<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--------- SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
Commission file number: 0-9788
RICHEY ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0594451
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7441 Lincoln Way, Suite 100, Garden Grove, California 92641
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (714) 898-8288
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
------------------------------
(Title of class)
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. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's Common Stock held by non-
affiliates of the registrant as of March 29, 1995, was $10,276,410 based on the
last sale price on the Nasdaq Stock Market on that date.
As of March 29, 1995, 5,889,341 shares of the registrant's Common Stock
were outstanding.
--------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Company's definitive proxy statement for the annual
meeting of stockholders on May 17, 1995, to be filed with the Securities and
Exchange Commission (the "Commission") no later than 120 days after December 31,
1994, are incorporated by reference into Part III of this Form 10-K (Items 10
through 13).
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Richey Electronics Inc., a Delaware corporation ("Richey Electronics" or
the "Company"), is a multi-regional, specialty distributor of electronic
components and a provider of value-added assembly services. The Company
distributes connectors, switches, cable and other interconnect,
electromechanical and passive components used in the assembly and manufacturing
of electronic equipment. Richey Electronics also provides a wide variety of
value-added assembly services, which typically generate higher gross margins
than traditional component distribution. The Company's customers are primarily
small- and medium-sized original equipment manufacturers ("OEMs") that produce
electronic equipment used in a wide variety of industries, including
telecommunications, computer, medical and aerospace. In 1994, the Company
distributed electronic components to approximately 9,000 customers, none of
which represented more than 2.5% of net sales.
In December 1990, RicheyImpact Electronics, Inc. ("RicheyImpact") acquired
the operations of Richey/Impact Electronics Inc. ("Old Richey") from Lex Service
Inc. ("Lex"). On April 6, 1993, RicheyImpact merged with Brajdas Corporation
("Brajdas"). After the merger with Brajdas (the "Richey-Brajdas Merger"),
management of RicheyImpact assumed control of the combined company, which
changed its name to Richey Electronics, Inc. On April 4, 1994, the Company
completed the acquisition (the "In-Stock Acquisition") of the business of the
In-Stock division of Anchor Group, Inc. ("In-Stock").
Members of senior management have an average of 25 years experience in the
industry and own approximately 26% (fully diluted) of the Company. Eleven of
the Company's senior managers previously held management positions at Avnet,
Inc., the second largest distributor of electronic components in the world.
The Company's Chairman, President and Chief Executive Officer, William C.
Cacciatore, was previously Senior Vice President responsible for the Electronic
Marketing and Electrical and Engineering groups of Avnet, Inc. and a member of
Avnet, Inc.'s Board of Directors.
The Company has filed a Registration Statement on Form S-2 with the
Commission (the "Registration Statement") on February 23, 1995, and Amendment
No. 1 to the Registration Statement on March 24, 1995, relating to an offering
(the "Offering") of up to 3,000,000 shares of the Company's common stock, $0.001
par value (the "Common Stock"). The Company and certain stockholders of the
Company have granted the underwriters an option to purchase up to an additional
450,000 shares of Common Stock.
The Company's principal executive offices are located at 7441 Lincoln Way,
Garden Grove, California 92641, and its telephone number is (714) 898-8288.
INDUSTRY OVERVIEW
Over the last 30 years, the electronics industry has grown significantly as
a result of increased demand for products incorporating sophisticated electronic
components, such as telecommunications and computer equipment. This industry
growth has been matched by an increase in the number of products, component
manufacturers and OEMs.
The electronics distribution industry has become an increasingly important
sales channel for the electronics industry because distributors can market
component manufacturers' products to a broader range of OEMs than suppliers
could economically serve with their direct sales forces. Historically,
1
<PAGE>
manufacturers of electronic components have sold directly to larger OEMs and
relied upon distributors to serve smaller customers. Today, distributors have
become more of an extension of component manufacturers' product delivery channel
by providing value-added assembly services and technical support to customers,
stocking sufficient local inventory to ensure timely delivery of components and
managing customer credit. Distributors also work with OEMs to ensure that
component manufacturers' products are designed into new products. This is
particularly important because product innovations in the electronics industry
often come from smaller, entrepreneurial companies.
As component manufacturers have increasingly focused their sales efforts on
the largest OEMs, and less on smaller customers, the distribution segment has
increased its share of the electronic component market from an estimated 12% in
1970 to an estimated 30% today, according to an October 1994 financial analyst's
report on Kent Electronics Corporation. The report estimates that approximately
one-half of all electronic components are purchased by the top 100 customers and
virtually all of these products are purchased directly from component
manufacturers. The remaining electronic components are purchased by
approximately 100,000 OEMs. These OEMs purchase products from both distributors
and manufacturers, with smaller customers purchasing a greater proportion of
their products from distributors.
MARKET SIZE. According to the December 5, 1994 edition of ELECTRONIC NEWS,
in 1994, the electronics distribution industry recorded approximately
$16 billion in sales. Of these sales, the Company estimates that approximately
$12 billion consisted of sales of semiconductors and computer related
peripherals, which are not sold by the Company. The remaining $4 billion
consisted of sales of interconnect (connectors, sockets), electromechanical
(relays, switches) and passive (resistors, capacitors) components, which are
marketed by the Company.
TRENDS. A number of trends are affecting the electronic component
distribution industry today. One of the most significant trends is that of
consolidation. A series of mergers and acquisitions over the last ten years has
created a number of very large distribution companies that have increasingly
focused on their larger customers and on expanding international operations. As
a result of this large customer focus, regional and specialty distributors have
gained market share among small- and medium-sized OEMs. These smaller customers
often require value-added assembly services, detailed technical information
about available products, assistance in coordinating product design and
engineering with materials resource planning, fast response to inventory
availability inquiries, dependable on-time deliveries and other services.
In addition to the consolidation of distributors, manufacturers are
limiting the number of distributors through which they market their products in
an effort to improve operating efficiency. Regional distributors must therefore
demonstrate strong local market positions and client relationships when
competing to obtain or retain top manufacturer franchises. Many of these
distributors have made substantial efforts to expand local market share by
emphasizing customer services, such as value-added assembly, just-in-time
inventory management, automatic-replenishment and in-plant stores.
Another key trend is the outsourcing of component assembly, which allows
OEMs to enhance profitability by concentrating resources on product design,
marketing and other core aspects of their business. By serving a variety of
customers, distributors can often produce subassemblies more efficiently than
many small- and medium-sized OEMs. The September 12, 1994 edition of OUTSOURCE
MAGAZINE estimates that OEM outsourcing is now an $11 billion industry growing
at an estimated 14.5% per annum.
2
<PAGE>
DISTRIBUTION AND SERVICES
The Company distributes interconnect, electromechanical and passive
electronic components used in the assembly and manufacturing of electronic
equipment. Richey Electronics also provides its customers with a wide variety
of value-added assembly services, which typically generate higher gross margins
than traditional component distribution. These value-added assembly services
consist of (i) component assembly, which is the assembly of components to
manufacturer specifications and (ii) contract assembly, which is the assembly of
cable assemblies, battery packs and mechanical assemblies to customer
specifications. The Company's value-added assembly services respond to an
industry trend toward outsourcing in which purchasing, manufacturing and
distribution functions are allocated to the most efficient provider. The
Company believes that outsourcing represents a significant opportunity to expand
sales, margins and operating profits.
COMPONENT DISTRIBUTION. The distribution of interconnect,
electromechanical and passive electronic components accounted for approximately
76.5% of the Company's net sales in 1994. These products include electronic
connectors, wire, cable, relays, switches, motors, batteries, power supplies,
resistors and potentiometers. The Company sources its products from such
leading suppliers as AMP, Burndy, C&K, Delta, Deutsch, Dialight, Eaton,
Grayhill, MicroSwitch, 3M, Molex, Panasonic, Panduit, Power General,
Precicontact, Samtec, Sullins, TDK, TI Klixon and Wieland.
VALUE-ADDED ASSEMBLY SERVICES. The electronics industry's trend toward the
use of outside vendors to provide value-added assembly services represents a
growth opportunity for the Company. Outsourcing offers OEMs the opportunity to
invest financial resources in areas with higher returns, such as engineering and
marketing. Additionally, the capital investment required to stay current in
manufacturing technologies is beyond the financial capability of many smaller
OEMs. By servicing a variety of such customers, the Company spreads such costs
over a larger business base. Moreover, by integrating assembly services with
extensive inventories, the Company is able to eliminate a large amount of
shipping, handling and receiving costs from the process. For many OEMs, the
Company is able to offer assembly services at a lower cost to the customer while
producing higher margins for itself. The Company currently builds a variety of
component assemblies, including cable, battery pack, switch and mechanical
assemblies, wire harnesses, fan and motor assemblies, and provides engraving and
molding services. The Company has increased its emphasis on higher-margin,
value-added assembly services, which grew from $6.5 million or 20.7% of net
sales in 1992 to $10.9 million or 16.8% of net sales in 1993 and to $21.2
million or 23.5% of net sales in 1994.
The Company currently provides value-added assembly services from its Los
Angeles, San Diego and San Jose, California facilities and from its Boston,
Massachusetts facility. The Company is preparing its Dallas, Texas facility to
begin providing these services.
SALES AND MARKETING
The Company provides its customers with a wide range of products from a
large number of component manufacturers. The Company believes that it has
developed valuable long-term customer relationships and an in-depth
understanding of its customers' needs and purchasing patterns. Richey
Electronics serves a broad range of industrial, commercial and aerospace
customers, none of which represented more than 2.5% of net sales in 1994.
The Company's sales representatives are trained to identify their
customers' electronic component requirements and to actively market the
Company's entire product line to satisfy these needs. During the design
process, sales representatives meet with the customers' engineers and designers
to discuss their component needs and any design or procurement problems. The
sales representatives suggest components
3
<PAGE>
that meet performance criteria, are cost effective and focus on specific
problems. Through this approach, components carried by the Company are often
incorporated into final product specifications.
The Company had approximately 105 sales representatives as of December 31,
1994. The Company has sales offices in ten metropolitan markets throughout the
United States. Sales representatives are compensated primarily by commission
based on the gross profits obtained on their sales.
The Company's local sales efforts are supported by a central marketing
group, located at its headquarters in Garden Grove, California, which is
responsible for identifying new suppliers and developing supplier relations,
coordinating national advertising, negotiating supplier agreements and promoting
new and existing product lines within the Company.
OPERATIONS
DISTRIBUTION. The principal focus of the Company's distribution business
is to provide its OEM customers with rapid and reliable deliveries of electronic
components and a wide variety of related value-added assembly services. The
Company utilizes a computerized system of inventory control to assist in
marketing its products and to coordinate purchases from manufacturers. The
Company's computer system provides detailed on-line information regarding the
price and availability of the Company's entire stock of inventory, as well as
on-line access to the inventories of several of the Company's major suppliers.
After product price and availability are established, the system
automatically places an order for shipment, or allocates inventory to the
assembly operations, if so required. The system then instructs warehouse
personnel to pull products for shipment and, via its locator system, informs
them as to the location of the inventory. In order to optimize use of available
warehouse space, the Company uses a random-access, multi-bin system whereby
inventory is stored in the first available space.
If the order is scheduled for delivery over an extended period of time or
requires inventory purchases to fulfill all or part of the customer's
requirements, the system will inform the product management team, via a buy
action report, that action must be taken. The product manager makes the
appropriate buying decision which is forwarded, in most cases, by electronic
purchase order to component manufacturers.
Approximately 80% of the inventory is stored in the Company's centralized
distribution facility in Los Angeles; the remaining 20% of the inventory is
stored locally in the Company's regional facilities in Boston, San Diego and San
Jose. The Company constantly reviews inventories in an effort to maximize
inventory turnover and customer service. The Company believes its turnover
ratios (4.9x for 1994) compare favorably with the industry average for
interconnect, electromechanical and passive component inventories.
VALUE-ADDED ASSEMBLY SERVICES. The Company offers a wide variety of value-
added assembly services, including component assemblies, cable and harness
assemblies, battery packs and other related electromechanical subassemblies.
After a customer's assembly order is taken, the inventory requirements are
automatically routed, via the computer system, to the warehouse facilities. The
system tracks the order through the entire assembly process, including final
inspection and shipment to the customer. The Company conducts stringent quality
control tests in-line during assembly, and also conducts physical, mechanical
and electrical tests at the conclusion of the assembly process.
4
<PAGE>
COMPONENT MANUFACTURERS
The Company's base of manufacturers has increased significantly over the
past four years. Presently, the Company has non-exclusive franchise
(distribution) agreements with approximately 75 component manufacturers,
including AMP, Burndy, C&K, Delta, Deutsch, Dialight, Eaton, Grayhill,
Microswitch, 3M, Molex, Panasonic, Panduit, Power General, Precicontact, Samtec,
Sullins, TDK, TI Klixon and Wieland. Management believes that it has one of the
strongest product offerings, or line cards, in the markets it serves. The
Company believes that it is the only distributor in the United States which
represents six of the world's seven largest connector manufacturers, who
together control 85% of the global connector market.
For the year ended December 31, 1994, the Company's top five suppliers
accounted for approximately 36% of net sales, although no single manufacturer
accounted for more than 11% of net sales.
The Company generally purchases products from manufacturers pursuant to
franchise agreements. Being a local authorized distributor is a valuable
marketing tool for the Company because customers receive warranty benefits and
support from the component manufacturer when they purchase products from Richey
Electronics. As an authorized distributor, the Company provides customers a
benefit from the marketing and engineering support available from the Company's
manufacturers, which assists the Company in closing sales and attracting new
customers.
Most of the Company's franchise agreements are cancelable by either party,
typically upon 30 to 90 days' notice. These agreements typically provide for
price protection, stock rotation privileges and the right to return certain
inventory if the agreement is canceled. Price protection is typically in the
form of a credit to the distributor for any inventory in the distributor's
possession for which the manufacturer reduces its prices. Stock rotation
privileges typically allow the Company to exchange inventory in an amount up to
5% of a prior period's purchases. Upon termination of a franchise agreement,
the right of return typically requires the manufacturer to repurchase the
Company's inventory at the Company's adjusted purchase price. If the Company
terminates the franchise agreement, there is typically a 10% to 15% restocking
charge. The Company believes that the provisions of these franchise agreements
should generally reduce the Company's exposure to significant inventory losses,
although there can be no assurance that the Company will not experience
significant inventory losses.
COMPETITION
The electronics distribution industry is highly competitive, primarily with
respect to price and product availability. The Company believes that breadth of
product line, level of technical expertise and quality of service are also
particularly important to small- and medium-sized customers. The Company
competes with large national distributors such as Arrow Electronics, Inc. and
Avnet, Inc. as well as regional and specialty distributors, many of whom
distribute the same or competitive products. Many of the Company's competitors
have significantly greater assets and greater financial and personnel resources
than those of the Company.
In 1994, total North American sales in the electronic components
distribution industry (including semiconductors and computer related
peripherals) were approximately $16 billion, of which the top 25 distributors
had sales of approximately $13 billion. The Company was ranked as the 24th
largest electronic components distributor in the United States by ELECTRONIC
NEWS in its December 5, 1994 edition. Within the interconnect,
electromechanical and passive electronic components markets in which the Company
competes, it is ranked considerably higher. Richey Electronics ranked 11th in
the connector
5
<PAGE>
market and 14th in the electromechanical/passive market by ELECTRONIC BUSINESS
BUYER in its April 1994 edition.
The Company encounters some competition from products manufactured abroad
and distributed domestically. Such foreign manufactured products are often sold
at prices below the Company's prices for comparable products. The Company
competes by providing its customers with reliable, rapid delivery of products
that meet strict quality control standards.
EMPLOYEES
The Company had approximately 475 employees as of December 31, 1994.
Approximately 75 of the Company's employees are corporate personnel involved in
production management, finance, quality control or senior management. Another
50 employees work in the Company's Los Angeles, Boston and branch warehouses;
175 individuals are employed in branch sales and marketing efforts and 175
persons are employed on a full-time or on-call basis in value-added assembly
services. There are no collective bargaining contracts covering any of the
Company's employees. The Company believes its relationship with its employees
is satisfactory.
BACKLOG
The Company believes that order backlog (confirmed orders from customers
for shipment within the next 12 months) generally averages two to three months'
sales in the electronics distribution industry. Order backlog grew throughout
fiscal 1994 and at fiscal year end was $19.9 million, up 33% from $15.0 million
at December 31, 1993. Order backlog at March 20, 1995 was approximately $26.0
million, substantially all of which will be shipped within the next 12 months.
The Company believes that the increase in order backlog is attributable to the
general world-wide economic advance in the telecommunications and computer
industries, as well as to various sales, marketing and operational programs
implemented by Richey Electronics following the Richey-Brajdas Merger and In-
Stock Acquisition. Order backlog is not necessarily indicative of future sales
for any particular period. Orders constituting the Company's backlog are
subject to delivery rescheduling, price renegotiations and cancellation at the
option of the buyer without significant penalty.
WORKING CAPITAL
The Company must have sufficient inventories on hand to satisfy the needs
of its customers. For the quarter ended December 31, 1994, the Company's
inventory turnover was 4.9x, compared to 4.4x for 1993 and 3.7x for 1992. The
Company believes it has sufficient working capital and borrowing capacity
available to maintain adequate levels of inventory for the foreseeable future.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
ENVIRONMENTAL PROTECTION
The nature of the Company's operations does not present any significant
risks to the environment. Therefore, no material capital expenditures were or
are expected to be required for environmental protection.
6
<PAGE>
ITEM 2. PROPERTIES
The Company leases all facilities used in its business. The Company's
headquarters are located in Garden Grove, California in an office comprising
approximately 15,500 square feet. This facility is in the process of being
expanded to approximately 21,000 square feet in the first quarter of 1995. Most
of the Company's inventory is consolidated and shipped from a warehouse in Los
Angeles, California, comprising approximately 34,500 square feet. The Company
plans to expand this facility to approximately 55,000 square feet during 1995.
Approximately 12,000 square feet of the Los Angeles warehouse facility is
currently dedicated to value-added assembly services. During 1995, the Company
plans to expand to 20,000 square feet the area dedicated to value-added assembly
services. The Company's Boston, Massachusetts facility, comprising
approximately 23,000 square feet, holds most of the Company's remaining
inventory. Approximately 6,000 square feet is dedicated to value-added assembly
services in the Boston facility. The Company also leases space for its other
facilities which range in size from approximately 1,000 square feet to 15,000
square feet. The Company believes its facilities are suitable for their uses
and are, in general, adequate for the Company's current needs. The Company
believes that lease extensions or replacement space may be obtained for all of
its leased facilities upon the expiration of the current lease terms, in most
cases at rates which are not materially higher than those currently in effect.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Until January 25, 1994, the Common Stock of Richey Electronics was traded
in the over-the-counter market in what is commonly referred to as the "bulletin
board." From January 25, 1994 until April 13, 1994, the Company's Common Stock
traded on the Nasdaq Small-Cap Market. On April 14, 1994, the Company's Common
Stock began trading on The Nasdaq Stock Market ("Nasdaq") under the symbol
"RCHY."
The following table sets forth, for the periods indicated, certain high and
low bid information of the Common Stock as reported by IDD/Tradeline until
January 24, 1994 and by Nasdaq beginning January 25, 1994. High and low bid
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions and may not necessarily reflect actual transactions. The historical
high and low bid and sale information has been adjusted to give effect to the
reverse stock split pursuant to which each outstanding pre-split share was
converted into ten thirty-fifths (10/35) of a post-split share, which became
effective on December 30, 1993.
7
<PAGE>
<TABLE>
<CAPTION>
STOCK PRICE
-----------
HIGH LOW
---- ----
<S> <C> <C>
CALENDAR YEAR 1993:
First quarter . . . . . . . . . . . . . . . . . . . $10-1/2 $1-5/16
Second quarter . . . . . . . . . . . . . . . . . . . 7-7/8 5-1/4
Third quarter. . . . . . . . . . . . . . . . . . . . 8-3/4 5-1/4
Fourth quarter . . . . . . . . . . . . . . . . . . . 8-3/4 4-3/8
CALENDAR YEAR 1994:
First quarter. . . . . . . . . . . . . . . . . . . . $10 $5
Second quarter . . . . . . . . . . . . . . . . . . . 9-1/2 5-1/2
Third quarter. . . . . . . . . . . . . . . . . . . . 7-1/2 6
Fourth quarter . . . . . . . . . . . . . . . . . . . 7-1/2 6
</TABLE>
On March 29, 1995, there were approximately 1,467 holders of record of the
Company's Common Stock.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company intends to retain earnings for working capital to support growth, to
reduce outstanding indebtedness and for general corporate purposes. In
addition, the credit agreement governing certain of the Company's indebtedness
contains provisions that limit the Company's ability to pay dividends on its
Common Stock without prior approval of the Company's lender. Accordingly, the
Company does not expect to pay any dividends on its Common Stock in the
foreseeable future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 4 of Notes to Financial
Statements.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data of the
Company and should be read in conjunction with and is qualified by "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Financial Statements, Notes to Financial Statements and other
financial information included herein. All of the financial information, except
for that of the predecessor company, is derived from financial statements that
have been audited by McGladrey & Pullen, LLP, independent accountants.
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------------------------------------
Predecessor
Company (1) The Company (2)
-------------- ---------------------------------------------------------------
(Fiscal 1990) (Fiscal 1991) (Fiscal 1992) (Fiscal 1993) (Fiscal 1994)
December 28, January 3, January 1, December 31, December 31,
1990 1992 1993 1993 1994
------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operations Statement Data: (IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
Net sales. . . . . . . . . . . . . . . . . $34,363 $32,994 $31,387 $64,995 $90,266
Cost of goods sold . . . . . . . . . . . . 26,394 24,123 23,105 48,741 68,176
--------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . 7,969 8,871 8,282 16,254 22,090
Operating expenses . . . . . . . . . . . . 15,289(3) 7,233 7,144 13,889 17,318
Interest expense, net. . . . . . . . . . . (267) 476 388 1,198 1,606
Income tax expense (4) . . . . . . . . . . 44 473 308 460 1,273
--------- -------- -------- -------- --------
Net income (loss). . . . . . . . . . . . . $ (7,097) $ 689 $ 442 $ 707 $ 1,893
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Earnings per common share (5). . . . . . . $ -- $ 0.25 $ 0.16 $ 0.14 $ 0.32
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Dividends per share. . . . . . . . . . . . $ -- $ -- $ -- $ -- $ --
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Weighted average number of common
shares outstanding (5) . . . . . . . . . -- 2,774 2,774 5,085 5,889
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
OTHER DATA:. . . . . . . . . . . . . . . . .
EBITDA (6) . . . . . . . . . . . . . . . . $ 1,788 $ 1,283 $ 3,362 $ 5,537
EBITDA margin (6). . . . . . . . . . . . . 5.4% 4.1% 5.2% 6.1%
Inventory turnover ratio . . . . . . . . . 4.3x 3.7x 4.4x 4.9x
Number of days sales in accounts
receivable . . . . . . . . . . . . . . . 34 41 43 42
</TABLE>
<TABLE>
<CAPTION>
December 28, January 3, January 1, December 31, December 31,
1990 1992 1993 1993 1994
------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data: (in thousands)
Working capital. . . . . . . . . $ 1,924 $ 2,500 $ 3,014 $ 6,888 $ 5,317
Total assets . . . . . . . . . . 8,088 9,370 9,669 30,918 35,013
Short-term debt. . . . . . . . . 3,648 3,510 3,181 6,995 10,443
Long-term debt . . . . . . . . . 83 -- -- 8,151 3,594
Stockholders' equity . . . . . . 2,202 2,891 3,333 6,898 8,785
</TABLE>
(SEE NOTES TO SELECTED FINANCIAL DATA ON FOLLOWING PAGE)
9
<PAGE>
NOTES TO SELECTED FINANCIAL DATA:
(1) The operations statement data for fiscal year 1990 represent the financial
data of a predecessor company, Old Richey. RicheyImpact acquired certain
assets and assumed certain liabilities of Old Richey from Lex on December
28, 1990.
(2) Excludes results of operations of Brajdas prior to the Richey-Brajdas
Merger in April 1993 and of In-Stock prior to the In-Stock Acquisition in
April 1994. See Note 2 of Notes to Financial Statements for a discussion
of the Richey-Brajdas Merger and the In-Stock Acquisition and pro forma
information.
(3) Operating expenses include a loss on sale of assets from Old Richey to
RicheyImpact of approximately $6.1 million, a write-off of the remaining
goodwill of $973,000 and central office charges of $206,000.
(4) The Company had approximately $24.0 million in federal and $5.0 million in
state tax net operating loss carryforwards ("NOLs"), primarily California,
as of December 31, 1994 which have resulted in minimal cash tax payments.
For the period ended December 31, 1994, cash tax payments were
approximately $1.1 million less than the expense recorded.
(5) The Richey-Brajdas Merger was accounted for as a reverse purchase
acquisition with RicheyImpact being the accounting acquirer. Per share
data for all periods from December 28, 1990 through April 6, 1993, the date
of the Richey-Brajdas Merger, are based upon the weighted average number of
shares of Brajdas indirectly acquired by the former stockholders of
RicheyImpact.
(6) EBITDA consists of earnings before interest, income taxes, depreciation and
amortization. The Company has included EBITDA data (which are not a
measure of financial performance under generally accepted accounting
principles) because it understands such data are used by certain investors.
EBITDA margin represents EBITDA as a percentage of net sales. Because of
the significant amortization of intangible assets and non-cash income tax
expense incurred as a result of the Company's NOLs, the Company believes
that EBITDA may be a meaningful measure of its financial performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Deferred Tax Assets."
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Richey Electronics is a multi-regional, specialty distributor of electronic
components and a provider of value-added assembly services. The Company
distributes connectors, switches, cable and other interconnect,
electromechanical and passive components used in the assembly and manufacturing
of electronic equipment. Richey Electronics also provides a wide variety of
value-added assembly services, which typically generate higher gross margins
than traditional component distribution. These value-added assembly services
consist of (i) component assembly, which is the assembly of components to
manufacturer specifications and (ii) contract assembly, which is the assembly of
cable assemblies, battery packs and mechanical assemblies to customer
specifications. The Company's customers are primarily small- and medium-sized
OEMs. Approximately 80% of the Company's inventory is located at its
centralized distribution facility in Los Angeles, and the remaining inventory is
located in regional warehouses in Boston, San Diego and San Jose.
Management and an investor group built the Company through a series of
transactions, beginning with the acquisition of the operations of Old Richey in
December 1990 for $5.5 million, consisting of $3.7 million in cash funded by the
revolving line of credit, senior preferred stock valued at $1.0 million and
$800,000 in cash contributed by the former RicheyImpact stockholders. The
Company completed the Richey-Brajdas Merger in April 1993 through the issuance
of 10,900,000 shares of Common Stock to the former Brajdas shareholders valued
at $4.1 million. The Company completed the In-Stock Acquisition in April 1994
for $1.9 million in cash funded by the revolving line of credit. The Company
has devoted significant efforts to improving the performance of those
operations. The Company's financial statements exclude the financial results of
Brajdas prior to the Richey-Brajdas Merger and of In-Stock prior to the In-Stock
Acquisition.
In addition, the Company intends to capitalize on the trend toward
outsourcing by increasing sales of value-added assembly services. These sales
increased to $21.2 million, or 23.5% of net sales, in fiscal 1994 from $10.9
million, or 16.8% of net sales, in fiscal 1993.
The Company separately reported net sales of certain inventory designated
as special inventory in its statements of operations. In connection with the
purchase of Old Richey from Lex, the Company entered into sales agency and
consignment agreements with Lex regarding certain inventories not originally
purchased by it. Under these arrangements, Lex retained title to the
inventories and guaranteed certain profit margins to the Company. Effective
June 28, 1991, Lex granted the Company title to all remaining sales agency and
consigned inventories at no cost. The non-recurring benefit associated with
special inventory sales resulted in higher gross profit margins in fiscal 1992
and fiscal 1993. Excluding special inventory sales, gross profit margins would
have been 23.2%, 24.4% and 24.5% for fiscal 1992, 1993 and 1994, respectively.
Substantially all Lex sales agency and consigned inventories were sold as of
December 31, 1993. Consequently, special inventory sales were not material in
1994.
11
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain items in the statements of
operations as a percentage of net sales for periods shown.
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
(Fiscal 1992) (Fiscal 1993) (Fiscal 1994)
January 1, December 31, December 31,
1993 1993 1994
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS STATEMENT DATA:
Net sales. . . . . . . . . . . 100.0% 100.0% 100.0%
------------- ------------- -------------
Cost of goods sold . . . . . . 73.6 75.0 75.5
------------- ------------- -------------
Gross profit (1) . . . . . . . 26.4 25.0 24.5
Operating expenses . . . . . . 22.8 21.4 19.2
------------- ------------- -------------
Operating income . . . . . . . 3.6 3.6 5.3
Interest expense . . . . . . . 1.2 1.8 1.8
------------- ------------- -------------
Income before income taxes . . 2.4 1.8 3.5
Income tax expense . . . . . . 1.0 0.7 1.4
------------- ------------- -------------
Net income . . . . . . . . . . 1.4% 1.1% 2.1%
------------- ------------- -------------
------------- ------------- -------------
<FN>
(1) Includes effects of special inventory sales. See "--General." Had the
effects of special inventory sales been excluded from the gross profit
reported above, the results would have been as follows:
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1992 Fiscal 1993 Fiscal 1994
----------- ----------- -----------
<S> <C> <C> <C>
Adjusted gross profit 23.2% 24.4% 24.5%
</TABLE>
YEAR ENDED DECEMBER 31, 1994 (FISCAL 1994) AS COMPARED WITH YEAR ENDED
DECEMBER 31, 1993 (FISCAL 1993)
Net sales were $90.3 million for fiscal 1994, an increase of $25.3 million,
or 38.9%, from $65.0 million for fiscal 1993. Net sales of electronic
components increased to $69.1 million in fiscal 1994 from $54.1 million in
fiscal 1993, an increase of 27.7%. Net sales of value-added assembly services
increased to $21.2 million from $10.9 million in fiscal 1993, an increase of
94.5%. Although the Company fully integrated In-Stock with its existing
operations and has not maintained separate sales records since the In-Stock
Acquisition, the Company estimates that at least $7.0 million of the increase in
net sales are attributable to the In-Stock Acquisition. This estimate is based
solely on In-Stock's historical sales rates and backlog at the time of the In-
Stock Acquisition and, among other things, does not take into account post-
acquisition results of In-Stock's operations or variations due to overlapping
product lines or customers. The balance of the increase in net sales is
attributable to internal growth and the benefit of twelve months of Brajdas'
integrated operations in 1994 as compared to only nine months in 1993. In 1994,
the Company experienced net sales growth in most of the ten metropolitan markets
it serves. On a pro forma basis, assuming the Richey-Brajdas Merger and the In-
Stock Acquisition occurred as of January 1, 1993, sales would have been $84.6
million and $93.0 million for fiscal 1993 and fiscal 1994, respectively. See
Note 2 of Notes to Financial Statements.
Gross profit was $22.1 million for fiscal 1994, an increase of $5.8
million, or 35.6%, from $16.3 million in fiscal 1993. Excluding special
inventory sales in fiscal 1993, gross profit as a percentage of sales increased
slightly to 24.5% in fiscal 1994 from 24.4% in fiscal 1993. Component
distribution gross margins remained essentially flat in fiscal 1994 compared to
fiscal 1993. Value-added assembly margins declined in fiscal 1994 compared to
fiscal 1993 because of lower gross margins from value-added assembly sales at
In-Stock, which the Company acquired in April 1994. The Company took a number
12
<PAGE>
of actions to improve operating efficiencies at its In-Stock operations and
believes that by the end of fiscal 1994 gross margins from value-added assembly
sales at those operations were roughly comparable to gross margins from its
other value-added assembly sales. Overall gross margins increased slightly due
to a changing sales mix increasingly oriented toward value-added assembly
services.
Operating expenses were $17.3 million in fiscal 1994, an increase of $3.4
million, or 24.5%, from $13.9 million in fiscal 1993. These expenses as a
percentage of sales declined to 19.2% from 21.4% in fiscal 1993. Increased
sales from internal growth as well as from the Richey-Brajdas Merger and the In-
Stock Acquisition, coupled with cost-saving initiatives, have allowed the
Company to substantially improve its operating leverage. The reduction in
operating expenses as a percentage of net sales resulted in part from the
elimination of duplicate personnel, sales, warehouse and corporate facilities,
computer systems and communication networks.
Interest expense increased to $1.6 million in fiscal 1994 from $1.2 million
in fiscal 1993. Interest expense rose as a result of increases in prime lending
rates and average borrowings brought about by the financing of the In-Stock
Acquisition. See "Liquidity and Capital Resources."
The Company's provision for federal and state income tax expense increased
to $1.3 million from $460,000 in fiscal 1993. The effective tax rate for 1994
increased slightly to 40% from 39% for 1993. The Company had approximately
$24.0 million in federal and $5.0 million in state tax NOLs, primarily
California, as of December 31, 1994 which have resulted in minimal cash tax
payments. For the period ended December 31, 1994, cash tax payments were
approximately $1.1 million less than the expense recorded. See "--Deferred Tax
Assets."
YEAR ENDED DECEMBER 31, 1993 (FISCAL 1993) AS COMPARED WITH YEAR ENDED
JANUARY 1, 1993 (FISCAL 1992)
Net sales were $65.0 million for fiscal 1993, an increase of $33.6 million,
or 107.0%, from $31.4 million for fiscal 1992. Although the Company fully
integrated Brajdas with its existing operations and has not maintained separate
sales records since the Richey-Brajdas Merger, the Company estimates that at
least $29.0 million of the increase in net sales are attributable to the Richey-
Brajdas Merger. This estimate is based solely on Brajdas' historical sales
rates and backlog at the time of the Richey-Brajdas Merger and, among other
things, does not take into account post-merger results of Brajdas' operations or
variations due to overlapping product lines or customers. The balance of the
increase in net sales is attributable to internal growth, including an increase
of $4.4 million of value-added assembly services. As noted above, historical
information excludes the operations of Brajdas for periods prior to April 6,
1993. See Note 2 of Notes to Financial Statements.
Gross profit was $16.3 million in fiscal 1993, an increase of $8.0 million,
or 96.4%, from $8.3 million in fiscal 1992. Gross profit increased primarily as
a result of the Richey-Brajdas Merger. Excluding special inventory sales, gross
profit as a percentage of sales increased to 24.4% from 23.2% in fiscal 1992.
The increase in gross margins is attributable primarily to an increase in value-
added assembly services and increased management controls over gross profit
margins.
Operating expenses were $13.9 million in fiscal 1993, an increase of $6.8
million, or 95.8%, from $7.1 million in fiscal 1992. These expenses as a
percentage of sales declined to 21.4% from 22.8% in fiscal 1992. While overall
expenses were up as a result of the Richey-Brajdas Merger, the combined
operations benefitted from economies of scale that reduced operating expenses as
a percentage of net sales. The Company implemented a number of cost cutting
programs to eliminate duplicate personnel, sales, warehouse and corporate
facilities, computer systems and communication networks following the Richey-
Brajdas Merger.
13
<PAGE>
Interest expense increased to $1.2 million for fiscal 1993 from $388,000
for fiscal 1992. The increase in interest expense was due primarily to the
increased revolving line of credit borrowings and subordinated debt incurred as
a result of the Richey-Brajdas Merger.
The Company's provision for federal and state income tax expense increased
to $460,000 for the year ended December 31, 1993 from $308,000 for the
corresponding period of 1992. The effective tax rate for 1993 declined slightly
to 39% from 41% for 1992.
LIQUIDITY AND CAPITAL RESOURCES
Richey Electronics currently maintains a revolving line of credit of up to
$15 million based upon eligible accounts receivable and inventory, with interest
on borrowed funds at prime rate plus 1.5%. The credit agreement restricts
payment of cash dividends on the Company's stock without prior approval of the
Company's lender. In addition, the Company must comply with various financial
and operational covenants established by its lender, all of which the Company
currently satisfies. The Company negotiates certain of these operational
covenants on an annual basis with its lender. As of December 31, 1994, Richey
Electronics had outstanding borrowings thereunder of $8.8 million, with an
additional borrowing capacity of $5.5 million available. The Company believes
that its line of credit will be adequate to meet its anticipated funding
commitments for the remainder of 1995. The Company plans to use a portion of
the net proceeds to be received by the Company from the Offering to repay
certain indebtedness, including the indebtedness incurred under its revolving
line of credit. The Company is currently in negotiations with its asset
based lender to increase the size and modify the terms of its revolving line
of credit.
Working capital decreased to $5.3 million as of December 31, 1994 from $6.9
million as of December 31, 1993, a decrease of $1.6 million. This decrease was
primarily the result of a $3.0 million paydown of long-term senior subordinated
debt in the first quarter of 1994 with funds borrowed under the Company's
revolving line of credit. This paydown had the effect of converting $3.0
million of debt from long-term to short-term debt. In addition, the Company
expects to pay down $1.6 million of its senior subordinated debt in the first
quarter of 1995.
During fiscal 1994, the Company's net cash from operating activities was
$4.0 million, as compared to $468,000 in fiscal 1993 and $407,000 in fiscal
1992. Net cash generated from operations increased in fiscal 1994 compared to
fiscal 1993, primarily as a result of an increase in net income, an increase in
utilization of the Company's NOLs and a $2.8 million increase in accounts
payable, offset to some extent by a $1.1 million increase in trade receivables.
Net cash generated from operations in fiscal 1993 increased slightly compared to
fiscal 1992, primarily as a result of an increase in net income to approximately
$700,000 in fiscal 1993 from approximately $400,000 in fiscal 1992, a
corresponding increase in utilization of the Company's NOLs and a significant
increase in non-cash expenses, offset by increases in inventory of $1.3 million
at December 31, 1993.
Net cash used in investment activities was $2.9 million in fiscal 1994,
$3.2 million in fiscal 1993 and negligible in fiscal 1992. During fiscal 1994,
the Company had capital expenditures of $401,000, as compared to $89,000 in
fiscal 1993. Most of these capital expenditures were made to enhance the
Company's value-added assembly capabilities. During fiscal 1994, the Company
spent approximately $2.5 million on acquisition related activities, which
included $1.8 million for the In-Stock Acquisition, $490,000 in Richey-Brajdas
Merger costs and $220,000 incurred pursuant to a revaluation of RicheyImpact
assets as a result of an Internal Revenue Service ("IRS") settlement of 1991
taxes. During fiscal 1993, the Company spent $3.2 million on costs associated
with the Richey-Brajdas Merger. The Company financed its capital expenditure
and acquisition activities with net cash from operating activities and
borrowings under its revolving line of credit. The Company anticipates
incurring capital expenditures of approximately $600,000 in fiscal 1995, all of
which will be financed with net cash from operating activities and borrowings
under its revolving line of credit. The Company's actual capital expenditures
may vary significantly from its current expectations, based on a number of
factors, including, but not limited to additional acquisitions, if any.
14
<PAGE>
For the quarter ended December 31, 1994, inventory turnover was 4.9x,
compared to 4.4x for 1993 and 3.7x for 1992. The improvement in inventory
turnover was a result of the enhanced inventory control and supplier product
return programs instituted by the Company, the general improvement in business
activity experienced in 1994, and the acquisition of In-Stock inventories having
a relatively high turnover.
The number of days sales outstanding in accounts receivable decreased by
one day to 42 days in the fourth quarter of fiscal 1994 from 43 days in the
final quarter of fiscal 1993. In April 1994, the Company acquired the
operations and business of In-Stock which had an approximately 50 day turnover
on about $1.5 million in receivables. At the time of the acquisition, this
added approximately two days to days sales in accounts receivable, which the
Company was able to improve to historical averages by fiscal year end. The
Company did not experience any significant trade collection difficulties in
1994.
DEFERRED TAX ASSETS
As of December 31, 1994, the Company had approximately $24.0 million in
federal and $5.0 million in state tax NOLs, primarily California, most of which
expire between 1998 and 2009. The NOLs resulted from Brajdas' losses prior to
the Richey-Brajdas Merger.
Section 382 of the Internal Revenue Code of 1986, as amended
("Section 382"), and related regulations impose certain limitations on a
corporation's ability to use NOLs in the event certain changes in a company's
stock ownership over a three-year period exceed a specified threshold (a "Change
in Ownership"). Upon a Change in Ownership, the use of NOLs is restricted.
California law conforms to the provisions of Section 382. The Richey-Brajdas
Merger did not result in a Change in Ownership; therefore, the Company's current
ability to utilize the NOLs is not restricted. As a result of the Offering, a
Change in Ownership will occur. Accordingly, the Company estimates that its use
of the NOLs will be limited to approximately $2.5 million per year until the
NOLs are fully utilized or expire, whichever occurs first.
As discussed in Note 9 of Notes to Financial Statements, at December 31,
1994, the Company recorded a deferred tax asset of $3.9 million, net of a $3.7
million valuation allowance. The estimated future tax benefits of the NOLs
comprise the principal portion of the deferred tax asset. SFAS No. 109,
"Accounting for Income Taxes," requires that a valuation allowance be recorded
"when it is more likely than not" that any portion of the deferred tax asset
will not be realized. Due to the inherent uncertainty in forecasts of future
events and operating results, the Company has established a $3.7 million
valuation allowance which reduces the December 31, 1994 net deferred tax asset
to the tax benefit expected to be realized during approximately the next four
years after giving effect to the annual limitation resulting from the Change in
Ownership.
The Company has been consistently profitable since December 28, 1990 and
generated taxable income before NOLs of $3.0 million in 1994. Further, the
Company incurred interest expense of $1.6 million during 1994 on borrowings
which will be repaid through the proceeds of the Offering. Consequently, on an
as adjusted basis, the Company's 1994 taxable income, after excluding such
interest expense, was substantially greater than the $2.5 million annual
limitation on the use of the NOLs. Based on its historic and current level of
profitability, the Company believes that it is "more likely than not" that the
Company will be able to generate the $11.0 million of future taxable income
needed to realize the recorded amount of the net deferred tax asset prior to
expiration of the NOLs.
At the date of the Richey-Brajdas Merger, management established a
valuation allowance to reduce net deferred tax assets to zero. As part of the
Richey-Brajdas Merger, the Company allocated the purchase price in excess of
tangible net assets acquired of approximately $10.2 million to distribution
agreements and customer lists. In December 1993, as the favorable results of
the Richey-Brajdas Merger developed and the Company's prospects for ongoing
profitability improved, the valuation allowance was decreased by $4.3 million,
resulting in an increase in the net deferred tax asset, and a corresponding
15
<PAGE>
reduction in the carrying value of the distribution agreements and customer
lists. During 1994, amounts allocated to distribution agreements and customer
lists were further reduced by $1.3 million reflecting the realization of the
deferred tax assets during the year.
SELECTED QUARTERLY FINANCIAL DATA
The following table sets forth certain statements of operations data for
the periods indicated. This information has been derived from unaudited
financial statements which, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such information. These operating results are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FISCAL 1994
Net sales $20,247,000 $23,105,000 $22,838,000 $24,076,000
Gross profit 4,855,000 5,562,000 5,793,000 5,880,000
Net income 355,000 532,000 471,000 535,000
Earnings per common share .06 .09 .08 .09
Shipping days 65 64 63 62
FISCAL 1993
Net sales $8,088,000 $19,721,000 $18,927,000 $18,259,000
Gross profit 2,154,000 4,782,000 4,686,000 4,632,000
Net income 85,000 93,000 288,000 241,000
Earnings per common share .03 .02 .05 .04
Shipping days 64 64 63 61
FISCAL 1992
Net sales $7,862,000 $8,009,000 $8,300,000 $7,216,000
Gross profit 2,080,000 2,198,000 2,082,000 1,922,000
Net income 165,000 160,000 83,000 34,000
Earnings per common share .06 .06 .03 .01
Shipping days 64 63 64 60
</TABLE>
The unaudited quarterly results of operations indicate that net sales rose
from $299,000 per shipping day in the fourth quarter of 1993 to $311,000,
$361,000, $362,000, and $388,000 per shipping day in the four consecutive
quarters of 1994, respectively. The fiscal calendar for 1995 contains 64, 64,
62 and 62 shipping days for the first through fourth quarters, respectively.
Quarterly operating results may fluctuate significantly from quarter to quarter
in the future.
INFLATION
Inflation has not had a significant impact on the Company's operations
during the period under review.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements required by this Item 8 are listed in Item 14(a)
and are submitted at the end of this Form 10-K.
16
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item regarding directors and executive
officers of the Company is set forth in the Company's definitive Proxy Statement
(the "1995 Proxy Statement") to be filed with the Commission relating to its
Annual Meeting of Stockholders to be held on May 17, 1995, under the headings
"Nominees for Election as Directors," "Other Executive Officers of the Company"
and "Compliance with Section 16(a) of the Exchange Act," and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item regarding compensation of the
Company's directors and executive officers, set forth in the 1995 Proxy
Statement under "Executive Compensation" is incorporated herein by reference (to
the extent allowed by Item 402(a)(8) of Regulation S-K).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this item regarding beneficial ownership of the
Common Stock by certain beneficial owners and by management of the Company set
forth in the 1995 Proxy Statement under "Security Ownership of Certain
Beneficial Owners and Management" is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item regarding certain relationships and
related transactions with management of the Company set forth in the 1995 Proxy
Statement under "Compensation Committee Interlocks and Insider Participation"
and "Certain Relationships and Related Transactions" is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements
Independent Auditors' Report
Balance Sheets at December 31, 1993 and 1994
Statements of Income for the Years ended January 1, 1993 and
December 31, 1993 and 1994
17
<PAGE>
Statements of Stockholders' Equity for the Years ended January 1,
1993 and December 31, 1993 and 1994
Statements of Cash Flows for the Years ended January 1, 1993 and
December 31, 1993 and 1994
Notes to Financial Statements
2. Financial Statement Schedules
Not Applicable.
3. Exhibits
2.1 Merger Agreement among RicheyImpact Electronics, Inc.,
BRJS Investment Holding Corp. and Brajdas Corporation
dated as of February 22, 1993. *2* (A)
2.2 Amendment to Merger Agreement among RicheyImpact
Electronics, Inc., BRJS Investment Holding Corp. and
Brajdas Corporation dated as of April 5, 1993. *2* (A)
2.3 Agreement of Merger dated April 5, 1993 among Brajdas
Corporation, RicheyImpact Electronics, Inc. and BRJS
Investment Holding Corp., as filed with the Secretary
of State of the State of California on April 6, 1993.
*2* (B)
2.4 Certificate of Merger of RicheyImpact Electronics, Inc.
into Brajdas Corporation dated April 5, 1993 as filed
with the Secretary of State of the State of Delaware on
April 6, 1993. *2* (C)
2.5 Agreement of Merger of BRJS Investment Holding Corp.
and Brajdas Corporation dated as of July 12, 1993. *4*
(2)
2.6 Restated Agreement of Merger of BRJS Investment Holding
Corp. and Richey Electronics, Inc., f/k/a Brajdas
Corporation dated as of November 9, 1993. *6* (2.6)
2.7 Agreement of Merger (To Effect Reincorporation in
Delaware) between Richey Electronics, Inc., a Delaware
corporation and Richey Electronics, Inc., a California
corporation dated as of December 14, 1993. *6* (2.7)
2.8 Asset Purchase Agreement between Anchor Group,
Inc. and Richey Electronics, Inc. dated as of
April 4, 1994. *8* (2.8)
3.1 Restated Certificate of Incorporation of Richey
Electronics, Inc. *6* (3.1)
3.2 Bylaws of Richey Electronics, Inc. *6* (3.2)
18
<PAGE>
10.1 Stockholders Agreement among Brajdas Corporation and
the individuals and entities listed on Schedule I
thereto dated as of March 1993. *2* (F)
10.2 Indemnification Agreement among Barclay and Company,
Inc., Brajdas Corporation, Donald I. Zimmerman and
certain former shareholders of RicheyImpact
Electronics, Inc. identified therein dated as of April
5, 1993. *2* (E)
10.3 Letter re Amendment to Indemnification Agreement by
Barclay and Company, Inc. and Donald I. Zimmerman, and
agreed to by BRJS Investment Holding Corp., Brajdas
Corporation and the other persons and entities
identified therein dated April 23, 1993. *1* (10.3)
10.4 Registration Rights Agreement between Brajdas
Corporation and BRJS Investment Holding Corp. dated
April 2, 1993. *2* (D)
10.5 Stock Transfer Agreement dated March 31, 1993 among
Charles LaVarnway, Alex Mendoza, Arthur Mendoza, Lee
Teano and Donald I. Zimmerman. *2* (G)
10.6 BRJS/BFG Assignment and Acceptance Agreement dated
April 2, 1993 between Barclay Financial Group and BRJS
Investment Holding Corp. *1* (10.5)
10.7 $8 million Note from BRJS Investment Holding Corp. to
Barclay Financial Group dated April 2, 1993. *2* (H)
10.8 $8 million Subordinated Note from Brajdas Corporation
to BRJS Investment Holding Corp. dated April 6, 1993.
*2* (I)
10.9 Note Pledge Agreement dated April 2, 1993 by BRJS
Investment Holding Corp. to Barclay Financial Group.
*1* (10.8)
10.10 Barclay Confirmation of Guaranty Re Brajdas/BFG
Debt Purchase dated April 2, 1993 by Barclay and
Company in favor of BRJS Investment Holding Corp.
*1* (10.9)
10.11 Amended and Restated Guaranty dated as of April 6,
1993 by Barclay and Company, Inc. in favor of BRJS
Investment Holding Corp. *2* (J)
10.12 Agreement Re Brajdas/BRJS Indebtedness and
Amendment of Security Agreement dated April 6,
1993 between Brajdas and BRJS Investment Holding
Corp. *1* (10.11)
10.13 Amended and Restated Loan and Security Agreement
dated as of April 7, 1993 between Sanwa Business
Credit Corporation and Brajdas Corporation. *1*
(10.15)
10.14 Subordination Agreement dated April 7, 1993 by
BRJS Investment Holding Corp., Barclay Financial
Group, Barclay and
19
<PAGE>
Company, Inc. and the RicheyImpact stockholders named
therein to Sanwa Business Credit Corporation. *1* (10.16)
10.15 Employment Agreement between William C. Cacciatore
and Brajdas Corporation dated as of April 1, 1993.
*1* (10.18)
10.16 Employment Agreement between C. Don Alverson and
Brajdas Corporation dated as of April 1, 1993. *1*
(10.17)
10.17 Employment Agreement between Richard N. Berger and
Brajdas Corporation dated as of April 1, 1993. *1*
(10.20)
10.18 Employment Agreement between Norbert W. St. John
and Brajdas Corporation dated as of April 1, 1993.
*1* (10.19)
10.19 Brajdas Corporation Bonus Plan. *1* (10.21)
10.20 Employment Severance Agreement dated March 8, 1993
between Chuck LaVarnway and Brajdas Corporation.
*1* (10.22)
10.21 Employment Severance Agreement dated March 8, 1993
between Thomas Arrieta and Brajdas Corporation.
*1* (10.23)
10.22 Employment Severance Agreement dated March 8, 1993
between Lee Teano and Brajdas Corporation. *1*
(10.24)
10.23 Employment Severance Agreement dated March 8, 1993
between Robert Valone and Brajdas Corporation. *1*
(10.25)
10.24 Service and Management Agreement dated December
18, 1990 by and among RicheyImpact Electronics,
Inc., Palisades Associates, Inc. and Saunders
Capital Group, Inc. *3* (10.2)
10.25 Agreement to Assume and Amend the Service and
Management Agreement among Brajdas Corporation,
Palisades Associates, Inc. and Saunders Capital
Group, Inc. dated as of April 6, 1993. *3* (10.3)
10.26 Modification Agreement among the
Company, Palisades Associates, Inc. and
Saunders Capital Group, Inc. dated as of
January 2, 1995. *9* (10.26)
10.27 Form of 12% Junior Subordinated Promissory Note
issued to former shareholders of RicheyImpact
Electronics, Inc. by BRJS Investment Holding Corp.
*3* (10.1)
10.28 1993 Stock Appreciation Rights Plan. *5* (A)
10.29 Assumption and Amendment Agreement to Loan and
Security Agreement dated as of December 31, 1993
by and between Sanwa Business Credit Corporation
and Richey Electronics, Inc. *8* (10.31)
20
<PAGE>
10.30 Second Amendment to Amended and Restated Loan and
Security Agreement dated as of March 29, 1994 by
and between Sanwa Business Credit Corporation and
Richey Electronics, Inc. *8* (10.32)
10.31 First Amendment to Stockholders Agreement dated
December 14, 1994 among the Company and the
individuals and entities listed on Schedule I to
the Stockholders Agreement. *9* (10.31)
10.32 Lease between Principal Mutual Life Insurance
Company and Richey Electronics, Inc. for lease of
premises at 7441 Lincoln Way, Garden Grove,
California. *9* (10.32)
10.33 Lease between M&M Enterprises, a California
General Partnership and Richey Electronics, Inc.
for lease of premises at 10871 La Tuna Canyon
Road, Sun Valley, California. *9* (10.33)
10.34 Lease between Anchor Group, Inc. and Richey
Electronics, Inc. for lease of premises at 11
Walkup Drive, Westborough, Massachusetts. *9*
(10.34)
10.35 1992 Stock Option Plan. *9* (10.35)
10.36 Form of Incentive Stock Option Agreement. *9*
(10.36)
10.37 Addendum to Employment Agreement (William C.
Cacciatore) dated as of February 21, 1995. *9*
(10.37)
10.38 Addendum to Employment Agreement (C. Don Alverson)
dated as of February 21, 1995. *9* (10.38)
10.39 Addendum to Employment Agreement (Richard N.
Berger) dated as of February 21, 1995. *9* (10.39)
10.40 Addendum to Employment Agreement (Norbert W. St.
John) dated as of February 21, 1995. *9* (10.40)
10.41 Modification Agreement by and between Richey
Electronics, Inc. and Palisades Associates, Inc.
dated as of February 21, 1995. *9* (10.41)
12.1 Schedule regarding computation of ratios. *10* (12.1)
16.1 Letter re Change in Certifying Accountant. *7* (C)
21.1 Subsidiaries of Richey Electronics, Inc. *5*
(21.1)
__________
*1* Incorporated by reference to the designated exhibit of the Annual
Report on Form 10-K for Brajdas Corporation for the fiscal year ended
February 28, 1993, filed May 28, 1993.
*2* Incorporated by reference to the designated exhibit of the Statement
on Schedule 13D filed on behalf of BRJS Investment Holding Corp., C.
Don Alverson, William C. Cacciatore, Greg A. Rosenbaum and Norbert W.
St. John with the Securities and Exchange Commission on April 20,
1993.
21
<PAGE>
*3* Incorporated by reference to the designated exhibit of the Transition
Report on Form 10-Q for Brajdas Corporation for the period from
January 1, 1993 through July 2, 1993, filed August 4, 1993.
*4* Incorporated by reference to the designated exhibit of the Quarterly
Report on Form 10-Q for Richey Electronics, Inc., f/k/a Brajdas
Corporation for the period ended October 1, 1993, filed November 10,
1993.
*5* Incorporated by reference to the designated exhibit of the definitive
proxy statement for the 1993 Annual Meeting of Stockholders.
*6* Incorporated by reference to the designated exhibit of the
Registration Statement on Form S-1, filed January 7, 1994.
*7* Incorporated by reference to the designated exhibit of the Form 8-K
for Brajdas Corporation dated July 7, 1993, filed July 13, 1993.
*8* Incorporated by reference to the designated exhibit of Post-Effective
Amendment No. 1 to the Shelf Registration Statement on April 18, 1994.
*9* Incorporated by reference to the designated exhibit of the
Registration Statement on Form S-2, filed February 23, 1995.
*10* Incorporated by reference to the designated exhibit of Amendment No. 1
to the Registration Statement on Form S-2, filed March 24, 1995.
Exhibits 10.15-10.26, Exhibit 10.28, and Exhibits 10.35 - 10.41
are management contracts or compensatory plans or arrangements required to be
filed as exhibits pursuant to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1994.
22
<PAGE>
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, in the City of Garden
Grove, State of California, on March 30, 1995.
RICHEY ELECTRONICS, INC.
By /s/ Richard N. Berger
-----------------------------------------------
Richard N. Berger
Vice President, Chief Financial
Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ William C. Cacciatore Chairman of the Board, March 30, 1995
----------------------------- President, Chief Executive
William C. Cacciatore Officer (Principal Executive
Officer)
/s/ Don Alverson Director March 30, 1995
-----------------------------
Don Alverson
/s/ Richard N. Berger Vice President, Chief Financial March 30, 1995
----------------------------- Officer and Secretary
Richard N. Berger (Principal Financial and
Accounting Officer
/s/ Greg A. Rosenbaum Director March 30, 1995
-----------------------------
Greg A. Rosenbaum
/s/ Norbert W. St. John Director March 30, 1995
-----------------------------
Norbert W. St. John
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Richey Electronics, Inc.
Garden Grove, California
We have audited the accompanying balance sheets of Richey Electronics, Inc. as
of December 31, 1993 and 1994, and the related statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Richey Electronics, Inc. as of
December 31, 1993 and 1994 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
McGLADREY & PULLEN, LLP
Pasadena, California
February 3, 1995
24
<PAGE>
RICHEY ELECTRONICS, INC.
BALANCE SHEETS
DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
ASSETS (Note 4) 1993 1994
--------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 7,000 $ 9,000
Trade receivables 8,590,000 11,167,000
Inventories 12,460,000 14,913,000
Deferred income taxes (Note 9) 1,405,000 1,427,000
Other current assets 295,000 435,000
--------------------------------
Total current assets 22,757,000 27,951,000
IMPROVEMENTS AND EQUIPMENT (Note 3) 355,000 1,017,000
--------------------------------
OTHER ASSETS AND INTANGIBLES
Deferred income taxes (Note 9) 2,599,000 2,430,000
Distribution agreements 3,316,000 2,304,000
Customer lists 1,770,000 957,000
Deposits and other (Note 2) 121,000 354,000
--------------------------------
7,806,000 6,045,000
--------------------------------
$30,918,000 $35,013,000
--------------------------------
--------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of subordinated
notes payable (Note 4) $ - $ 1,600,000
Note payable, revolving line of credit
(Note 4) 6,995,000 8,843,000
Accounts payable 6,968,000 10,457,000
Accrued expenses (Note 5) 1,906,000 1,734,000
--------------------------------
Total current liabilities 15,869,000 22,634,000
--------------------------------
SUBORDINATED NOTES PAYABLE (Note 4) 8,151,000 3,594,000
--------------------------------
STOCKHOLDERS' EQUITY
Preferred stock $.001 par value,
authorized 10,000 shares, issued none - -
Common stock $.001 par value, authorized
30,000,000 shares, issued and
outstanding 5,889,000 shares 6,000 6,000
Additional paid-in capital 5,246,000 5,240,000
Retained earnings 1,646,000 3,539,000
--------------------------------
6,898,000 8,785,000
--------------------------------
$30,918,000 $35,013,000
--------------------------------
--------------------------------
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
RICHEY ELECTRONICS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended
January 1, December 31, December 31,
1993 1993 1994
------------------------------------------
<S> <C> <C> <C>
Net sales:
Components and value-added $30,100,000 $64,455,000 $90,266,000
Special inventory 1,287,000 540,000 -
------------------------------------------
31,387,000 64,995,000 90,266,000
------------------------------------------
Cost of goods sold:
Components and value-added 23,105,000 48,741,000 68,176,000
Special inventory - - -
------------------------------------------
23,105,000 48,741,000 68,176,000
------------------------------------------
Gross profit:
Components and value-added 6,995,000 15,714,000 22,090,000
Special inventory 1,287,000 540,000 -
------------------------------------------
8,282,000 16,254,000 22,090,000
------------------------------------------
Operating expenses:
Selling, warehouse, general and
administrative (Note 7) 7,144,000 13,002,000 16,750,000
Amortization of intangibles -- 887,000 568,000
------------------------------------------
7,144,000 13,889,000 17,318,000
------------------------------------------
Operating income 1,138,000 2,365,000 4,772,000
Interest expense (Note 4) 388,000 1,198,000 1,606,000
------------------------------------------
Income before income taxes 750,000 1,167,000 3,166,000
Federal and state income tax
(Note 9) 308,000 460,000 1,273,000
------------------------------------------
Net income $ 442,000 $ 707,000 $ 1,893,000
------------------------------------------
------------------------------------------
Earnings per common share $ .16 $ .14 $ .32
------------------------------------------
------------------------------------------
Weighted average number of
common shares outstanding 2,774,000 5,085,000 5,889,000
------------------------------------------
------------------------------------------
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
RICHEY ELECTRONICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------
Senior Additional
Preferred Shares Par Paid-In Retained
Stock Outstanding Value Capital Earnings Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 3, 1992 $1,061,000 6,000 $ - $1,200,000 $630,000 $2,891,000
Senior preferred stock
dividend of 667 shares 133,000 - - - (133,000) -
Net income - - - - 442,000 442,000
--------------------------------------------------------------------------------------
Balance, January 1, 1993 1,194,000 6,000 - 1,200,000 939,000 3,333,000
Cancellation of senior
preferred stock (Note 2) (1,194,000) - - 1,194,000 - -
Merger: (Note 2)
Recapitalization - 9,705,000 971,000 (971,000) - -
Issuance of common stock - 10,905,000 1,091,000 2,961,000 - 4,052,000
Issuance of junior
subordinated notes - - - (1,194,000) - (1,194,000)
Effect of three and one-half-
to-one reverse stock split - (14,727,000) (1,473,000) 1,473,000 - -
Effect of change in par value
from $.10 per common
share to $.001 per common
share - - (583,000) 583,000 - -
Net income - - - - 707,000 707,000
--------------------------------------------------------------------------------------
Balance, December 31, 1993 - 5,889,000 6,000 5,246,000 1,646,000 6,898,000
Reverse stock split
adjustments - - - (6,000) - (6,000)
Net income - - - - 1,893,000 1,893,000
--------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 $ - 5,889,000 $ 6,000 $5,240,000 $3,539,000 $8,785,000
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
RICHEY ELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------
January 1, December 31, December 31,
1993 1993 1994
----------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 442,000 $ 707,000 $ 1,893,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 145,000 997,000 765,000
Deferred income taxes (30,000) 465,000 1,157,000
Change in operating assets and liabilities,
net of effect of business combinations:
(Increase) decrease in:
Trade receivables (168,000) (255,000) (1,107,000)
Inventories (124,000) (1,345,000) (1,518,000)
Other current assets (45,000) (161,000) 14,000
Increase in accounts payable, trade and
accrued expenses 187,000 60,000 2,820,000
----------------------------------------------
Net cash provided by operating activities 407,000 468,000 4,024,000
----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment - 42,000 -
Purchase of leasehold improvements and
equipment (79,000) (89,000) (401,000)
Payment of acquisition and
restructuring costs - (3,188,000) (2,512,000)
----------------------------------------------
Net cash (used in) investing activities (79,000) (3,235,000) (2,913,000)
----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net advances (repayments) on revolving
line of credit (288,000) 3,859,000 1,848,000
Payments on long-term debt (42,000) (1,088,000) (2,957,000)
----------------------------------------------
Net cash provided by (used in)
financing activities (330,000) 2,771,000 (1,109,000)
----------------------------------------------
Increase (decrease) in cash (2,000) 4,000 2,000
CASH
Beginning 5,000 3,000 7,000
----------------------------------------------
Ending $ 3,000 $ 7,000 $ 9,000
----------------------------------------------
----------------------------------------------
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
RICHEY ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company is a multi-regional, specialty distributor of electronic components
and a provider of value-added assembly services. The Company has distribution
rights for various electronic components, primarily interconnect,
electromechanical and passive components, from major world-wide suppliers. The
Company conducts its business under the name RicheyCypress Electronics.
A SUMMARY OF THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES FOLLOWS:
YEAR END
The Company reports its annual operating results based upon a calendar year end
(December 31) and its quarterly results using the Friday nearest the end of each
quarter. For years prior to 1993, the Company reported its annual results
closing on the Friday nearest to December 31. The fiscal year ended January 1,
1993 included 52 weeks.
CONCENTRATION OF CREDIT RISK
The Company distributes electronic components to small- and medium-sized
manufacturers of telecommunications, computer and medical equipment and the
aerospace industry. Credit is extended based on an evaluation of the customer's
financial condition and collateral is typically not required. Credit losses are
provided for in the financial statements through a change to operations.
Additionally, a valuation allowance for known and anticipated credit losses is
maintained. Credit losses have been consistently within management's
expectations and were not material in any year presented.
INVENTORIES
Inventories consist of electronic components held for sale and are valued at the
lower of cost (first-in, first-out method) or market. The Company periodically
reviews the age and turnover of its inventory to determine whether any inventory
has become obsolete or has declined in value and incurs a charge to operations
for known and anticipated inventory obsolescence. The Company has not incurred
any material charges to operations for inventory obsolescence during any year
presented.
On December 28, 1990, RicheyImpact Electronics, Inc. ("RicheyImpact") purchased
certain assets and assumed certain obligations and liabilities of Richey/Impact
Electronics Inc. ("Old Richey") from Lex Service Inc. ("Lex"). In connection
with that purchase agreement, RicheyImpact entered into sales agency and
consignment agreements with Lex regarding certain inventories not originally
purchased by it. Under these arrangements, Lex retained title to the inventory
and guaranteed certain profit margins to RicheyImpact. Effective June 28, 1991,
Lex granted RicheyImpact title to all remaining sales agency and consigned
inventory at no cost. Sales of this inventory during 1992 and 1993 are reported
separately in the statement of income as special inventory sales, cost of goods
sold and gross profit. Substantially all Lex sales agency and consigned
inventory was sold as of December 31, 1993. Accordingly, special inventory
sales in 1994 were not material.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment are stated at cost, less accumulated
depreciation and amortization. Equipment is depreciated using the straight-line
method over estimated service lives. Leasehold improvements are amortized over
the life of the lease or the economic life of the asset, whichever is shorter.
DISTRIBUTION AGREEMENTS AND CUSTOMER LISTS
Distribution agreements and customer lists and are being amortized using the
straight-line method over the respective estimated economic lives of fifteen and
five years. As the benefit of the Company's net operating loss carryforwards is
realized, through the results of operations or a reduction in the deferred tax
asset valuation allowance, the carrying value of the distribution agreements and
customer lists is reduced proportionately.
At December 31, 1993, the cumulative reductions in distribution agreements and
customer lists were reduced by $3,071,000 and $2,063,000, respectively. At
December 31, 1994, the cumulative reductions were $4,083,000 and $2,876,000,
respectively. See Note 9.
INCOME TAXES
Deferred taxes are provided on a liability method whereby deferred tax
liabilities are recognized for taxable temporary differences and deferred tax
assets are recognized for deductible temporary differences and operating loss
and tax credit carryforwards. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when it cannot be demonstrated
that the deferred tax assets are more likely than not to be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
EARNINGS PER COMMON SHARE
Earnings per common share are computed using the weighted average number of
shares of common stock outstanding. On December 30, 1993, the Company effected
a reverse stock split by issuing one share for every three and one-half shares
of common stock previously outstanding. All previously reported earnings per
share have been restated to give retroactive effect to this reverse stock split.
NOTE 2. BUSINESS COMBINATIONS
BRAJDAS
On April 6, 1993, RicheyImpact merged with Brajdas Corporation, a California
corporation ("Brajdas" or the "Registrant"), with Brajdas as the surviving legal
entity (the "Richey-Brajdas Merger"). Brajdas subsequently changed its name to
Richey Electronics, Inc. (the "Company") and reincorporated in Delaware. Both
companies operated as wholesale distributors of electronic components. The
Richey-Brajdas Merger was recorded as a reverse purchase acquisition with
RicheyImpact as the accounting acquirer. Because the accounting acquirer is
treated as the surviving entity in a reverse purchase acquisition, the
Registrant's legal existence did not change. The results of operations of
Brajdas subsequent to the date of the Richey-Brajdas Merger are included in the
Company's financial statements.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Prior to the Richey-Brajdas Merger, the RicheyImpact stockholders surrendered
the senior preferred stock for cancellation and contributed it to common
stockholders' equity. As part of the merger transaction, the Company
recapitalized through the issuance of 9,705,000 common shares to former
RicheyImpact stockholders and 10,905,000 common shares to former shareholders of
Brajdas that were valued at $4,052,000. Additionally, as part of the merger,
RicheyImpact stockholders received junior subordinated notes of $1,194,000.
IN-STOCK
On April 4, 1994, the Company completed the purchase of the assets and business
of the In-Stock Products division of the Anchor Group, Inc. ("In-Stock"), a
Boston, Massachusetts area distributor of electronic components, for
approximately $1,841,000 in cash, including acquisition costs. The acquisition
was accounted for as a purchase. The fair value of assets acquired was
$2,787,000 and the liabilities assumed totaled $946,000. Goodwill of $274,000
is included in other assets and is being amortized over 15 years. The results
of operations of In-Stock subsequent to the date of acquisition are included in
the Company's financial statements.
PRO FORMA RESULTS
The following pro forma results assume the acquisition of the assets and
business of In-Stock occurred as of the beginning of the respective years. In
addition, the 1993 results reflect the Richey-Brajdas Merger as if it occurred
as of the beginning of the year. The unaudited pro forma results have been
prepared utilizing the historical financial statements of the Company and the
acquired businesses. The unaudited pro forma results give effect to certain
adjustments, including amortization of acquired intangibles and goodwill,
elimination of duplicate facilities and redundant salaries, reduction in
interest expense and related tax effects.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1993 1994
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Net Sales $84,579,000 $92,964,000
Net Income 862,000 2,008,000
Earnings per share .17 .34
</TABLE>
The pro forma financial information does not purport to be indicative of the
results of operations that would have occurred had the transactions actually
taken place at the beginning of the periods presented.
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 3. IMPROVEMENTS AND EQUIPMENT
Improvements and equipment at December 31 consist of the following:
<TABLE>
<CAPTION>
1993 1994
--------------------------
<S> <C> <C>
Leasehold improvements $167,000 $293,000
Furniture, fixtures and equipment 686,000 1,431,000
--------------------------
853,000 1,724,000
Less accumulated depreciation and amortization (498,000) (707,000)
--------------------------
$355,000 $1,017,000
--------------------------
--------------------------
</TABLE>
NOTE 4. REVOLVING LINE OF CREDIT AND SUBORDINATED DEBT
REVOLVING LINE OF CREDIT
The Company's revolving line of credit allows advances up to $15,000,000,
limited to 85% of eligible accounts receivable and 45% of eligible inventory not
to exceed $7,500,000. The Company is required to maintain a depository account
where all receivable collections are deposited for the benefit of the lender.
Subject to availability under the line of credit and borrowing base, the lender
advances funds to the Company's account to cover disbursements when presented
for payment by the Company.
The credit agreement extends through February 28, 1996. Borrowings bear
interest at 1-1/2% above the national prime rate and are collateralized by
substantially all assets of the Company, including accounts receivable,
inventory, equipment and intangibles. As of March 1, 1995, the Company is
required to pay the lender an unused line fee equal to 1/2% per annum of the
difference between the maximum commitment of $15,000,000 and the daily average
outstanding borrowings for the prior month.
The credit agreement contains various covenants which require the Company to
meet certain financial conditions, including maintenance of a minimum tangible
net worth. The agreement also restricts the Company from declaring or paying
dividends, without prior approval of the Company's lender.
The following is a summary of borrowings under the revolving line of credit:
<TABLE>
<CAPTION>
1992 1993 1994
----------------------------------------
<S> <C> <C> <C>
Interest rate in effect at year end 8.5% 10.0%
Available borrowings at year end $ 553,000 $ 5,452,000
Maximum outstanding borrowings
during the year $ 3,896,000 6,995,000 12,610,000
Weighted average interest rate
for the borrowings outstanding
during the year 8.8% 8.5% 8.9%
</TABLE>
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 4. REVOLVING LINE OF CREDIT AND SUBORDINATED DEBT, CONTINUED
SUBORDINATED DEBT
Subordinated debt at December 31 was:
<TABLE>
<CAPTION>
1993 1994
-------------------------
<S> <C> <C>
10% senior subordinated note payable, secured,
interest payable quarterly $6,957,000 $4,000,000
12% junior subordinated notes payable,
unsecured, interest payable semiannually 1,194,000 1,194,000
-------------------------
8,151,000 5,194,000
Less current maturities of senior subordinated
note payable - (1,600,000)
-------------------------
$8,151,000 $3,594,000
-------------------------
-------------------------
</TABLE>
SENIOR SUBORDINATED NOTE. In April 1993 and March 1994, the Company paid
$1,043,000 and $2,957,000, respectively, of principal on this debt based upon
existing provisions of the note. Commencing in 1995 and each year thereafter
until the note is paid, principal payments equal to the greater of $500,000 or
cash flows as defined ($1,600,000 as of December 31, 1994) are required. Any
remaining balance is due March 1, 2000. The debt is secured by a security
interest in accounts receivable, inventory, and property and equipment,
subordinated to the security interest of the revolving line-of-credit lender.
Interest expense on this note payable to Barclay Financial Group, a related
party, was $541,000 and $479,000 for 1993 and 1994, respectively.
JUNIOR SUBORDINATED NOTES. The junior subordinated notes are due March 2, 2000;
provided, however, that mandatory prepayments of principal are required if the
senior subordinated note payable and any balance outstanding under the revolving
line-of-credit agreement are paid off. Principal repayments would then be
determined based on net after-tax cash flow as defined by the junior
subordinated notes. Interest expense on these notes payable to stockholders was
$107,000 and $145,000 for 1993 and 1994, respectively.
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 5. ACCRUED EXPENSES
Accrued expenses at December 31 consist of the following:
<TABLE>
<CAPTION>
1993 1994
-------------------------
<S> <C> <C>
Compensation $907,000 $1,163,000
Rent and facilities costs 354,000 85,000
Interest 342,000 273,000
Other 303,000 213,000
-------------------------
$1,906,000 $1,734,000
-------------------------
-------------------------
</TABLE>
The accrual for rent and facilities costs is net of sublease income of $411,000
and $255,000 at December 31, 1993 and 1994, respectively.
NOTE 6. LEASE COMMITMENTS
OPERATING LEASES
The Company leases office and warehouse space under operating lease agreements
with various terms and conditions, expiring in years ending 1995 through 2000,
with rent escalations typically based on the Consumer Price Index.
Future minimum lease payments under these leases, exclusive of lease payments on
duplicate facilities which have been accrued, are as follows:
<TABLE>
<S> <C>
1995 $658,000
1996 687,000
1997 688,000
1998 696,000
1999 562,000
2000 98,000
----------
$3,389,000
----------
----------
</TABLE>
Total rent expense under operating leases, including rent for facilities leased
on a month-to-month basis, was $473,000, $846,000 and $678,000, for 1992, 1993
and 1994, respectively.
NOTE 7. SERVICE AND MANAGEMENT AGREEMENT
The Company is a party to a five-year Service and Management Agreement dated
December 18, 1990. Terms of the five-year agreement provide for the payment of
management fees for financial and administrative services performed for the
Company. Management fees were approximately $244,000 in each year presented and
were paid to two corporations controlled by stockholders of the Company. In
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 7. SERVICE AND MANAGEMENT AGREEMENT, CONTINUED
January 1995, the Company reached an agreement with one of the corporations to
terminate its service under the agreement, upon payment of $65,000.
NOTE 8. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
---------------------------------------
Year Ended
---------------------------------------
January 1, December 31, DECEMBER 31,
1993 1993 1994
---------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash payments for:
Interest $324,000 $ 994,000 $1,675,000
---------------------------------------
---------------------------------------
Income Taxes $321,000 $ -- $ 46,000
---------------------------------------
---------------------------------------
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES (Note 2)
Cancellation of senior
preferred stock $ 1,194,000
-------------
-------------
Assets acquired, liabilities assumed
and securities issued in business
combinations:
Current assets $10,416,000 $2,410,000
Current liabilities (5,093,000) (946,000)
Leasehold improvements and
equipment 188,000 103,000
Distribution agreements and
customer lists 10,220,000 -
Other assets 69,000 274,000
Restructuring and transaction costs (3,748,000) -
Subordinated notes payable (8,000,000) -
Common stock issued (4,052,000) -
--------------------------
Net cash paid $ -- $1,841,000
--------------------------
--------------------------
Issuance of subordinated notes
payable in connection with
merger $(1,194,000)
-------------
-------------
</TABLE>
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 9. INCOME TAXES
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
January 1, December 31, DECEMBER 31,
1993 1993 1994
------------------------------------------
<S> <C> <C> <C>
Currently paid or payable:
Federal $258,000 $ (8,000) $ 60,000
State 80,000 3,000 56,000
Deferred (30,000) 465,000 1,157,000
------------------------------------------
$308,000 $460,000 $1,273,000
------------------------------------------
------------------------------------------
</TABLE>
The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income due to the following:
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------
January 1, December 31, DECEMBER 31,
1993 1993 1994
-----------------------------------------
<S> <C> <C> <C>
Computed "expected" statutory rate
Increase (decrease) in rate resulting
from: 34% 35% 35%
Benefit of income taxed at lower
rates -- (1) (1)
State income taxes, net of federal
tax benefit 7 7 5
Other -- (2) 1
-----------------------------------------
41% 39% 40%
-----------------------------------------
-----------------------------------------
</TABLE>
36
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 9. INCOME TAXES, CONTINUED
Net deferred taxes at December 31 consist of the following:
<TABLE>
<CAPTION>
1993 1994
--------------------------
<S> <C> <C>
Deferred tax liabilities:
Intangibles recorded at the purchase
price for financial reporting purposes,
not recognized in tax-free merger $2,034,000 $1,348,000
Other 284,000 337,000
--------------------------
2,318,000 1,685,000
--------------------------
Deferred tax assets:
Net operating loss carryforwards ("NOLs") 9,593,000 8,421,000
Other, primarily costs capitalized to
inventory for tax purposes and accrued
expenses not tax deductible until paid 1,128,000 774,000
--------------------------
10,721,000 9,195,000
Less valuation allowance (4,399,000) (3,653,000)
--------------------------
6,322,000 5,542,000
--------------------------
Net $4,004,000 $3,857,000
--------------------------
--------------------------
</TABLE>
Net deferred tax assets described above have been included in the accompanying
balance sheets as follows:
<TABLE>
<CAPTION>
1993 1994
--------------------------
<S> <C> <C>
Current assets $1,405,000 $1,427,000
Noncurrent assets 2,599,000 2,430,000
--------------------------
$4,004,000 $3,857,000
--------------------------
--------------------------
</TABLE>
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 9. INCOME TAXES, CONTINUED
As of December 31, 1994, the Company had net operating loss carryforwards which
have the following expiration dates:
<TABLE>
<CAPTION>
Expiration Date Federal California
--------------- -----------------------------------
<S> <C> <C>
1997 $ -- $3,599,000
1998 3,450,000 953,000
1999 2,935,000 270,000
2000 490,000 --
2005 2,000,000 --
2006 2,053,000 --
2007 9,700,000 --
2008 2,500,000 --
2009 771,000 --
-----------------------------------
$23,899,000 $4,822,000
-----------------------------------
-----------------------------------
</TABLE>
Section 382 of the Internal Revenue Code of 1986 and the related regulations
impose certain limitations on a corporation's ability to use net operating loss
carryforwards if more than a 50% ownership change occurs. California law
conforms to the provisions of Section 382. The Richey-Brajdas Merger did not
result in a more than 50% ownership change; therefore, the Company's current
ability to utilize the net operating loss carryforwards is not restricted.
However, if the Company issues additional common stock, its ability to utilize
these NOLs could be restricted on an annual basis.
The Company has been consistently profitable since the December 1990 acquisition
of the operations of Old Richey and generated taxable income before NOL
carryforwards of $3.0 million in 1994. Based on its current level of
profitability, management believes that the Company will be able to fully
utilize the NOLs prior to their expiration. However, as stated in Note 1,
generally accepted accounting principles require that deferred tax assets be
reduced by a valuation allowance when it cannot be demonstrated that they are
more likely than not to be realized. Due to the uncertainty inherent in
forecasts of future events and operating results, management has established a
valuation allowance to reduce the net deferred tax asset to the tax benefit
expected to be realized during approximately the next four years. Management
believes that it is "more likely than not" that the Company will be able to
generate the $11.0 million of future taxable income necessary to realize the
recorded amount of the net deferred tax asset prior to the expiration of the
NOLs.
NOTE 10. EMPLOYEE BENEFIT PLANS
STOCK APPRECIATION RIGHTS PLAN
On July 7, 1993, the Company adopted a Stock Appreciation Rights Plan. Each
stock appreciation right ("SAR") provides the recipient with the right to
receive a cash payment equal to the excess, if any, of the fair market value of
a share of the Company's common stock on the date the SAR is exercised over the
fair market value on the date the SAR was granted, or such other value as
determined by the Compensation Committee. The maximum number of rights that may
be awarded under the plan may not exceed approximately 589,000. To date, no
rights have been granted under this plan.
38
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 9. INCOME TAXES, CONTINUED
STOCK OPTION PLAN
On June 16, 1994, the Company approved the issuance of 226,737 options under the
terms of the 1992 stock option plan. At the time of this issuance, there were
no previous options outstanding under this plan. The Company may grant up to
362,197 additional options. These options vest at a rate of 25% per year over a
four-year period and expire ten years from the date of grant. The options were
granted at fair market value at the date of grant.
As of December 31, 1994, 226,737 options granted in 1994 remain outstanding with
an exercise price of $6.00 per share.
401(K) SAVINGS PLAN
The Company has two defined contribution 401(k) savings plans covering
substantially all its employees. The plans do not provide for the Company to
match any contributions by participants, and no contributions were made by the
Company to either of these plans during 1992, 1993 or 1994.
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Net sales $20,247,000 $23,105,000 $22,838,000 $24,076,000
Gross profit 4,855,000 5,562,000 5,793,000 5,880,000
Net income 355,000 532,000 471,000 535,000
Earnings per common
share .06 .09 .08 .09
1993
Net sales $8,088,000 $19,721,000 $18,927,000 $18,259,000
Gross profit 2,154,000 4,782,000 4,686,000 4,632,000
Net income 85,000 93,000 288,000 241,000
Earnings per common
share .03 .02 .05 .04
1992
Net sales $7,862,000 $8,009,000 $8,300,000 $7,216,000
Gross profit 2,080,000 2,198,000 2,082,000 1,922,000
Net income 165,000 160,000 83,000 34,000
Earnings per common
share .06 .06 .03 .01
</TABLE>
40
<PAGE>
RICHEY ELECTRONICS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1994
EXHIBIT INDEX
Exhibit
Number
-------
2.1 Merger Agreement among RicheyImpact Electronics, Inc., BRJS
Investment Holding Corp. and Brajdas Corporation dated as of
February 22, 1993. *2*(A)
2.2 Amendment to Merger Agreement among RicheyImpact Electronics,
Inc., BRJS Investment Holding Corp. and Brajdas Corporation dated
as of April 5, 1993. *2*(A)
2.3 Agreement of Merger dated April 5, 1993 among Brajdas Corporation,
RicheyImpact Electronics, Inc. and BRJS Investment Holding Corp.,
as filed with the Secretary of State of the State of California on
April 6, 1993. *2*(B)
2.4 Certificate of Merger of RicheyImpact Electronics, Inc. into
Brajdas Corporation dated April 5, 1993 as filed with the
Secretary of State of the State of Delaware on April 6, 1993.
*2*(C)
2.5 Agreement of Merger of BRJS Investment Holding Corp. and Brajdas
Corporation dated as of July 12, 1993. *4*(2)
2.6 Restated Agreement of Merger of BRJS Investment Holding Corp. and
Richey Electronics, Inc., f/k/a Brajdas Corporation dated as of
November 9, 1993. *6* (2.6)
2.7 Agreement of Merger (To Effect Reincorporation in Delaware)
between Richey Electronics, Inc., a Delaware corporation and
Richey Electronics, Inc., a California corporation dated as of
December 14, 1993. *6* (2.7)
2.8 Asset Purchase Agreement between Anchor Group, Inc. and Richey
Electronics, Inc. dated as of April 4, 1994. *8* (2.8)
3.1 Restated Certificate of Incorporation of Richey Electronics, Inc.
*6* (3.1)
3.2 Bylaws of Richey Electronics, Inc. *6* (3.2)
10.1 Stockholders Agreement among Brajdas Corporation and the
individuals and entities listed on Schedule I thereto dated as of
March 1993. *2* (F)
10.2 Indemnification Agreement among Barclay and Company, Inc., Brajdas
Corporation, Donald I. Zimmerman and certain former shareholders
of RicheyImpact Electronics, Inc. identified therein dated as of
April 5, 1993. *2* (E)
10.3 Letter re Amendment to Indemnification Agreement by Barclay and
Company, Inc. and Donald I. Zimmerman, and agreed to by BRJS
Investment Holding Corp., Brajdas Corporation and the other
persons and entities identified therein dated April 23, 1993. *1*
(10.3)
41
<PAGE>
10.4 Registration Rights Agreement between Brajdas Corporation and BRJS
Investment Holding Corp. dated April 2, 1993. *2* (D)
10.5 Stock Transfer Agreement dated March 31, 1993 among Charles
LaVarnway, Alex Mendoza, Arthur Mendoza, Lee Teano and Donald I.
Zimmerman. *2* (G)
10.6 BRJS/BFG Assignment and Acceptance Agreement dated April 2, 1993
between Barclay Financial Group and BRJS Investment Holding Corp.
*1* (10.5)
10.7 $8 million Note from BRJS Investment Holding Corp. to Barclay
Financial Group dated April 2, 1993. *2* (H)
10.8 $8 million Subordinated Note from Brajdas Corporation to BRJS
Investment Holding Corp. dated April 6, 1993. *2* (I)
10.9 Note Pledge Agreement dated April 2, 1993 by BRJS Investment
Holding Corp. to Barclay Financial Group. *1* (10.8)
10.10 Barclay Confirmation of Guaranty Re Brajdas/BFG Debt Purchase
dated April 2, 1993 by Barclay and Company in favor of BRJS
Investment Holding Corp. *1* (10.9)
10.11 Amended and Restated Guaranty dated as of April 6, 1993 by Barclay
and Company, Inc. in favor of BRJS Investment Holding Corp. *2*
(J)
10.12 Agreement Re Brajdas/BRJS Indebtedness and Amendment of Security
Agreement dated April 6, 1993 between Brajdas and BRJS Investment
Holding Corp. *1* (10.11)
10.13 Amended and Restated Loan and Security Agreement dated as of April
7, 1993 between Sanwa Business Credit Corporation and Brajdas
Corporation. *1* (10.15)
10.14 Subordination Agreement dated April 7, 1993 by BRJS Investment
Holding Corp., Barclay Financial Group, Barclay and Company, Inc.
and the RicheyImpct stockholders named therein to Sanwa Business
Credit Corporation. *1* (10.16)
10.15 Employment Agreement between William C. Cacciatore and Brajdas
Corporation dated as of April 1, 1993. *1* (10.18)
10.16 Employment Agreement between C. Don Alverson and Brajdas
Corporation dated as of April 1, 1993. *1* (10.17)
10.17 Employment Agreement between Richard N. Berger and Brajdas
Corporation dated as of April 1, 1993. *1* (10.20)
10.18 Employment Agreement between Norbert W. St. John and Brajdas
Corporation dated as of April 1, 1993. *1* (10.19)
10.19 Brajdas Corporation Bonus Plan. *1* (10.21)
10.20 Employment Severance Agreement dated March 8, 1993 between Chuck
LaVarnway and Brajdas Corporation. *1* (10.22)
42
<PAGE>
10.21 Employment Severance Agreement dated March 8, 1993 between Thomas
Arrieta and Brajdas Corporation. *1* (10.23)
10.22 Employment Severance Agreement dated March 8, 1993 between Lee
Teano and Brajdas Corporation. *1* (10.24)
10.23 Employment Severance Agreement dated March 8, 1993 between Robert
Valone and Brajdas Corporation. *1* (10.25)
10.24 Service and Management Agreement dated December 18, 1990 by and
among RicheyImpact Electronics, Inc., Palisades Associates, Inc.
and Saunders Capital Group, Inc. *3* (10.2)
10.25 Agreement to Assume and Amend the Service and Management Agreement
among Brajdas Corporation, Palisades Associates, Inc. and Saunders
Capital Group, Inc. dated as of April 6, 1993. *3* (10.3)
10.26 Modification Agreement among the Company, Palisades Associates,
Inc. and Saunders Capital Group, Inc. dated as of January 2, 1995.
*9* (10.26)
10.27 Form of 12% Junior Subordinated Promissory Note issued to former
shareholders of RicheyImpact Electronics, Inc. by BRJS Investment Holding
Corp. *3* (10.1)
10.28 1993 Stock Appreciation Rights Plan. *5* (A)
10.29 Assumption and Amendment Agreement to Loan and Security Agreement
dated as of December 31, 1993 by and between Sanwa Business Credit
Corporation and Richey Electronics, Inc. *8* (10.31)
10.30 Second Amendment to Amended and Restated Loan and Security
Agreement dated as of March 29, 1994 by and between Sanwa Business
Credit Corporation and Richey Electronics, Inc. *8* (10.32)
10.31 First Amendment to Stockholders Agreement dated December 14, 1994
among the Company and the individuals and entities listed on
Schedule I to the Stockholders Agreement. *9* (10.31)
10.32 Lease between Principal Mutual Life Insurance Company and Richey
Electronics, Inc. for lease of premises at 7441 Lincoln Way,
Garden Grove, California. *9* (10.32)
10.33 Lease between M&M Enterprises, a California General Partnership
and Richey Electronics, Inc. for lease of premises at 10871 La
Tuna Canyon Road, Sun Valley, California. *9* (10.33)
10.34 Lease between Anchor Group, Inc. and Richey Electronics, Inc. for
lease of premises at 11 Walkup Drive, Westborough, Massachusetts.
*9* (10.34)
10.35 1992 Stock Option Plan. *9* (10.35)
10.36 Form of Incentive Stock Option Agreement. *9* (10.36)
10.37 Addendum to Employment Agreement (William C. Cacciatore) dated as
of February 21, 1995. *9* (10.37)
43
<PAGE>
10.38 Addendum to Employment Agreement (C. Don Alverson) dated as of
February 21, 1995. *9* (10.38)
10.39 Addendum to Employment Agreement (Richard N. Berger) dated as of
February 21, 1995. *9* (10.39)
10.40 Addendum to Employment Agreement (Norbert W. St. John) dated as of
February 21, 1995. *9* (10.40)
10.41 Modification Agreement by and between Richey Electronics, Inc. and
Palisades Associates, Inc. dated as of February 21, 1995. *9*
(10.41)
12.1 Schedule regarding computation of ratios. *10* (12.1)
16.1 Letter re Change in Certifying Accountant. *7* (C)
21.1 Subsidiaries of Richey Electronics, Inc. *5* (21.1)
27.1 Financial Data Schedule
__________
*1* Incorporated by reference to the designated exhibit of the Annual Report
on Form 10-K for Brajdas Corporation for the fiscal year ended February
28, 1993, filed May 28, 1993.
*2* Incorporated by reference to the designated exhibit of the Statement on
Schedule 13D filed on behalf of BRJS Investment Holding Corp., C. Don
Alverson, William C. Cacciatore, Greg A. Rosenbaum and Norbert W. St.
John with the Securities and Exchange Commission on April 20, 1993.
*3* Incorporated by reference to the designated exhibit of the Transition
Report on Form 10-Q for Brajdas Corporation for the period from January
1, 1993 through July 2, 1993, filed August 4, 1993.
*4* Incorporated by reference to the designated exhibit of the Quarterly
Report on Form 10-Q for Richey Electronics, Inc., f/k/a Brajdas
Corporation for the period ended October 1, 1993, filed November 10,
1993.
*5* Incorporated by reference to the designated exhibit of the Registration
Statement on Form S-1, filed January 7, 1994.
*6* Incorporated by reference to the designated exhibit of the definitive
proxy statement for the 1993 Annual Meeting of Stockholders.
*7* Incorporated by reference to the designated exhibit of the Form 8-K for
Brajdas Corporation dated July 7, 1993, filed July 13, 1993.
*8* Incorporated by reference to the designated exhibit of Post-Effective
Amendment No. 1 to the Shelf Registration Statement on April 18, 1994.
*9* Incorporated by reference to the designated exhibit of the Registration
Statement on Form S-2, filed February 23, 1995.
*10* Incorporated by reference to the designated exhibit of Amendment No. 1 to
the Registration Statement on Form S-2, filed March 24, 1995.
44
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000320591
<NAME> U*W3BQGD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 9,000
<SECURITIES> 0
<RECEIVABLES> 11,167,000
<ALLOWANCES> 0
<INVENTORY> 14,913,000
<CURRENT-ASSETS> 27,951,000
<PP&E> 1,724,000
<DEPRECIATION> 707,000
<TOTAL-ASSETS> 35,013,000
<CURRENT-LIABILITIES> 22,634,000
<BONDS> 3,594,000
<COMMON> 5,246,000
0
0
<OTHER-SE> 3,539,000
<TOTAL-LIABILITY-AND-EQUITY> 35,013,000
<SALES> 90,266,000
<TOTAL-REVENUES> 90,266,000
<CGS> 68,176,000
<TOTAL-COSTS> 68,176,000
<OTHER-EXPENSES> 17,318,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,606,000
<INCOME-PRETAX> 3,166,000
<INCOME-TAX> 1,273,000
<INCOME-CONTINUING> 1,893,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,893,000
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
