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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I5zwltk7VtsOPk2T7IgC/gMQqwpvfgPY72oVinj4LUW9jjLTdgnelj7RzpSFfsrE H8DQ4PfTznGp3aKMR1jhKg== 0001193125-09-003295.txt : 20090108 0001193125-09-003295.hdr.sgml : 20090108 20090108170915 ACCESSION NUMBER: 0001193125-09-003295 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20081129 FILED AS OF DATE: 20090108 DATE AS OF CHANGE: 20090108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RICHARDSON ELECTRONICS LTD/DE CENTRAL INDEX KEY: 0000355948 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 362096643 STATE OF INCORPORATION: DE FISCAL YEAR END: 0602 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12906 FILM NUMBER: 09516332 BUSINESS ADDRESS: STREET 1: 40W267 KESLINGER RD CITY: LAFOX STATE: IL ZIP: 60147 BUSINESS PHONE: 7082082200 MAIL ADDRESS: STREET 1: 40W267 KESLINGER ROAD CITY: LAFOX STATE: IL ZIP: 60147 10-Q 1 d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 29, 2008

¨	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

LOGO

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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨ Accelerated Filer x Non-Accelerated Filer ¨ Smaller Reporting Company ¨

(Do not check if a smaller reporting company)

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 5, 2009, there were outstanding 14,865,370 shares of Common Stock, $0.05 par value and 3,048,258 shares of Class B Common Stock, $0.05 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	2
	Unaudited Condensed Consolidated Balance Sheets	2
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32

Part II.	Other Information
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 4.	Submission of Matters to a Vote of Security Holders	33
Item 5.	Other Information	34
Item 6.	Exhibits	34
Signatures		35
Exhibit Index		36

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Richardson Electronics, Ltd.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)


	November 29, 2008			May 31, 2008
Assets
Current assets:
Cash and cash equivalents	$	35,480		$	40,042
Accounts receivable, less allowance of $1,559 and $1,635		100,166			109,520
Inventories		99,698			93,858
Prepaid expenses		5,319			4,300
Deferred income taxes		2,093			2,121

Total current assets		242,756			249,841

Non-current assets:
Property, plant and equipment, net		26,526			28,635
Goodwill		1,602			1,483
Other intangible assets, net		528			758
Non-current deferred income taxes		3,692			3,875
Assets held for sale		82			105
Other non-current assets		1,111			1,538

Total non-current assets		33,541			36,394

Total assets	$	276,297		$	286,235

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	62,405		$	58,860
Accrued liabilities		18,775			21,818

Total current liabilities		81,180			80,678

Non-current liabilities:
Long-term debt		52,353			55,683
Long-term income tax liabilities		5,189			6,768
Other non-current liabilities		1,403			1,676

Total non-current liabilities		58,945			64,127

Total liabilities		140,125			144,805

Commitments and contingencies		—			—

Stockholders’ equity
Common stock, $0.05 par value; issued 15,930 shares at November 29, 2008, and 15,929 shares at May 31, 2008		797			797
Class B common stock, convertible, $0.05 par value; issued 3,048 shares at November 29, 2008, and May 31, 2008		152			152
Preferred stock, $1.00 par value, no shares issued		—			—
Additional paid-in-capital		120,044			119,735
Common stock in treasury, at cost, 1,065 shares at November 29, 2008, and May 31, 2008		(6,310	)		(6,310	)
Retained earnings		20,021			11,098
Accumulated other comprehensive income		1,468			15,958

Total stockholders’ equity		136,172			141,430

Total liabilities and stockholders’ equity	$	276,297		$	286,235

Richardson Electronics, Ltd.

Unaudited Condensed Consolidated Statements of Operations

and Comprehensive Income (Loss)

(in thousands, except per share amounts)


	Three Months Ended						Six Months Ended
Statements of Operations	November 29, 2008			December 1, 2007			November 29, 2008			December 1, 2007
Net sales	$	132,551		$	144,985		$	271,498		$	274,450
Cost of sales		99,373			111,185			205,601			208,012

Gross profit		33,178			33,800			65,897			66,438
Selling, general, and administrative expenses		28,219			31,317			56,403			61,283
Loss on disposal of assets		3			10			78			11

Operating income		4,956			2,473			9,416			5,144

Other (income) expense:
Interest expense		1,183			1,616			2,359			4,244
Investment income		(163	)		(245	)		(370	)		(616	)
Foreign exchange (gain) loss		(1,485	)		1,357			(2,483	)		1,801
Gain on retirement of long-term debt		(849	)		—			(849	)		—
Other, net		(90	)		(39	)		(166	)		8

Total other (income) expense		(1,404	)		2,689			(1,509	)		5,437

Income (loss) from continuing operations before income taxes		6,360			(216	)		10,925			(293	)
Income tax provision		426			464			1,298			778

Income (loss) from continuing operations		5,934			(680	)		9,627			(1,071	)
Income from discontinued operations, net of tax		—			24			—			55

Net income (loss)	$	5,934		$	(656	)	$	9,627		$	(1,016	)

Net income (loss) per common share – basic:
Income (loss) from continuing operations	$	0.34		$	(0.04	)	$	0.55		$	(0.06	)
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income (loss) per common share – basic	$	0.34		$	(0.04	)	$	0.55		$	(0.06	)

Net income (loss) per Class B common share – basic:
Income (loss) from continuing operations	$	0.30		$	(0.03	)	$	0.49		$	(0.05	)
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income (loss) per Class B common share – basic	$	0.30		$	(0.03	)	$	0.49		$	(0.05	)

Net income (loss) per common share – diluted:
Income (loss) from continuing operations	$	0.31		$	(0.04	)	$	0.52		$	(0.06	)
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income (loss) per common share – diluted	$	0.31		$	(0.04	)	$	0.52		$	(0.06	)

Net income (loss) per Class B common share – diluted:
Income (loss) from continuing operations	$	0.28		$	(0.03	)	$	0.47		$	(0.05	)
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income (loss) per Class B common share – diluted	$	0.28		$	(0.03	)	$	0.47		$	(0.05	)

Weighted average number of shares:
Common shares – basic		14,858			14,798			14,855			14,783

Class B common shares – basic		3,048			3,048			3,048			3,048

Common shares – diluted		21,140			14,798			21,139			14,783

Class B common shares – diluted		3,048			3,048			3,048			3,048

Dividends per common share	$	0.020		$	0.040		$	0.040		$	0.080

Dividends per Class B common share	$	0.018		$	0.036		$	0.036		$	0.072

Statements of Comprehensive Income (Loss)
Net income (loss)	$	5,934		$	(656	)	$	9,627		$	(1,016	)
Foreign currency translation		(9,500	)		4,710			(14,347	)		5,456
Fair value adjustments on investments		(100	)		(119	)		(143	)		(355	)

Comprehensive income (loss)	$	(3,666	)	$	3,935		$	(4,863	)	$	4,085

Richardson Electronics, Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended						Six Months Ended
	November 29, 2008			December 1, 2007			November 29, 2008			December 1, 2007
Operating activities:
Net income (loss)	$	5,934		$	(656	)	$	9,627		$	(1,016	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		1,150			1,258			2,359			2,573
Gain on retirement of long-term debt		(849	)		—			(849	)		—
Loss on disposal of assets		3			10			78			11
Write-off of deferred financing costs		—			—			—			643
Stock compensation expense		206			249			304			347
Deferred income taxes		(251	)		(201	)		(60	)		(979	)
Accounts receivable		918			(3,457	)		2,072			5,400
Inventories		(2,800	)		5,134			(10,398	)		(1,429	)
Prepaid expenses		35			(107	)		(1,222	)		532
Accounts payable		1,558			3,005			5,407			11,691
Accrued liabilities		(586	)		(1,023	)		(2,232	)		(6,845	)
Other		(783	)		(1,473	)		(1,514	)		(2,265	)

Net cash provided by operating activities		4,535			2,739			3,572			8,663

Investing activities:
Capital expenditures		(369	)		(2,314	)		(498	)		(3,892	)
Proceeds from sale of assets		29			346			51			387
Contingent purchase price consideration		(86	)		—			(139	)		—
(Gain) loss on sale of investments		4			—			(10	)		8
Proceeds from sales of available-for-sale securities		40			—			99			157
Purchases of available-for-sale securities		(40	)		—			(99	)		(157	)

Net cash used in investing activities		(422	)		(1,968	)		(596	)		(3,497	)

Financing activities:
Proceeds from borrowings		47,600			65,600			57,900			111,400
Payments on debt		(47,600	)		(69,800	)		(57,900	)		(177,040	)
Retirement of long-term debt		(2,364	)		—			(2,364	)		—
Restricted cash		—			—			—			61,899
Proceeds from issuance of common stock		—			—			5			69
Cash dividends		(352	)		(703	)		(704	)		(1,405	)
Other		—			(95	)		—			(95	)

Net cash used in financing activities		(2,716	)		(4,998	)		(3,063	)		(5,172	)

Effect of exchange rate changes on cash and cash equivalents		(2,984	)		2,646			(4,475	)		2,770

Increase (decrease) in cash and cash equivalents		(1,587	)		(1,581	)		(4,562	)		2,764
Cash and cash equivalents at beginning of period		37,067			21,781			40,042			17,436

Cash and cash equivalents at end of period	$	35,480		$	20,200		$	35,480		$	20,200

Richardson Electronics, Ltd.

Unaudited Condensed Consolidated Statement of Stockholders’ Equity

(in thousands)


	Common	Class B Common	Par Value		Additional Paid In Capital		Common Stock in Treasury			Retained Earnings			Accumulated Other Comprehensive Income			Total
Balance May 31, 2008:	15,929	3,048	$	949	$	119,735	$	(6,310	)	$	11,098		$	15,958		$	141,430
Net income	—	—		—		—		—			9,627			—			9,627
Foreign currency translation	—	—		—		—		—			—			(14,347	)		(14,347	)
Fair value adjustments on investments	—	—		—		—		—			—			(143	)		(143	)

Share-based compensation:
Non-vested restricted stock	—	—		—		18		—			—			—			18
Stock options	—	—		—		286		—			—			—			286

Common stock issued	1	—		—		5		—			—			—			5

Dividends paid to:
Common ($0.040 per share)	—	—		—		—		—			(594	)		—			(594	)
Class B ($0.036 per share)	—	—		—		—		—			(110	)		—			(110	)

Balance November 29, 2008:	15,930	3,048	$	949	$	120,044	$	(6,310	)	$	20,021		$	1,468		$	136,172

RICHARDSON ELECTRONICS, LTD.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS

1.	DESCRIPTION OF THE COMPANY

Richardson Electronics, Ltd. (“we”, “us”, and “our”) was originally incorporated in the state of Illinois in 1947 and is currently incorporated in the state of Delaware. We are a global provider of engineered solutions and a global distributor of electronic components to the radio frequency (“RF”), wireless and power conversion, electron device, and display systems markets. Utilizing our core engineering and manufacturing capabilities, we are committed to a strategy of providing specialized technical expertise and value-added products, or “engineered solutions,” in response to our customers’ needs. These solutions include products which we manufacture or modify and products which are manufactured to our specifications by independent manufacturers under our own private labels. Additionally, we provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, and logistics for end products of our customers. Design-in support includes component modifications or the identification of lower-cost product alternatives or complementary products.

Our products include RF and microwave components, power semiconductors, electron tubes, microwave generators, and data display monitors. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, and communication applications.

Our sales and marketing, product management, and purchasing functions are organized as follows:

RF, Wireless & Power Division (“RFPD”) serves the global RF and wireless communications market, including infrastructure, wireless networks, and the power conversion market.

Electron Device Group (“EDG”) provides engineered solutions and distributes electronic components to customers in diverse markets including the steel, automotive, textile, plastics, semiconductor manufacturing, and broadcast industries.

Canvys (formerly the Display Systems Group or “DSG”) provides global integrated display products, systems and digital signage solutions serving financial, corporate enterprise, healthcare, and industrial markets.

We currently have operations in the following major geographic regions:

•

North America;

•

Asia/Pacific;

•

Europe; and

•

Latin America.

2.	BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Item 10 of Regulation S-K. Accordingly, they do not include all the information and notes required by GAAP 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. All inter-company transactions and balances have been eliminated. The unaudited condensed consolidated financial statements presented herein include the accounts of our wholly owned subsidiaries. The results of operations and cash flows for the three and six months ended November 29, 2008, are not necessarily indicative of the results that may be expected for the fiscal year ending May 30, 2009.

During the second quarter of fiscal 2009, we renamed our DSG business unit to Canvys. This change from DSG to Canvys signifies its evolution to a market-driven solutions group.

During the first quarter of fiscal 2009, we moved our Cathode Ray Tube (“CRT”) product line from our Canvys segment to our EDG segment. As a result of implementing a new business plan for Canvys during the third quarter of fiscal 2008, we felt that the CRT product line more closely aligned with the existing EDG business model. Prior period segment information has been restated to reflect this change.

The unaudited condensed consolidated statements of cash flows for the six months ended December 1, 2007, have been restated to reflect the reclassification of the gain on sale of investments from operating activities to investing activities. The gain on sale of investments was an immaterial amount for the six months ended December 1, 2007.

Our fiscal quarter ends on the Saturday nearest the end of the quarter ending month. The first six months of fiscal 2009 and 2008 each contain 26 weeks.

The financial information contained in this report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May 31, 2008.

3.	DISCONTINUED OPERATIONS / ASSETS HELD FOR SALE

Discontinued Operations Held for Sale:

On May 31, 2007, we completed the sale of the Security Systems Division/Burtek Systems (“SSD/Burtek”) to Honeywell International Incorporated (“Honeywell”). We present SSD/Burtek as a discontinued operation in accordance with the criteria of Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”), and prior period results and disclosures have been restated to reflect this reporting.

The sale agreement of SSD/Burtek to Honeywell contemplated a post-closing working capital-based purchase price adjustment. During the second quarter of fiscal 2008, we received notification from Honeywell seeking a purchase price adjustment in the amount of $6.4 million. During the third and fourth quarters of fiscal 2008, we reviewed and responded to Honeywell’s notice. We believe this claim to be without merit and intend to vigorously defend our position with respect to this claim. Should we ultimately pay Honeywell all, or a significant portion, of the requested amount, it could have a material adverse impact on results of our discontinued operations and cash flows.

Net sales, gross profit, income tax provision, and income from discontinued operations for the three and six months ended December 1, 2007, is presented in the following table (in thousands):

The net sales, gross profit, income tax provision, and income from discontinued operations during the second quarter and first six months of fiscal 2008 represent the operations of our Colombia location which were included in the SSD/Burtek sale agreement with Honeywell, but were not transferred as part of the May 31, 2007, closing. During the first quarter of fiscal 2008, we mutually agreed with Honeywell that Honeywell would not purchase the SSD/Burtek Colombia business, and that we would wind down the SSD/Burtek Colombia business in exchange for a payment from Honeywell equal to a portion of the value of the SSD/Burtek business in Colombia on May 31, 2007, including reimbursement of related employee severance expenses. We ceased operations of the SSD/Burtek business in Colombia during the third quarter of fiscal 2008. Results of the operation of the SSD/Burtek business in Colombia are included in discontinued operations in accordance with SFAS No. 144.

Assets Held for Sale:

As of November 29, 2008, we maintained a building in Mexico City, Mexico as an asset held for sale. We believe we will be able to sell the building within fiscal 2009; however, we cannot give any assurance as to the actual timing or successful completion of the sale.

4.	INVESTMENT IN MARKETABLE EQUITY SECURITIES

Our 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. The fair value of our equity securities, which are included in other non-current assets, was $0.3 million as of November 29, 2008, and $0.4 million as of May 31, 2008. Proceeds from the sale of the securities were an immaterial amount during the second quarter of fiscal 2009 while there were no sales of securities during the second quarter of fiscal 2008. Proceeds from the sale of the securities were $0.1 million and $0.2 million during the first six months of fiscal 2009 and 2008, respectively. Gross realized gains and losses on those sales were an immaterial amount during the second quarter and first six months of fiscal 2009 and 2008. Net unrealized holding losses of $0.1 million during both the second quarter and first six months of fiscal 2009 have been included in accumulated comprehensive income for fiscal 2009. Net unrealized holding losses of $0.1 million and $0.4 million during the second quarter and first six months of fiscal 2008, respectively, have been included in accumulated comprehensive income for fiscal 2008.

The following table presents the disclosure under 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 (in thousands):


	Marketable Security Holding Length								Total
	Less Than 12 Months				More Than 12 Months				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
November 29, 2008 Common Stock	$	26	$	40	$	39	$	28	$	65	$	68
May 31, 2008 Common Stock	$	25	$	3	$	46	$	5	$	71	$	8

5.	GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill during the first six months ended November 29, 2008, by reportable segment were as follows (in thousands):


	Goodwill
	RFPD		EDG			Canvys		Total
Balance at May 31, 2008	$	551	$	932		$	—	$	1,483
Contingent purchase price consideration		139		—			—		139
Foreign currency translation		8		(28	)		—		(20	)

Balance at November 29, 2008	$	698	$	904		$	—	$	1,602

During the fourth quarter of each fiscal year, our goodwill balances are reviewed for impairment through the application of a fair-value based test, using the end of the third quarter as the measurement date. The results of our goodwill impairment test as of March 1, 2008, indicated that the value of goodwill attributable to our Canvys segment of $11.5 million was fully impaired. As a result, we recorded a pre-tax impairment of $11.5 million, during the fourth quarter of fiscal 2008. In addition, we recorded a $2.3 million tax benefit related to the impairment charge. Our estimate of fair value for each of our reporting units was based on projected future operating results and cash flows and other specific assumptions.

Intangible assets subject to amortization were as follows (in thousands):


	Intangible Assets Subject to Amortization
	November 29, 2008				May 31, 2008
	Gross Amounts		Accumulated Amortization		Gross Amounts		Accumulated Amortization
Deferred financing costs	$	1,115	$	587	$	2,744	$	1,986
Trademarks		478		478		478		478

Total	$	1,593	$	1,065	$	3,222	$	2,464

Deferred financing costs decreased during the second quarter of fiscal 2009 due primarily to the write-off of previously capitalized deferred financing costs of $0.1 million related to the retirement of $3.3 million of the 8% convertible senior subordinated notes (“8% notes”) on November 7, 2008, and the write-off of fully amortized deferred financing costs.

Amortization expense during the three and six months ended November 29, 2008, and December 1, 2007, was as follows (in thousands):


	Amortization Expense for Three Months				Amortization Expense for Six Months
	November 29, 2008		December 1, 2007		November 29, 2008		December 1, 2007
Deferred financing costs	$	54	$	58	$	113	$	158

Total	$	54	$	58	$	113	$	158

The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table (in thousands):


Fiscal Year	Amortization Expense
2009	$	95
2010	$	190
2011	$	190
2012	$	53
2013	$	—
Thereafter	$	—

The weighted average number of years of amortization expense remaining is 2.77.

6.	WARRANTIES

We offer warranties for specific products we manufacture. We also provide extended warranties for some products we sell that lengthen the period of coverage specified in the manufacturer’s original warranty. Our warranty terms generally range from one to three years.

We estimate the cost to perform under the warranty obligation and recognize this estimated cost at the time of the related product sale. We record expense related to our warranty obligations as cost of sales in our unaudited condensed consolidated statements of operations and comprehensive income (loss). Each quarter, we assess actual warranty costs incurred on a product-by-product basis and compare the warranty costs to our estimated warranty obligation. With respect to new products, estimates are based generally on knowledge of the products, the extended warranty period, and warranty experience.

Warranty reserves are established for costs that are expected to be incurred after the sale and delivery of products under warranty. Warranty reserves are included in accrued liabilities on our unaudited condensed consolidated balance sheets. The warranty reserves are determined based on known product failures, historical experience, and other available evidence.

Changes in the warranty reserve during the first six months of fiscal 2009 were as follows (in thousands):


	Warranty Reserve
Balance at May 31, 2008	$	377
Accruals for products sold		265
Utilization		(263	)
Adjustment		(70	)
Foreign currency translation		(17	)

Balance at November 29, 2008	$	292

As a result of lower sales volume of products under warranty and lower than anticipated failure rates, reserve adjustments of $0.1 million were recorded during the first six months of fiscal 2009.

DEBT

Long-term debt for the periods ended November 29, 2008, and May 31, 2008, was as follows (in thousands):


	November 29, 2008		May 31, 2008
7³/4% convertible senior subordinated notes, due December 2011	$	44,683	$	44,683
8% convertible senior subordinated notes, due June 2011		7,670		11,000
Revolving credit agreement, due July 2010		—		—

Total debt		52,353		55,683
Less: current portion		—		—

Long-term debt	$	52,353	$	55,683

As of November 29, 2008, we maintained $52.4 million in long-term debt in the form of two series of convertible notes. On November 7, 2008, we retired $3.3 million of the 8% notes at approximately 71% of par value, which resulted in a gain of $0.8 million, net of deferred financing costs of $0.1 million. As the revolving credit agreement allows us to retire up to $15.0 million of our outstanding notes, we did not need to obtain a waiver from our lending group to permit the retirement of $3.3 million of the 8% notes. The retirement was financed through the use of cash available as of November 7, 2008.

We entered into a revolving credit agreement on July 27, 2007, which included a Euro sub-facility of $15.0 million and a Singapore sub-facility of $5.0 million. Pursuant to an amendment to the revolving credit agreement entered into on February 29, 2008, the Euro sub-facility and Singapore sub-facility individual limits were increased to $20.0 million each; however, the total amount of the combined Euro sub-facility and Singapore sub-facility is limited to $25.0 million. The U.S. facility is reduced if amounts drawn on the Euro sub-facility and Singapore sub-facility exceed $20.0 million, maintaining a total capacity of $40.0 million on the revolving credit agreement. This revolving credit agreement expires in July 2010 and bears interest at applicable LIBOR, SIBOR, or prime rates plus a margin varying with certain quarterly borrowings under the revolving credit agreement. This revolving credit agreement is secured by a lien on our U.S. assets and also contains a financial covenant requiring us to maintain a leverage ratio of less than 2.0 to 1.0. Pursuant to an amendment to the revolving credit agreement entered into on November 29, 2007, the leverage ratio was increased to 3.0 to 1.0 for the fiscal quarters ended December 1, 2007, and March 1, 2008. The commitment fee related to the revolving credit agreement is 0.25% per annum payable quarterly on the average daily unused portion of the aggregate commitment. As of November 29, 2008, there were no amounts outstanding under the revolving credit agreement. Outstanding letters of credit were approximately $0.1 million and we also had $1.1 million reserved for usage on our commercial credit card program, leaving an unused line of $38.8 million as of November 29, 2008. Based on our loan covenants, actual available credit as of November 29, 2008, was $40.0 million.

Pursuant to an amendment to the revolving credit agreement entered into on July 29, 2008, the definition of the leverage ratio was modified to exclude the goodwill impairment charge in the calculation of adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”), for the fiscal year ended May 31, 2008. We were in compliance with our loan covenants as of May 31, 2008, without this amendment to our revolving credit agreement.

Interest expense decreased to $1.2 million and $2.4 million during the second quarter and first six months of fiscal 2009, respectively, as compared with $1.6 million and $4.2 million during the second quarter and first six months of fiscal 2008. The components of interest expense from continuing operations are shown in the following table (in thousands):


	Second Quarter				Six Months
	FY 2009		FY 2008		FY 2009		FY 2008
7³/4% convertible senior subordinated notes interest expense	$	865	$	865	$	1,731	$	1,731
8% convertible senior subordinated notes interest expense		198		220		418		440
Multi-currency revolving credit agreement interest expense		—		—		—		556
Revolving credit agreement interest expense		38		446		47		675
Deferred financing costs amortization		54		58		113		158
Write-off of deferred financing costs		—		—		—		643
Other		28		27		50		41

Total interest expense	$	1,183	$	1,616	$	2,359	$	4,244

Interest expense incurred on the multi-currency revolving credit agreement (“credit agreement”) during the first six months of fiscal 2008 was due primarily to borrowings to support working capital investments. During the first six months of fiscal 2008, we wrote off $0.6 million of deferred financing costs due to the extinguishment of the credit agreement on July 27, 2007.

8.	INCOME TAXES

The effective income tax rate for the second quarter and first six months of fiscal 2009 was a provision of 6.7% and 11.9%, respectively, as compared with a provision of 214.8% and 265.5% for the second quarter and first six months of fiscal 2008, respectively. The difference between the effective tax rates as compared to the U.S. federal statutory rate of 34% primarily results from our geographical distribution of taxable income or losses and valuation allowances related to net operating losses. For the first six months of fiscal 2009, we realized a tax benefit from the partial release of the valuation allowances related to net operating losses of $0.9 million. The tax provision for the first six months of fiscal 2009 includes $0.6 million related to prior years income tax of one of our foreign jurisdictions.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. We are no longer subject to either U.S. federal, state, or local tax examinations by tax authorities for years prior to fiscal year 2004. With few exceptions, we are no longer subject to non-U.S. income tax examinations by tax authorities for years prior to fiscal year 2002. Our primary foreign tax jurisdictions are the United Kingdom, Germany, Singapore, and the Netherlands. We have tax years open in Singapore beginning in fiscal year 2002; in Germany and the Netherlands beginning in fiscal year 2003; in the U.S. beginning in fiscal year 2004; and in the United Kingdom beginning in fiscal year 2006.

As of November 29, 2008, our worldwide liability for uncertain tax positions, excluding interest and penalties, is $4.7 million as compared to $6.0 million as of May 31, 2008. We record penalties and interest relating to uncertain tax positions in the income tax expense line item within the unaudited condensed consolidated statements of operations and comprehensive income (loss). The net liability for uncertain tax positions decreased in the three months ended November 29, 2008, primarily due to closure of certain statutes of limitation.

It is reasonably possible that there will be a change in the unrecognized tax benefits in the range of $0 to approximately $1.2 million due to the expiration of various statutes of limitations within the next 12 months.

9.	CALCULATION OF EARNINGS PER SHARE

We have authorized 30,000,000 shares of common stock, 10,000,000 shares of Class B common stock, and 5,000,000 shares of preferred stock. The Class B common stock has ten votes per share and has transferability restrictions; however, Class B common stock 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 cash dividends are limited to 90% of the amount of common stock cash dividends.

In accordance with Emerging Issues Task Force (“EITF”) Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128 (“EITF No. 03-6”), our 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 were computed using the two-class method as prescribed in EITF No. 03-6. 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 which is 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. For second quarter and first six months of fiscal 2009, the assumed conversion and the effect of the interest savings of our 8% notes and 7³/4% convertible senior subordinated notes (“7³/4% notes”) were included because their inclusion was dilutive. For the second quarter and first six months of fiscal 2008, the assumed conversion and the effect of the interest savings of our 7³/4% notes and 8% notes were excluded because their inclusion would have been anti-dilutive.

The amounts per share presented in our unaudited condensed consolidated statements of operations and comprehensive income (loss) are based on the following amounts (in thousands, except per share amounts):


	Three Months Ended
	November 29, 2008						December 1, 2007
	Basic			Diluted (1)			Basic			Diluted
Numerator for basic and diluted EPS:
Income (loss) from continuing operations	$	5,934		$	6,566		$	(680	)	$	(680	)
Less dividends:
Common stock		297			362			593			593
Class B common stock		55			55			110			110

Undistributed earnings (losses)	$	5,582		$	6,149		$	(1,383	)	$	(1,383	)

Common stock undistributed earnings (losses)	$	4,712		$	5,339		$	(1,167	)	$	(1,167	)
Class B common stock undistributed earnings (losses)		870			810			(216	)		(216	)

Total undistributed earnings (losses)	$	5,582		$	6,149		$	(1,383	)	$	(1,383	)

Income from discontinued operations	$	—		$	—		$	24		$	24
Less dividends:
Common stock		297			362			593			593
Class B common stock		55			55			110			110

Undistributed losses	$	(352	)	$	(417	)	$	(679	)	$	(679	)

Common stock undistributed losses	$	(297	)	$	(362	)	$	(573	)	$	(573	)
Class B common stock undistributed losses		(55	)		(55	)		(106	)		(106	)

Total undistributed losses	$	(352	)	$	(417	)	$	(679	)	$	(679	)

Net income (loss)	$	5,934		$	6,566		$	(656	)	$	(656	)
Less dividends:
Common stock		297			362			593			593
Class B common stock		55			55			110			110

Undistributed earnings (losses)	$	5,582		$	6,149		$	(1,359	)	$	(1,359	)

Common stock undistributed earnings (losses)	$	4,712		$	5,339		$	(1,146	)	$	(1,146	)
Class B common stock undistributed earnings (losses)		870			810			(213	)		(213	)

Total undistributed earnings (losses)	$	5,582		$	6,149		$	(1,359	)	$	(1,359	)

Denominator for basic and diluted EPS:
Denominator for basic EPS:
Common stock weighted average shares		14,858			14,858			14,798			14,798

Class B common stock weighted average shares, and shares under if-converted method for diluted earnings per share		3,048			3,048			3,048			3,048

Effect of dilutive securities
Unvested restricted stock awards					8						—
Dilutive stock options					—						—
Conversion of 8% notes					744						—
Conversion of 7³/4% notes					2,482						—

Denominator for diluted EPS adjusted for weighted average shares and assumed conversions					21,140						17,846

Income (loss) from continuing operations per share:
Common stock	$	0.34		$	0.31		$	(0.04	)	$	(0.04	)

Class B common stock	$	0.30		$	0.28		$	(0.03	)	$	(0.03	)

Income from discontinued operations per share:
Common stock	$	0.00		$	0.00		$	0.00		$	0.00

Class B common stock	$	0.00		$	0.00		$	0.00		$	0.00

Net income (loss) per share:
Common stock	$	0.34		$	0.31		$	(0.04	)	$	(0.04	)

Class B common stock	$	0.30		$	0.28		$	(0.03	)	$	(0.03	)

(1)

Income from continuing operations and net income for the three months ended November 29, 2008, have been adjusted for interest savings, net of tax, for the assumed conversion of our 8% notes and 7³/4% notes. Common stock dividends have been adjusted for the three months ended November 29, 2008, for the assumed conversion of our 8% notes and 7³/4% notes.


	Six Months Ended
	November 29, 2008						December 1, 2007
	Basic			Diluted (1)			Basic			Diluted
Numerator for basic and diluted EPS:
Income (loss) from continuing operations	$	9,627		$	10,891		$	(1,071	)	$	(1,071	)
Less dividends:
Common stock		594			724			1,185			1,185
Class B common stock		110			110			220			220

Undistributed earnings (losses)	$	8,923		$	10,057		$	(2,476	)	$	(2,476	)

Common stock undistributed earnings (losses)	$	7,532		$	8,733		$	(2,088	)	$	(2,088	)
Class B common stock undistributed earnings (losses)		1,391			1,324			(388	)		(388	)

Total undistributed earnings (losses)	$	8,923		$	10,057		$	(2,476	)	$	(2,476	)

Income from discontinued operations	$	—		$	—		$	55		$	55
Less dividends:
Common stock		594			724			1,185			1,185
Class B common stock		110			110			220			220

Undistributed losses	$	(704	)	$	(834	)	$	(1,350	)	$	(1,350	)

Common stock undistributed losses	$	(594	)	$	(724	)	$	(1,139	)	$	(1,139	)
Class B common stock undistributed losses		(110	)		(110	)		(211	)		(211	)

Total undistributed losses	$	(704	)	$	(834	)	$	(1,350	)	$	(1,350	)

Net income (loss)	$	9,627		$	10,891		$	(1,016	)	$	(1,016	)
Less dividends:
Common stock		594			724			1,185			1,185
Class B common stock		110			110			220			220

Undistributed earnings (losses)	$	8,923		$	10,057		$	(2,421	)	$	(2,421	)

Common stock undistributed earnings (losses)	$	7,532		$	8,733		$	(2,042	)	$	(2,042	)
Class B common stock undistributed earnings (losses)		1,391			1,324			(379	)		(379	)

Total undistributed earnings (losses)	$	8,923		$	10,057		$	(2,421	)	$	(2,421	)

Denominator for basic and diluted EPS:
Denominator for basic EPS:
Common stock weighted average shares		14,855			14,855			14,783			14,783

Class B common stock weighted average shares, and shares under if-converted method for diluted earnings per share		3,048			3,048			3,048			3,048

Effect of dilutive securities
Unvested restricted stock awards					10						—
Dilutive stock options					—						—
Conversion of 8% notes					744						—
Conversion of 7³/4% notes					2,482						—

Denominator for diluted EPS adjusted for weighted average shares and assumed conversions					21,139						17,831

Income (loss) from continuing operations per share:
Common stock	$	0.55		$	0.52		$	(0.06	)	$	(0.06	)

Class B common stock	$	0.49		$	0.47		$	(0.05	)	$	(0.05	)

Income from discontinued operations per share:
Common stock	$	0.00		$	0.00		$	0.00		$	0.00

Class B common stock	$	0.00		$	0.00		$	0.00		$	0.00

Net income (loss) per share:
Common stock	$	0.55		$	0.52		$	(0.06	)	$	(0.06	)

Class B common stock	$	0.49		$	0.47		$	(0.05	)	$	(0.05	)

(1)

Income from continuing operations and net income for the six months ended November 29, 2008, have been adjusted for interest savings, net of tax, for the assumed conversion of our 8% notes and 7³/4% notes. Common stock dividends have been adjusted for the six months ended November 29, 2008, for the assumed conversion of our 8% notes and 7³/4% notes.

Common stock options that were anti-dilutive and not included in dilutive earnings per common share for the second quarter and first six months of fiscal 2009 and the second quarter and first six months of fiscal 2008 were 1,880,832 and 1,760,441, respectively.

10.

SHARE BASED COMPENSATION

During the first quarter of fiscal 2007, we adopted SFAS No. 123 (Revised 2004), Share-Based Payment, which requires the measurement and recognition of compensation cost at fair value for all share-based payments, including stock options. We estimate fair value using the Black-Scholes option-pricing model, which requires assumptions such as expected volatility, risk-free interest rate, expected life, and dividends. Compensation cost is recognized using a graded-vesting schedule over the applicable vesting period or the date on which retirement eligibility is achieved, if shorter (non-substantive vesting period approach). Share-based compensation totaled $0.2 million and $0.3 million during the second quarter and first six months of fiscal 2009, respectively, and $0.2 million and $0.3 million during the second quarter and first six months of 2008, respectively.

11.

SEGMENT REPORTING

Based on our interpretation of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS No. 131”), we have identified three reportable segments: the RF, Wireless & Power Division (RFPD), the Electron Device Group (EDG), and Canvys.

RFPD serves the global RF and wireless communications market, including infrastructure, and wireless networks, and the power conversion market.

EDG provides engineered solutions and distributes electronic components to customers in diverse markets including the steel, automotive, textile, plastics, semiconductor manufacturing, and broadcast industries.

Canvys provides global integrated display products, systems and digital signage solutions serving financial, corporate enterprise, healthcare, and industrial markets.

Each segment is directed by a Vice President and General Manager who reports to the Chief Executive Officer (“CEO”) or the Executive Vice President of Business Development. The CEO evaluates performance and allocates resources, in part, based on the direct operating contribution of each segment. Direct operating contribution is defined as gross margin less direct selling, general, and administrative expenses.

During the second quarter of fiscal 2009, we renamed our DSG business unit to Canvys. This change from DSG to Canvys signifies its evolution to a market-driven solutions group.

During the first quarter of fiscal 2009, we moved our CRT product line from our Canvys segment to our EDG segment. As a result of implementing a new business plan for Canvys during the third quarter of fiscal 2008, we felt that the CRT product line more closely aligned with the existing EDG business model. Prior period segment information has been restated to reflect this change.

Operating results and assets by segment are summarized in the following table (in thousands):


	Net Sales		Gross Profit		Direct Operating Contribution (Loss)			Assets (1)
Second Quarter Fiscal 2009
RFPD	$	93,445	$	21,263	$	10,820		$	133,255
EDG		22,210		7,811		4,320			44,760
Canvys		16,820		4,156		397			20,280

Total	$	132,475	$	33,230	$	15,537		$	198,295

Second Quarter Fiscal 2008
RFPD	$	95,486	$	21,095	$	10,243		$	135,444
EDG		28,765		9,290		5,525			51,065
Canvys		19,487		3,895		(566	)		38,580

Total	$	143,738	$	34,280	$	15,202		$	225,089

Six Months Fiscal 2009
RFPD	$	190,317	$	42,169	$	21,297		$	133,255
EDG		47,261		15,440		8,423			44,760
Canvys		33,933		8,486		1,231			20,280

Total	$	271,511	$	66,095	$	30,951		$	198,295

Six Months Fiscal 2008
RFPD	$	179,792	$	41,467	$	20,363		$	135,444
EDG		54,850		17,702		10,279			51,065
Canvys		37,374		7,712		(1,012	)		38,580

Total	$	272,016	$	66,881	$	29,630		$	225,089

(1)

Accounts receivable, inventory, and goodwill are identified by segment. Cash, net property plant and equipment, and other assets are not identifiable by segment.

A reconciliation of net sales, gross profit, operating income, and assets to the relevant consolidated amounts is as follows (in thousands):


	Second Quarter						Six Months
	2009			2008			2009			2008
Segment net sales	$	132,475		$	143,738		$	271,511		$	272,016
Corporate		76			1,247			(13	)		2,434

Net sales	$	132,551		$	144,985		$	271,498		$	274,450

Segment gross profit	$	33,230		$	34,280		$	66,095		$	66,881
Manufacturing variances and other costs		(52	)		(480	)		(198	)		(443	)

Gross profit	$	33,178		$	33,800		$	65,897		$	66,438

Segment direct operating contribution	$	15,537		$	15,202		$	30,951		$	29,630
Manufacturing variances and other costs		(52	)		(480	)		(198	)		(443	)
Administrative expenses		(10,526	)		(12,239	)		(21,259	)		(24,032	)
Loss on disposal of assets		(3	)		(10	)		(78	)		(11	)

Operating income	$	4,956		$	2,473		$	9,416		$	5,144


	November 29, 2008		May 31, 2008
Segment assets	$	198,295	$	199,634
Cash and cash equivalents		35,480		40,042
Other current assets (1)		10,583		11,648
Net property		26,526		28,635
Other assets (2)		5,413		6,276

Total assets	$	276,297	$	286,235

(1)

Other current assets include miscellaneous receivables, manufacturing inventories, prepaid expenses, and current deferred income taxes.

(2)

Other assets include investments, assets held for sale, non-current deferred income taxes, and other assets.

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

Net sales and gross profit by geographic region are summarized in the following table (in thousands):


	Second Quarter					Six Months
	FY 2009		FY 2008			FY 2009			FY 2008
Net Sales
North America	$	47,766	$	59,033		$	98,269		$	111,840
Asia/Pacific		44,995		43,164			92,769			81,293
Europe		34,928		37,715			70,462			71,917
Latin America		4,414		4,440			8,829			8,534
Corporate		448		633			1,169			866

Total	$	132,551	$	144,985		$	271,498		$	274,450

Gross Profit
North America	$	12,333	$	15,454		$	25,077		$	29,587
Asia/Pacific		10,036		9,412			20,687			18,899
Europe		9,012		9,384			18,456			18,637
Latin America		1,489		1,295			2,831			2,562
Corporate		308		(1,745	)		(1,154	)		(3,247	)

Total	$	33,178	$	33,800		$	65,897		$	66,438

We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition. Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe, and Latin America. Estimates of credit losses are recorded in the financial statements based on periodic reviews of outstanding accounts.

12.

FAIR VALUE MEASUREMENTS

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. We have adopted the provisions of SFAS No. 157 for financial instruments as of June 1, 2008. The adoption of SFAS No. 157 did not materially impact our financial condition, results of operations, or cash flow.

SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists; therefore requiring an entity to develop its own assumptions.

As of November 29, 2008, we held investments that are required to be measured at fair value on a recurring basis. Our investments (available-for-sale) primarily consist of equity securities of publicly traded companies for which market prices are readily available.

Investments measured at fair value on a recurring basis subject to the disclosure requirements of SFAS No. 157 as of November 29, 2008, were as follows (in thousands):


	Level 1		Level 2		Level 3
Equity securities	$	267	$	—	$	—

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 allows an entity to irrevocably elect fair value for the initial and subsequent measurement of certain financial instruments and other items that are not currently required to be measured at fair value. When the fair value option is elected and a company chooses to record eligible items at fair value, the company must report unrealized gains and losses on those items in results of operations at each subsequent reporting date. Additionally, the transition provisions of SFAS No. 159 permit a one-time election for existing positions at the adoption date, with a cumulative-effect adjustment included in opening retained earnings. All future changes in fair value would be reported in results of operations. SFAS No. 159 became effective for us June 1, 2008, and we did not elect the fair value option for any eligible items as allowed by SFAS No. 159.

13.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 141-R, Business Combinations (“SFAS No. 141-R”) which revises SFAS No. 141, Business Combinations (“SFAS No. 141”). Under SFAS No. 141, organizations utilize the announcement date as the measurement date for the purchase price of the acquired entity. SFAS No. 141-R requires the measurement at the date the acquirer obtains control of the acquiree, generally referred to as the acquisition date. SFAS No. 141-R will have a significant impact on the accounting of transaction costs, restructuring costs as well as the initial recognition of contingent assets and liabilities assumed during a business combination. Under SFAS No. 141-R, adjustments to the acquired entity’s deferred tax assets and uncertain tax position balances occurring outside the measurement period are recorded as a component of the income tax expense, rather than goodwill. SFAS No. 141-R will become effective for our fiscal year 2010. As the provisions of SFAS No. 141-R are applied prospectively, the impact for us cannot be determined unless a transaction occurs.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an Amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 expands the disclosure requirements for derivative instruments and hedging activities. This statement specifically requires entities to provide enhanced disclosures addressing the following: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 will become effective for our third quarter of fiscal year 2009. We are currently evaluating the impact of the adoption of SFAS 161 on our consolidated financial statements.

In May 2008, the FASB issued FASB Staff Position (“FSP”) No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlements) (“FSP No. APB 14-1”), which will change the accounting treatment for convertible securities which the issuer may settle fully or partially in cash. Under FSP No. APB 14-1, cash settled convertible securities will be separated into their debt and equity components. The value assigned to the debt component will be the estimated fair value, as of the issuance date, of a similar debt instrument without the conversion feature, and the difference between the proceeds for the convertible debt and the amount reflected as a debt liability will be recorded as additional paid-in-capital. As a result, the debt will be recorded at a discount reflecting its below market coupon interest rate. The debt will subsequently be accreted to its par value over its expected life, with the rate of interest that reflects the market rate at issuance being reflected on the income statement. This change in methodology will affect the calculations of net income and earnings per share for many issuers of cash settled convertible securities. FSP No. APB 14-1 will become effective for our fiscal year 2010. We are currently evaluating the impact of the adoption of FSP No. APB 14-1 on our consolidated financial statements.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (“FSP EITF 03-6-1”). The Staff Position provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and must be included in the earnings per share computation. FSP EITF 03-6-1 will become effective for our fiscal year 2010. All prior-period earnings per share data presented must be adjusted retrospectively. We are currently evaluating the impact of the adoption of FSP EITF 03-6-1 on our consolidated financial statements.

In June 2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument (or an Embedded Feature) is indexed to an Entity’s Own Stock (“EITF 07-5”), which supersedes EITF Issue No. 01-6, The Meaning of ‘Indexed to a Company’s Own Stock’. SFAS No. 133 specifies that a contract issued or held by a company that is both indexed to its own stock and classified in stockholders’ equity is not considered a derivative instrument for purposes of applying SFAS No. 133. EITF 07-5 provides further guidance in requiring that both an instrument’s contingency exercise provisions and its settlement provisions be evaluated for determining whether the instrument (or embedded feature) is indexed solely to an entity’s own stock. EITF 07-5 will become effective for any outstanding or new arrangements for our fiscal year 2010. We are currently evaluating the impact of the adoption of EITF 07-5 on our consolidated financial statements.

In June 2008, the FASB issued EITF Issue No. 08-4, Transition Guidance for Conforming Changes to Issue No. 98-5 (“EITF 08-4”). The objective of EITF 08-4 is to provide transition guidance for conforming changes made to EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios that result from EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, and SFAS Issue No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. EITF 08-4 will become effective for our fiscal year 2010. We are currently evaluating the impact of the adoption of EITF 08-4 on our consolidated financial statements.

14.

SUBSEQUENT EVENTS

On January 6, 2009, our Board of Directors approved a share repurchase program authorizing us to purchase up to $12.6 million of our outstanding common stock. Stock repurchases under this program may be made on the open market or in privately negotiated transactions, depending on factors including market conditions and other factors. The stock repurchase program does not have an expiration date and may be suspended or discontinued at any time.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. The terms “may,” “should,” “could,” “anticipate,” “believe,” “continues,” “estimate,” “expect,” “intend,” “objective,” “plan,” “potential,” “project” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A of our Annual Report on Form 10-K. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events or otherwise. You should consider carefully the risk factors described in our Annual Report on Form 10-K, in addition to the other information included and incorporated by reference in this Quarterly Report on Form 10-Q.

In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree 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 our responsibility.

INTRODUCTION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist the reader in better understanding our business, results of operations, financial condition, changes in financial condition, critical accounting policies and estimates, and significant developments. MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying notes thereto appearing elsewhere herein. This section is organized as follows:

•

Business Overview

•

Results of Continuing Operations – an analysis and comparison of our consolidated results of operations for the three and six months ended November 29, 2008, and December 1, 2007, as reflected in our unaudited condensed consolidated statements of operations and comprehensive income (loss).

•

Liquidity, Financial Position, and Capital Resources – a discussion of our primary sources and uses of cash for the six months ended November 29, 2008, and December 1, 2007, and a discussion of selected changes in our financial position.

BUSINESS OVERVIEW

Our sales and marketing, product management, and purchasing functions are organized as follows:

RF, Wireless & Power Division (“RFPD”) serves the global RF and wireless communications market, including infrastructure, wireless networks, and the power conversion market.

We currently have operations in the following major geographic regions:

•

North America;

•

Asia/Pacific;

•

Europe; and

•

Latin America.

During the second quarter of fiscal 2009, we renamed our DSG business unit to Canvys. This change from DSG to Canvys signifies its evolution to a market-driven solutions group.

The recent capital and credit market crisis is adversely affecting the U.S. and global economies. Slower economic growth could lead to lower demand for the products we sell. Lower demand for our products could also lead to lower margins on the products that we sell. In addition, our customers may not be able to pay, or may delay payment of accounts receivable that we are owed. Management believes it has taken steps to mitigate this risk through heightened collection efforts.

RESULTS OF CONTINUING OPERATIONS

Overview – Three Months Ended November 29, 2008

•

Consolidated net sales for the quarter were $132.6 million, compared to $145.0 million last year. Net sales for RFPD declined 2.1%, or $2.0 million, during the second quarter of fiscal 2009 compared to the second quarter of fiscal 2008. Net sales for EDG and Canvys (formerly known as Display Systems Group “DSG”) decreased 22.8% and 13.7%, respectively, during the second quarter of fiscal 2009 as compared to the second quarter last year.

•

Consolidated gross margin percentage increased to 25.0% during the second quarter of fiscal 2009 compared to 23.3% during the second quarter last year.

•

Selling, general, and administrative expenses decreased to $28.2 million, or 21.3% of net sales, during the second quarter of fiscal 2009 compared to $31.3 million, or 21.6% of net sales, during the second quarter last year.

•

Operating income during the second quarter of fiscal 2009 was $5.0 million, up 100%, compared to operating income of $2.5 million during the second quarter of fiscal 2008.

•

Net income during the second quarter of fiscal 2009 was $5.9 million, or $0.31 per diluted common share, versus a net loss of $0.7 million during the second quarter last year.

Overview – Six Months Ended November 29, 2008

•

Consolidated net sales for the first six months were $271.5 million, compared to $274.5 million last year. Net sales for RFPD increased 5.9%, or $10.5 million, during the first six months of fiscal 2009 compared to the first six months of fiscal 2008. Net sales for EDG and Canvys decreased 13.8% and 9.2%, respectively, during the first six months of fiscal 2009 as compared to the first six months last year.

•

Consolidated gross margin percentage increased to 24.3% during the first six months of fiscal 2009 compared to 24.2% during the first six months last year.

•

Selling, general, and administrative expenses decreased to $56.4 million, or 20.8% of net sales, during the first six months of fiscal 2009 compared to $61.3 million, or 22.3% of net sales, during the first six months last year.

•

Operating income during the first six months of fiscal 2009 was $9.4 million, up 83%, compared to operating income of $5.1 million during the first six months of fiscal 2008.

•

Net income during the first half of fiscal 2009 was $9.6 million, or $0.52 per diluted common share, versus a net loss of $1.0 million during the first half last year.

Net Sales and Gross Profit Analysis

During the second quarter of fiscal 2009, consolidated net sales decreased 8.6% as all three segments experienced a decline compared to prior year. During the first six months of fiscal 2009, consolidated net sales decreased 1.1% due primarily to a decrease in sales of electron device and Canvys products, partially offset by an increase in wireless and power conversion products.

Net sales by segment and percent change during the second quarter and first six months of fiscal 2009 and 2008 were as follows (in thousands):


Net Sales	FY 2009			FY 2008		% Change
Second Quarter
RFPD	$	93,445		$	95,486	(2.1	)%
EDG		22,210			28,765	(22.8	)%
Canvys		16,820			19,487	(13.7	)%
Corporate		76			1,247

Total	$	132,551		$	144,985	(8.6	)%

Six Months
RFPD	$	190,317		$	179,792	5.9	%
EDG		47,261			54,850	(13.8	)%
Canvys		33,933			37,374	(9.2	)%
Corporate		(13	)		2,434

Total	$	271,498		$	274,450	(1.1	)%

Consolidated gross profit decreased slightly during both the second quarter and first six months of fiscal 2009 as compared to the second quarter and first six months of fiscal 2008. Consolidated gross margin as a percentage of net sales increased to 25.0% and 24.3% during the second quarter and first six months of fiscal 2009, respectively, as compared to 23.3% and 24.2% during the second quarter and first six months of fiscal 2008, respectively, due primarily to increased focus on higher margin products.

Gross profit reflects the distribution and manufacturing product margin less manufacturing variances, inventory obsolescence charges, customer returns, scrap and cycle count adjustments, engineering costs, and other provisions. Corporate gross profit includes certain freight costs and other miscellaneous charges.

Gross profit by segment and percent of segment sales during the second quarter and first six months of fiscal 2009 and 2008 were as follows (in thousands):


Gross Profit	FY 2009			% of Net Sales		FY 2008			% of Net Sales
Second Quarter
RFPD	$	21,263		22.8	%	$	21,095		22.1	%
EDG		7,811		35.2	%		9,290		32.3	%
Canvys		4,156		24.7	%		3,895		20.0	%
Corporate		(52	)				(480	)

Total	$	33,178		25.0	%	$	33,800		23.3	%

Six Months
RFPD	$	42,169		22.2	%	$	41,467		23.1	%
EDG		15,440		32.7	%		17,702		32.3	%
Canvys		8,486		25.0	%		7,712		20.6	%
Corporate		(198	)				(443	)

Total	$	65,897		24.3	%	$	66,438		24.2	%

RF, Wireless & Power Division

RFPD net sales were $93.4 million during the second quarter of fiscal 2009, a $2.1 million decrease, or 2.1%, from $95.5 million during the second quarter of fiscal 2008. The decrease in net sales during the second quarter was due primarily to a decline in sales of network access products, partially offset by an increase in sales of infrastructure and power conversion products. Net sales increased during the first six months of fiscal 2009 to $190.3 million, a $10.5 million increase, or 5.9%, from $179.8 million during the first six months of fiscal 2008. The increase in net sales during the first six months was due primarily to an increase in sales of infrastructure and power conversion products, partially offset by a decrease in net sales of network access products. Network access sales decreased 12.2% and 0.9% to $33.2 million and $69.4 million during the second quarter and first six months of fiscal 2009, respectively, from $37.8 million and $70.0 million during the second quarter and first six months of fiscal 2008, respectively. The decline in net sales of network access products was primarily in North America, Asia/Pacific, and Europe. Net sales of network access declined due to lower capital investment of network applications which was primarily the result of the weakening global economy. Infrastructure net sales increased 7.9% and 13.5% to $25.9 million and $52.1 million in the second quarter and first six months of fiscal 2009, respectively, from $24.0 million and $45.9 million during the second quarter and first six months of fiscal 2008, respectively. The net sales growth for infrastructure products was primarily in Asia/Pacific, which was due primarily to the deployment of the next infrastructure build-out of the Time Division-Synchronous Code Division Multiple Access (“TD-SCDMA”) project in China. Phase two of TD-SCDMA project was deployed during the first quarter of fiscal 2009 which is expected to be completed by the end of fiscal 2009, while phase one of the project occurred during fiscal 2007. Additionally, infrastructure increased due to the global investment in wideband code division multiple access (“W-CDMA”) applications during the second quarter of fiscal 2009. Power conversion net sales increased 11.5% and 15.0% to $15.5 million and $30.6 million during the second quarter and first six months of fiscal 2009, respectively, from $13.9 million and $26.6 million during the second quarter and first six months of fiscal 2008, respectively, as all four geographic regions experienced growth. Net sales of power conversion products in Asia/Pacific benefited from RFPD’s penetration of the welding and steel manufacturing market with induction heating and power supply applications, as well as the growth in the application of alternative energy. Gross margin as a percent of net sales slightly increased to 22.8% during the second quarter of fiscal 2009 from 22.1% during the second quarter of fiscal 2008 due to shifts in product mix. Gross margin as a percent of net sales decreased to 22.2% during the first six months of fiscal 2009 from 23.1% during the first six months of fiscal 2008. The decline in gross margin as a percent of net sales was due primarily to the lower margins generated from the TD-SCDMA project in China.

Electron Device Group

EDG net sales were $22.2 million during the second quarter of fiscal 2009, a $6.6 million decrease, or 22.8%, from $28.8 million during the second quarter of fiscal 2008. Net sales decreased during the first six months of fiscal 2009 to $47.3 million, a $7.6 million decrease, or 13.8%, from $54.9 million during the first six months of fiscal 2008. The net sales decline for both periods was due primarily to a decline in semiconductor fabrication equipment products and tube sales. Net sales of semiconductor fabrication equipment declined 28.8% and 23.6% to $3.7 million and $8.1 million during the second quarter and first six months of fiscal 2009, respectively, from $5.2 million and $10.6 million during the second quarter and first six months of fiscal 2008. The semiconductor fabrication equipment industry has experienced an overall decline during the past couple of years. Net sales of tubes decreased 19.6% and 11.5% to $15.6 million and $32.4 million during the second quarter and first six months of fiscal 2009, respectively, from $19.4 million and $36.6 million during the second quarter and first six months of fiscal 2008. Net sales of tubes decreased primarily in North America and Europe. The decline in North America, during both the second quarter and first six months of fiscal 2009, was due primarily to the conversion from analog to digital television in the U.S which takes place in February 2009. Gross margin as a percent of net sales increased to 35.2% and 32.7% during the second quarter and first six months of fiscal 2009, respectively, as compared to 32.3% during both the second quarter and first six months of fiscal 2008. The increase in gross margin for EDG was due primarily to a shift in product mix toward higher-margin products.

Canvys

Canvys net sales were $16.8 million during the second quarter of fiscal 2009, a $2.7 million decrease, or 13.7%, from $19.5 million during the second quarter of fiscal 2008. Net sales decreased during the first six months of fiscal 2009 to $33.9 million, a $3.4 million decrease, or 9.2%, from $37.4 million during the first six months of fiscal 2008. The net sales decline for both periods was due primarily to a decline in medical imaging products, partially offset by an increase in digital signage products. During the third quarter of fiscal 2008, Canvys implemented a new business plan, part of which included exiting unprofitable market segments and the distribution of low margin branded products. Due to a focus on profitable sales growth, gross margin improved to 24.7% and 25.0% during the second quarter and first six months of fiscal 2009, respectively, from 20.0% and 20.6% during the second quarter and first six months of fiscal 2008, respectively, which we believe will be a sustainable long-term improvement.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) decreased during the second quarter and first six months of fiscal 2009 to $28.2 million and $56.4 million, respectively, from $31.3 million and $61.3 million during the second quarter and first six months of fiscal 2008, respectively. The decrease in SG&A expense during the second quarter and first six months of fiscal 2009 was due primarily to a decline in consulting, employee-related, travel, and facility expenses. SG&A as a percent of net sales declined to 21.3% and 20.8% of net sales during the second quarter and first six months of fiscal 2009, respectively, as compared with 21.6% and 22.3% of net sales during the second quarter and first six months of fiscal 2008, respectively.

Other (Income) Expense

Other (income) expense was $1.4 million and $1.5 million of income during the second quarter and first six months of fiscal 2009, respectively, as compared to an expense of $2.7 million and $5.4 million during the second quarter and first six months of fiscal 2008, respectively. The change to income from expense was due primarily to favorable changes in foreign currency exchange rates, a gain related to the retirement of a portion of our long-term debt, and a decrease in interest expense. Other (income) expense included a foreign exchange gain of $1.5 million and $2.5 million during the second quarter and first six months of fiscal 2009, respectively, as compared to a foreign exchange loss of $1.4 million and $1.8 million during the second quarter and first six months of fiscal 2008, respectively. The second quarter and first six months of fiscal 2009 included a gain of $0.8 million related to the retirement of $3.3 million of our 8% notes. See Note 7 “Debt” of our unaudited condensed consolidated financial statements for additional discussion on the retirement. Interest expense decreased to $1.2 million and $2.4 million during the second quarter and first six months of fiscal 2009, respectively, as compared to $1.6 million and $4.2 million during the second quarter and first six months of fiscal 2008, respectively. See Note 7 “Debt” of our unaudited condensed consolidated financial statements for additional discussion on interest expense.

Income Tax Provision

primary foreign tax jurisdictions are the United Kingdom, Germany, Singapore, and the Netherlands. We have tax years open in Singapore beginning in fiscal year 2002; in Germany and the Netherlands beginning in fiscal year 2003; in the U.S. beginning in fiscal year 2004; and in the United Kingdom beginning in fiscal year 2006.

Net Income (Loss) and Per Share Data

Net income during the second quarter of fiscal 2009 was $5.9 million, or $0.31 per diluted common share and $0.28 per Class B diluted common share as compared with a net loss of $0.7 million during the second quarter of fiscal 2008, or $0.04 per diluted common share and $0.03 per Class B diluted common share. Net income during the first six months of fiscal 2009 was $9.6 million, or $0.52 per diluted common share and $0.47 per Class B diluted common share as compared with a net loss of $1.0 million during the first six months of fiscal 2008, or $0.06 per diluted common share and $0.05 per Class B diluted common share.

LIQUIDITY, FINANCIAL POSITION, AND CAPITAL RESOURCES

We have financed our growth and cash needs largely through income from operations, borrowings under the revolving credit facilities, issuance of convertible senior subordinated notes, and sale of assets. Liquidity is reduced by working capital requirements, debt service, capital expenditures, dividends, and business acquisitions. Liquidity is increased by proceeds from borrowings, disposition of businesses and assets, and improved working capital management.

Cash and cash equivalents were $35.5 million as of November 29, 2008, as compared to $40.0 million as of May 31, 2008.

Cash Flows from Operating Activities

Cash provided operating activities during the first six months of fiscal 2009 was $3.6 million, due primarily to higher accounts payable balances and lower accounts receivable balances, partially offset by higher inventory balances and lower accrued liability balances. The increase in accounts payable balances of $5.4 million, excluding the impact of foreign currency exchange of $1.9 million, during the first six months of fiscal 2009 was due primarily to negotiating favorable payment terms with many of our vendors. The decline in accounts receivable balances of $2.1 million, excluding the impact of foreign currency of $7.3 million, during the first six months of fiscal 2009 was due primarily to a decline in sales volume. The increase in inventory balances of $10.4 million, excluding the impact of foreign currency exchange of $4.6 million, during the first six months of fiscal 2009 was due primarily to purchases of inventory necessary to support anticipated sales volume in future quarters. The decline in accrued liability balances of $2.2 million, excluding the impact of foreign currency exchange of $0.8 million, during the first six months of fiscal 2009 was due primarily to the timing and payment of accrued payroll and accrued taxes.

Cash provided by operating activities during the first six months of fiscal 2008 was $8.7 million, primarily due to lower accounts receivable and higher accounts payable balances, partially offset by higher inventory balances. Accounts receivable declined

$5.4 million, excluding the impact of foreign currency exchange of $4.1 million, during the first six months of fiscal 2008 was due primarily to improved cash collections. Accounts payable balances increased $11.7 million, excluding the impact of foreign currency exchange of $1.1 million, during the first six months of fiscal 2008 was due primarily to negotiating with many of our vendors related to payment terms. Inventory balances increased $1.4 million during the first six months of fiscal 2008, excluding the impact of foreign currency exchange of $4.1 million.

Cash Flows from Investing Activities

Net cash used by investing activities was $0.6 million during the first six months of fiscal 2009, primarily due to capital expenditures of $0.5 million and contingent purchase price payments of $0.1 million.

Net cash used by investing activities was $3.5 million during the first six months of fiscal 2008, primarily due to capital expenditures for information technology projects.

Cash Flows from Financing Activities

Net cash used by financing activities was $3.1 million and $5.2 million during the first six months of fiscal 2009 and 2008, respectively, are summarized in the following table (in thousands):


	Six Months Ended
	November 29, 2008			December 1, 2007
Net debt borrowings on revolving credit agreement	$	—		$	—
Net debt payments on multi-currency revolving credit agreement (“credit agreement”)		—			(65,711	)
Retirement of long-term debt		(2,364	)		—
Use of restricted cash to pay down credit agreement		—			61,899
Cash dividends paid		(704	)		(1,405	)
Other		5			45

Cash used in financing activities	$	(3,063	)	$	(5,172	)

of credit were approximately $0.1 million and we also had $1.1 million reserved for usage on our commercial credit card program, leaving an unused line of $38.8 million as of November 29, 2008. Based on our loan covenants, actual available credit as of November 29, 2008, was $40.0 million.

We believe that the existing sources of liquidity, including current cash, as well as cash provided by operating activities, supplemented as necessary with funds available under credit arrangements, will provide sufficient resources to meet known capital requirements and working capital needs for the fiscal year ending May 30, 2009.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management and Market Sensitive Financial Instruments

Certain operations, assets, and liabilities of ours are denominated in foreign currencies subjecting us to foreign currency exchange risk. In addition, some of our debt financing varies with market rates exposing us to the market risk from changes in interest rates. In order to provide the user of these financial statements guidance regarding the magnitude of these risks, the Securities and Exchange Commission requires us to provide certain quantitative disclosures based upon hypothetical assumptions. Specifically, these disclosures require the calculation of the effect of a 10% increase in market interest rates and an unfavorable 10% change in the U.S. dollar against foreign currencies on the reported net earnings and financial position.

Interest Expense Exposure

Our new credit agreement’s interest rates vary based on market interest rates. Had interest rates increased 10%, interest expense would have increased by an immaterial amount for the second quarter and first six months of fiscal 2009 and 2008.

Foreign Currency Exposure

Even though we take into account current foreign currency exchange rates at the time an order is taken, our foreign denominated financial statements are subject to foreign exchange rate fluctuations.

Our foreign denominated assets and liabilities are cash, accounts receivable, inventory, accounts payable, and intercompany receivables and payables, as we conduct business in countries of the European Union, Asia/Pacific and, to a lesser extent, Canada and Latin America. We could manage foreign exchange exposures by using currency clauses in sales contracts, local debt to offset asset exposures and forward contracts to hedge significant transactions. We have not entered into any forward contracts in fiscal 2009 or 2008.

Had the U.S. dollar changed unfavorably 10% against various foreign currencies, net sales would have been lower by an estimated $4.7 million and $10.0 million during the second quarter and first six months of fiscal 2009, respectively, and by an estimated $5.4 million and $10.5 million during the second quarter and first six months of fiscal 2008, respectively. Total assets would have declined by an estimated $12.0 million as of November 29, 2008, and an estimated $13.0 million as of the fiscal year ended May 31, 2008. The total liabilities would have decreased by an estimated $1.5 million as of November 29, 2008, and an estimated $1.5 million as of the fiscal year ended May 31, 2008.

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 our operations.

For an additional description of our market risk, see “Item 7A – Quantitative and Qualitative Disclosures about Market Risk – Risk Management and Market Sensitive Financial Instruments” in our Annual Report on Form 10-K for the fiscal year ended May 31, 2008.

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 November 29, 2008. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b)	Changes in Internal Control over Financial Reporting

There were no 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 second quarter of fiscal 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are involved in several pending judicial proceedings concerning matters arising in the ordinary course of our business. We cannot predict the outcome of any pending legal matters, and an unfavorable outcome of any one or more of these matters could have a material adverse impact on our business, results of operations, cash flows, and financial position.

ITEM 1A.

RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended May 31, 2008, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially impact our operations and financial condition.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the annual meeting of stockholders held on October 7, 2008, two proposals were submitted to a vote of our stockholders: (1) to elect our directors; and (2) to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2009. Stockholders present in person or by proxy holding shares representing 43,652,430 votes out of a total of 45,347,950 votes entitled to be voted at the meeting, 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	42,679,361	973,068
Scott Hodes	36,168,295	7,484,134
Samuel Rubinovitz	42,284,317	1,368,112
Jacques Bouyer	42,696,940	955,489
Harold L. Purkey	42,703,992	948,437
Ad Ketelaars	42,694,178	958,251
John R. Peterson	43,288,942	363,487

Proposal	For	Against	Abstain	Not Voted
2. Ratify the selection of Ernst & Young LLP	42,725,157	917,095	13,269	1,692,429

ITEM 5.

OTHER INFORMATION

Amendment to By-Laws

On January 6, 2009, our Board of Directors amended our By-Laws by adding the following Section to Article VII of the By-Laws:

SECTION 16. AMENDMENTS. — Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the Corporation’s Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision.

A copy of our Amended and Restated By-Laws is furnished as Exhibit 3.2 to this Form 10-Q.

Share Repurchase Program

Results of Operation and Financial Condition, Share Repurchase Program, and Declaration of Dividend

On January 7, 2009, we issued a press release reporting results for our second quarter ended November 29, 2008, announcing a share repurchase program, and the declaration of a cash dividend. A copy of the press release is furnished as Exhibit 99.1 to this Form 10-Q and incorporated by reference herein.

ITEM 6.

EXHIBITS

See exhibit index which is incorporated by reference herein.

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.

Date: January 8, 2009	By:	/s/ Kathleen S. Dvorak
		Kathleen S. Dvorak
		Chief Financial Officer
		(on behalf of the Registrant and as Principal Financial Officer)

Exhibit Index

(c)

EXHIBITS


Exhibit Number		Description
3.1		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.

3.2		Amended and Restated By-Laws of the Company.

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 Kathleen S. Dvorak 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).

99.1		Press release, dated January 7, 2009.

EX-3.2 2 dex32.htm AMENDED AND RESTATED BY-LAWS OF THE COMPANY Amended and Restated By-Laws of the Company

Exhibit 3.2

AMENDED AND RESTATED BY-LAWS

RICHARDSON ELECTRONICS, LTD.

AS OF JANUARY 6, 2009

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. — The registered office shall be established and maintained at the Office of the United States Corporation Company, in the City of Dover, in the County of Kent, in the State of Delaware, and said corporation shall be the registered agent of this corporation in charge thereof.

SECTION 2. OTHER OFFICES. — The corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. ANNUAL MEETINGS. — Annual meetings of stockholders for the election of directors and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. In the event the Board of Directors fails to so determine the time, date and place of meeting, the annual meeting of stockholders shall be held at the registered office of the corporation in Delaware on the first Thursday in October of each year.

If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting.

SECTION 2. OTHER MEETINGS. — Meetings of stockholders for any purpose other than the election of directors may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting.

SECTION 3. VOTING. — Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-Laws shall be entitled to such number of votes, in person or by proxy, for each share of stock entitled to vote held by such stockholder as provided in the Certificate of Incorporation or the resolution or resolutions of the directors establishing the voting rights, if any, of Preferred Stock or any series thereof, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. Upon the demand of any stockholder, the vote for directors and the vote

upon any question before the meeting, shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be elected by majority vote except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware.

A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

SECTION 4. QUORUM. — Except as otherwise required by Law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding stock of the corporation entitled to vote having a majority of voting power shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in voting interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof.

SECTION 5. SPECIAL PURPOSES. — Special meetings of the stockholders for any purpose or purposes may be called by the Chairman of the Board, President or Secretary, or by resolution of the directors.

SECTION 6. NOTICE OF MEETINGS. — Written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, not less than ten nor more than sixty days before the date of the meeting.

SECTION 7. ACTION WITHOUT MEETING. — Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting, may be taken without a meeting without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

ARTICLE III

DIRECTORS

SECTION 1. NUMBER AND TERM. — The number of directors shall be seven (7). The directors shall be elected at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify.

SECTION 2. RESIGNATIONS. — Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Chairman of the Board, President or Secretary. The acceptance of a resignation shall not be necessary to make it effective.

SECTION 3. VACANCIES. — If the office of any director, member of a committee or other officer becomes vacant, the remaining directors in office, though less than a quorum by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen.

SECTION 4. REMOVAL. — Except as hereinafter provided, any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of the shares of stock outstanding and entitled to vote having a majority of the voting power, at a special meeting of the stockholders called for the purpose and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in voting interest of the stockholders entitled to vote.

Unless the Certificate of Incorporation otherwise provides, stockholders may effect removal of a director who is a member of a classified Board of Directors only for cause. If the Certificate of Incorporation provides for cumulative voting and if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors, or, if there be classes of directors, at an election of the class of directors of which he is a part.

If the holders of any class or series are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, these provisions shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole.

SECTION 5. INCREASE OF NUMBER. — The number of directors may be increased by amendment of these By-Laws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority in voting interest of the stockholders, at the annual meeting or at a special meeting called for that purpose, and by like vote the additional directors may be chosen at such meeting to hold office until the next annual election and until their successors are elected and qualify.

SECTION 6. POWERS. — The Board of Directors shall exercise all of the powers of the corporation except such as are by law, or by the Certificate of Incorporation of the corporation or by these By-Laws conferred upon or reserved to the stockholders.

SECTION 7. COMMITTEES. — The Board of Directors may, by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

Any such committee, to the extent provided in the resolution of the Board of Directors, or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the By-Laws of the corporation; and, unless the resolution, these By-Laws, or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.

SECTION 8. MEETINGS. — The newly elected directors may hold their first meeting for the purpose or organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent in writing of all the directors.

Regular meetings of the directors may be held without notice at such places and times as shall be determined from time to time by resolution of the directors.

Special meetings of the board may be called by the Chairman of the Board or by the Secretary on the written request of any two directors on at least two day’s notice to each director and shall be held at such place or places as may be determined by the directors, or as shall be stated in the call of the meeting.

Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

SECTION 9. QUORUM. — A majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned.

SECTION 10. COMPENSATION. — By resolution of the Board, Directors may be compensated for their services as directors or as members of committees, and receive a fixed fee and expenses of attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor.

SECTION 11. ACTION WITHOUT MEETING. — Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee.

ARTICLE IV

OFFICERS

SECTION 1. OFFICERS. — The officers of the corporation shall be a Chairman of the Board, a President, a Chief Financial Officer, a Treasurer, and a Secretary, all of whom shall be elected by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect one or more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as they may deem proper. None of the officers of the corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. More than two offices may be held by the same person.

SECTION 2. OTHER OFFICERS AND AGENTS. — The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.

SECTION 3. CHAIRMAN. — The Chairman of the Board of Directors shall be the chief executive officer of the corporation. He or she shall preside at all meetings of the stockholders and of the Board of Directors; and, subject to the direction and control of the Board of Directors, he or she shall be in charge of the business of the corporation and shall direct the policy and management of the corporation. In general he or she shall discharge all the duties incident to the position of chief executive officer and such other duties as may be prescribed by the Board of Directors from time to time. He or she may sign certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed, and he or she may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-Laws, according to the requirements of the form of the instrument. He or she may vote or execute consents or proxies with respect to all securities which the corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent of the corporation by the Board of Directors.

SECTION 4. PRESIDENT. — The President shall be the chief operating officer of the corporation and, subject to the direction and control of the Board of Directors and Chairman of the Board, shall in general supervise, manage and control all of the operations, business and affairs of the corporation. In the absence of the Chairman of the Board, he or she shall preside at all meetings of the stockholders and of the Board of Directors. He or she may sign certificates for shares of the corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed, and he or she may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-Laws, according to the requirements of the form of the instrument. In general he or she shall perform all duties incident to the office of President and such other duties as may be prescribed by the Chairman of the Board or by the Board of Directors from time to time.

SECTION 5. VICE-PRESIDENT. — The Vice President (or in the event there be more than one Vice President, each of the Vice Presidents) shall assist the Chairman of the Board and President in the discharge of their duties as the Chairman of the Board and President may direct and shall perform such other duties as from time to time may be assigned to him or her by the Chairman of the Board or President or by the Board of Directors. In the absence of the President or in the event of his or her inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or by the Chairman of the Board if the Board of Directors has not made such a designation, or by the President if neither the Chairman of the Board nor the Board of Directors has made such a designation, or in the absence of any designation, then in the order of seniority of tenure as Vice President) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-Laws, the Vice President (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, and he or she may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument.

SECTION 6. CHIEF FINANCIAL OFFICER. — The Chief Financial Officer shall be the chief financial officer and principal accounting officer of the corporation having the duties, responsibility and authority incident to such position for all financial and accounting matters involving the corporation. He or she shall have such other duties, responsibilities and authority as may be determined by and be responsible to, the Board of Directors, the Audit Committee, the Chairman of the Board, and the President.

SECTION 7. TREASURER. — The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He or she shall deposit all moneys and other valuables in the name and to the credit of the corporation in such depositaries as may be designated by the Board of Directors or pursuant to their authorization.

The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, or the Chairman of the Board or the President, or the Chief Financial Officer, taking proper vouchers for such disbursements. He or she shall render to the Chairman of the Board, the President, the Chief Financial Officer and Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his or her transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he or she shall give the corporation a bond for the faithful discharge of his or her duties in such amount and with such surety as the board shall prescribe. He or she shall be responsible to the Chief Financial Officer.

SECTION 8. SECRETARY. — The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these By-Laws, and in case of his or her absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chairman of the Board or the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these By-Laws. He or she shall record all the proceedings of the corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him or her by the directors or Chairman of the Board or the President. He or she shall have the custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the directors or the Chairman of the Board or the President, and attest the same.

SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. — Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors.

ARTICLE V

MISCELLANEOUS

SECTION 1. CERTIFICATES OF STOCK. — The shares of the corporation shall be represented by certificates, provided, however, that the Board may provide by resolution that some or all of any classes or series of the corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the foregoing, every holder of stock represented by certificates and, upon request, every holder of uncertificated shares shall be entitled to have a certificate, in any form approved by the Board, signed by the Chairman of the Board or the President or a Vice President of the corporation and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the corporation, and shall bear the corporate seal of the corporation. If the certificate is countersigned by a transfer agent or registrar other than the corporation or its employee, any other signature and the corporate seal appearing on certificates of stock may be facsimile, engraved or printed. In case any such officer, transfer agent or registrar who has signed or whose facsimile signature appears on any such certificate shall have ceased to be such officer, transfer agent or registrar before the certificate is issued, such certificate may nevertheless be issued by the corporation with the same effect as if such officer, transfer agent or registrar had not ceased to be such officer, transfer agent or registrar at the date of its issue. Every holder of uncertificated shares shall be entitled to receive a statement of holdings as evidence of share ownership.

SECTION 2. LOST CERTIFICATES. — A new certificate of stock may be issued in the place of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate.

SECTION 3. TRANSFER OF SHARES. — The shares of stock of the corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer.

SECTION 4. STOCKHOLDERS RECORD DATE. — In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 5. DIVIDENDS. — Subject to the provisions of the Certificate of Incorporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the directors shall deem conducive to the interests of the corporation.

SECTION 6. SEAL. — The corporate seal shall be circular in form and shall contain the name of the corporation, the year of its creation and the words “CORPORATE SEAL DELAWARE.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

SECTION 7. FISCAL YEAR. — The fiscal year of the corporation shall be determined by resolution of the Board of Directors.

SECTION 8. CHECKS. — All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors.

SECTION 9. NOTICE AND WAIVER OF NOTICE. — Whenever any notice is required by these By-Laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by Statute.

Whenever any notice whatever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the corporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE VI

AMENDMENTS

These By-Laws may be altered or repealed and By-Laws may be made at any annual meeting of the stockholders or at any special meeting thereof if notice of the proposed alteration or repeal or By-Law or By-Laws to be made be contained in the notice of such special meeting, by the affirmative vote of the stock issued and outstanding and entitled to vote thereat having a majority of the voting power, or by the affirmative vote of a majority of the Board of Directors, at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration or repeal, or By-Law or By-Laws to be made, be contained in the notice of such special meeting.

ARTICLE VII

INDEMNIFICATION

SECTION 1. GENERAL. — The corporation shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (as hereinafter defined) as provided in this Article and to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended.

SECTION 2. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. — Indemnitee shall be entitled to the rights of indemnification provided in this Section 2 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to any Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the corporation. Pursuant to this Section 2, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines (including, without limitation, excise taxes assessed on an Indemnitee with respect to an employee benefit plan) and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in Good Faith.

SECTION 3. PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. — Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of his Corporate Status, he is, or is threatened to be made, a party to any Proceeding brought by or in the right of the corporation to procure a judgment in its favor. Pursuant to this Section, Indemnitee shall be indemnified against Expenses, judgments, penalties and amounts paid in settlement actually and reasonably incurred by him or

on his behalf in connection with such Proceeding if he acted in Good Faith. Notwithstanding the foregoing, no indemnification against such Expenses, judgments, penalties and amounts paid in settlement shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the corporation if applicable law prohibits such indemnification; provided, however, that, if applicable law so permits, indemnification against Expenses, judgments, penalties and amounts paid in settlement shall nevertheless be made by the corporation in such event if and only to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine.

SECTION 4. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL. — Notwithstanding any other provision of this Article, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law against all Expenses, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the corporation shall indemnify Indemnitee to the maximum extent permitted by law against all Expenses, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

SECTION 5. INDEMNIFICATION FOR EXPENSES OF A WITNESS. — Notwithstanding any other provision of this Article, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

SECTION 6. ADVANCEMENT OF EXPENSES. — Notwithstanding any provisions to the contrary in Section 7, the corporation shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within twenty days after the receipt by the corporation of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advance and undertaking to repay pursuant to this Section 6 shall be unsecured and interest free.

SECTION 7. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.—

(a) To obtain indemnification under this Article, Indemnitee shall submit to the corporation a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the corporation shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 7(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control (as hereinafter defined) shall have occurred, by Independent Counsel (as hereinafter defined) (unless Indemnitee shall request that such determination be made by the Board of Directors or the stockholders, in which case by the person or persons or in the manner provided for in clauses (ii) or (iii) of this Section 7(b)) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee or (C) by the stockholders of the corporation; or (iii) as provided in Section 8(b) of this Article; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the corporation (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the corporation hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) of this Article, the Independent Counsel shall be selected as provided in this Section 7(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the corporation shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the corporation advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the corporation, as the case may be, may, within 7 days after such written notice of selection shall have been given, deliver to the corporation or to Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 13 of this Article, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 7(a) hereof, no Independent Counsel shall have been selected and not objected to, either the corporation or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the corporation or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Independent Counsel under Section 7(b) hereof. The corporation shall pay any and all reasonable fees and

expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 7(b) hereof, and the corporation shall pay all reasonable fees and expenses incident to the procedures of this Section 7(c), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 9(a)(iii) of this Article, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

SECTION 8. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. —

(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Article if Indemnitee has submitted a request for indemnification in accordance with Section 7(a) of this Article, and the corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

(b) If the person, persons or entity empowered or selected under Section 7 of this Article to determine whether Indemnitee is entitled to indemnification shall not have made such determination within 60 days after receipt by the corporation of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 8(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 7(b) of this Article and if (A) within 15 days after receipt by the corporation of the request for such determination the Board of Directors has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) of this Article.

(c) The termination of any Proceeding or of any claim, issue or matter therein by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Article) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in Good Faith.

(d) For purposes of any determination of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on

information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. The provisions of this Section 7(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Article.

(e) The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Article.

SECTION 9. REMEDIES OF INDEMNITEE. —

(a) In the event that (i) a determination is made pursuant to Section 7 of this Article that Indemnitee is not entitled to indemnification under this Article, (ii) advancement of Expenses is not timely made pursuant to Section 6 of this Article, (iii) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) of this Article and such determination shall not have been made and delivered in a written opinion within 90 days after receipt by the corporation of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 of this Article within ten (10) days after receipt by the corporation of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 8 of this Article, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 9(a). The corporation shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) In the event that a determination shall have been made pursuant to Section 7 of this Article that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 9 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 9 the corporation shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made or deemed to have been made pursuant to Section 7 or 8 of this Article that Indemnitee is entitled to indemnification, the corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 9, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) The corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 9 that the procedures and presumptions of this Article are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the corporation is bound by all the provisions of this Article.

(e) In the event that Indemnitee, pursuant to this Section 9, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Article, Indemnitee shall be entitled to recover from the corporation, and shall be indemnified by the corporation against, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Article) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

SECTION 10. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.—

(a) The rights of indemnification and to receive advancement of Expenses as provided by this Article shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. The rights conferred by this Article shall be deemed contract rights and no amendment, alteration or repeal of this Article or of any provision hereof shall be effective as to any Indemnitee with respect to any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. The provisions of this Article shall continue as to an Indemnitee whose Corporate Status has ceased and shall inure to the benefit of his heirs, executors and administrators.

(b) To the extent that the corporation maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the corporation, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies.

(c) In the event of any payment under this Article, the corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the corporation to bring suit to enforce such rights.

(d) The corporation shall not be liable under this Article to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(e) The corporation shall have the express authority to enter into such agreements as the Board of Directors deems appropriate for the indemnification of present or future directors, officers, employees or agents of the corporation in connection with their service to, or status with, any Enterprise.

SECTION 11. SEVERABILITY. — If any provision or provisions of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article (including without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the

fullest extent possible, the provisions of this Article (including, without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

SECTION 12. CERTAIN PERSONS NOT ENTITLED TO INDEMNIFICATION OR ADVANCEMENT OF EXPENSES. — Notwithstanding any other provision of this Article, no person shall be entitled to indemnification or advancement of Expenses under this Article with respect to any Proceeding, or any claim therein other than to enforce indemnification rights under this Article, brought or made by him against the corporation.

SECTION 13. DEFINITIONS. — For purposes of this Article:

(a) “Change in Control” means a change in control of the corporation occurring after the Effective Date of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the “Act”), whether or not the corporation is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if after the Effective Date (i) any “person” (as such term is used in Sections 1 3(d) and 1 4(d) of the Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the corporation representing 50% or more of the combined voting power of the corporation’s then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the corporation’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors.

(b) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the corporation.

(c) “Disinterested Director” means a director of the corporation who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(d) “Effective Date” means September 11, 1986.

(e) “Enterprise” shall mean the corporation and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the corporation as a director, officer, employee, agent or fiduciary.

(f) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

(g) “Good Faith” shall mean Indemnitee having acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal Proceeding, having had no reasonable cause to believe Indemnitee’s conduct was unlawful.

(h) “Indemnitee” includes any person who is, or is threatened to be made, a witness in or a party to any Proceeding as described in Sections 2, 3, 4 or 5 of this Article by reason of his Corporate Status.

(i) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the corporation or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the corporation or Indemnitee in an action to determine Indemnitee’s rights under this Article.

(j) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other threatened, pending or completed proceeding whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee. For purposes of the foregoing sentence, a “Proceeding” shall not be deemed to have been initiated by Indemnitee where Indemnitee seeks pursuant to Section 9 of this Article to enforce his rights under this Article.

SECTION 14. NOTICES. — Any notice, request or other communication required or permitted to be given to the corporation under this Article shall be in writing and either delivered in person or sent by telex, telegram or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the corporation and shall be effective only upon receipt by the Secretary.

SECTION 15. MISCELLANEOUS. — Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

EX-31.1 3 dex311.htm SECTION 302 CEO CERTIFICATION Section 302 CEO Certification

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 November 29, 2008;

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;

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:

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;

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;

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

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):

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

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 8, 2009

Signature:		/s/ Edward J. Richardson
Edward J. Richardson
Chairman of the Board and Chief Executive Officer

EX-31.2 4 dex312.htm SECTION 302 CFO CERTIFICATION Section 302 CFO Certification

Exhibit 31.2

CERTIFICATION PURSUANT TO

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

I, Kathleen S. Dvorak, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Richardson Electronics, Ltd. for the period ended November 29, 2008;

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;

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):

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 8, 2009

Signature:		/s/ Kathleen S. Dvorak
Kathleen S. Dvorak
Chief Financial Officer

EX-32 5 dex321.htm SECTION 906 CEO AND CFO CERTIFICATION Section 906 CEO and CFO Certification

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 November 29, 2008, 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 8, 2009

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 November 29, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kathleen S. Dvorak, 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/ Kathleen S. Dvorak

Kathleen S. Dvorak

Chief Financial Officer

January 8, 2009

EX-99.1 6 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO


		Corporate Headquarters
*For Immediate Release*		40W267 Keslinger Road
*For Immediate Release*		PO Box 393
For Details Contact:		LaFox, IL 60147-0393 USA
Edward J. Richardson	Kathleen S. Dvorak	Phone:	(630) 208-2200
Chairman and CEO	EVP & CFO	Fax:	(630) 208-2550
Phone: (630) 208-2340	(630) 208-2208
E-mail: info@rell.com

RICHARDSON ELECTRONICS REPORTS SECOND QUARTER FISCAL

2009 RESULTS, ANNOUNCES SHARE REPURCHASE PROGRAM,

AND DECLARES CASH DIVIDEND

LaFox, IL, January 7, 2009: Richardson Electronics, Ltd. (NASDAQ: RELL) today reported second quarter fiscal 2009 net income of $5.9 million, or $0.31 per diluted common share, on sales of $132.6 million, compared with a net loss of $0.7 million on sales of $145.0 million last year.

SG&A costs during the second quarter declined to $28.2 million, or 21.3% of net sales, compared to $31.3 million, or 21.6% of net sales last year. Operating income during the second quarter was $5.0 million, or 3.7% of net sales, compared to operating income of $2.5 million, or 1.7% of net sales last year. Cash provided by operating activities during the second quarter was $4.5 million, compared to $2.7 million of cash provided by operating activities during the second quarter last year.

“While our sales have been impacted by the weakening economic conditions, I am pleased with the significant progress we have made in driving costs out of the company. Our progress is reflected in the operating income of $5.0 million during the second quarter and $9.4 million for the first half of this fiscal year,” said Edward J. Richardson, Chairman, Chief Executive Officer and President of Richardson Electronics, Ltd.

“In light of the uncertainty surrounding the current global economic environment, we will continue to make adjustments to our cost structure and business model to enhance our profitability,” added Mr. Richardson.

FINANCIAL HIGHLIGHTS — THREE MONTHS ENDED NOVEMBER 29, 2008

•

Consolidated net sales for the quarter were $132.6 million, compared to $145.0 million last year. Net sales for the RF, Wireless & Power Division (“RFPD”) declined 2.1%, or $2.0 million, during the second quarter of fiscal 2009 compared to the second quarter of fiscal 2008. Net sales for the Electron Device Group (“EDG”) and Canvys (formerly known as Display Systems Group “DSG”) decreased 22.8% and 13.7%, respectively, during the second quarter of fiscal 2009 as compared to the second quarter last year.

•

Consolidated gross margin percentage increased to 25.0% during the second quarter of fiscal 2009 compared to 23.3% during the second quarter last year.

•

Operating income during the second quarter of fiscal 2009 was $5.0 million, up 100%, compared to operating income of $2.5 million during the second quarter of fiscal 2008.

•

Net income during the second quarter of fiscal 2009 was $5.9 million, or $0.31 per diluted common share, versus a net loss of $0.7 million during the second quarter last year.

FINANCIAL HIGHLIGHTS — SIX MONTHS ENDED NOVEMBER 29, 2008

•

Consolidated gross margin percentage increased to 24.3% during the first six months of fiscal 2009 compared to 24.2% during the first six months last year.

•

Operating income during the first six months of fiscal 2009 was $9.4 million, up 83%, compared to operating income of $5.1 million during the first six months of fiscal 2008.

•

Net income during the first half of fiscal 2009 was $9.6 million, or $0.52 per diluted common share, versus a net loss of $1.0 million during the first half last year.

CONTINUING FOCUS ON WORKING CAPITAL MANAGEMENT AND CASH FLOWS

Cash flows provided by operating activities were $4.5 million and $3.6 million during the second quarter and first six months of fiscal 2009, respectively.

“We spent approximately $10 million for inventory, excluding the effects of foreign exchange, during the first six months of fiscal 2009. This was offset by a decrease in our accounts receivable and an increase in our accounts payable balances as of November 29, 2008, compared to our fiscal 2008 year end. Although it is difficult to predict how the current global economic conditions will impact us over the next several quarters, we remain focused on working capital management and improving our cash flows,” said Kathleen S. Dvorak, Executive Vice President and Chief Financial Officer.

REDUCING DEBT

During the second quarter of fiscal 2009, we retired $3.3 million of our 8% convertible senior subordinated notes at a discount of 29%, resulting in a net gain of $849,000. The retirement of the notes was financed through cash generated from operating activities.

SHARE REPURCHASE PROGRAM

On January 6, 2009, the Company’s Board of Directors approved a share repurchase program authorizing the Company to purchase up to $12.6 million of its outstanding common stock. Stock repurchases under this program may be made on the open market or in privately negotiated transactions, depending on factors including market conditions and other factors. The stock repurchase program does not have an expiration date and may be suspended or discontinued at any time.

“We believe an investment in our stock at this time represents an excellent opportunity for us to return value to our shareholders,” said Mr. Richardson.

OUTLOOK

“The second quarter financial results reflect continued progress in many key areas of our business. While the current economic crisis limits our visibility to future sales, we remain committed to improving gross margin and reducing costs throughout the company” added Mr. Richardson.

CASH DIVIDEND

The Company today also announced that its Board of Directors voted to declare a $0.02 cash dividend per share to all holders of common stock and a $0.018 cash dividend per share to all holders of Class B common stock. The dividend will be payable on February 20, 2009, to all common stockholders of record on February 11, 2009. The Company currently has 14,865,370 outstanding shares of common stock and 3,048,258 outstanding shares of Class B common stock.

CONFERENCE CALL INFORMATION

On Thursday, January 8, 2009, at 9:00 a.m. CT, Edward J. Richardson, Chairman and Chief Executive Officer, and Kathleen S. Dvorak, Chief Financial Officer, will host a conference call to discuss the Company’s second quarter 2009 results. A question and answer session will be included as part of the call’s agenda. To listen to the call, please dial 888-419-5570 and enter access code 18839404 approximately five minutes prior to the start of the call. A replay of the call will be available beginning at 11:00 a.m. CT on January 8, 2009, for seven days. The telephone numbers for the replay are (USA) 888-286-8010 and (International) 617-801-6888; access code 71779862.

FORWARD-LOOKING STATEMENTS

This release includes certain “forward-looking” statements as defined by the Securities and Exchange Commission. Statements in this press release regarding the Company’s business which are not historical facts represent “forward-looking” statements that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the most recently ended fiscal year. The Company assumes no responsibility to update the forward-looking statements in this release as a result of new information, future events, or otherwise.

ABOUT RICHARDSON ELECTRONICS, LTD.

Richardson Electronics, Ltd. is a global provider of engineered solutions and a global distributor of electronic components to the radio frequency (“RF”), wireless and power conversion, electron device, 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 its customers’ needs. These solutions include products which it manufactures or modifies and products which are manufactured to the Company’s specifications by independent manufacturers under its 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 end products of its customers. More information is available online at www.rell.com.

Richardson Electronics common stock trades on the NASDAQ Global Market under the ticker symbol RELL.

Richardson Electronics, Ltd.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)


	Three Months Ended						Six Months Ended
Statements of Operations	November 29, 2008			December 1, 2007			November 29, 2008			December 1, 2007
Net sales	$	132,551		$	144,985		$	271,498		$	274,450
Cost of sales		99,373			111,185			205,601			208,012

Gross profit		33,178			33,800			65,897			66,438
Selling, general, and administrative expenses		28,219			31,317			56,403			61,283
Loss on disposal of assets		3			10			78			11

Operating income		4,956			2,473			9,416			5,144

Other (income) expense:
Interest expense		1,183			1,616			2,359			4,244
Investment income		(163	)		(245	)		(370	)		(616	)
Foreign exchange (gain) loss		(1,485	)		1,357			(2,483	)		1,801
Gain on retirement of long-term debt		(849	)		—			(849	)		—
Other, net		(90	)		(39	)		(166	)		8

Total other (income) expense		(1,404	)		2,689			(1,509	)		5,437

Income (loss) from continuing operations before income taxes		6,360			(216	)		10,925			(293	)
Income tax provision		426			464			1,298			778

Income (loss) from continuing operations		5,934			(680	)		9,627			(1,071	)
Income from discontinued operations, net of tax		—			24			—			55

Net income (loss)	$	5,934		$	(656	)	$	9,627		$	(1,016	)

Net income (loss) per common share – basic:
Income (loss) from continuing operations	$	0.34		$	(0.04	)	$	0.55		$	(0.06	)
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income (loss) per common share – basic	$	0.34		$	(0.04	)	$	0.55		$	(0.06	)

Net income (loss) per Class B common share – basic:
Income (loss) from continuing operations	$	0.30		$	(0.03	)	$	0.49		$	(0.05	)
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income (loss) per Class B common share – basic	$	0.30		$	(0.03	)	$	0.49		$	(0.05	)

Net income (loss) per common share – diluted:
Income (loss) from continuing operations	$	0.31		$	(0.04	)	$	0.52		$	(0.06	)
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income (loss) per common share – diluted	$	0.31		$	(0.04	)	$	0.52		$	(0.06	)

Net income (loss) per Class B common share – diluted:
Income (loss) from continuing operations	$	0.28		$	(0.03	)	$	0.47		$	(0.05	)
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income (loss) per Class B common share – diluted	$	0.28		$	(0.03	)	$	0.47		$	(0.05	)

Weighted average number of shares:
Common shares – basic		14,858			14,798			14,855			14,783

Class B common shares – basic		3,048			3,048			3,048			3,048

Common shares – diluted		21,140			14,798			21,139			14,783

Class B common shares – diluted		3,048			3,048			3,048			3,048

Dividends per common share	$	0.020		$	0.040		$	0.040		$	0.080

Dividends per Class B common share	$	0.018		$	0.036		$	0.036		$	0.072

Richardson Electronics, Ltd.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)


	November 29, 2008			May 31, 2008
Assets
Current assets:
Cash and cash equivalents	$	35,480		$	40,042
Accounts receivable, less allowance of $1,559 and $1,635		100,166			109,520
Inventories		99,698			93,858
Prepaid expenses		5,319			4,300
Deferred income taxes		2,093			2,121

Total current assets		242,756			249,841


Non-current assets:
Property, plant and equipment, net		26,526			28,635
Goodwill		1,602			1,483
Other intangible assets, net		528			758
Non-current deferred income taxes		3,692			3,875
Assets held for sale		82			105
Other non-current assets		1,111			1,538

Total non-current assets		33,541			36,394

Total assets	$	276,297		$	286,235


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	62,405		$	58,860
Accrued liabilities		18,775			21,818

Total current liabilities		81,180			80,678


Non-current liabilities:
Long-term debt		52,353			55,683
Long-term income tax liabilities		5,189			6,768
Other non-current liabilities		1,403			1,676

Total non-current liabilities		58,945			64,127

Total liabilities		140,125			144,805

Commitments and contingencies		—			—

Stockholders’ equity
Common stock, $0.05 par value; issued 15,930 shares at November 29, 2008, and 15,929 shares at May 31, 2008		797			797
Class B common stock, convertible, $0.05 par value; issued 3,048 shares at November 29, 2008, and May 31, 2008		152			152
Preferred stock, $1.00 par value, no shares issued		—			—
Additional paid-in-capital		120,044			119,735
Common stock in treasury, at cost, 1,065 shares at November 29, 2008, and May 31, 2008		(6,310	)		(6,310	)
Retained earnings		20,021			11,098
Accumulated other comprehensive income		1,468			15,958

Total stockholders’ equity		136,172			141,430

Total liabilities and stockholders’ equity	$	276,297		$	286,235

Richardson Electronics, Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended						Six Months Ended
	November 29, 2008			December 1, 2007			November 29, 2008			December 1, 2007
Operating activities:
Net income (loss)	$	5,934		$	(656	)	$	9,627		$	(1,016	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		1,150			1,258			2,359			2,573
Gain on retirement of long-term debt		(849	)		—			(849	)		—
Loss on disposal of assets		3			10			78			11
Write-off of deferred financing costs		—			—			—			643
Stock compensation expense		206			249			304			347
Deferred income taxes		(251	)		(201	)		(60	)		(979	)
Accounts receivable		918			(3,457	)		2,072			5,400
Inventories		(2,800	)		5,134			(10,398	)		(1,429	)
Prepaid expenses		35			(107	)		(1,222	)		532
Accounts payable		1,558			3,005			5,407			11,691
Accrued liabilities		(586	)		(1,023	)		(2,232	)		(6,845	)
Other		(783	)		(1,473	)		(1,514	)		(2,265	)

Net cash provided by operating activities		4,535			2,739			3,572			8,663


Investing activities:
Capital expenditures		(369	)		(2,314	)		(498	)		(3,892	)
Proceeds from sale of assets		29			346			51			387
Contingent purchase price consideration		(86	)		—			(139	)		—
(Gain) loss on sale of investments		4			—			(10	)		8
Proceeds from sales of available-for-sale securities		40			—			99			157
Purchases of available-for-sale securities		(40	)		—			(99	)		(157	)

Net cash used in investing activities		(422	)		(1,968	)		(596	)		(3,497	)


Financing activities:
Proceeds from borrowings		47,600			65,600			57,900			111,400
Payments on debt		(47,600	)		(69,800	)		(57,900	)		(177,040	)
Retirement of long-term debt		(2,364	)		—			(2,364	)		—
Restricted cash		—			—			—			61,899
Proceeds from issuance of common stock		—			—			5			69
Cash dividends		(352	)		(703	)		(704	)		(1,405	)
Other		—			(95	)		—			(95	)

Net cash used in financing activities		(2,716	)		(4,998	)		(3,063	)		(5,172	)

Effect of exchange rate changes on cash and cash equivalents		(2,984	)		2,646			(4,475	)		2,770

Increase (decrease) in cash and cash equivalents		(1,587	)		(1,581	)		(4,562	)		2,764
Cash and cash equivalents at beginning of period		37,067			21,781			40,042			17,436

Cash and cash equivalents at end of period	$	35,480		$	20,200		$	35,480		$	20,200

Richardson Electronics, Ltd.

Net Sales and Gross Profit

For the Second Quarter and First Six Months of Fiscal 2009 and 2008

(in thousands)

By Business Unit:


	Net Sales							Gross Profit
Second Quarter	FY 2009			FY 2008		% Change		FY 2009			% of Sales		FY 2008			% of Sales
RF, Wireless & Power Division	$	93,445		$	95,486	(2.1	)%	$	21,263		22.8	%	$	21,095		22.1	%
Electron Device Group		22,210			28,765	(22.8	)%		7,811		35.2	%		9,290		32.3	%
Canvys		16,820			19,487	(13.7	)%		4,156		24.7	%		3,895		20.0	%
Corporate		76			1,247				(52	)				(480	)

Total	$	132,551		$	144,985	(8.6	)%	$	33,178		25.0	%	$	33,800		23.3	%


	Net Sales							Gross Profit
Six Months	FY 2009			FY 2008		% Change		FY 2009			% of Sales		FY 2008			% of Sales
RF, Wireless & Power Division	$	190,317		$	179,792	5.9	%	$	42,169		22.2	%	$	41,467		23.1	%
Electron Device Group		47,261			54,850	(13.8	)%		15,440		32.7	%		17,702		32.3	%
Canvys		33,933			37,374	(9.2	)%		8,486		25.0	%		7,712		20.6	%
Corporate		(13	)		2,434				(198	)				(443	)

Total	$	271,498		$	274,450	(1.1	)%	$	65,897		24.3	%	$	66,438		24.2	%

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Second Quarter
FY 2008

Six Months
FY 2008

Gross profit

Income tax provision

Income, net of tax