distribution of taxable income or losses, and, in the three and six months ended December 3, 2005, subject to valuation allowances related to net operating losses. For the six months ended December 3, 2005, the tax benefit primarily related to domestic net operating losses was limited by the requirement for a valuation allowance of $2,204, which increased the effective income tax rate by 44.5%. The first six months of fiscal 2006 includes an income tax provision of $344 for income tax exposures related to prior years recorded in the first quarter of fiscal 2006. In addition, during the second quarter of fiscal 2006, income tax reserves of approximately $1,000 for certain income tax exposures were reversed because the statute of limitations with respect to these income tax exposures expired.

In May 2005, the Company was informed by one of its foreign subsidiaries that its records may not be adequate to support the taxable revenues and deductions included within tax returns previously filed for the tax years 2003 and 2004. At this time, the Company has not received notification from any tax authority regarding this matter. In December 2005, the Company determined its income tax exposure for the tax year 2003 is less than $100. During the second quarter of fiscal 2006, the Company increased its income tax reserve for this potential exposure, and no additional exposure is anticipated with respect to the tax year 2003. The Company expects to complete its investigation for the tax year 2004 prior to the third quarter ending March 4, 2006. As of January 12, 2006, for the tax year 2004, based on the conclusions reached for the tax year 2003, any material liability is considered to be remote and therefore, no liability with respect to the tax year 2004 has been recorded.

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Net Income and Per Share Data

Net income for the second quarter of fiscal 2006 was $474 or $0.03 per diluted common share or $0.02 per Class B diluted common share as compared with $4,045 for the second quarter of fiscal 2005, or $0.23 per diluted common share or $0.21 per Class B diluted common share. Net income for the first six months of fiscal 2006 was $2,036 or $0.12 per diluted common share or $0.11 per Class B diluted common share as compared with $4,851 for the first six months of fiscal 2005, or $0.29 per diluted common share or $0.26 per Class B diluted common share.

Liquidity and Capital Resources

The Company has financed its growth and cash needs largely through income from operations, borrowings under the revolving credit facilities, an equity offering, issuance of convertible senior subordinated notes, and sale of assets. Liquidity provided by operating activities is reduced by working capital requirements, debt service, capital expenditures, dividends, and business acquisitions. Liquidity provided by operating activities is increased by proceeds from borrowings and dispositions of businesses and assets.

Cash and cash equivalents were $15,972 at December 3, 2005, a decrease of $8,558 from fiscal 2005 year end. The decrease in cash is primarily due to the collection of receivables due from foreign subsidiaries to the U.S. parent company. The cash received by the U.S. parent company was used to reduce the amount outstanding under the Company’s revolving credit agreement.

Cash provided by operating activities for the first six months of fiscal 2006 was $7,784 primarily due to higher accounts payable, partially offset by the increase in inventories. The increase in inventories, due to inventory stocking programs to support anticipated sales growth, was more than offset by the increase in accounts payable due to the timing of inventory purchases during the second quarter of fiscal 2006. Cash used in operating activities for the first six months of fiscal 2005 was $8,092 mainly due to an increase in inventories and accounts receivable. Initial stocking packages for exclusive supplier programs caused inventory to increase. Accounts receivable increased as a result of the 18.2% increase in sales during the second quarter of fiscal 2005 versus the second quarter of fiscal 2004.

Net cash used in investing activities of $9,232 for the first six months of fiscal 2006 was a result of the acquisition, effective June 1, 2005, of Kern located in Donaueschingen in southern Germany. The cash outlay for Kern was $6,583, net of cash acquired. In addition, effective October 1, 2005, the Company acquired Image Systems, a division of CSI in Hector, Minnesota. The initial cash outlay for Image Systems was $250. Image Systems is a specialty supplier of displays, display controllers, and calibration software for the healthcare market. The Company spent $2,673 on capital projects during the first six months of fiscal 2006 primarily related to facility and information technology projects. The Company spent $4,682 on capital projects during the first six months of fiscal 2005 related to PeopleSoft development costs and ongoing investments in information technology infrastructure.

Net cash used in financing activities of $6,507 was primarily due to payments of debt during the first six months of fiscal 2006 and costs related to the issuance of the Company’s 8% convertible senior subordinated notes (8% notes) on November 21, 2005. During the first half of fiscal 2005, net cash provided in financing activities was $12,937. During the first quarter of fiscal 2005, the Company had an equity offering for three million shares of stock that contributed $27,915 in proceeds that was used to reduce long-term debt by $13,293 and fund working capital requirements.

On November 21, 2005, the Company sold $25,000 in aggregate principal amount of 8% notes pursuant to an indenture dated November 21, 2005. The 8% notes bear interest at a rate of 8% per annum.

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Interest is due on June 15 and December 15 of each year. The 8% notes mature on June 15, 2011. The 8% notes are convertible at the option of the holder, at any time on or prior to maturity, into shares of the Company’s common stock at a price equal to $10.31 per share, subject to adjustment in certain circumstances. In addition, the Company may elect to automatically convert the 8% notes into shares of common stock if the trading price of the common stock exceeds 150% of the conversion price of the 8% notes for at least 20 trading days during any 30 trading day period subject to a payment of three years of interest if the Company elects to convert the 8% notes prior to December 20, 2008.

The indenture provides that on or after December 20, 2008, the Company has the option of redeeming the 8% notes, in whole or in part, for cash, at a redemption price equal to 100% of the principal amount of the 8% notes to be redeemed, plus accrued and unpaid interest, if any, but excluding, the redemption date. Holders may require the Company to repurchase all or a portion of their 8% notes for cash upon a change-of-control event, as described in the indenture, at a repurchase price equal to 100% of the principal amount of the 8% notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding the repurchase date. The 8% notes are unsecured and subordinate to the Company’s existing and future senior debt and senior to the Company’s existing 7 ¹/4% convertible subordinated debentures (7 ¹/4% debentures) and 8 ¹/4% convertible senior subordinated debentures (8 ¹/4% debentures). The 8% notes rank on parity with the Company’s existing 7 ³/4% convertible senior subordinated notes (7 ³/4% notes).

The Company has used the net proceeds from the sale of the 8% notes to repay amounts outstanding under its amended and restated credit agreement. The Company redeemed all of the outstanding 8 ¹/4% debentures on December 23, 2005 in the amount of $17,538 and all of the outstanding 7 ¹/4% debentures on December 30, 2005 in the amount of $4,753 by borrowing amounts under the amended and restated credit agreement to effect these redemptions.

In October 2004, the Company renewed its multi-currency revolving credit agreement with the current lending group in the amount of approximately $109,000 (varies based on fluctuations in foreign currency exchange rates). The agreement matures in October 2009, when the outstanding balance at that time will become due. At December 3, 2005, $24,989 was outstanding under the amended and restated credit agreement. The amended and restated credit agreement is principally secured by the Company’s trade receivables and inventory. The amended and restated credit agreement bears interest at applicable LIBOR rates plus a margin, varying with certain financial performance criteria. At December 3, 2005, the applicable margin was 2.25%. Outstanding letters of credit were $2,166 at December 3, 2005, leaving an unused line of $81,536 under the total amended and restated credit agreement; however, this amount was reduced to $29,173 due to maximum permitted leverage ratios. The commitment fee related to the amended and restated credit agreement is 0.25% per annum payable quarterly on the average daily unused portion of the aggregate commitment. The Company’s multi-currency revolving credit agreement consists of the following facilities as of December 3, 2005:

	Capacity		Amount Outstanding		Interest Rate
US Facility	$	70,000	$	1,300	6.75	%
Canada Facility		14,607		7,358	4.25	%
Sweden Facility		7,932		7,932	3.63	%
UK Facility		7,793		4,156	6.62	%
Euro Facility		5,868		2,582	4.19	%
Japan Facility		2,491		1,661	1.85	%
Total	$	108,691	$	24,989	4.41	%

Note: Due to maximum permitted leverage ratios, the amount of the unused line cannot be calculated on a facility-by-facility basis.

On August 24, 2005, the Company executed an amendment to the amended and restated credit agreement. The amendment changed the maximum permitted leverage ratios and the minimum required

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fixed charge coverage ratios for each of the first three quarters of fiscal 2006 to provide the Company additional flexibility for these periods. In addition, the amendment also provided that the Company will maintain excess availability on the borrowing base of not less than $23,000 until the 8 ¹/4% and 7 ¹/4% debentures were redeemed, at which time the Company will maintain excess availability of the borrowing base of not less than $10,000. The applicable margin pricing was increased by 25 basis points. In addition, the amendment extended the Company’s requirement to refinance the remaining $22,291 aggregate principal amount of the Company’s 7 ¹/4% debentures and the 8 ¹/4% debentures from February 28, 2006 to June 10, 2006.

At September 3, 2005, the Company was not in compliance with its amended and restated credit agreement covenants with respect to the tangible net worth covenant due solely to the additional goodwill recorded as a result of the Kern acquisition. On October 12, 2005, the Company received a waiver from its lending group for the default and executed an amendment to the amended and restated credit agreement. The amendment changed the minimum tangible net worth requirement to adjust for the goodwill associated with the Kern acquisition. At December 3, 2005, the Company was in compliance with its amended and restated credit agreement covenants.

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) revised Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation. This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) is effective at the beginning of the next fiscal year that begins after June 15, 2005, or the Company’s fiscal year 2007. The Company is evaluating the impact of the adoption of SFAS No.123(R) on the financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management and Market Sensitive Financial Instruments

The Company’s foreign denominated assets and liabilities are cash, accounts receivable, inventory, accounts payable, and intercompany receivables and payables, primarily in Canada and member countries of the European Union and, to a lesser extent, in Asia/Pacific and Latin America. The Company has not entered into any forward contracts to hedge significant transactions in fiscal 2006 or fiscal 2005. Other tools that the Company may use to manage foreign exchange exposures include the use of currency clauses in sales contracts and the use of local debt to offset asset exposures.

As discussed above, the Company’s debt financing expense, in part, varies with market rates exposing the Company to the market risk from changes in interest rates. Certain operations, assets, and liabilities of the Company are denominated in foreign currencies subjecting the Company to foreign currency exchange risk. In order to provide the user of these financial statements guidance regarding the magnitude of these risks, the Securities and Exchange Commission requires the Company to provide certain quantitative disclosures based upon hypothetical assumptions. Specifically, these disclosures require the calculation of the effect of a uniform 10% strengthening of the U.S. dollar against foreign currencies on the reported net earnings and financial position of the Company.

Had the U.S. dollar strengthened 10% against various foreign currencies, sales would have been lower by an estimated $6,400 and $12,400 for the three and six months ended December 3, 2005, respectively, and $6,000 and $11,200 for the three and six months ended November 27, 2004, respectively. Total assets would have declined by an estimated $11,400 as of the second quarter ended December 3, 2005 and an estimated $10,700 as of the fiscal year ended May 28, 2005, while the total liabilities would have decreased by an estimated $4,300 as of the second quarter ended December 3, 2005 and an estimated $4,100 as of the fiscal year ended May 28, 2005.

The interpretation and analysis of these disclosures should not be considered in isolation since such variances in interest rates and exchange rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect the Company’s operations.

For an additional description of the Company’s market risk, see “Item 7A – Quantitative and Qualitative Disclosures about Market Risk – Risk Management and Market Sensitive Financial Instruments” in the Company’s Annual Report on Form 10-K for the fiscal year ended May 28, 2005.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of December 3, 2005. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of December 3, 2005 due to material weaknesses in the Company’s internal control over financial reporting disclosed in “Item 9A. Controls and Procedures” of the Company’s Annual Report on Form 10-K for the fiscal year ended May 28, 2005. The weaknesses were (1) deficiencies in the Company’s control environment, (2) inadequate controls associated with the accounting for income taxes, (3) inadequate financial statement preparation and review procedures, and (4) deficiency related to the application of accounting literature. To address these material weaknesses, the Company has expanded its disclosure controls and procedures to include additional analysis and other post-closing procedures. Accordingly, management believes that the financial statements included in this report fairly present in all material respects the Company’s financial position, results of operations, and cash flows for the periods presented.

(b) Changes in Internal Control over Financial Reporting

There were nine changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the first six months of fiscal 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

• In June 2005, the Company hired a Director of Tax to increase its focus on processes and procedures associated with accounting for income taxes;

• The Company has implemented a program to provide training for accounting personnel in the Company’s foreign subsidiaries, which has been provided to the Company’s European and Asia/Pacific subsidiaries;

• The Company has enhanced its account reconciliation process to ensure that accounts are being reconciled on a timely basis, the reconciliations are independently reviewed, and any reconciling items are cleared on a timely basis;

• The Company has implemented a system to review and approve journal entries through system automation;

• The Company has implemented formal procedures for financial statement variance analysis and balance sheet reconciliations. The monthly closing schedule is formally communicated to all subsidiaries;

• The Company has improved documentation of management review and reconciliation performance through policies, education and re-enforcement, a listing of employees who reconcile and approve balance sheet account reconciliations, and the implementation of key financial manager checklists;

• The Company has engaged outside tax professionals to provide global compliance and reporting services to ensure that the Company has appropriate resources to conduct timely reviews and evaluations of the Company’s current and deferred tax provisions, deferred tax assets and liabilities, and related complex tax issues;

• The Company has developed a policy related to controls over end-user computing; and

• The Company hired a Director of Internal Audit to assist the Company in its ongoing evaluation and monitoring of internal control over financial reporting.

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(c) Remediation Efforts to Address Material Weaknesses in Internal Control over Financial Reporting

In order to remediate the material weaknesses identified in internal control over financial reporting and ensure the integrity of our financial reporting processes, the Company has implemented or is in the process of implementing the measures described in Item 4(b) above, as well as continuing to train its other foreign subsidiaries throughout fiscal 2006.

In addition, in an effort to improve internal control over financial reporting, the Company continues to emphasize the importance of establishing the appropriate environment in relation to accounting, financial reporting, and internal control over financial reporting and the importance of identifying areas for improvement and to create and implement new policies and procedures where material weaknesses or significant deficiencies exist.

It should be noted the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, do not expect that the Company’s internal controls will prevent all error and all fraud, even after completion of the described remediation efforts. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in several pending judicial proceedings concerning matters arising in the ordinary course of its business. While the outcome of litigation is subject to uncertainties, based on currently available information, the Company believes that, in the aggregate, the results of these proceeding will not have a material effect on the Company’s financial condition.

On December 20, 2002, the Company filed a complaint against Signal Technology Corporation in the United States District Court for the Northern District of Illinois, which the Company dismissed on February 27, 2003. On February 14, 2003 Signal Technology filed a declaratory judgment against the Company in Superior Court, Boston, Massachusetts, and on March 4, 2003, the Company filed a complaint against Signal Technology in the Circuit Court of Cook County, Illinois. On February 13, 2004, the Company dismissed the complaint in Circuit Court, Cook County, Illinois. From November 6, 2000 through December 6, 2001, Signal Technology issued six purchase orders to purchase low-frequency amplifiers and other electronic components from the Company and subsequently refused to take delivery of the components. The Company initially claimed damages of approximately $2.0 million resulting from the dispute concerning Signal Technology’s obligation to take delivery. Signal Technology’s declaratory judgment suit in Massachusetts seeks a ruling that it has no liability to the Company, but Signal Technology had not asserted any claim against the Company. The Company entered into a Settlement Agreement and Mutual Release with Signal Technology effective November 16, 2005. Pursuant to the settlement, the Company received a cash payment of $325,000, retained the remaining inventory, and the parties provided mutual releases without any admission of liability. The pending litigation was dismissed on November 30, 2005.

In fiscal 2003, two customers of the Company’s German subsidiary asserted claims against the Company in connection with heterojunction field effect transistors the Company sold to them. The Company acquired the heterojunction field effect transistors from the manufacturer pursuant to a distribution agreement. The customers claimed that the heterojunction field effect transistors did not meet the specification provided by the manufacturer. The Company notified the manufacturer and its insurance carrier of these claims. In fiscal 2005, the claim of one of the two customers was settled without any admission of liability on the part of the Company, with a full release from liability, and without any material consideration from the Company, the settlement amount being paid by the Company’s insurance carrier. On December 12, 2005, the claim of the second of the two customers was settled without any admission of liability on the part of the Company, with a full release from liability, and without any material consideration from the Company, the settlement amount being paid by the Company’s insurance carrier.

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

At the Annual Meeting of Stockholders held October 18, 2005, two proposals were submitted to a vote of the Company’s stockholders: (1) the election of directors; and (2) the adoption of the Richardson Electronics, Ltd. 2006 Stock Option Plan for Non-Employee Directors. Stockholders present in person or by proxy holding shares representing 44,133,308 votes out of a total of 45,473,296 votes entitled to be voted at the meeting were present, which was more than the number of votes necessary to constitute a quorum. The following table sets forth the results of the voting:

Proposal	Number of affirmative votes	Withheld authority
1. Election of Directors
Edward J. Richardson	38,504,455	5,628,853
Scott Hodes	37,657,382	6,475,926
Samuel Rubinovitz	40,808,903	3,324,405
Arnold R. Allen	38,448,446	5,684,862
Jacques Bouyer	40,760,271	3,373,037
Harold L. Purkey	40,753,948	3,379,360
Ad Ketelaars	43,216,989	916,319
Bruce W. Johnson	38,303,723	5,829,585
John R. Peterson	40,753,948	3,379,360
Proposal	For	Against	Abstain	Not Voted
2. Adoption of Stock Option Plan	38,074,767	3,573,332	72,116	2,413,093

Each of the proposals set forth above received more than the required number of votes for approval and was therefore duly and validly approved by the stockholders.

ITEM 5. OTHER INFORMATION

On January 10, 2006, the Company’s Board of Directors amended the Company’s Corporate Code of Conduct (the “Code of Conduct”). Among other non-material changes, the amendments clarify that, to the extent that the laws of any jurisdiction in which the Company operates conflict with a provision of the Code of Conduct, such laws will control the obligations of any Company employee employed in such jurisdiction.

The Code of Conduct is attached hereto as Exhibit 14 and is incorporated herein by reference.

On January 10, 2006, William G. Seils retired as General Counsel, Senior Vice President and Secretary of the Company and will remain as Of Counsel and Assistant Secretary of the Company. Mr. Seils’ resignation from his corporate offices was accepted by the Company and the Company appointed David J. Gilmartin as General Counsel, Vice President and Secretary to succeed Mr. Seils. Mr. Gilmartin was previously employed by the Company as its Assistant General Counsel, Vice President and Assistant Secretary from July 2004. Prior to that, Mr. Gilmartin served as Vice President of Legal for SBI Group Inc. from December 2002 to July 2004 and Deputy General Counsel to Lante Corporation from January 2002 until it was acquired by SBI Group Inc. in September 2002. Prior to that, Mr. Gilmartin served as Corporate Counsel to Alliant Foodservice, Inc. from May 1999 to January 2002.

ITEM 6. EXHIBITS

See exhibit index.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		RICHARDSON ELECTRONICS, LTD.
	By:	/s/    David J. DeNeve
Date: January 12, 2006		David J. DeNeve Senior Vice President and Chief Financial Officer (on behalf of the Registrant and as Principal financial and accounting officer)

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Exhibit Index 

(c) EXHIBITS

Exhibit Number	Description
3(a)	Restated Certificate of Incorporation of the Company, incorporated by reference to Appendix B to the Proxy Statement / Prospectus dated November 13, 1986, incorporated by reference to the Company’s Registration Statement on Form S-4, Commission File No. 33-8696.
3(b)	By-laws of the Company, as amended, incorporated by reference to Exhibit 3(b) to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1997, Commission File No. 000-12906.
10(am)	Employment, Nondisclosure and Non-Compete Agreement dated June 1, 2004 by and between the Company and David J. Gilmartin.
14	Corporate Code of Conduct, as amended January 10, 2006.
31.1	Certification of Edward J. Richardson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed pursuant to Part I).
31.2	Certification of David J. DeNeve pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed pursuant to Part I).
32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed pursuant to Part I).

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EX-10.(AM)

EXHIBIT 10(am)

EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT

EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT (“Agreement”) made and entered into as of this 1st day of June 2004 by and between RICHARDSON ELECTRONICS, LTD., a Delaware corporation with its principal place of business located at 40W267 Keslinger Road, P.O. Box 393, LaFox, IL 60147-0393 (the “Employer”), and DAVID J. GILMARTIN, an individual whose current residence address is 437 S. Hawthorne, Elmhurst, IL 60126 (“Employee”).

RECITALS

WHEREAS, the Employer desires to employ Employee upon the terms and conditions stated herein; and

WHEREAS, Employee desires to be so employed by the Employer at the salary and benefits provided for herein; and

WHEREAS, Employee acknowledges and understands that during the course of his employment, Employee has and will become familiar with certain confidential information of the Employer which provides Employer with a competitive advantage in the marketplace in which it competes, is exceptionally valuable to the Employer, and is vital to the success of the Employer’s business; and

WHEREAS, the Employer and Employee desire to protect such confidential information from disclosure to third parties or its use to the detriment of the Employer; and

WHEREAS, the Employee acknowledges that the likelihood of disclosure of such confidential information would be substantially reduced, and that legitimate business interests of the Employer would be protected, if Employee refrains from competing with the Employer and from soliciting its customers and employees during and following the term of the Agreement, and Employee is willing to covenant that he will refrain from such actions.

NOW THEREFORE, in consideration of the promises and of the mutual covenants and agreements hereinafter set forth, the parties hereto acknowledge and agree as follows:

ARTICLE ONE

NATURE AND TERM OF EMPLOYMENT

1.01 Employment. The Employer hereby agrees to employ Employee and Employee hereby accepts employment as the Employer’s Vice President and Assistant Corporation Counsel and such other positions as agreed upon by the parties.

1.02 Term of Employment. Employee’s employment pursuant to this Agreement shall commence on July 1, 2004 or such other date, sooner or later, as the parties may agree and, subject to the other provisions of this Agreement, the term of such employment (the “Employment Term”) shall continue indefinitely on an “at will” basis.

1.03 Duties. Employee shall perform such duties and responsibilities in connection with the Company’s Legal Department as may be assigned by the General Counsel, or such other person as the Employer may designate from time to time and Employee will adhere to the policies and procedures of the Employer, including, without limitation, its Code of Conduct, and will follow the supervision and direction of Employer’s General Counsel or such other person as the Employer may designate from time to time in the performance of such duties and responsibilities. Employee agrees to devote his full working time, attention and energies to the diligent and satisfactory performance of his duties hereunder and to developing and improving the business and best interests of the Company. Employee will use all reasonable efforts to promote and protect the good name of the Company and will comply with all of his obligations, undertakings, promises, covenants and agreements as set forth in this Agreement. Employee will not, during the Employment Term or during any period during which Employee is receiving payments pursuant to Article 2 and/or Section 5.04, engage in any activity

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which would have, or reasonably be expected to have, an adverse affect on the Employer’s reputation, goodwill or business relationships or which would result, or reasonably be expected to result, in economic harm to the Employer.

ARTICLE TWO

COMPENSATION AND BENEFITS

For all services to be rendered by Employee in any capacity hereunder (including as an officer, director, committee member or otherwise of the Employer or any parent or subsidiary thereof or any division of any thereof) on behalf of the Employer, the Employer agrees to pay Employee so long as he is employed hereunder, and the Employee agrees to accept, the compensation set forth below.

2.01 Base Salary. During the term of Employee’s employment hereunder, the Employer shall pay to Employee an annual base salary (“Base Salary”) at the rate of One Hundred Seventy Thousand and 00/100 Dollars ($170,000.00), payable in installments as are customary under the Employer’s payroll practices from time to time. The Employer at its sole discretion may, but is not required to, review and adjust the Employee’s Base Salary from year to year; provided, however, that, except as may be expressly consented otherwise in writing by Employee, Employer may not decrease Employee’s Base Salary. No additional compensation shall be payable to Employee by reason of the number of hours worked or by reason of hours worked on Saturdays, Sundays, holidays or otherwise.

2.02 Incentive Plan. During the term of the Employee’s employment hereunder, the Employee shall be a participant in the Corporate Bonus Plan, as modified from time to time (the “Annual Incentive Plan”) and paid a bonus (“Bonus”) pursuant thereto. The Employee’s “target bonus percentage” for purposes of the Annual Incentive Plan shall be twenty-five percent (25%). Such Bonus shall be determined and paid strictly in accordance with the Annual Incentive Plan as modified or reduced by Employer at its discretion, and for any partial fiscal year the Bonus shall be computed and paid only for the portion of the fiscal year Employee is employed hereunder.

2.03 Auto Allowance. During the term of the Employee’s employment hereunder, the Employee shall be paid an auto allowance in accordance with Employer’s auto allowance plan for corporate executives as modified from time to time.

2.04 Initial Stock Award and Future Option. On the commencement date of Employee’s employment under this agreement he will be granted a Stock Award under Employer’s Incentive Compensation Plan for 1,405 shares that will vest in five equal annual installments over five years beginning one year from the grant date. Employee will participate in the Employer’s Performance Based Management Stock Option Plan for Fiscal Year 2005 under the Employer’s Incentive Compensation Plan with a target base number of shares of 5,000. It is contemplated that if Employee becomes the Employer’s General Counsel he will the participate in such Performance Based management Stock Option Plan, if and as it then may exist, at a share level that is commensurate with other executive staff participants at the vice president level.

2.05 Other Benefits. Employer will provide Employee such benefits (other than bonus, auto allowance, severance and cash incentive compensation benefits) as are generally provided by the Employer to its other employees, including but not limited to, health/major medical insurance, dental insurance, disability insurance, life insurance, sick days and other employee benefits (collectively “Other Benefits”), all in accordance with the terms and conditions of the applicable Other Benefits Plans as in effect from time to time. Nothing in this Agreement shall require the Employer to maintain any benefit plan, nor prohibit the Employer from modifying any such plan as it sees fit from time to time. It is only intended that Employee shall be entitled to participate in any such plan offered for which he may qualify under the terms of any such plan as it may from time to time exist, in accordance with the terms thereof.

2.06 Disability. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness.

2.07 Withholding. All salary, bonus and other payments described in this Agreement shall be subject to

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withholding for federal, state or local taxes, amounts withheld under applicable benefit policies or programs, and any other amounts that may be required to be withheld by law, judicial order or otherwise.

ARTICLE THREE

CONFIDENTIAL INFORMATION

RECORDS AND

REPUTATION

3.01 Definition of Confidential Information. For purposes of this Agreement, the term “Confidential Information” shall mean all of the following materials and information (whether or not reduced to writing and whether or not patentable) to which Employee receives or has received access or develops or has developed in whole or in part as a direct or indirect result of his employment with Employer or through the use of any of Employer’s facilities or resources:

(1) Marketing techniques, practices, methods, plans, systems, processes, purchasing information, price lists, pricing policies, quoting procedures, financial information, customer names, contacts and requirements, customer information and data, product information, supplier names, contacts and capabilities, supplier information and data, and other materials or information relating to the manner in which Employer, its customers and/or suppliers do business;

(2) Discoveries, concepts and ideas, whether patentable or not, or copyrightable or not, including without limitation the nature and results of research and development activities, processes, formulas, techniques, “know-how,” designs, drawings and specifications;

(3) Any other materials or information related to the business or activities of Employer which are not generally known to others engaged in similar businesses or activities or which could not be gathered or obtained without significant expenditure of time, effort and money; and

(4) All inventions and ideas that are derived from or relate to Employee’s access to or knowledge of any of the above enumerated materials and information.

The Confidential Information shall not include any materials or information of the types specified above to the extent that such materials or information are publicly known or generally utilized by others engaged in the same business or activities in the course of which Employer utilized, developed or otherwise acquired such information or materials and which Employee has gathered or obtained (other than on behalf of the Employer) after termination of his employment with the Employer from such other public sources by his own expenditure of significant time, effort and money after termination of his employment with the Employer. Failure to mark any of the Confidential Information as confidential shall not affect its status as part of the Confidential Information under the terms of this Agreement.

3.02 Ownership of Confidential Information. Employee agrees that the Confidential Information is and shall at all times remain the sole and exclusive property of Employer. Employee agrees immediately to disclose to Employer all Confidential Information developed in whole or part by him during the term of his employment with Employer and to assign to Employer any right, title or interest he may have in such Confidential Information.

Without limiting the generality of the foregoing, every invention, improvement, product, process, apparatus, or design which Employee may take, make, devise or conceive, individually or jointly with others, during the period of his employment by the Employer, whether during business hours or otherwise, which relates in any manner to the business of the Employer either now or at any time during the period of his employment), or which may be related to the Employer in connection with its business (hereinafter collectively referred to as “Invention”) shall belong to and be the exclusive property of the Employer and Employee will make full and prompt disclosure to the Employer of every Invention. Employee will assign to the Employer, or its nominee, every Invention and Employee will execute all assignments and other instruments or documents and do all other things necessary and proper to confirm the Employer’s right and title in and to every Invention; and Employee will perform all proper acts within his power necessary or desired by the Employer

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to obtain letters patent in the name of the Employer (at the Employer’s expense) for every Invention in whatever countries the Employer may desire, without payment by the Employer to Employee of any royalty, license fee, price or additional compensation.

3.03. Non Disclosure of Confidential Information. Except as required in the faithful performance of Employee’s duties hereunder (or as required by law), during the term of his employment with Employer and for a period after the termination of such employment until the Confidential Information no longer meets the definition set forth above of Confidential Information with respect to Employee, Employee agrees not to directly or indirectly reveal, report, publish, disseminate, disclose or transfer any of the Confidential Information to any person or entity, or utilize for himself or any other person or entity any of the Confidential Information for any purpose (including, without limitation, in the solicitation of existing Employer customers or suppliers), except in the course of performing duties assigned to him by Employer. Employee further agrees to use his best endeavors to prevent the use for himself or others, or dissemination, publication, revealing, reporting or disclosure of, any Confidential Information.

3.04 Protection of Reputation. Employee agrees that he will at no time, either during his employment with the Employer or at any time after termination of such employment, engage in conduct which injures, harms, corrupts, demeans, defames, disparages, libels, slanders, destroys or diminishes in any way the reputation or goodwill of the Employer, its subsidiaries, or their respective shareholders, directors, officers, employees, or agents, or the services provided by the Employer or the products sold by the Employer, or its other properties or assets, including, without limitation, its computer systems hardware and software and its data or the integrity and accuracy thereof.

3.05 Records and Use of Employer Facilities. All notes, data, reference materials, memoranda and records, including, without limitation, data on the Employer’s computer system, computer reports, products, customers and suppliers lists and copies of invoices, in any way relating to any of the Confidential Information or Employer’s business (in whatever form existing, including, without limit, electronic) shall belong exclusively to Employer, and Employee agrees to maintain them in a manner so as to secure their confidentiality and to turn over to Employer all copies of such materials (in whole or in part) in his possession or control at the request of Employer or, in the absence of such a request, upon the termination of Employee’s employment with Employer. Upon termination of Employee’s employment with Employer, Employee shall immediately refrain from seeking access to Employer’s (a) telephonic voice mail, E-mail or message systems, (b) computer system and (c) computer data bases and software. The foregoing shall not prohibit Employee from using Employer’s public Internet (not intranet) site.

ARTICLE FOUR

NON-COMPETE AND NON-SOLICITATION COVENANTS

4.01 Non-Competition and Non-Solicitation. Employee acknowledges that it may be very difficult for him to avoid using or disclosing the Confidential Information in violation of Article Three above in the event that he is employed by any person or entity other than the Employer in a capacity similar or related to the capacity in which he is employed by the Employer. Accordingly, Employee agrees that he will not, during the term of employment with Employer and for a period of one (1) year after the termination of such employment, irrespective of the time, manner or cause of such termination, directly or indirectly (whether or not for compensation or profit):

(1) Engage in any business or enterprise the nature of any part of which is competitive with any part of that of the Employer (a “Prohibited Business”); provided that, performing services solely as legal counsel for a “Prohibited Business” shall not considered a violation of Section 4.01; or

(2) Participate as an officer, director, creditor, promoter, proprietor, associate, agent, employee, partner, consultant, legal counsel, sales representative or otherwise, or promote or assist, financially or otherwise, or directly or indirectly own any interest in any person or entity involved in any Prohibited Business; or

(3) Canvas, call upon, solicit, entice, persuade, induce, respond to, or otherwise deal with, directly or indirectly, any individual or entity which, during Employee’s term of employment with the Employer,

4

was or is a customer or supplier, or proposed customer or supplier, of the Employer whom Employee called upon or dealt with, or whose account Employee supervised, for any of the following purposes:

(a) to purchase (with respect to customers) or to sell (with respect to suppliers) products of the types or kinds sold by the Employer or which could be substituted for (including, but not limited to, rebuilt products), or which serve the same purpose or function as, products sold by the Employer (all of which products are herein sometimes referred to, jointly and severally, as “Prohibited Products”), or

(b) to request or advise any such customer or supplier to withdraw, curtail or cancel its business with the Employer; or

(4) For himself or for or through any other individual or entity call upon, solicit, entice, persuade, induce or offer any individual who, during Employee’s term of employment with the Employer, was an employee or sales representative or distributor of the Employer, employment by, or representation as sales agent or distributor for, any one other than the Employer, or request or advise any such employee or sales agent or distributor to cease employment with or representation of the Employer, and Employee shall not approach, respond to, or otherwise deal with any such employee or sales representative or distributor of Employer for any such purpose, or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.

4.02 Obligation Independent. Each obligation of each subparagraph and provision of Section 4.01 shall be independent of any obligation under any other subparagraph or provision hereof or thereof.

4.03 Public Stock. Nothing in Section 4.01, however, shall prohibit Employee from owning (directly or indirectly through a parent, spouse, child or other relative or person living in the same household with Employee or any of the foregoing), as a passive investment, up to 1% of the issued and outstanding shares of any class of stock of any publicly traded company.

4.04 Business Limitation. If, at the termination of Employee’s employment and for the entire period of twelve (12) months prior thereto his duties and responsibilities are limited by the Employer so that he is specifically assigned to, or responsible for, one or more divisions, subsidiaries or business units of the Employer, then subparagraphs (1) through (3) of Section 4.01 shall apply only to any business which competes with the business of such divisions, subsidiaries or business units.

4.05 Area Limitation. If at the termination of Employee’s employment and for the entire period of twelve (12) months prior thereto he or he has responsibility for only a designated geographic area, then subparagraphs (1) through (3) of Section 4.01 shall apply only within such area.

ARTICLE FIVE

TERMINATION

5.01 Termination of Employee for Cause. The Employer shall have the right to terminate Employee’s employment at any time for “cause.” Prior to such termination, the Employer shall provide Employee with written notification of any and all allegations constituting “cause” and the Employee shall be given five (5) working days after receipt of such written notification to respond to those allegations in writing. Upon receipt of the Employee’s response, the Employer shall meet with the Employee to discuss the allegations.

For purposes hereof, “cause” shall mean (i) an act or acts of personal dishonesty taken by the Employee and intended to result in personal enrichment of the Employee, (ii) material violations by the Employee of the Employee’s obligations or duties under, or any terms of, this Agreement, which are not remedied in a reasonable period (not to exceed ten (10) days) after receipt of written notice thereof from the Employer, (iii) any violation by the Employee of any of the provisions of Articles Three or Four, or (iv) Employee being charged, indicted or convicted (by trial, guilty or no contest

5

plea or otherwise) of (a) a felony, (b) any other crime involving moral turpitude, or (c) any violation of law which would impair the ability of the Employer or any affiliate to obtain any license or authority to do any business deemed necessary or desirable for the conduct of its actual or proposed business.

5.02 Termination of Employee Because of Employee’s Disability, Injury or Illness. The Employer shall have the right to terminate Employee’s employment if Employee is unable to perform the duties assigned to him by the Employer because of Employee’s disability, injury or illness, provided however, such inability must have existed for a total of one hundred eighty (180) consecutive days before such termination can be made effective. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness.

5.03 Termination as a Result of Employee’s Death. The obligations of the Employer to Employee pursuant to this Agreement shall automatically terminate upon Employee’s death.

5.04 Termination of Employee for any Other Reason. The Employer shall have the right to terminate Employee’s employment at any time at will for any reason upon (a) six months prior written notice to Employee if the notice of termination is given to Employee prior to or on July 1, 2005, or (b) one year prior written notice to Employee if the notice of termination is given to Employee after July 1, 2005.

5.05 Termination by Employee. Subject to the provisions of Articles Three and Four above, Employee may terminate his employment by the Employer at any time by written notice to Employer.

5.06 Compensation on Termination. If Employee’s employment is terminated under Sections 5.01, 5.02 or 5.03 above, the Employer’s obligation to pay Employee’s Base Salary, Auto Allowance and Bonus pursuant to the Annual Incentive Plan shall cease on the date on which the termination of employment occurs and shall be prorated and accrued to the date of termination. Employer’s obligations and Employee’s rights with respect to Stock Awards, Options and Other Benefits shall be governed by the provisions of the plans under which they are granted.

If Employee’s employment is terminated under Section 5.04 (a) the Employer shall be obligated to continue to pay to Employee his then current Base Salary accrued up to and including the date on which Executive’s employment is so terminated, (b) the Employer shall continue to pay Auto Allowance and Bonus, in accordance with the terms of the Annual Incentive Plan under which it is them being paid, accrued up to and including the date on which Employee’s employment is so terminated, and (c) Employer’s obligations and Employee’s rights with respect to Stock Awards, Options and Other Benefits shall be governed by the provisions of the plans under which they are granted and paid or provided to the date on which Employee’s employment is so terminated.

If Employee’s employment is terminated under Section 5.05, subject to its rights as specified in Section 1.02, (a) the Employer shall be obligated to continue to pay to Employee his then current Base Salary accrued up to and including the date on which Executive’s employment is so terminated, (b) the Employer shall continue to pay Auto Allowance and Bonus, in accordance with the terms of the Annual Incentive Plan under which it is them being paid, accrued up to and including the date notice of termination is given under such Section, and (c) Employer’s obligations and Employee’s rights with respect to Stock Awards, Options and Other Benefits shall be governed by the provisions of the plans under which they are granted and paid or provided to the date on which Employee’s employment is so terminated.

ARTICLE SIX

REMEDIES

6.01 Employee acknowledges that the restrictions contained in this Agreement will not prevent him from obtaining such other gainful employment he may desire to obtain or cause him any undue hardship and are reasonable and necessary in order to protect the legitimate interests of employer and that violation thereof would result in irreparable injury to Employer. Employee therefor acknowledges and agrees that in the event of a breach or threatened breach by Employee of the provisions of Article Three or Article Four or Section 1.03, Employer shall be entitled to seek an

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injunction restraining Employee from such breach or threatened breach and Employee shall lose all rights to receive any payments under Section 5.04. Nothing herein shall be construed as prohibiting or limiting Employer from pursuing any other remedies available to Employer for such breach or threatened breach; the rights hereinabove mentioned being in addition to and not in substitution of such other rights and remedies. The period of restriction specified in Article Four shall abate during the time of any violation thereof, and the portion of such period remaining at the commencement of the violation shall not begin to run until the violation is cured. If Employer is unsuccessful on the merits of such action, the restriction shall terminate upon termination of such action.

6.02 Survival. The provisions of this Article Six and of Articles Three and Four shall survive the termination or expiration of this Agreement.

ARTICLE SEVEN

MISCELLANEOUS

7.01 Assignment. Employee and Employer acknowledge and agree that the covenants, terms and provisions contained in this Agreement constitute a personal employment contract and the rights and obligations of the parties thereunder cannot be transferred, sold, assigned, pledged or hypothecated, excepting that the rights and obligations of the Employer under this Agreement may be assigned or transferred pursuant to a sale of the business, merger, consolidation, share exchange, sale of substantially all of the Employer’s assets or of the business unit or division for which Employee is performing services, or other reorganization described in Section 368 of the Code, or through liquidation, dissolution or otherwise, whether or not the Employer is the continuing entity, provided that the assignee, or transferee is the successor to all or substantially all of the assets of the Employer or of the business unit or division for which Employee is performing services and such assignee or transferee assumes the rights and duties of the Employer, if any, as contained in this Agreement, either contractually or as a matter of law.

7.02 Severability. Should any of Employee’s obligations under this Agreement or the application of the terms or provisions of this Agreement to any person or circumstances, to any extent, be found illegal, invalid or unenforceable in any respect, such illegality, invalidity or unenforceability shall not affect the other provisions of this Agreement, all of which shall remain enforceable in accordance with their terms, or the application of such terms or provisions to persons or circumstances other than those to which it is held illegal, invalid or unenforceable. Despite the preceding sentence, should any of Employee’s obligations under this Agreement be found illegal, invalid or unenforceable because it is too broad with respect to duration, geographical or other scope, or subject matter, such obligation shall be deemed and construed to be reduced to the maximum duration, geographical or other scope, and subject matter allowable under applicable law.

The covenants of Employee in Articles Three and Four and each subparagraph of Section 4.01 are of the essence of this Agreement; they shall be construed as independent of any other provision of this Agreement; and the existence of any claim or cause of action of Employee against the Employer, whether predicated on the Agreement or otherwise shall not constitute a defense to enforcement by the Employer of any of these covenants. The covenants of Employee shall be applicable irrespective of whether termination of employment hereunder shall be by the Employer or by Employee, whether voluntary or involuntary, or whether for cause or without cause.

7.03 Notices. Any notice, request or other communication required to be given pursuant to the provisions hereof shall be in writing and shall be deemed to have been given when delivered in person or three (3) days after being deposited in the United States mail, certified or registered, postage prepaid, return receipt requested and addressed to the party at its or his last known addresses. The address of any party may be changed by notice in writing to the other parties duly served in accordance herewith.

7.04 Waiver. The waiver by the Employer or Employee of any breach of any term or condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. Failure by any party to claim any breach or violation of any provision of this Agreement shall not constitute a precedent or be construed as a waiver of any subsequent breaches hereof.

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7.05 Continuing Obligation. The obligations, duties and liabilities of Employee pursuant to Articles Three and Four of this Agreement are continuing, absolute and unconditional and shall remain in full force and effect as provided herein and survive the termination of this Agreement.

7.06 No Conflicting Obligations or Use. Employer does not desire to acquire from Employee any secret or confidential know-how or information which he may have acquired from others nor does it wish to cause a breach of any non compete or similar agreement to which Employee may be subject. Employee represents and warrants that (i) other than for this Agreement, he is not subject to or bound by any confidentiality agreement or non disclosure or non compete agreement or any other agreement having a similar intent, effect or purpose, and (ii) he is free to use and divulge to Employer, without any obligation to or violation of any right of others, any and all information, data, plans, ideas, concepts, practices or techniques which he will use, describe, demonstrate, divulge, or in any other manner make known to Employer during the performance of services.

7.07 Attorneys Fees. In the event that Employee has been found to have violated any of the terms of Articles Three or Four of this Agreement either after a preliminary injunction hearing or a trial on the merits or otherwise, Employee shall pay to the Employer the Employer’s costs and expenses, including attorneys fees, in enforcing the terms of Articles Three or Four of this Agreement. In the event that Employee has been found to not to have violated any of the terms of Articles Three or Four of this Agreement either after a preliminary injunction hearing or a trial on the merits or otherwise, Employer shall pay to the Employee the Employee’s costs and expenses, including attorneys fees, in defending the action.

7.08 Advise New Employers. During Employee’s employment with the Employer and for one (1) year thereafter, Employee will communicate the contents of Articles Three and Four to any individual or entity which Employee intends to be employed by, associated with, or represent which is engaged in a business which is competitive to the business of Employer.

7.09 Captions. The captions of Articles and Sections this Agreement are inserted for convenience only and are not to be construed as forming a part of this Agreement.

EMPLOYEE ACKNOWLEDGES THAT HE HAS READ AND FULLY UNDERSTANDS EACH AND EVERY PROVISION OF THE FOREGOING AND DOES HEREBY ACCEPT AND AGREE TO THE SAME.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

EMPLOYEE	EMPLOYER
	By:
	Title:

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EXHIBIT A

ANNUAL INCENTIVE PLAN

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EX-14

Exhibit 14

RICHARDSON ELECTRONICS GROUP

CORPORATE CODE OF CONDUCT

This Corporate Code of Conduct states concepts and principles by which all entities forming part of the Richardson Electronics, Ltd. group of companies (individually or collectively, as applicable, “Richardson” or the “Company”) has operated for many years. As we have grown larger in numbers it was deemed advisable to begin to put these concepts and principles in writing to avoid any possible misunderstanding or misinterpretation, and also to emphasize Richardson’s high priority for observance of the standards set forth. This written statement of our Company’s policies will be added to from time to time as appropriate.

Key among Richardson’s business principles is the principle of integrity.

Richardson expects the highest level of integrity and ethical behavior in relationships with customers, employees, stockholders, vendors, neighbors and governments.

Richardson, like any other business, is subject to countless federal, state and local laws and regulations. It is the policy of Richardson to operate its worldwide business in accordance with the highest ethical standards, and with the applicable laws of the United States and other jurisdictions in which the Company operates not only following the letter of these laws, but the spirit as well. Specific matters or types of transactions not covered by specific policies should be conducted in accordance with this general policy.

As an employee of Richardson, you are obligated to monitor your personal and professional affairs so as not to discredit the Company. Your personal conduct should reflect the highest professional standards of behavior. Your behavior at work reflects Richardson’s ethics, so you will be expected to:

Obey all laws and regulations that apply to Richardson’s business.

Avoid activities that could create conflicts of interest or even the appearance of conflicts of interest with Richardson.

Respect the confidentiality of information about those with whom Richardson has business relationships and Richardson’s business and activities.

Details of the above principles and obligations are presented in the remainder of this Code of Conduct. Remember, the standards and examples that are given are guidelines. While in several cases we have referred to specific laws of the United States, in the following sections, our Code of Conduct requires your compliance with all applicable laws. This requires compliance with all laws of the Country in which you are working, including, without limitation, those comparable to the referenced United States laws.

I. CONFLICT OF INTEREST

1. POLICY

A. All Company employees have a duty to the Company to be entirely free from the influence of any conflicting interests when they represent the Company in any business dealings, or make any recommendations which may influence an action of the Company.

B. The Company respects the rights of employees to privacy in their personal activities and financial affairs. A principal purpose of this policy is to provide guidance to employees in avoiding situations in their personal activities and financial affairs which are, or may appear, in conflict with their responsibility to act in the best interests of the Company at all times. The policy of the Company has been and continues to be that: (i) no employee shall engage in conduct which results in a conflict of his personal interests with that of the Company or which reflects unfavorably on the integrity; and (ii) each employee will comply with the applicable laws which apply to our operations in each of the countries in which Richardson operates.

C. It is impractical to try to foresee or define with precision every situation which might be considered as a conflict of interest. Generally speaking, a conflict of interest exists when an obligation or a situation resulting from an employee’s personal activities or financial affairs may adversely influence his judgment in the performance of his duty to the Company or may be inconsistent with or opposed to the best interests of the Company. Richardson naturally expects complete and undivided loyalty to its

Code of Conduct 1-06 1

interests from its employees. At Richardson, a conflict of interest occurs when you allow any interest, activity or influence outside of Richardson to:

Influence your judgment when acting on behalf of Richardson;

Compete against Richardson in any business activity;

Diminish the efficiency with which you perform your regular duties; or

Harm or impair Richardson’s business, financial or professional reputation.

As an employee, you are not permitted to participate in any activity which could cause a conflict of interest or give the appearance of a conflict of interest. There may well be cases in which an apparent conflict of interest is more theoretical then real, but it is important to resolve such doubtful cases promptly. An employee in doubt about his position in a particular case should make a timely disclosure of the facts in consultation with the responsible supervisory personnel of the Company.

2. GUIDES FOR COMPLIANCE

The situations described in the following paragraphs are areas where the possibility of a conflict of interest may occur:

A. FINANCIAL INTERESTS

A conflict of interest may exist when an employee, directly or indirectly, or one of his close relatives, owns any beneficial interest in, or lends money to or borrows from, an organization which is a competitor of the Company, or which has current or prospective business with the Company as a supplier, customer, or contractor, and when such employee may be able to influence such business with the Company. (A conflict is not likely to exist, however, where the financial interest consists of stock shares, bonds or other securities of a company listed on a public securities exchange, and the amount of such interest is less than five percent (5%) of the value of the class of such securities and represents less then five percent (5%) of the individual’s net worth.)

B. OUTSIDE WORK

A conflict of interest may exist when an employee, directly or indirectly, or one of his close relatives serves as a director, officer, employee, consultant, or agent of an organization which is a competitor of the Company, or which has current or prospective business with the Company as a supplier, customer, or contractor. Similarly, a conflict of interest may exist when an employee undertakes to engage in an independent business venture or to perform work or services for another business, civil, or charitable organization to the extent that the activity prevents such employee from devoting the time and effort to the Company’s business which his position requires. Generally, your outside interests or activities:

Should not significantly encroach on time or attention you devote to your duties;

Should not adversely affect the quality of your work;

Should not compete with Richardson’s activities;

Should not involve any significant use of Richardson’s equipment, facilities, or supplies;

Should not imply Richardson’s sponsorship or support (for example, through the use of Richardson stationery for personal purposes); or

Should not adversely affect the reputation of Richardson.

C. GIFTS OR FAVORS

A conflict of interest may arise when an employee, or one of his close relatives, asks for or accepts any payment, gift, favor or any other thing of significant value from any person or organization which is a competitor of the Company, or which has current or

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prospective business with the Company as a supplier, customer or contractor, if the acceptance, or the prospect of future gifts or favors, may tend to limit the employee/recipient from acting solely in the best interests of the Company in dealings with such person or organization. For this purpose a “gift” or “favor” includes any gratuitous service, loan, discount, money or article of value, but does not include loans from financial institutions on customary terms, articles of nominal value ordinarily used for sales promotion, ordinary “business lunches,” or reasonable entertainment consistent with local social and business custom. Reporting Requirements. Any employee receiving any payment, gift, favor or other thing of value (such as dinner, entertainment, tickets to sporting events, concerts and the like) that exceed $500 in value from any person or organization which is a competitor of the Company, or which has current or prospective business with the Company as a supplier, customer or contractor, shall report the same to his supervisor and request approval before accepting the same.

D. TRADING WITH THE COMPANY

A conflict of interest may exist when an employee, or one of his close relatives, is a principal party to a transaction with the Company involving the rental or purchase of real estate or other property, where the transaction is something other than the routine purchase of merchandise from the Company, or purchases of Company surplus property according to customary or established disposition procedures. No employee or member of his immediate family is to benefit personally from any purchase of goods or services of whatever nature by Richardson or by its subsidiaries or affiliates, or to derive personal gain from actions taken or associations made in his capacity as an employee of Richardson. In some instances it may be a benefit to the Company to engage in a transaction with an employee, but this will be done only with Directors’ approval.

E. MISUSE OF CONFIDENTIAL INFORMATION

A conflict of interest may exist when an employee, or one of his close relatives, uses for his personal gain or for the benefit of others any confidential information obtained as a result of his employment with the Company, or permits or suffers any such use. Examples include trading in shares of the Company or shares of another company as a result of any unpublished “inside” business information, and unauthorized use of Company-owned confidential business or technical information.

F. “INSIDE” INFORMATION

As an investor-owned corporation, Richardson is subject to a wide variety of complex laws and regulations governing transactions in corporate securities (stocks and bonds) and the securities industry. These laws are designed to protect the investing public by requiring disclosure of material information by the corporations whose securities are traded publicly. These laws are strictly enforced and violation can lead to civil and criminal actions against the individuals and the corporation involved.

Employees who know of any material fact about Richardson which has not been disclosed to the general public, are said to have access to “inside” information. The inside information rule applies only to material facts - information that may be a factor in a decision to buy, sell, or hold a particular security. Some examples: knowledge of significant new products or discoveries, sales and earnings figures, major contracts, plans for stock splits or acquisitions or mergers. Employees may not engage in any transactions in Richardson stocks or bonds until such information is disclosed to the public, nor may employees provide such information to others (family members, friends, brokers, etc.).

This rule also applies to securities of other companies. If in the course of business you become aware of “inside” information about another corporation you may not engage in any transactions in that corporation’s stock or bonds, or provide that information to others, until such information is disclosed to the public. For example, if you become aware of a significant new product or discovery by one of the corporations that is a customer or supplier of ours, you may not engage in any transaction in that corporation’s securities or tell others of the product or discovery until that corporation discloses the information to the public in general.

G. CONFIDENTIAL INFORMATION

As part of your job, you may have access to confidential information about Richardson, its customers, suppliers and competitors. Until released to the public, this information should not be disclosed to fellow employees who do not have a business need to know or to non-employees for any reason, except in accordance with established corporate procedures. Confidential information of this sort includes information or data on customers, products, business strategies, corporate manuals, processes, systems, procedures, computer software and databases, engineering, research and development, market surveys and data, etc. It includes information of this type which you may discover, develop, conceive or create. You are not to disclose, permit or suffer

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disclosure of confidential information to anyone outside of the Company or use, permit or suffer use of confidential information directly or indirectly for your personal benefit or for the benefit of any third party who is not entitled to such information.

No employee is to use or reveal (without proper authorization) to a third party, or permit or suffer use or such revelation of, any confidential product information, data on decisions, plans, or any other information concerning Richardson or any subsidiary or affiliate. Confidential information is to be used only for corporate purposes. Under no circumstances may you use such information for personal gain or pass it on to any person outside of the Company, including family or friends, or even to other associates who do not need such information to carry out their duties or permit or suffer any such use or passing on of such information.

Upon termination of your employment with the Company, voluntarily or involuntarily, you agree to, and will, forthwith return to the Company all confidential information and confidential product information or materials, and any and all copies thereof in whole or in part whether made by you or others and in whatever form or medium, then in or at any time thereafter coming into your possession or control.

H. MISAPPROPRIATION OF BUSINESS OPPORTUNITIES

A conflict of interest may exist when an employee, without the knowledge and consent of the Company, appropriates to himself or to another person or organization the benefit of any business venture, opportunity, information or potential about which such employee learns or develops in the course of his employment, and which is related to any current or prospective business of the Company. No employee should appropriate to himself or herself, nor divert to any other person or entity, a business or financial opportunity or information which the employee knows, or reasonably could anticipate, the Company would have interest in pursuing.

I. COMPANY RELATIVES

A conflict of interest may exist when an employee, directly or indirectly, supervises or processes payments (i.e. payroll, employee benefits) to relatives or cohabitants employed by the Company. Similarly a conflict of interest may exist when an employee, directly or indirectly, processes orders or payments to, or makes any decisions relating to a customer or supplier of Richardson that employs a relative or cohabitant of the employee. The mere fact that a relative or cohabitant may work for the Company or a customer or supplier does not automatically mean that a conflict exists.

J. USE OF CORPORATE FUNDS AND ASSETS

The assets of Richardson are much more than our physical plants, equipment, corporate funds, typewriters and pencils. They include technologies and concepts, business strategies and plans, as well as information about our business, our customer list, and information regarding customer’s needs and activities, our computer programs, detail information regarding our finances, inventories, manufacturing, markets and the like, and files and data you develop in the course of your employment with the Company. These assets may not be improperly used to provide personal gain for employees. Nor may employees provide others with the assets of Richardson. No employee is to use, or permit others to use, Richardson employees, materials or equipment improperly for personal purposes.

II. KICKBACKS AND GIFTS AND GRATUITIES

1. POLICY:

We obtain and keep our business because of the quality of our products and services. Conducting business, however, with suppliers and customers can pose ethical or even legal problems, especially in international activities where differing local laws, customs and market practices exist. The following guidelines are intended to help all employees make the “right” decision in potentially difficult situations.

It is the policy of the Company to obey the laws of the United States and all other countries in which the Company does business. It is also the policy of the Company that such laws are a “floor” and the ethical standards of the Company in the conduct of its business should normally be well above that minimum level. Set forth in this policy are a few specific actions which are not considered to be within the acceptable standards of ethical conduct.

No officer or employee acting on behalf of the Company shall:

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(a) offer, give, solicit or take a bribe;

(b) maintain Company funds in a separate account for unlawful or improper purposes;

(c) establish or allow to be maintained an undisclosed or unrecorded fund or asset for any purpose, i.e., not kept and accounted for as part of the general books and records of the Company;

(d) pay or apply any corporate funds or asset(s) for any purpose other than as described by the documents supporting the payment or application.

It is emphasized, however, that these examples are not all inclusive and with respect to each and every action proposed to be taken by an officer or employee on behalf of the Company, the individual should ask of himself or herself the following questions.

(a) Would the proposed action(s), if publicly revealed, seem morally wrong to those whose standards of morality are generally respected?

(b) Would such action(s), if publicly revealed, be embarrassing to the Company or to the individual involved and/or to his or her family?

If the answer to either of these questions is “yes” the action should not be taken. If there is doubt, the matter should be brought to a supervisor’s attention.

2. GUIDES FOR COMPLIANCE:

A. KICKBACKS

No employee of the Company, or anyone acting in its behalf shall, for the purpose of receiving, or giving preferential consideration in maintaining, securing, or awarding business or other concessions either for the Company, or to any other company, agency, organization, or their representatives:

(1) Make, or offer to make, directly or indirectly, a kickback, whether in cash, property, or services, to any employee, person, company, organization, or any of their representatives, or to any (federal, state, or local) government official or employee, domestic or foreign, governmentally controlled business, corporations, companies, or societies.

(2) Accept, solicit, invite, or request a kickback, directly or indirectly, in any form whether cash property, or services, from any source or under any of the circumstances as outlined in 1 above.

The payment or acceptance of kickbacks is a serious offense which can lead to criminal penalties, including fines and imprisonment if made in conjunction with a U.S. Government prime contract or subcontract, and in cases involving a commercial transaction, could subject both the Company and its management to embarrassment and possible litigation.

This policy is not intended to prohibit reasonable business expenses paid for such things as entertainment, business meals, sales commissions and other normal costs of marketing and doing business. Unless prohibited by law in specific situations, this policy does not preclude (i) the exchange of gifts between an employee or agent of the Company and a personal friend; (ii) the exchange of gifts between an employee or agent of the Company and a business associate where such is the custom in the associate’s country; (iii) the giving of tips or gratuities to expedite service and handling; or (iv) the issuance of handouts of nominal value for advertising or goodwill. Reporting Requirements. Any employee giving any payment, gift, favor or other thing of value (such as dinner, entertainment, tickets to sporting events, concerts and the like) that exceed $500 in value to any person or organization which is a competitor of the Company, or which has current or prospective business with the Company as a supplier, customer or contractor, shall report the same to his supervisor and request approval before giving same.

This policy does prohibit the offering, authorizing, paying or promising to pay money or anything of value to any official or employee of the U.S. Government or of a foreign government or of a commercial firm with whom we do or seek to do business if it is done to influence such official or employee to violate, breach or disregard a law, rule, regulation or policy he is required to enforce or

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observe. Note, there are further limitations with respect to employees and officials of U.S. Government organizations with whom we do business.

There are many U.S. laws that govern the conduct of companies and their employees in the giving of gifts and bribes. Antitrust laws, securities laws and certain other criminal statutes directly control such activities. The U.S. Foreign Corrupt Practices Act makes it a serious violation to offer, pay, authorize or promise to pay money to a foreign official to influence his official acts or decisions (including a decision not to act) or to use his influence with a government or a government instrumentally to influence its acts or decisions. Here, “money” also includes gifts and things of value. “Foreign official” includes not only employees of the government but employees of quasi-government organization such as commissions, authorities, private corporations hired to perform government tasks, universities, hospitals and similar entities owned or funded by the government. It also includes foreign political parties, their officials and candidates for foreign political office and, in fact, anyone, if we know or have reason to know that the money is going to any foreign official for influencing such decisions.

Although it is illegal to give money or something of value to a foreign official with the intent to influence him in his official acts, there are times when a tip or gratuity may be properly given to him. It is legal to give a customs worker in a non-U.S. port such a tip or gratuity to insure the movement of goods through such port where it is local custom to experience long delays in clearing that port when, tips are not given. This is only true where such worker has no authority to enforce, make judgments concerning or interpret the laws, rules or regulations applying to such entry. In this example and in all cases, the controlling factor is not the intention of the donor but it is the actual authority of the foreign official or worker. If he has the authority to enforce laws, grant contracts, interpret regulations, assess duties or taxes or in any way exercise discretionary authority, then it is illegal to give him any gift regardless of whether or not he actually exercises such authority to the Company’s advantage. On the other hand, if he does not have such authority and is given a tip to perform his assigned duties in an expeditious manner, then the gift is not illegal. It is sometimes difficult to accurately determine the authority of the recipient. Therefore, all doubts should be resolved in favor of making no such offer, payment or promise to pay. Furthermore, even when it is determined that the recipient has only such limited authority, the value of the gift should be nominal in relation to the services rendered.

B. RECIPROCITY

In many instances, the Company may purchase goods and/or services from a supplier who buys products or services from us. This practice is normal and acceptable, but any form of “reciprocity” for supplier purchases is not. That is suppliers may not be asked to buy our products and services in order to become or continue to be a supplier.

C. PAYMENTS TO AGENTS, CONSULTANTS, DISTRIBUTORS

Agreements with agents, sales representatives, distributors and consultants must be in writing and must clearly and accurately set forth the services to be performed, the basis for earning the commission or fee involved, and the applicable rate or fee. Payments must be reasonable in amount, not excessive in light of the practice in the trade and commensurate with the value of services rendered. The agent, sales representative, distributor or consultant must be advised that the agreement may be publicly disclosed and must agree to such public disclosure. In some foreign countries, local laws may prohibit the use of agents or limit the rate of commission or fee.

Sales may not be billed at prices exceeding the established net price for the product and level of distribution in question. This ensures against overbilling and possible rebate abuses.

D. PAYMENTS TO GOVERNMENT EMPLOYEES

No payment of money, gifts, services, entertainment or anything of value may be offered or made available in any amount, directly or indirectly, to any government officials or employees in any country where such payments are illegal under the laws of that country. However, payments in minimal amounts as authorized under the Foreign Corrupt Practices Act and usual or customary in the country covered may be made to low-level foreign government (non-U.S.) employees, whose duties are essentially ministerial or clerical, for the purpose of processing or expediting routine matters.

E. PAYMENT OR COURTESIES TO U.S. GOVERNMENT EMPLOYEES

It is illegal to give or promise anything of value to any employee of any Government Unit, including State and Municipal, to influence any public act. No payment or business courtesy may be provided to any employee of any Government Unit, including State

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and Municipal employee. Applicable U.S. Government standard of conduct regulations generally prohibit the furnishing of anything of value to government employees other than promotional or advertising novelties with the Company name or logo on them and of less than $5 retail value. You may provide meals and/or refreshments at a working business meeting or hospitality suites or other public functions but you must advise government employees attending of the fair cost thereof and that applicable regulations require them to pay for such business courtesies received, and provide a convenient method for them to reimburse the Company. You have no obligation if they do not. When dining with a Government employee, it is appropriate for each person to pay the cost of his or her lunch. You may not provide transportation to a Government employee except that automobile transportation may be provided between local Richardson facilities.

F. BUSINESS COURTESIES ACCEPTED FROM RICHARDSON VENDORS UNDER U.S. GOVERNMENT CONTRACTS AND BUSINESS COURTESIES GRANTED TO EMPLOYEES OF HIGHER TIER U.S. GOVERNMENT PRIME CONTRACTORS AND SUBCONTRACTORS

Any gift or gratuity intended as an inducement for the award of a subcontract or order previously awarded is an unlawful kickback. Any business courtesy or social amenity which might be construed as a kickback must not be provided or accepted. You must also comply with any customer rules of conduct for its own employees. Meals and/or refreshments of modest value may be provided or accepted in connection with a working business meeting. Such refreshments and meals must be for the benefit of the companies involved, not the individuals, must not be entertainment, and must not exceed amounts considered reasonable for Richardson employee meals and refreshments under Richardson expense account rules. Local automobile transportation may be provided or accepted where it facilitates the purposes of a working business meeting.

III. BOOKS AND RECORDS

1. POLICY:

False or artificial entries shall not be made in the books or records of the Company for any reason; to do so may result in criminal and/or civil penalties to the Company and/or employee. No employee may engage in an arrangement that in any way may be interpreted or construed as misstating or otherwise concealing the nature or purpose of any entries in the books and records of the Company.

No payment or receipt on behalf of the Company may be approved or made with the intention or understanding that any part of the payment or receipt is to be used for a purpose other than that described in the documents supporting the transaction. “Slush funds” or similar funds or accounts where no accounting for receipts or expenditures is made on the Company’s books are strictly prohibited.

IV. COMPETITIVE PRACTICES

1. POLICY:

In business, it is inevitable that the Company and its competitors will meet and talk from time to time. This is neither against the law nor to be avoided.

What must be avoided at all costs, is collaboration with competitors in violation of the law on such things as pricing, production, marketing, inventories, product development, sales territories and goals, market studies and proprietary or confidential information.

As a vigorous competitor in the marketplace, we seek economic knowledge about our competitors. However, we will not engage in illegal or improper acts to acquire a competitor’s trade secrets, customer lists, information about company facilities, technical developments or operations. In addition, we will not hire competitors’ employees to obtain confidential information or urge competitive personnel or customers to disclose confidential information.

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V. POLITICAL ACTIVITIES AND CONTRIBUTIONS

1. POLICY:

The Company encourages each of its employees to be good citizens and to fully participate in the political process. Employees should, however, be aware that (1) federal law and the statutes of most states in the U.S. prohibit the Company from contributing to political candidates, political parties or party officials; and (2) employees who participate in partisan political activities must make every effort to ensure that they do not leave the impression that they speak or act for the Company.

VI. IMPLEMENTATION AND COMPLIANCE

A. DISTRIBUTION AND CERTIFICATION

It is Richardson’s policy that all employees comply with company policy and follow company practices. Certain policies and practices require ethical and legal standards which are of overriding importance in the conduct of the Company’s business. These have been set forth in this Corporate Code of Conduct.

To communicate and ensure the application of these ethical and legal standards, all employees will be given a copy of this Code and must certify that they have read and are familiar with these key policies. They must also certify that they understand these policies contain mandatory ethical and legal standards and practices to be followed in conducting the Company’s business.

Each employee must provide the certificate set forth as Exhibit 1 hereto within thirty (30) working days of being hired.

Subsequently, each employee also must provide the certification set forth as Exhibit 2 hereto on an annual basis as requested by the Company and/or the employee’s manager.

All Managers shall provide the certificate set forth as Exhibit 3 on an annual basis as requested by the Company (See B. Compliance and Education below).

Certification forms must be forwarded to the:

Office of the Vice President, Human Resources

Richardson Electronics, Ltd.

40W267 Keslinger Road

P. O. Box 393

LaFox, IL 60147-0393

These certifications are retained in the employee’s personnel file. The certifications may be provided electronically.

For employees in locations other than the United States, it is Richardson’s intent and practice to comply at all times with the laws of the jurisdictions in which we operate; and, if there is a conflict between a provision of the Code of Conduct and the law of the jurisdiction in which you are employed, the law of your jurisdiction will control.

B. COMPLIANCE AND EDUCATION

Employees at every level, consultants and agents of Richardson and its subsidiaries are required to:

Comply with the latest version of Richardson’s Corporate Code of Conduct.

Avoid involvement in acts that may be illegal, or appear to be unethical or improper.

Seek a practical working knowledge of the laws and regulations affecting their work.

Code of Conduct 1-06 8

Seek guidance from a supervisor, the Legal Department, or Richardson’s Open Line when in doubt about their responsibilities under this Code, the requirements of applicable laws or regulations or basic tenets of business honesty and integrity.

Report on a confidential basis to their supervisor, to the extent not contrary to local law, another Richardson executive, the Legal Department, the Audit Committee of the Board of Directors of the Company or the Richardson Hot Line conduct involving Richardson which may be illegal, or which appears to be unethical or improper, including, without limitation, matters involving accounting, internal controls or auditing.

Managers and supervisors at all levels are expected to foster the highest standard of ethical conduct and to ensure adherence to company policies and practices. They are also responsible for maintaining a workplace environment which encourages and supports frank and open communication among employees and with management.

Members of management at all levels are expected to inform appropriate employees and consultants under their supervision of the requirements of the Corporate Code of Conduct, and to teach by example the exercise of sound and mature judgment in all business relationships. Managers and supervisors must discuss the content and application of the Company’s ethics program and particularly this Corporate Code of Conduct with newly hired or promoted employees during the initial orientation or evaluation time period, and on an annual basis thereafter, and shall provide the certificate set forth as Exhibit 3 hereto as requested by the Company In addition, promotion of the ethics program will be an element of each manager’s and supervisor’s performance standards.

Responsibility for compliance with this policy rests with each employee. The unqualified recognition on the part of all employees of this responsibility is fundamental to Richardson’s compliance program.

Conduct of any employee that violates applicable laws, regulations, the letter or spirit of this Corporate Code of Conduct or other basic tenets of business honesty and integrity may be grounds for appropriate disciplinary action, which may include immediate dismissal. Employees who violate the law or this Code may expose themselves to substantial civil damages, criminal fines and prison terms as dictated by applicable laws. The Company may also face substantial fines and penalties and may incur damage to its reputation and standing in the community. Your conduct as a representative of the Company, if it does not comply with the law or with this Code, can result in serious consequences for both you and the Company.

Waivers of this Code will be granted only in extraordinary circumstances. Waivers of this Code for employees may be made only by an executive officer of the Company. Any waiver of this Code for our directors, executive officers or other principal financial officers may be made only by our Board of Directors or the Audit Committee of our Board of Directors and will be disclosed to the public as required by law or the rules of the Nasdaq National Market.

C. HOT LINE AND OPEN LINE

Richardson’s company policies and practices contain ethical and legal standards which must be followed by employees in conducting Richardson’s business. Compliance with laws and regulations is specifically required. The Company welcomes questions regarding these requirements. Also, every employee has the right and duty to report to the Company, to the extent not contrary to local law, any conduct which does not conform to these ethical and legal standards. The Richardson Hot Line/Open Line is established to receive reports of possible wrongdoing and to answer questions about business conduct. Calls go directly to Richardson’s Internal Audit Representative, Audit Committee Representative or Legal Department. Also, employees may report violations directly to appropriate Government officials. This practice explains the procedure for making and handling Hot Line/Open Line calls. Employees at any level can call directly when they have a business conduct issue, without fear of reprisal, as follows:

Hot Line: To report job-related violations of ethical standards, or laws or regulations, including, without limitation, matters involving accounting, internal controls or auditing. Hot Line reports may be made anonymously. You may make Hot Line reports by mail, e-mail or telephone. If you are making a report by telephone and wish to make it anonymous, you should make the call from a pay telephone or, if making it from a personal phone, please follow these directions to turn off the caller identification feature of the phone. If calling from a telephone in the United States, dial *67 before dialing the Hot Line phone number. This will block the caller ID number. This applies to only one single phone call. You will have to dial *67 for every call you want your identification

Code of Conduct 1-06 9

blocked. For telephone calls from outside of the United States, contact your local telephone service provider for instructions on how to block the caller identification feature.

Open Line: To talk about job-related ethical and legal issues and to receive assistance about the proper way to proceed.

To receive assistance in interpreting company policies and practices.

1. PHONE NUMBERS.

Any employee in the United States or Canada who wants to make either a Hot Line call or an Open Line call is urged to call:

Internal Audit Representative – Glenn Middlekauff 630-208-2533

Audit Committee Representative – John Peterson 414-291-4551

Legal Department – David Gilmartin 630-208-2441

2. HOT LINE PROCEDURE

a. Hot Line

All Hot Line calls are received for evaluation and coordination of review.

b. Report Confidentiality

Hot Line reports are confidential. The names of reporting persons are not released without the Audit Committee’s written permission, except to designees of the above representatives as necessary for such designee to assist with the investigation. Reports may be made anonymously, if requested by the reporting person. Note the instructions above for turning off the caller identification feature of your telephone if you make a report by telephone and wish it to remain anonymous.

c. Investigation

Internal Audit and the Legal Department review the report and assign responsibility for further action to the appropriate department(s). Normally, Internal Audit coordinates the review. However, the Legal Department may assume coordination and direction of the review in cases where legal issues are raised or legal advice is required. Each department or function assigned action items as part of the review process promptly and confidentially investigates and sends a completed “Hot Line investigation” report to Internal Auditor (the Legal Department for investigations directed by it). Internal Audit and the Legal Department will report on all reports of violations they receive or investigate to the Audit Committee.

d. Confidentiality of Investigation

Neither the review nor any results or related information are disclosed or discussed with anyone except as provided in this procedure without the written permission of either the Internal Audit, Legal Department or the Audit Committee. (Written permission of the Legal Department is mandatory in matters reviewed under its direction.) After the review is completed, all files are sent to Internal Audit or Legal Department, as applicable. No material or copies are kept by anyone without the Legal Department’s written permission. Internal Audit and the Legal Department will report on all reports of violations they receive or investigate to the Audit Committee.

Code of Conduct 1-06 10

e. Corrective Action

Internal Audit or Legal Department informs the appropriate department(s) of the review results and the need for any corrective action. Internal Audit and/or the Legal Department also reports the matter and any corrective action, including government reporting requirements, to the Audit Committee of the Board of Directors of Richardson.

f. Report of Results

If requested, the person making the report is advised of the completion and results of the review, if appropriate.

3. OPEN LINE PROCEDURE

a. Open Line

Employees at any level are encouraged to talk with their supervisor, applicable functions, or higher level management to clear up questions about ethical or legal issues, unless they feel doing so would be inappropriate. Employees are also encouraged to get help from Richardson’s Internal Audit at any time by calling Open Line.

b. Referrals

Internal Audit answers questions directly or asks other Richardson departments to give guidance (such as Human Resources, Legal, Accounting, or general management).

Calls involving possible illegal activities or violations of Richardson’s ethical and legal standards are handled as Hot Line calls.

Internal Audit refers to the appropriate Richardson department(s) and to the Audit Committee all matters raised by Open Line calls which raise significant issues or which may require revision of company policies or practices.

c. Confidentiality

Open Line calls are confidential, and if the employee calling Open Line requests, can be anonymous. Even if anonymity is not requested, the name of the calling employee is not released without the written permission of the Legal Department.

d. Follow-Up

Internal Audit is responsible for ensuring that the caller gets an appropriate response.

Code of Conduct 1-06 11

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Edward J. Richardson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Richardson Electronics, Ltd. for the period ended December 3, 2005;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     January 12, 2006    

Signature: /s/    Edward J. Richardson                        

Edward J. Richardson

Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, David J. DeNeve, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Richardson Electronics, Ltd. for the period ended December 3, 2005;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     January 12, 2006    

Signature: /s/    David J. DeNeve                                

David J. DeNeve

Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Richardson Electronics, Ltd. (the “Company”) on Form 10-Q for the period ended December 3, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward J. Richardson, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/    Edward J. Richardson                                              

Edward J. Richardson

Chairman of the Board and Chief Executive Officer

January 12, 2006

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Richardson Electronics, Ltd. (the “Company”) on Form 10-Q for the period ended December 3, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. DeNeve, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/    David J. DeNeve                                                      

David J. DeNeve

Senior Vice President and Chief Financial Officer

January 12, 2006