RICHEY ELECTRONICS INC, 8-K/A, 1996-01-31

RICHEY ELECTRONICS INC
8-K/A, 1996-01-31
ELECTRONIC PARTS & EQUIPMENT, NEC

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

AMENDMENT NO. 1

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 20, 1995
-----------------

RICHEY ELECTRONICS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 0-9788 33-0594451
- -------------- ---------------- ----------------------
(State of (Commission file (IRS Employer
incorporation) Number) Identification Number)

7441 Lincoln Way, Garden Grove, California 92641
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (714) 898-8288
--------------

<PAGE>

Item 5. Other Events

Attached as Exhibit A is a press release issued by the Company on
January 30, 1996. The press release announced results for the fourth quarter
and twelve month period ended December 31, 1995, a proposed private offering
of convertible debt and the signing of a letter of intent to acquire MS
Electronics, Inc., a Maryland-based distributor of electronic components.

Item 7. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

See Appendix 1 attached hereto which includes the following audited
financial information:

Deanco, Inc.

Independent Auditor's Report

Balance Sheets at June 30, 1993, June 30, 1994, and December 31,
1994

Statements of Operations for the years ended June 30, 1992, June
30, 1993 and June 30, 1994, and for each of the three month periods ended
September 30, 1994 and December 31, 1994

Statements of Stockholders' Equity for the years ended June 30,
1992, June 30, 1993 and June 30, 1994 and for the three months ended
December 31, 1994

Statements of Cash Flows for the years ended June 30, 1992, June
30, 1993 and June 30, 1994 and for each of the three month periods ended
September 30, 1994 and December 31, 1994

Notes to Financial Statements

Electrical Distribution Acquisition Company and Subsidiary

Independent Auditor's Report

Balance Sheet at December 31, 1994

Statement of Operations for the three month ended December 31, 1994

Statement of Stockholders' Equity for the three months ended
December 31, 1994

Statement of Cash Flows for the three months ended December 31, 1994

Notes to Financial Statements

(b) Pro Forma Financial Information.

See Appendix 2 attached hereto which includes the following pro forma
financial information:

Unaudited Pro Forma Condensed Income Statement

Unaudited Pro Forma Condensed Balance Sheet

Notes to Pro Forma Financial Statements

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

RICHEY ELECTRONICS, INC.
(Registrant)

By /s/ Richard N. Berger
-----------------------------------
Richard N. Berger
Vice President,
Chief Financial Officer
and Secretary

January 31, 1996

<PAGE>
APPENDIX 1

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Deanco, Inc.

We have audited the accompanying balance sheet of Deanco, Inc. as
of December 31, 1994, and the related statements of operations,
stockholder's equity, and cash flows for the period October 1, 1994 to
December 31, 1994. We have also audited the accompanying balance sheets of
the Predecessor Business as of June 30, 1994 and 1993; the statements of
operations and cash flows for the period July 1, 1994 to September 30,
1994 and the years ended June 30, 1994, 1993, and 1992; and the statements
of stockholders' equity for the years ended June 30, 1994, 1993, and 1992.
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 Deanco, Inc. at
December 31, 1994, and the results of its operations and its cash flows
for the period October 1, 1994 to December 31, 1994, in conformity with
generally accepted accounting principles. Also in our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of the Predecessor Business at June 30, 1994 and
1993, and the results of its operations and cash flows for the period
July 1, 1994 to September 30, 1994 and the years ended June 30, 1994, 1993,
and 1992, in conformity with generally accepted accounting principles.

As discussed in Note 6 to the financial statements, in fiscal 1994
the Company changed its method of accounting for income taxes.

ERNST & YOUNG LLP

Syracuse, New York
April 14, 1995, except for
Note 2 as to which the
date is November 9, 1995

<PAGE>
DEANCO, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DEANCO, INC. PREDECESSOR BUSINESS
------------ ----------------------
DECEMBER 31, JUNE 30,
1994 1994 1993
------------ ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 390,066 $ 572,115 $ 595,863
Trade accounts receivable, less allowance for uncollectible accounts of
$171,631, $178,110, and $218,800....................................... 11,134,410 12,789,931 11,307,266
Inventory............................................................... 14,755,117 14,178,961 13,352,229
Note and accounts receivable from affiliates (Note 5)................... 9,273 12,573 46,239
Deferred income taxes (Note 6).......................................... 1,060,325 776,607 521,307
Prepaid expenses........................................................ 374,765 157,131 122,503
Other current assets.................................................... 138,696 144,405 29,547
Receivable from former majority shareholder (Note 5).................... 368,616 -- --
Due from parent company................................................. 33,095 -- --
------------ ---------- ----------
Total current assets...................................................... 28,264,363 28,631,723 25,974,954
OTHER ASSETS:
Note receivable from affiliate (Note 5)................................. -- -- 16,716
Investment in Partnership (Note 5)...................................... -- -- 149,936
Cash value of life insurance (net of policy loans of $-0-, $155,298, and
$149,498).............................................................. 10,245 581,129 401,884
Cost in excess of net assets of businesses acquired, less accumulated
amortization of $766,651, $643,597, and $557,489....................... 14,362,114 2,694,869 2,792,951
Unamortized loan expenses, less accumulated amortization of $31,430,
$204,240, and $102,120................................................. 597,171 102,137 204,257
Deferred income taxes (Note 6).......................................... 98,442 107,822 76,900
Other noncurrent assets................................................. 286,479 107,000 110,085
------------ ---------- ----------
Total other assets........................................................ 15,354,451 3,592,957 3,752,729
PROPERTY, PLANT, AND EQUIPMENT (Note 2):
Land and buildings...................................................... 906,069 906,068 1,514,523
Furniture, fixtures, and equipment...................................... 4,335,483 4,171,739 3,683,382
Leasehold improvements.................................................. 1,152,943 1,011,664 1,015,535
------------ ---------- ----------
6,394,495 6,089,471 6,213,440
Less accumulated depreciation and amortization.......................... (4,584,453) (4,429,040) (4,199,051)
------------ ---------- ----------
Total property, plant, and equipment...................................... 1,810,042 1,660,431 2,014,389
------------ ---------- ----------
$45,428,856 $33,885,111 $31,742,072
------------ ---------- ----------
------------ ---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses................................... $7,390,992 $8,548,374 $7,137,529
Accrued payroll, payroll taxes, and vacation pay........................ 1,258,713 1,852,029 1,697,472
Other payables.......................................................... 1,213,319 -- --
Current portion of long-term debt and capitalized lease obligations
(Note 2)............................................................... 1,156,990 496,464 453,579
------------ ---------- ----------
Total current liabilities................................................. 11,020,014 10,896,867 9,288,580
LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS, LESS CURRENT PORTION
(Note 2)................................................................. 29,228,504 12,720,801 14,099,825
DEFERRED COMPENSATION..................................................... 49,916 49,916 38,834
------------ ---------- ----------
Total liabilities......................................................... 40,298,434 23,667,584 23,427,239
STOCKHOLDERS' EQUITY (Notes 3 and 5):
Common Stock--$.10 par value:
Authorized--4,000,000 shares
Issued, including shares held in treasury--470,573 shares at December
31, 1994 and 654,080 shares at June 30, 1994 and 1993................ 47,057 65,408 65,408
Paid-in capital......................................................... 5,625,383 1,561,978 1,561,978
Retained (deficit from October 1, 1994) earnings........................ (542,018) 10,967,354 9,064,660
------------ ---------- ----------
5,130,422 12,594,740 10,692,046
Less treasury stock at cost (-0- shares at December 31, 1994 and 139,279
shares at June 30, 1994 and 1993)...................................... -- (2,377,213) (2,377,213)
------------ ---------- ----------
5,130,422 10,217,527 8,314,833
COMMITMENTS (Note 4 )
------------ ---------- ----------
$45,428,856 $33,885,111 $31,742,072
------------ ---------- ----------
------------ ---------- ----------
</TABLE>

See notes to financial statements.

<PAGE>
DEANCO, INC.
STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
DEANCO, INC. PREDECESSOR BUSINESS
------------ --------------------------------------------------
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED JUNE 30
DECEMBER 31, SEPTEMBER 30, -----------------------------------
1994 1994 1994 1993 1992
------------ ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales................................... $23,551,367 $24,775,535 $100,545,646 $93,281,670 $86,775,753
Cost of sales............................... 18,494,764 18,996,695 76,817,721 71,144,786 66,180,365
------------ ------------- ----------- ---------- ----------
5,056,603 5,778,840 23,727,925 22,136,884 20,595,388
Commission income........................... 38,852 44,338 129,272 193,014 180,533
------------ ------------- ----------- ---------- ----------
5,095,455 5,823,178 23,857,197 22,329,898 20,775,921
Selling and administrative expenses......... 4,763,353 5,036,389 20,413,269 19,301,946 18,488,063
------------ ------------- ----------- ---------- ----------
332,102 786,789 3,443,928 3,027,952 2,287,858
Interest expense............................ 659,869 308,982 1,208,147 1,164,348 1,259,731
Other expense (income) -- net............... 464,354 317,325 (122,859) (389,455) 488,255
------------ ------------- ----------- ---------- ----------
(Loss) income before income taxes,
extraordinary item and cumulative effect
adjustment................................. (792,121) 160,482 2,358,640 2,253,059 539,872
Income taxes (credit) (Note 6):
Currently payable:
Federal................................. (166,000) 291,000 771,500 771,000 430,000
State................................... (42,000) 74,000 200,000 226,000 71,500
Deferred.................................. (42,103) (232,235) 58,008 (87,000) (190,000)
------------ ------------- ----------- ---------- ----------
(250,103) 132,765 1,029,508 910,000 311,500
------------ ------------- ----------- ---------- ----------
(Loss) income before extraordinary item and
cumulative effect adjustment............... (542,018) 27,717 1,329,132 1,343,059 228,372
Extraordinary item -- warehouse casualty
gain, net of tax (Note 7).................. -- -- 229,332 -- --
Cumulative effect adjustment for change in
accounting method (Note 6)................. -- -- 344,230 -- --
------------ ------------- ----------- ---------- ----------
Net (loss) income........................... $ (542,018) $ 27,717 $ 1,902,694 $1,343,059 $ 228,372
------------ ------------- ----------- ---------- ----------
------------ ------------- ----------- ---------- ----------
Weighted average number of common shares
outstanding................................ 470,573 514,081 514,081 537,482 570,248
(Loss) income per common share:
(Loss) income before extraordinary item
and cumulative effect adjustment......... $ (1.15) $ .05 $ 2.58 $ 2.49 $ .40
Extraordinary item -- warehouse casualty
gain..................................... -- -- .45 -- --
Cumulative effect adjustment for change in
accounting method........................ -- -- .67 -- --
------------ ------------- ----------- ---------- ----------
Net (loss) income........................... $ (1.15) $ .05 $ 3.70 $ 2.49 $ .40
------------ ------------- ----------- ---------- ----------
------------ ------------- ----------- ---------- ----------
</TABLE>

See notes to financial statements.

<PAGE>
DEANCO, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1994 AND
YEARS ENDED JUNE 30, 1994, 1993, AND 1992

<TABLE>
<CAPTION>
COMMON RETAINED
STOCK PAID-IN (DEFICIT) TREASURY
$.10 PAR CAPITAL EARNINGS STOCK TOTAL
----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
DEANCO, INC.
470,573 shares issued on October 1, 1994............. $ 47,057 $5,625,383 $ -- $ -- $5,672,440
Net loss for the period.............................. -- -- (542,018) -- (542,018)
----------- --------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1994......................... $ 47,057 $5,625,383 $ (542,018) $ -- $5,130,422
----------- --------- ---------- ---------- ----------
----------- --------- ---------- ---------- ----------

PREDECESSOR BUSINESS
BALANCE AT JULY 1, 1991.............................. $ 65,408 $1,561,978 $7,493,229 $(1,021,340) $8,099,275
Purchase of treasury stock........................... -- -- -- (464,059) (464,059)
Net income for the year.............................. -- -- 228,372 -- 228,372
----------- --------- ---------- ---------- ----------
BALANCES AT JUNE 30, 1992............................ 65,408 1,561,978 7,721,601 (1,485,399) 7,863,588
Purchase of treasury stock........................... -- -- -- (891,814) (891,814)
Net income for the year.............................. -- -- 1,343,059 -- 1,343,059
----------- --------- ---------- ---------- ----------
BALANCES AT JUNE 30, 1993............................ 65,408 1,561,978 9,064,660 (2,377,213) 8,314,833
Net income for the year.............................. -- -- 1,902,694 -- 1,902,694
----------- --------- ---------- ---------- ----------
BALANCES AT JUNE 30, 1994............................ $ 65,408 $1,561,978 $10,967,354 $(2,377,213) $10,217,527
----------- --------- ---------- ---------- ----------
----------- --------- ---------- ---------- ----------
</TABLE>

See notes to financial statements.

<PAGE>
DEANCO, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
DEANCO, INC. PREDECESSOR BUSINESS
------------ --------------------------------------------------
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED JUNE 30
DECEMBER 31, SEPTEMBER 30, -----------------------------------
1994 1994 1994 1993 1992
------------ ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income........................... $ (542,018) $ 27,717 $ 1,902,694 $1,343,059 $ 228,372
Adjustments to reconcile net (loss) income
to net cash (used in) provided by
operating activities:
Cumulative effect adjustment.............. -- -- (344,230) -- --
Depreciation and amortization............. 231,457 214,565 617,430 615,466 1,080,199
Extraordinary gain........................ -- -- (377,832) -- --
Provision for losses on accounts
receivable............................... 8,854 30,975 (40,690) (38,200) 62,000
Provision for deferred taxes.............. (42,103) (232,235) 58,008 (87,000) (190,000)
(Gain) loss on sale of equipment.......... (803) 6,128 (1,578) (757) (3,948)
Equity in earnings of general
partnership.............................. -- -- 88,361 (124,936) --
Provision for deferred compensation....... -- -- 11,082 3,107 2,858
Changes in operating assets and
liabilities, net:
Decrease (increase) in accounts
receivable............................. 1,373,790 241,902 (1,437,810) 75,962 138,380
Increase in inventory, net of insurance
proceeds (Note 7)...................... (333,068) (243,088) (629,653) (898,677) (137,106)
(Increase) decrease in prepaid expenses
and other assets....................... (118,051) (25,129) (63,758) 76,085 (423,920)
(Decrease) increase in accounts payable
and accrued expenses................... (1,529,529) (1,179,160) 1,474,884 876,225 1,268,807
------------ ------------- ----------- ---------- ----------
Net cash (used in) provided by operating
activities................................. (951,471) (1,158,325) 1,256,908 1,840,334 2,025,642
INVESTING ACTIVITIES
Acquisition of Deanco, Inc. net of cash
acquired of $396,564....................... (5,903,436) -- -- -- --
EDAC capital contribution................... 272,857 -- -- -- --
Purchase of property, plant, and
equipment.................................. (270,901) (75,084) (626,116) (965,198) (137,839)
Proceeds from sale of equipment............. 1,648 -- 6,300 773 4,400
Payments on note receivable................. 423 393 29,580 53,406 50,656
Increase in cash value of life insurance.... (118,565) (40,500) (179,245) (110,501) (73,225)
Investment in general partnership........... -- -- -- (25,000) --
Investment in Therma Shield, net of cash
acquired................................... -- -- (176,043) -- --
Insurance proceeds (Note 7)................. -- -- 1,001,007 -- 47,660
Proceeds from surrender of life insurance
policies................................... 319,109 -- -- -- --
Issuance of note receivable................. (48,238) -- -- -- --
------------ ------------- ----------- ---------- ----------
Net cash (used in) provided by investing
activities................................. (5,747,103) (115,191) 55,483 (1,046,520) (108,348)
FINANCING ACTIVITIES
Net proceeds (payouts) from revolving line
of credit.................................. 379,769 1,223,568 (670,008) (1,293,597) 12,186,980
Principal payments on long-term debt and
capital lease obligations.................. (1,291,129) (125,603) (959,599) (179,682) (16,996,866)
Proceeds from long-term borrowings.......... 8,000,000 -- 293,468 745,949 3,400,000
Purchase of treasury stock.................. -- -- -- (891,814) (92,812)
------------ ------------- ----------- ---------- ----------
Net cash provided by (used in) financing
activities................................. 7,088,640 1,097,965 (1,336,139) (1,619,144) (1,502,687)
------------ ------------- ----------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents................................ 390,066 (175,551) (23,748) (825,330) 414,597
Cash and cash equivalents at beginning of
year....................................... -- 572,115 595,863 1,421,193 1,006,596
------------ ------------- ----------- ---------- ----------
Cash and cash equivalents at end of year.... $ 390,066 $ 396,564 $ 572,115 $ 595,863 $1,421,193
------------ ------------- ----------- ---------- ----------
------------ ------------- ----------- ---------- ----------
</TABLE>

See notes to financial statements.

<PAGE>
DEANCO, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, JUNE 30, 1994 AND 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Deanco, Inc. (the "Company") is a distributor of electrical components
for various manufacturers. The Company's corporate headquarters are
based in California and it has sales and/or warehouse locations
throughout the United States. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not
require collateral. There are no significant concentrations of credit risk
at December 31, 1994.

On October 1, 1994, the Company was acquired by Electrical Distribution
Acquisition Company ("EDAC") pursuant to the terms of the Stock Purchase
Agreement (the "Purchase Agreement") dated September 30, 1994 between EDAC
and the former stockholders (the "Stockholders") of the Company (the
"Acquisition"). The Purchase Agreement provided that the Stockholders would
sell, and EDAC would purchase the shares of the Company for total
consideration of approximately $20,449,000, consisting of $17,449,000 paid
in cash and $3,000,000 in subordinated promissory notes issued to certain
majority stockholders. The Acquisition has been accounted for under the
purchase method of accounting as of the closing date. Accordingly, the
Company's financial statements reflect the allocation of the purchase price
to the assets and liabilities of the Company based upon their respective fair
values.

Concurrent with the Acquisition and in order to implement plans and actions
designed to continue its competitive cost structures the Company recorded
accrued restructuring costs totaling $1 million to cover costs of employee
separations, facilities consolidations, asset relocation and related costs.
The Company will continue to review such competitive actions throughout 1995
and continue to make purchase price adjustments (increase/decrease goodwill)
as required.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out method)
or market.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost, less allowances for
depreciation and amortization. Depreciation and amortization are computed on
either the straight-line method or the declining-balance method over the
estimated useful lives of the assets. Maintenance and repairs are expensed as
incurred. Amortization of capital leases is included with depreciation and
amortization expense.

COST IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED

Costs in excess of the net assets of acquired businesses (goodwill)
are amortized on the straight-line basis over forty years.

INCOME TAXES

The primary difference between the effective and the statutory tax rate is
due to the amortization of goodwill, officers' life insurance premiums that
are not deductible for tax purposes, and state taxes. The Company made income
tax payments as follows: $311,975 and $227,872 for the three month periods
ended December 31, 1994 and September 30, 1994, respectively, and $1,051,400,
$1,212,500, and $164,849 for the years ended June 30, 1994, 1993, and 1992,
respectively.

Beginning July 1, 1993, the Company provides for income taxes in accordance
with the liability method as set forth in Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Under

<PAGE>
DEANCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the liability method, deferred taxes are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse. The principal differences relate to property and
equipment, merchandise inventory, and compensated absences (see Note 6).

Prior to the year ended June 30, 1994, the Company provided for deferred
income taxes in accordance with Accounting Principles Board Opinion No. 11.

EARNINGS PER SHARE

Net earnings per common share are determined by dividing the weighted
average number of common shares outstanding during the year into net earnings.

RECLASSIFICATION

Certain items in the 1992 and 1993 financial statements have been
reclassified to conform with the 1994 presentation.

2. BORROWING ARRANGEMENTS
The Company entered into an amended and restated loan and security
agreement with a bank on October 11, 1994. The agreement provides for a $20
million revolving line of credit with a five-year term secured by
substantially all assets. The Company intends to maintain borrowings of at
least the amount outstanding at December 31, 1994 under this agreement for an
uninterrupted period extending beyond one year from the balance sheet date.
Accordingly, the revolving line of credit agreement in place at December 31,
1994 has been treated as short-term debt expected to be refinanced on a
long-term basis and, therefore, has been classified as long-term debt in the
financial statements. As part of the revolving credit, the Company may also
issue standby or merchandise letters of credit up to a maximum $2,500,000.
Available borrowings under this agreement are based upon a percentage of
accounts receivable and inventory. Proceeds of advances under the revolving
credit were used to provide working capital and fund the

<PAGE>
DEANCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. BORROWING ARRANGEMENTS (CONTINUED)
acquisition. Interest on the borrowings is at prime plus 1%. Borrowings
against the line of credit aggregated $11,826,713 at December 31, 1994,
$10,223,375 at June 30, 1994, and $10,893,381 at June 30, 1993. Long-term
debt and capitalized lease obligations consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1994 JUNE 30, 1994 JUNE 30, 1993
---------------------- ---------------------- ----------------------
CURRENT NONCURRENT CURRENT NONCURRENT CURRENT NONCURRENT
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Term loan payable to a bank in
escalating monthly installments
through October 1999. Interest payable
monthly at prime plus 2%.............. $ 666,664 $7,333,336 $ -- $ -- $ -- $ --
Subordinated promissory notes payable
to former majority shareholders due in
annual installments of $1,000,000
beginning in 1997 through September
30, 1999. Interest payable annually at
8%.................................... -- 3,000,000 -- -- -- --
Subordinated note payable to EDAC due
December 31, 1999. Interest payable in
periodic monthly installments at the
lesser of the 30 month LIBOR rate plus
3% or 9%.............................. -- 5,981,617 -- -- -- --
Mortgage note payable to a bank paid in
full in fiscal 1994 (see Note 7)...... -- -- -- -- 10,880 502,598
Convertible, subordinated note payable
to a corporation for the exchange of
trade payables. Principal due June 30,
2002, convertible into 57,500 shares
of common stock at the option of the
lender. Interest payable quarterly at
prime plus 1%, but not less than 9%,
nor more than 12%..................... -- -- -- 1,000,000 -- 1,000,000
Unsecured note payable to a corporation
for the purchase of a division
Subordinated note due on January 1,
1996; interest payable annually at
8%.................................. -- 700,000 -- 700,000 -- 700,000
Subordinated note payable in annual
installments of $166,667 (subject to
certain covenants) on the first day
of July 1993-1995. Interest payable
monthly at 8%....................... 166,666 -- 166,667 166,666 166,667 333,333
Capital lease obligations for office
equipment and software. Payments are
due monthly in various amounts through
1998 with interest rates from
9.4%-12.8%............................ 90,996 196,279 98,354 237,212 46,925 45,521
Notes payable for purchase of stock in
various annual principal installments
with interest rates from 6.0% to 8.5%
through June 1998..................... 191,052 99,519 191,052 281,392 191,052 472,444
Note payable for the purchase of stock
in quarterly installments of principal
and interest at 6.0% through 1997..... 41,612 91,040 40,391 112,156 38,055 152,548
Revolving line of credit based on the
level of qualifying assets, interest
payable monthly at prime plus 1% or
LIBOR rate through October 1999;
collateralized by substantially all
assets................................ -- 11,826,713 -- 10,223,375 -- 10,893,381
--------- ----------- --------- ----------- --------- -----------
$1,156,990 $29,228,504 $ 496,464 $12,720,801 $ 453,579 $14,099,825
--------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- -----------
</TABLE>

<PAGE>
DEANCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. BORROWING ARRANGEMENTS (CONTINUED)

Aggregate maturities of long-term obligations, as of December 31, 1994,
are as follows:

Terms of the various debt agreements contain restrictions, among other
things, on purchases of treasury stock, borrowings, capital expenditures,
dividends, stock transactions, and require certain minimum financial ratios
and results.

At December 31, 1994, the Company was in violation of certain covenants.
On November 9, 1995 the bank waived compliance with these covenants.

The $1 million convertible subordinated note payable to a corporation for
the exchange of trade payables outstanding at June 30, 1994 was cancelled as
of September 30, 1994 and paid off in October 1994 with proceeds from the
amended loan agreement. The Company was required to pay a $250,000 prepayment
penalty in connection with this transaction.

Interest paid totaled as follows: $468,259 and $273,058 for the three
month periods ended December 31, 1994 and September 30, 1994, respectively,
and $1,212,376, $1,026,864, and $1,265,664 for the years ended June 30, 1994,
1993, and 1992, respectively.

During the year ended June 30, 1994, the Company entered into capital
lease obligations totaling $293,468 for the acquisition of equipment. This
amount is included in purchase of property, plant, and equipment, and
proceeds from long-term borrowings in the statements of cash flow.

3. EMPLOYEE BENEFIT PLANS
The Company has a variety of employee benefit plans that provide for
retirement and health insurance benefits as follows:

DEFINED CONTRIBUTION PLANS:

The Company sponsors two qualified profit sharing plans for certain
eligible employees. The contribution for one of the plans is determined in
accordance with a formula defined by the Plan. The other Plan's contribution
is determined by the Board of Directors. There were no contributions to the
Plans for the three month periods ended December 31, 1994 and September 30,
1994. Contributions for the Plans aggregated $140,612, $113,000, and $15,000
for the years ended June 30, 1994, 1993, and 1992, respectively. The Company
intends to terminate those plans in 1995.

The Company also sponsors a 401(k) profit sharing plan whereby the
Company contributes 25% of each plan participant's covered contribution up to
certain specified limits. The Company's contributions to the plan aggregated
$33,792 and $27,755 for the three month periods ended December 31, 1994 and
September 30, 1994, respectively, and $119,251, $106,928, and $92,142 for the
years ended June 30, 1994, 1993, and 1992, respectively.

The Company also sponsored a qualified Employee Stock Ownership Plan
under which contributions, either in the form of cash or stock of the
Company, were paid to a trustee. Contributions were determined by

<PAGE>
DEANCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. EMPLOYEE BENEFIT PLANS (CONTINUED)
the Board of Directors and were limited to a maximum amount as stipulated in
the Plan. The Company contributed $100,000 to the Plan in the year ended June
30, 1993. No contributions were made in the years ended June 30, 1994 and
1992. The Plan was terminated in connection with the acquisition of the
Company.

HEALTH INSURANCE TRUST:

The Company has a health insurance trust which provides benefits to
certain employees and their eligible dependents for medical and dental
expenses. The trust is funded by the Company and employee contributions and
reimburses covered claims directly from the trust's funds. The Company has
purchased an insurance policy to provide coverage which pays benefits if an
individual's claims exceed $50,000 and aggregate claims for a year exceed
150% of the annual expected claims, as computed by the insurance company.

4. LEASES
The Company is committed under various operating lease agreements for
office space (see Note 5) and equipment. Future minimum payments, by year and
in the aggregate, under noncancelable operating leases with initial or
remaining terms of one year or more, consisted of the following at December
31, 1994:

<TABLE>
<S> <C>
1995............................................................ $1,257,041
1996............................................................ 1,102,901
1997............................................................ 821,827
1998............................................................ 674,143
1999............................................................ 624,168
Thereafter...................................................... 1,979,872
---------
$6,459,952
---------
---------
</TABLE>

Rental expense for all operating leases amounted to $365,294 and $345,021
for the three month periods ended December 31, 1994 and September 30, 1994,
respectively, and $1,299,917, $1,222,816, and $1,283,312 for the years ended
June 30, 1994, 1993, and 1992, respectively.

5. TRANSACTIONS WITH AFFILIATES
The Company leases its Ithaca, New York office from a partnership in
which a former majority stockholder of Deanco, Inc. is a partner. The lease
expires on August 31, 1996, and rental charges are $101,027 annually for the
term of the lease. The Company leased the Gaithersburg, Maryland offices from
two separate partnerships formed by related parties of Deanco, Inc. at an
annual rental of $49,620, which were terminated in June 1993.

The Company charges Bob Dean, Inc. (principally owned by the former
president and a former stockholder of Deanco, Inc. and his family) for
accounting, maintenance, and clerical costs. These charges totaled $15,700,
$14,541, and $19,369 in the years ended June 30, 1994, 1993, and 1992,
respectively. In addition, the Company leases office space to Bob Dean, Inc.
Rental income amounted to $5,544 in the years ended June 30, 1994, 1993, and
1992.

Notes receivable from Bob Dean, Inc. of $29,580 at June 30, 1993 was paid
in full in fiscal year 1994.

Accounts receivable from Bob Dean, Inc. amounted to $9,901 and $23,305 as
of June 30, 1994 and 1993.

The Company is charged administrative fees since October 1, 1994 from a
certain related party in the amount of $18,000 per month plus expenses.

Receivable from former majority shareholder at December 31, 1994
represents amounts due for the purchase of certain life insurance policies
that were previously owned by the Company.

<PAGE>
DEANCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Company was a 50% partner with another corporation in Uni-Trans
Company, a general partnership. The partnership was formed effective October
1, 1991 for the purpose of developing, manufacturing, and selling products
primarily to the rail and transit industry. Effective December 31, 1993 (the
"Dissolution Date"), the general partnership was dissolved. Effective
February 10, 1994, the Company and its partner entered into a Contract for
Purchase and Sale of Partners Interest ("Purchase Contract"), whereby the
Company purchased the partnership interest from its partner for $180,000.
Among other things, the terms of the Purchase Contract provide for the
Company to purchase all assets, assume all liabilities, and to be responsible
for winding up the affairs of Uni-Trans Company including the completion of
existing contractual obligations. The Company is continuing to pursue the
rail and transit business under the name Therma Shield Systems Division
("Therma Shield"). The transaction has been accounted for as a purchase and
Therma Shield operations have been included in the statements of operations
since February 1, 1994.

As of June 30, 1993, the Company had made capital contributions to the
partnership of $25,000. Through the Dissolution Date, the Company was
providing contract labor, administrative services, and certain other services
to the partnership. Revenues provided from services to the partnership
aggregated $80,819, $137,132, and $103,382 for the years ended June 30, 1994,
1993, and 1992, respectively. As of June 30, 1993, $10,070 was due from the
partnership.

Income (loss) from the partnership through the Dissolution Date was
recorded on the equity method and is included in other income (expense) on
the statements of operations in the amount of ($88,361) and $124,986 for the
year ended June 30, 1994 and 1993, respectively.

6. INCOME TAXES
A reconciliation of the statutory U.S. Federal income tax rate to the
effective income tax rate follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------- YEAR ENDED JUNE 30,
DECEMBER 31, SEPTEMBER 30, -------------------------------
1994 1994 1994 1993 1992
--------------- --------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Statutory tax rate................................ (34%) 34% 34% 34% 34%
State taxes (net of federal benefit).............. (5%) 11% 6% 7% 9%
Utilization of contribution carryforward.......... -- (11%) (2%) -- (8%)
Nontaxable income -- life insurance proceeds...... -- -- -- (6%) --
Nondeductible expenses:
Subordinated note redemption premium............ -- 32% -- -- --
Amortization.................................... 4% 5% 4% 2% 11%
Officers' life insurance........................ 1% 4% 2% 2% 9%
Meals and entertainment......................... 2% 8% 2% 1% 5%
Other, net...................................... -- -- (2%) -- (2%)
----- ----- --------- --- ---
Effective income tax rate......................... (32%) 83% 44% 40% 58%
----- ----- --------- --- ---
----- ----- --------- --- ---
</TABLE>

Effective July 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
FASB Statement 109, "Accounting for Income Taxes". As permitted under the new
rules, prior years financial statements have not been restated. The
cumulative effect of adopting Statement 109 as of July 1, 1993 was to
increase net income by $344,230.

<PAGE>
DEANCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's net deferred tax assets and liabilities are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1994
------------ ----------
<S> <C> <C>
Deferred tax assets:
Allowance for bad debts.................................................... $ 67,194 $ 69,715
Depreciation............................................................... 78,905 88,282
Deferred compensation...................................................... 19,540 19,540
Reserve for obsolescence................................................... 158,326 134,122
Inventory cap.............................................................. 525,711 465,633
Vacation................................................................... 149,636 111,411
Charitable contribution.................................................... 114,995 --
Interest................................................................... 49,503 --
------------ ----------
Deferred tax asset........................................................... 1,163,810 888,703
Deferred tax liabilities:
Real estate taxes.......................................................... $ 5,043 $ 4,274
------------ ----------
Total deferred tax liabilities............................................... 5,043 4,274
------------ ----------
Net deferred tax asset....................................................... $1,158,767 $ 884,429
------------ ----------
------------ ----------
Classification of net deferred tax assets:
Current.................................................................... $1,060,325 $ 776,607
Long-term.................................................................. 98,442 107,822
------------ ----------
$1,158,767 $ 884,429
------------ ----------
------------ ----------
</TABLE>

7. EXTRAORDINARY ITEM -- WAREHOUSE CASUALTY GAIN
On October 1, 1993, the Company experienced a fire which destroyed the
Ithaca warehouse. The warehouse was collateral for a mortgage note which was
repaid with insurance proceeds resulting from the fire. As of June 30, 1994,
the Company had received insurance proceeds totaling $4,259,874. The excess
of the insurance proceeds over the carrying value of the assets destroyed
plus any expenses incidental to the fire is recorded as extraordinary item --
warehouse casualty gain in the year ended June 30, 1994, net of income taxes
of $148,500.

<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
Electrical Distribution Acquisition Company

We have audited the accompanying balance sheet of Electrical Distribution
Acquisition Company and Subsidiary as of December 31, 1994, and the related
statements of operations, stockholders' equity, and cash flows for the period
October 1, 1994 to 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 audit.

We conducted our audit 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 audit provides 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 Electrical
Distribution Acquisition Company and Subsidiary at December 31, 1994, and the
results of its operations and its cash flows for the period October 1, 1994
to December 31, 1994, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Syracuse, New York
April 14, 1995, except for Note 2
as to which the date is November 9,
1995 and Note 8 as to which the
date is December 19, 1995

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY
AND SUBSIDIARY
BALANCE SHEET
DECEMBER 31, 1994

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................... $ 393,285
Trade accounts receivable, less allowance for uncollectible accounts of $171,631.... 11,134,410
Subscriptions receivable............................................................ 161,125
Inventory........................................................................... 14,755,117
Note and accounts receivable from affiliates........................................ 9,273
Deferred income taxes (Note 6)...................................................... 1,060,325
Prepaid expenses.................................................................... 374,765
Other current assets................................................................ 146,082
Receivable from former majority shareholder (Note 5)................................ 368,616
----------
Total current assets.................................................................. 28,402,998
OTHER ASSETS:
Cash value of life insurance........................................................ 10,245
Cost in excess of net assets of businesses acquired, less accumulated amortization
of $766,651........................................................................ 14,362,114
Unamortized loan expenses, less accumulated amortization of $31,890................. 616,031
Deferred income taxes (Note 6)...................................................... 98,442
Other noncurrent assets............................................................. 297,191
----------
Total other assets.................................................................... 15,384,023
PROPERTY, PLANT, AND EQUIPMENT (Note 2):
Land and buildings.................................................................. 906,069
Furniture, fixtures, and equipment.................................................. 4,335,483
Leasehold improvements.............................................................. 1,152,943
----------
6,394,495
Less accumulated depreciation and amortization...................................... (4,584,453)
----------
Total property, plant, and equipment.................................................. 1,810,042
----------
$45,597,063
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses............................................... $7,394,603
Accrued payroll, payroll taxes, and vacation pay.................................... 1,258,713
Other payables...................................................................... 1,213,319
Current portion of long-term debt and capitalized lease obligations (Note 2)........ 1,156,990
----------
Total current liabilities............................................................. 11,023,625
LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS, LESS CURRENT PORTION (Note 2)....... 29,228,504
DEFERRED COMPENSATION................................................................. 49,916
----------
Total liabilities..................................................................... 40,302,045
STOCKHOLDERS' EQUITY (Note 7):
10% non-cumulative convertible preferred stock, $.50 par value; authorized, issued,
and outstanding 11,100,000 shares; convertible into one share of common stock for
each share of preferred stock at the option of the holder.......................... 5,550,000
Common Stock -- $.01 par value:
Authorized -- 15,000,000 shares
Issued and outstanding -- 3,452,950 shares........................................ 34,530
Paid-in capital..................................................................... 397,091
Retained deficit from October 1, 1994............................................... (536,603)
----------
5,445,018
LESS SUBSCRIPTIONS RECEIVABLE......................................................... (150,000)
----------
5,295,018
COMMITMENTS (Note 4)
----------
$45,597,063
----------
----------
</TABLE>

See notes to financial statements.

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY
AND SUBSIDIARY
STATEMENT OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1994

<TABLE>
<S> <C>
Net sales.................................................................... $23,551,367
Cost of sales................................................................ 18,494,764
----------
5,056,603
Commission income............................................................ 38,852
----------
5,095,455
Selling and administrative expenses.......................................... 4,763,353
----------
332,102
Interest expense............................................................. 668,229
Other expense -- net......................................................... 446,969
----------
Loss before income taxes..................................................... (783,096)
Income taxes (credit) (Note 6):
Currently payable:
Federal.................................................................. (162,932)
State.................................................................... (41,458)
Deferred................................................................... (42,103)
----------
(246,493)
----------
Net loss..................................................................... $ (536,603)
----------
----------
Weighted average number of common shares outstanding......................... 3,452,950
----------
----------
Net loss per common share.................................................... $ (.16)
----------
----------
</TABLE>

See notes to financial statements.

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY
AND SUBSIDIARY
STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
10%
CONVERTIBLE
PREFERRED COMMON
STOCK STOCK PAID-IN RETAINED
$.50 PAR $.01 PAR CAPITAL DEFICIT TOTAL
------------ --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
11,100,000 shares issued on October 1, 1994...... $ 5,550,000 $ -- $ -- $ -- $ 5,550,000
3,452,950 shares issued on October 1, 1994....... -- 34,530 397,091 -- 431,621
Net loss for the period.......................... (536,603) (536,603)
------------ --------- ---------- ----------- ------------
5,550,000 34,530 397,091 (536,603) 5,445,018
Less subscriptions receivable.................... (150,000) -- -- -- (150,000)
------------ --------- ---------- ----------- ------------
Balances at December 31, 1994.................... $ 5,400,000 $ 34,530 $ 397,091 $ (536,603) $ 5,295,018
------------ --------- ---------- ----------- ------------
------------ --------- ---------- ----------- ------------
</TABLE>

See notes to financial statements.

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY
AND SUBSIDIARY
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1994

<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................................... $ (536,603)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................. 232,481
Provision for losses on accounts receivable............................... 8,854
Provision for deferred taxes.............................................. (42,103)
Gain on sale of equipment................................................. (803)
Changes in operating assets and liabilities, net:.........................
Decrease in accounts receivable......................................... 1,373,790
Increase in inventory................................................... (333,068)
Increase in prepaid expenses and other assets........................... (156,033)
Decrease in accounts payable and accrued expenses....................... (1,525,919)
-----------
Net cash used in operating activities....................................... (979,404)

INVESTING ACTIVITIES
Acquisition of Deanco, Inc. net of cash acquired of $396,564................ (17,284,637)
Purchase of property, plant, and equipment.................................. (270,901)
Proceeds from sale of equipment............................................. 1,648
Payments on note receivable................................................. 423
Increase in cash value of life insurance.................................... (118,565)
Proceeds from surrender of life insurance policies.......................... 319,109
Issuance of note receivable................................................. (15,142)
-----------
Net cash used in investing activities....................................... (17,368,065)
FINANCING ACTIVITIES
Proceeds from issuance of common and preferred stock........................ 5,831,620
Proceeds from issuance of subordinated debt................................. 5,820,494
Proceeds from term loan..................................................... 8,000,000
Net proceeds from revolving line of credit.................................. 379,769
Principal payments on long-term debt and capital lease obligations.......... (1,291,129)
-----------
Net cash provided by financing activities................................... 18,740,754
-----------
Net increase (decrease) in cash and cash equivalents........................ 393,285
Cash and cash equivalents at beginning of period............................ --
-----------
Cash and cash equivalents at end of period.................................. $ 393,285
-----------
-----------
</TABLE>

See notes to financial statements.

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS

Electrical Distribution Acquisition Company and its wholly-owned
subsidiary Deanco, Inc. (the "Company") is a distributor of electrical
components for various manufacturers. The Company's corporate headquarters
are based in California and it has sales and/or warehouse locations
throughout the United States. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not
require collateral. There are no significant concentrations of credit risk at
December 31, 1994.

On October 1, 1994, the Subsidiary was acquired by Electrical
Distribution Acquisition Company ("EDAC") pursuant to the terms of the Stock
Purchase Agreement (the "Purchase Agreement") dated September 30, 1994
between EDAC and the former stockholders (the "Stockholders") of the
Subsidiary (the "Acquisition"). The Purchase Agreement provided that the
Stockholders would sell, and EDAC would purchase the shares of the Subsidiary
for total consideration of approximately $20,449,000, consisting of
$17,449,000 paid in cash and $3,000,000 in subordinated promissory notes
issued to certain majority stockholders. The Acquisition has been accounted
for under the purchase method of accounting as of the closing date.
Accordingly, the Company's financial statements reflect the allocation of the
purchase price to the assets and liabilities of the Company based upon their
respective fair values.

Concurrent with the Acquisition and in order to implement plans and
actions designed to continue its competitive cost structures the Company
recorded accrued restructuring costs totaling $1 million to cover costs of
employee separations, facilities consolidations, asset relocation and related
costs. The Company will continue to review such competitive actions
throughout 1995 and continue to make purchase price adjustments
(increase/decrease goodwill) as required.

CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. All significant intercompany transactions
are eliminated in consolidation.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out method)
or market.

PROPERTY, PLANT, AND EQUIPMENT

COST IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED

Costs in excess of the net assets of previously acquired businesses are
amortized on the straight-line basis over forty years. Organization costs are
amortized on the straight-line basis over five years.

INCOME TAXES

The primary difference between the effective and the statutory tax rates
is due to the amortization of goodwill, officers' life insurance premiums
that are not deductible for tax purposes, and state taxes. The Company made
income tax payments of $311,975 for the three months ended December 31, 1994.

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company provides for income taxes in accordance with the liability
method as set forth in Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Under the liability method, deferred taxes are
determined based on the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse. The principal
differences relate to property and equipment, merchandise inventory, and
compensated absences (see Note 6).

EARNING PER SHARE

Net earning per share are determined by dividing the weighted average
number of common shares outstanding during the year into net earnings.
Conversion of the convertible preferred stock has not been assumed as the
effects would be anti-dilutive.

2. BORROWING ARRANGEMENTS

The Company entered into an amended and restated loan and security
agreement with a bank on October 11, 1994. The agreement provides for a $20
million revolving line of credit with a five-year term secured by
substantially all assets. The Company intends to maintain borrowings of at
least the amount outstanding at December 31, 1994 under this agreement for an
uninterrupted period extending beyond one year from the balance sheet date.
Accordingly, the revolving line of credit agreement in place at December 31,
1994 has been treated as short-term debt expected to be refinanced on a
long-term basis and, therefore, has been classified as long-term debt in the
financial statements. As part of the revolving credit, the Company may also
issue standby or merchandise letters of credit up to a maximum $2,500,000.
Available borrowings under this agreement are based upon a percentage of
accounts receivable and inventory. Proceeds of advances under the revolving
credit were used to provide working capital and fund the acquisition.
Interest on the borrowings is at prime plus 1%. Borrowings against the line
of credit aggregated $11,826,713 at December 31, 1994.

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. BORROWING ARRANGEMENTS (CONTINUED)
Long-term debt and capitalized lease obligations consisted of the
following at December 31, 1994:

<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------
CURRENT NONCURRENT
------------ -------------
<S> <C> <C>
Term loan payable to a bank in escalating monthly installments through
October 1999. Interest payable monthly at prime plus 2%................... $ 666,664 $ 7,333,336
Subordinated promissory notes payable to former majority shareholders due
in annual installments of $1,000,000 beginning in 1997 through September
30, 1999. Interest payable annually at 8%................................. -- 3,000,000
Subordinated notes payable to investors, management, and Sequoia Associates
due December 31, 1999. Interest payable in periodic monthly installments
at the lesser of the 30 month LIBOR rate plus 3% or 9%.................... -- 5,981,617
Unsecured note payable to a corporation for the purchase of a division
- Subordinated note due on January 1, 1996; interest payable annually at
8%..................................................................... -- 700,000
- Subordinated note payable in annual installments of $166,667 (subject
to certain covenants) on the first day of July 1993 -- 1995. Interest
payable monthly at 8%.................................................. 166,666 --
Capital lease obligations for office equipment and software. Payments are
due monthly in various amounts through 1998 with interest rates from 9.4%
-- 12.8%.................................................................. 90,996 196,279
Note payable for purchase of stock in various annual principal installments
with interest rates from 6.0% to 8.5% through June 1998................... 191,052 99,519
Note payable for the purchase of stock in quarterly installments of
principal and interest at 6.0% through 1997............................... 41,612 91,040
Revolving line of credit based on the level of qualifying assets, interest
payable monthly at prime plus 1% or LIBOR rate through October 1999;
collateralized by substantially all assets................................ -- 11,826,713
------------ -------------
$ 1,156,990 $ 29,228,504
------------ -------------
------------ -------------
</TABLE>

Aggregate maturities of long-term obligations, as of December 31, 1994,
are as follows:

At December 31, 1994, the Company was in violation of certain covenants.
On November 9, 1995, the bank waived compliance with these covenants.

Interest paid totaled $468,259 for the three months ended December 31,
1994.

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. EMPLOYEE BENEFIT PLANS
The Company has a variety of employee benefit plans that provide for
retirement and health insurance benefits as follows:

DEFINED CONTRIBUTION PLANS:

The Company sponsors two qualified profit sharing plans for certain
eligible employees. The contribution for one of the plans is determined in
accordance with a formula defined by the plan. The other plan's contribution
is determined by the Board of Directors. There were no contributions to the
Plans for the three months ended December 31, 1994. The Company intends to
terminate these plans in 1995.

HEALTH INSURANCE TRUST:

<TABLE>
<S> <C>
1995.................................................... $1,257,041
1996.................................................... 1,102,901
1997.................................................... 821,827
1998.................................................... 674,143
1999.................................................... 624,168
Thereafter.............................................. 1,979,872
---------
$6,459,952
---------
---------
</TABLE>

Rental expense for all operating leases amounted to $365,294 for the
three months ended December 31, 1994.

5. TRANSACTIONS WITH RELATED PARTIES
The Company leases its Ithaca, New York office from a partnership in
which a former majority stockholder of Deanco, Inc. is a partner. The lease
expires on August 31, 1996, and rental charges are $101,027 annually for the
term of the lease.

The Company is charged administrative fees from a certain related party
in the amount of $18,000 per month plus expenses.

Receivable from former majority shareholder at December 31, 1994
represents amounts due for the purchase of certain life insurance policies
that were previously owned by the Company.

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES
A reconciliation of the statutory U.S. Federal income tax rate to the
effective income tax rate follows:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31,
1994
---------------
<S> <C>
Statutory tax rate....................................................................... (34%)
State taxes (net of federal benefit)..................................................... (5%)
Nondeductible expenses:
Amortization........................................................................... 4%
Officers' life insurance............................................................... 1%
Meals and entertainment................................................................ 2%
-----
Effective income tax rate................................................................ (32%)
-----
-----
</TABLE>

Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's net deferred tax assets and liabilities as of
December 31, 1994 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
Deferred tax assets:
Allowance for bad debts................................................................. $ 67,190
Depreciation............................................................................ 78,901
Deferred compensation................................................................... 19,541
Reserve for obsolescence................................................................ 158,317
Interest................................................................................ 49,558
Inventory cap........................................................................... 525,685
Vacation................................................................................ 149,629
Contribution carryforward............................................................... 114,989
------------
Total deferred tax assets................................................................. 1,163,810
Less valuation allowance.................................................................. --
------------
Deferred tax asset........................................................................ 1,163,810
Deferred tax liabilities:
Real estate taxes....................................................................... $ 5,043
------------
Total deferred tax liabilities............................................................ 5,043
------------
Net deferred tax asset.................................................................... $1,158,767
------------
------------
Classification of net deferred tax assets:
Current................................................................................. $1,060,325
Long-term............................................................................... 98,442
------------
$1,158,767
------------
------------
</TABLE>

<PAGE>
ELECTRICAL DISTRIBUTION ACQUISITION COMPANY AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS' EQUITY
The Company may at any time, at its option, redeem all or any portion of
the outstanding preferred shares. The redemption price shall be equal to the
liquidation preference ($.50 per share) plus all accrued but unpaid dividends
through the redemption date. The Company must give at least 60 days prior
written notice of the redemption election. Each holder of preferred shares
has the same voting rights as a holder of common shares. The Company has
reserved 11,100,000 shares of authorized common stock for issuance upon the
conversion of shares of the preferred stock. So long as the preferred stock
is outstanding, the Company shall not declare or pay any dividend (other than
stock dividends) or other distribution in respect of its common stock, or
purchase or otherwise acquire for any consideration (other than in shares of
its common stock) shares of its common stock, unless all dividends accrued
and unpaid with respect to the preferred shares are simultaneously declared
and paid.

8. SUBSEQUENT EVENTS
Effective November 15, 1995, the shareholders of the Company's stock
entered into an agreement with Richey Electronics, Inc. ("Richey") for the
sale of all the Company's common and preferred stock. Effective with the
close of business on December 19, 1995, Richey acquired all of the
outstanding shares of the Company's stock. Also in connection with this
transaction subordinated notes payable to investors, management, and Sequoia
Associates, totaling $5,981,617 at December 31, 1994, were assumed and paid
off by Richey.

<PAGE>

APPENDIX 2

RICHEY ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS

These pro forma financial statements reflect the December 20, 1995 acquisition
of Electrical Distribution Acquisition Company (EDAC) and its wholly owned
subsidiary, Deanco, Inc. The pro forma balance sheet and income statement
present the balance sheet as if the transaction occurred on September 29, 1995
and the income statement as if the transaction occurred at the beginning of the
nine months ended September 29, 1995 and the year ended December 31, 1994.

The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma operations
and financial information do not purport to represent what the Company's
financial position or results of operations would actually have been had the
transactions in fact occurred on such date or to project the Company's financial
position or results of operations for any future date or period.

A further description of the purchase business combination, nature and amount of
consideration given and pro forma adjustments follow the pro forma financial
statements.

<PAGE>

RICHEY ELECTRONICS, INC.

UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
Year Ended December 31, 1994

<TABLE>
<CAPTION>
Richey Unaudited Pro Forma
Electronics, EDAC and Combined Pro Forma after
Inc. Subsidiary Historical Adjustments Adjustments
- ---------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Net sales $ 90,266,000 $ 100,563,000 $ 190,829,000 $ - $190,829,000
Cost of goods sold 68,176,000 75,605,000 143,781,000 - 143,781,000
---------------------------------------------------------------------------------------

GROSS PROFIT 22,090,000 24,958,000 47,048,000 - 47,048,000
---------------------------------------------------------------------------------------

Operating expenses: (4,355,000)(3)
Selling, warehouse, general and (30,000)(1)
administrative 16,750,000 22,422,000 39,172,000 125,000 (1) 34,912,000
1,175,000 (1)
Amortization of intangibles 568,000 276,000 844,000 (276,000)(1) 1,743,000
----------------------------------------------------------------------------------------
17,318,000 22,698,000 40,016,000 (3,361,000) 36,655,000
----------------------------------------------------------------------------------------

OPERATING INCOME 4,772,000 2,260,000 7,032,000 3,361,000 10,393,000

Interest expense 1,606,000 1,604,000 3,210,000 2,525,000 (4) 5,735,000
----------------------------------------------------------------------------------------

Income before income taxes 3,166,000 656,000 3,822,000 836,000 4,658,000

Federal and state income tax 1,273,000 332,000 1,605,000 695,000 (2) 2,300,000
----------------------------------------------------------------------------------------

INCOME BEFORE EXTRAORDINARY ITEM $ 1,893,000 $ 324,000 $ 2,217,000 $ 141,000 $ 2,358,000
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------

Earnings per common share $ 0.32 $ 0.40
------------- ------------
------------- ------------

Weighted average number of common
shares outstanding 5,889,000 5,889,000
------------- ------------
------------- ------------
</TABLE>

See Notes to Pro Forma Financial Statements.

<PAGE>

RICHEY ELECTRONICS, INC.

UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
Nine Months Ended September 29, 1995

<TABLE>
<CAPTION>
Richey Pro Forma
Electronics, EDAC and Combined Pro Forma after
Inc. Subsidiary Historical Adjustments Adjustments
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 83,704,000 $ 77,908,000 $ 161,612,000 $ - $ 161,612,000
Cost of goods sold 63,600,000 58,099,000 121,699,000 - 121,699,000
---------------------------------------------------------------------------------------------

GROSS PROFIT 20,104,000 19,809,000 39,913,000 - 39,913,000
---------------------------------------------------------------------------------------------

Operating expenses: (3,375,000)(3)
Selling, warehouse, general and (95,000)(1)
administrative 14,658,000 16,325,000 30,983,000 95,000 (1) 27,608,000
880,000 (1)
Amortization of intangibles 317,000 398,000 715,000 (398,000)(1) 1,197,000
---------------------------------------------------------------------------------------------
14,975,000 16,723,000 31,698,000 (2,893,000) 28,805,000
---------------------------------------------------------------------------------------------

OPERATING INCOME 5,129,000 3,086,000 8,215,000 2,893,000 11,108,000

Interest expense 687,000 2,256,000 2,943,000 1,800,000 (4) 4,743,000
---------------------------------------------------------------------------------------------

Income before income taxes 4,442,000 830,000 5,272,000 1,093,000 6,365,000

Federal and state income tax 1,783,000 372,000 2,155,000 630,000 (2) 2,785,000
---------------------------------------------------------------------------------------------

NET INCOME $ 2,659,000 $ 458,000 $ 3,117,000 $ 463,000 $ 3,580,000
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------

Earnings per common share $ 0.35 $ 0.47
------------- ------------
------------- ------------

Weighted average number of common
shares outstanding 7,688,000 7,688,000
------------- ------------
------------- ------------
</TABLE>

See Notes to Pro Forma Financial Statements.

<PAGE>

RICHEY ELECTRONICS, INC.

UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
September 29, 1995

<TABLE>
<CAPTION>
Richey Pro Forma
Electronics, EDAC and Combined Pro Forma after
ASSETS Inc. Subsidiary Historical Adjustments Adjustments
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash $ 1,776,000 $ 310,000 $ 2,086,000 $ - $ 2,086,000
Trade receivables 14,239,000 13,355,000 27,594,000 - 27,594,000
Inventories 17,358,000 13,087,000 30,445,000 - 30,445,000
580,000 (2)
Deferred income taxes 1,427,000 1,060,000 2,487,000 1,490,000 (1) 4,557,000
Other current assets 345,000 463,000 808,000 (192,000)(1) 616,000
---------------------------------------------------------------------------------------------

TOTAL CURRENT ASSETS 35,145,000 28,275,000 63,420,000 1,878,000 65,298,000
---------------------------------------------------------------------------------------------

Improvements and Equipment 1,931,000 1,989,000 3,920,000 (200,000)(1) 3,720,000
---------------------------------------------------------------------------------------------

Other Assets and Intangibles:
Deferred taxes 2,430,000 - 2,430,000 - 2,430,000
Other intangibles 1,987,000 - 1,987,000 - 1,987,000

Costs in excess of net assets of 46,845,000 (1)
business acquired 757,000 15,041,000 15,798,000 (15,041,000)(1) 47,602,000

500,000 (1)
Deferred debt costs - 503,000 503,000 (503,000)(1) 500,000

Deposits and other 82,000 405,000 487,000 (26,000)(1) 461,000
---------------------------------------------------------------------------------------------

TOTAL OTHER ASSETS 5,256,000 15,949,000 21,205,000 31,775,000 52,980,000
---------------------------------------------------------------------------------------------

TOTAL ASSETS $ 42,332,000 $ 46,213,000 $ 88,545,000 $ 33,453,000 $ 121,998,000
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
</TABLE>

See Notes to Pro Forma Financial Statements.

<PAGE>

RICHEY ELECTRONICS, INC.

UNAUDITED PRO FORMA CONDENSED BALANCE SHEET, CONTINUED
September 29, 1995

<TABLE>
<CAPTION>
Richey Pro Forma
Electronics, EDAC and Combined Pro Forma after
LIABILITIES Inc. Subsidiary Historical Adjustments Adjustments
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current Liabilities
Current maturities of long-term debt $ - $ 2,088,000 $ 2,088,000 $ (1,000,000)(1) $ 1,088,000
Revolving line of credit 3,131,000 - 3,131,000 - 3,131,000
Accounts payable 10,262,000 7,578,000 17,840,000 - 17,840,000
Accrued expenses 1,756,000 2,843,000 4,599,000 - 4,599,000
1,450,000 (2)
Restructuring and transaction costs - 643,000 643,000 4,500,000 (1) 6,593,000
-------------------------------------------------------------------------------------------

TOTAL CURRENT LIABILITIES 15,149,000 13,152,000 28,301,000 4,950,000 33,251,000
-------------------------------------------------------------------------------------------

Stock payment notes - - - 34,106,000 (1) 34,106,000
8% subordinated long-term notes payable - 3,000,000 3,000,000 - 3,000,000
EDAC stockholder notes - 5,962,000 5,962,000 - 5,962,000
Long-term debt - 18,366,000 18,366,000 1,000,000 (1) 19,366,000
-------------------------------------------------------------------------------------------
- 27,328,000 27,328,000 35,106,000 62,434,000
-------------------------------------------------------------------------------------------

Stockholders' Equity
Preferred stock - 5,550,000 5,550,000 (5,550,000)(1) -
Common stock 9,000 33,000 42,000 (33,000)(1) 9,000
Additional paid-in capital 20,976,000 379,000 21,355,000 (379,000)(1) 20,976,000
Stock subscription receivable - (150,000) (150,000)(1) 150,000 (1) -

(870,000)(2)
Retained earnings (deficit) 6,198,000 (79,000) 6,119,000 79,000 (1) 5,328,000
-------------------------------------------------------------------------------------------

TOTAL STOCKHOLDERS' EQUITY 27,183,000 5,733,000 32,916,000 (6,603,000) 26,313,000
-------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND EQUITY $ 42,332,000 $ 46,213,000 $ 88,545,000 $ 33,453,000 $ 121,998,000
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
</TABLE>

See Notes to Pro Forma Financial Statements.

<PAGE>

RICHEY ELECTRONICS, INC.

NOTES TO PRO FORMA FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. DESCRIPTION OF PURCHASE

On December 20, 1995, the Company completed the purchase of all the issued and
outstanding capital stock of Electrical Distribution Acquisition Company (EDAC).
EDAC, a holding company, and its wholly owned subsidiary, Deanco, Inc. (Deanco),
were acquired for $34,106,000 of stock payment notes, the assumption of
$5,962,000 of existing EDAC stockholder notes and the assumption of all other
debt of Deanco.

As payment to the EDAC shareholders for their stock, Richey agreed to deliver
promissory notes (stock payment notes) due January 2, 1996. These stock payment
notes bear interest at 4.79% and are secured by an irrevocable standby letter of
credit issued by Richey's lender.

On December 20, 1995, the Company also entered a new credit agreement secured by
all assets which expires December 31, 1999. The new credit line is comprised of
a revolving credit line of $45,000,000 and a $30,000,000 term loan. The
acquisition will be financed by the $30,000,000 term loan which will be fully
drawn on to fund the payment of the stock payment notes. The balance of the
stock payment notes, the assumption of the EDAC shareholder notes of $5,962,000
plus interest and the repayment of certain Deanco obligations to its bank of
$19,100,000 will be funded by the revolving credit facility. The term loan
requires no principal payments for the year ending December 31, 1996, $7,500,000
for 1997, $10,000,000 for 1998 and $12,500,000 for 1999.

NOTE 2. NATURE AND AMOUNT OF CONSIDERATION GIVEN

The preliminary allocation of purchase price based on September 29, 1995
unaudited financial statement information is as follows:

<TABLE>
<CAPTION>
<S> <C>
CONSIDERATION
Purchase price for EDAC stock, consideration provided with stock
payment notes, due January 2, 1996 $ 34,106,000
Assumption of EDAC stockholder notes, due January 2, 1996 5,962,000
Liabilities assumed, not including EDAC stockholder notes and stock
payment notes 34,518,000
Restructuring costs of acquired company 3,100,000
Transactions costs, including debt issuance costs 1,400,000
------------

$ 79,086,000
------------
------------

</TABLE>

<PAGE>

RICHEY ELECTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 2. NATURE AND AMOUNT OF CONSIDERATION GIVEN, CONTINUED

<TABLE>
<CAPTION>
<S> <C>
ALLOCATED TO
Estimated fair value of tangible assets acquired $ 31,741,000
Debt issuance costs 500,000
Costs in excess of net assets of business acquired (goodwill) 46,845,000
-------------

$ 79,086,000
-------------
-------------
</TABLE>

The Company anticipates that it will record an accrual in the fourth quarter of
1995 of approximately $1,450,000 to cover costs associated with closure of
certain of its own facilities and other costs associated with the consolidation
of the operations of Deanco into the Company. These costs are expected to be
paid out over the next year, except for amounts related to longer term leases.
This accrual has been reflected in the pro forma balance sheet but has not been
considered in the pro forma statements of operations because it is a material
nonrecurring charge.

The components of the restructuring cost, including those costs expected to be
charged to the Company's fourth quarter income statement and those related to
Deanco, which are recorded as a purchase accounting adjustment, are as follows:

<TABLE>
<CAPTION>
Purchase Charged to
Accounting Retained
Adjustment Earnings
----------------------------------
<S> <C> <C>
Costs related to termination of existing Deanco
computer systems and facility lease obligations $ 1,750,000 $ -
Severance for terminated Deanco employees 1,000,000 -
Severance for terminated Richey employees - 100,000
Costs to relocate inventory and facilities to combined
facilities - 75,000
Lease obligations for Richey facilities that will be closed - 400,000
Computer conversion costs - 250,000
Costs associated with changing corporate name
to Richey Electronics, Inc. for combined operations - 100,000
Richey furniture and fixtures disposed - 150,000
Other, including travel costs and other out-of-pocket
expenses related to transaction 50,000 100,000
Costs to eliminate certain distribution agreements,
primarily to write off inventory and restocking costs 300,000 200,000
Prepayment penalty for Richey debt obligations - 75,000
--------------------------------

$ 3,100,000 $ 1,450,000
--------------------------------
--------------------------------
</TABLE>

<PAGE>

RICHEY ELECTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 3. BALANCE SHEET PRO FORMA ADJUSTMENTS

The following is a description and summary of the pro forma adjustments related
to the combined balance sheets.

Dr. (Cr.)
--------------
<S> <C>
(1) Long-term debt $ (1,000,000)
Current maturities of long-term debt 1,000,000
Stock payment notes (34,106,000)
Preferred stock 5,550,000
Common stock and stock subscription (117,000)
Additional paid-in capital 379,000
Retained earnings (deficit) (79,000)
Cost in excess of net assets of business acquired, acquisition by Richey 46,845,000
Cost in excess of net assets of business acquired, prior acquisitions by
EDAC (15,041,000)
Improvements and equipment (200,000)
Deferred debt costs incurred by Richey 500,000
Deferred debt costs, EDAC (503,000)
Restructuring and transaction costs (4,500,000)
Deferred income taxes 1,490,000
Other current assets (192,000)
Other assets (26,000)
</TABLE>

To record purchase accounting adjustments based upon terms of
transaction in accordance with Accounting Principles Board Statement
No. 16. Includes $34,106,000 stock payment notes due January 2, 1996
to former shareholders of EDAC and obligation to redeem $5,962,000 of
shareholder notes due on January 2, 1996 to former shareholders of
EDAC. These notes were paid in full on January 2, 1996 from proceeds
of the Company's $30,000,000 term loan and the balance, $10,068,000,
with an advance on the Company's $45,000,000 four-year revolving line
of credit.

The Company intends to maintain borrowings of at least the amount
borrowed on December 20, 1995 to fund the acquisition and the portion
to be drawn on January 2, 1996 for an uninterrupted period extending
beyond one year; therefore, the pro forma amount of $19,100,000 as of
September 29, 1995 and the $10,068,000 to be paid on January 2, 1996
under the line of credit are classified as long-term debt. In
addition, the $30,000,000 paid from the term loan is classified as
long term.

<PAGE>

RICHEY ELECTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 3. BALANCE SHEET PRO FORMA ADJUSTMENTS, CONTINUED

Dr. (Cr.)
--------------
<S> <C>
(2) Retained earnings $ 870,000
Restructuring costs (1,450,000)
Deferred income taxes 580,000
</TABLE>

To record restructuring costs, net of taxes associated with costs
incurred by Richey to consolidate operations as a result of this
acquisition.

NOTE 4. INCOME STATEMENT PRO FORMA ADJUSTMENTS

The pro forma adjustments associated with the income statement represent those
items directly attributable to the acquisition and are as follows:

Nine Months Twelve
Ended Months Ended
September 29, December 31,
1995 1994
-----------------------------------
<S> <C> <C>
(1) Eliminate EDAC amortization of acquisition cost in
excess of net assets of business acquired $ (398,000) $ (276,000)
Eliminate EDAC deferred debt costs amortization (95,000) (30,000)
New deferred debt costs amortization 95,000 125,000
Amortization of acquisition cost in excess of net assets
of business acquired 880,000 1,175,000

To record estimated amortization of acquisition cost
in excess of net assets of business acquired over
40-year life and amortization of debt costs over four
years and eliminate EDAC amortization.

(2) Income tax expense 630,000 695,000

To adjust income tax expense to give effect to the
pro forma adjustments based on a 40% tax rate
applied to taxable income. Taxable income is
income before the provision for income taxes plus
nondeductible goodwill amortization.
</TABLE>

<PAGE>

RICHEY ELECTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 4. INCOME STATEMENT PRO FORMA ADJUSTMENTS, CONTINUED

Nine Months Twelve
Ended Months Ended
September 29, December 31,
1995 1994
-------------------------------------
<S> <C> <C>
(3) Salaries, employee benefits and facility expense $ (3,375,000) $ (4,355,000)

To eliminate salary and related expenses resulting
from termination of redundant corporate and branch
employees and duplicate facilities directly
attributable to the acquisition.

In addition to these cost savings directly attributable to the acquisition, the
Company anticipates it can eliminate an additional $1,000,000 of annual costs
through further reductions in branch operating expenses, freight and
advertising costs.

(4) Interest expense 1,800,000 2,525,000

To record interest expense associated with financing
of stock acquisition assuming 8.2% interest rate, net
of impact of interest rate reduction on existing debt.

The effect on pretax income of interest varying by
1/8% from those used in the pro forma adjustment is
$55,000 for the nine months ended September 29,
1995 and $65,000 for the year ended December 31,
1994.
</TABLE>

NOTE 5. ELECTRICAL DISTRIBUTION ACQUISITION COMPANY AND SUBSIDIARY FINANCIAL
STATEMENTS

Electrical Distribution Acquisition Company, a newly formed holding company in
1994, acquired 100% of the outstanding common stock of Deanco, Inc. on September
30, 1994. Prior to September 30, 1994, EDAC had no material activities or
operations. In addition, Deanco, Inc. reported its operating results using a
fiscal year end, June 30.

<PAGE>

RICHEY ELECTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 5. ELECTRICAL DISTRIBUTION ACQUISITION COMPANY AND SUBSIDIARY FINANCIAL
STATEMENTS, CONTINUED

As a result, unaudited pro forma income statement information for the year ended
December 31, 1994 for EDAC and subsidiary includes that portion of Deanco's
operations from January 1, 1994 through June 30, 1994 derived from Deanco's
income statement for the year ended June 30, 1994, Deanco only operations for
the period July 1, 1994 through September 30, 1994, and the consolidated
operations of EDAC and Deanco for the period October 1, 1994 through
December 31, 1994. In addition, the income statement information does not
include the extraordinary item resulting from a warehouse casualty gain, net of
tax of $229,000, recorded in April 1994.

NOTE 6. DECEMBER 31, 1995 PRO FORMA RESULTS

The Company's unaudited year ended December 31, 1995 sales were $117,057,000 and
net income of $2,868,000 ($.36 per share), including a $1,450,000 pretax
restructuring charge in the fourth quarter.

EDAC and subsidiary's unaudited sales were $99,926,000 and their net loss was
$127,000 for the period January 1, 1995 through December 19, 1995.

Pro forma unaudited results of operations for the year ended December 31, 1995,
assuming the acquisition had occurred as of January 1, 1995, are sales of
$216,983,000 and net income of $4,377,000 ($.54 per share).

<PAGE>
FOR IMMEDIATE RELEASE

EXHIBIT A

For: Richey Electronics, Inc.
7441 Lincoln Way
Garden Grove, CA 92641

Contact: William C. Cacciatore or Richard N. Berger
714/898-8288

RICHEY ELECTRONICS REPORTS FOURTH QUARTER EARNINGS, ANNOUNCES
PROPOSED PRIVATE OFFERING OF CONVERTIBLE DEBT, AND SIGNS LETTER OF
INTENT TO ACQUIRE MS ELECTRONICS, INC.

Garden Grove, California, January 30, 1996 - Richey Electronics, Inc. (Nasdaq
NNM:RCHY) today reported financial results for the fourth quarter and the twelve
month period ended December 31, 1995, announced a proposed private offering of
convertible debt and announced the signing of a letter of intent to acquire MS
Electronics, Inc., a Maryland-based distributor of electronic components.

YEAR END SALES UP 30%; PROFITS, EXCLUDING DEANCO ACQUISITION RESTRUCTURING
CHARGE, UP 98%

Net income for the fourth quarter of 1995 was $209,000, or $0.02 per share,
compared with net income of $535,000, or $0.09 per share, for the fourth quarter
of 1994. In the fourth quarter of 1995, the Company recognized a pretax charge
to earnings of $1.45 million related to its December 20, 1995 acquisition of
Deanco, Inc. (the "Deanco Acquisition") to cover the costs of closing certain of
the Company's facilities, severance pay, and consolidating the operations of
Deanco into the Company. Excluding this restructuring charge, net income for
the fourth quarter doubled to $1,079,000, or $0.12 per share. Net sales for the
fourth quarter ended December 31, 1995 rose to $33,353,000 (including $3.5
million from acquired Deanco operations after December 19) from $24,076,000 an
increase of 38.5%.

For the year ended December 31, 1995, net sales increased 29.7% to
$117,057,000 from $90,266,000 in 1994. Net income for the year ended
December 31, 1995 was $2,868,000, or $0.36 per share, compared with net income
of $1,893,000, or $0.32 per share, for 1994. Excluding the fourth quarter
restructuring charge, net income rose 97.5% to $3,738,000, or $0.47 per share.

On August 16, 1995, Richey Electronics acquired Inland Empire Interconnects
("IEI"). The financial results for the third and fourth quarters of 1995
include the results of this acquisition from the acquisition date. On
December 20, 1995, Richey Electronics acquired Deanco, Inc. The financial
results for the fourth quarter of 1995 include the results of this acquisition
from the acquisition date.

<PAGE>

Concurrent with the Deanco Acquisition, the Company replaced its existing
credit facility with a new senior credit facility, consisting of a 3.5 year,
$30 million dollar term loan and a 4 year, $45 million revolving line of credit.
This facility is secured by substantially all of the Company's assets and bears
interest at either the prime rate plus 1% (currently 9.50%) or the Eurodollar
rate plus 2.25% (currently 7.875%), at the Company's option.

PROPOSED PRIVATE OFFERING OF CONVERTIBLE DEBT

Richey Electronics also announced today that it proposes to make a private
offering of $50 million in aggregate principal amount of convertible
subordinated notes due 2006. The notes will be unsecured debt, subordinated to
all present and future senior indebtedness of the Company and convertible into
Richey Electronics common stock. The Company intends to use the net proceeds of
the offering to repay indebtedness under its senior credit facility.

The notes and underlying common stock have not been registered under the
Securities Act of 1933, as amended, and may not be offered or sold absent
registration or an applicable exemption from the registration requirements of
the Securities Act and applicable state securities laws. This press release
shall not constitute an offer to sell or the solicitation of any offer to buy
the notes.

LETTER OF INTENT TO ACQUIRE MS ELECTRONICS, INC.

Richey Electronics also announced the execution of a letter of intent to
acquire certain assets and the business of MS Electronics, Inc., a distributor
of interconnect, electromechanical and passive components and provider of value-
added services headquartered in Gaithersburg, Maryland. MS Electronics, which
is privately held, had sales of approximately $11 million in 1995.

The acquisition will be accounted for as a purchase, is subject to certain
customary terms and conditions, and is expected to close in the first quarter of
1996.

William C. Cacciatore, Chairman, President and Chief Executive Officer of
Richey Electronics commented:

"We are pleased with the year-end and fourth quarter operating results which,
excluding the restructuring charge related to the Deanco Acquisition, were in
line with our expectations. Both our component and value-added sales continued
to enjoy strong growth. In the fourth quarter, we completed the integration of
IEI by moving its operations into the Richey value-added facility, introducing
some assembly inefficiencies which depressed value-added gross profit margins
for the quarter.

"The integration of Deanco is well underway. We are very excited about this
acquisition and the potential operating leverage it brings to Richey. On a pro
forma basis, assuming the Deanco Acquisition had occurred on January 1, 1995,
the combined companies would have

<PAGE>

had sales of $217 million and earnings of $4.4 million, or $.54 per share. Our
plan to achieve significant savings in operating expenses through the
combination of Richey and Deanco facilities and management requires that we
first successfully convert Deanco's computer data to Richey's system, which we
plan to complete in the first half of 1996. Consequently, we will run Richey
and Deanco as separate entities with many duplicate costs until the computer
conversion is complete and do not expect to realize operating savings until
after the first quarter of 1996.

"In line with our strategy of pursuing complementary acquisitions, we have
signed a letter of intent to acquire MS Electronics. MS Electronics fits nicely
with our new location in the Baltimore-Washington market, acquired as part of
the Deanco Acquisition. We anticipate more than doubling our Baltimore-
Washington area volume, as MS brings new customers and product lines to Richey
in that market, including Amp, for whom MS is the largest local distributor.

"With estimated net proceeds of $47.5 million from the proposed offering of
convertible debt, we will pay off a $30 million term loan and pay down $17.5
million of borrowings under our revolving line of credit from our commercial
lender. Following the offering, we anticipate having outstanding borrowings of
approximately $11.5 million under the $45 million revolver, with $23.5 million
immediately available to fund future expansion. Furthermore, the offering would
fix the interest rate on the majority of the Company's debt and have no
amortization requirement until its maturity which is anticipated to be 10
years."

Attached are the Company's Condensed Statements of Operations, Balance
Sheets and Cash Flows for the year ended December 31, 1995 and an Unaudited Pro
Forma Condensed Statement of Operations for the year ended December 31, 1995
which assumes that the Deanco Acquisition occurred as of January 1, 1995.

Richey Electronics is a leading multi-regional, specialty distributor of
interconnect, electromechanical and passive electronic components and a provider
of value-added services.

<PAGE>

RICHEY ELECTRONICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
QUARTER ENDED TWELVE MONTHS ENDED
-------------------------- --------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales: $33,353,000 $24,076,000 $117,057,000 $90,266,000

Cost of Goods Sold: 25,480,000 18,196,000 89,080,000 68,176,000
----------- ----------- ------------ -----------
Gross Profit: $ 7,873,000 $ 5,880,000 $ 27,977,000 $22,090,000
----------- ----------- ------------ -----------

Operating expenses:
Selling, warehouse, general
and administrative $ 5,757,000 $ 4,457,000 $ 20,415,000 $16,750,000

Amortization of intangibles 142,000 126,000 459,000 568,000

Acquisition related
restructuring costs 1,450,000 -- 1,450,000 --
----------- ----------- ------------ -----------
$ 7,349,000 $ 4,583,000 $ 22,324,000 $17,318,000
----------- ----------- ------------ -----------
Operating Income $ 524,000 $ 1,297,000 $ 5,653,000 $ 4,772,000

Interest Expense $ 180,000 $ 403,000 $ 867,000 $ 1,606,000
----------- ----------- ------------ -----------
Income before income taxes $ 344,000 $ 894,000 $ 4,786,000 $ 3,166,000

Federal and state income taxes $ 135,000 $ 359,000 $ 1,918,000 $ 1,273,000
----------- ----------- ------------ -----------
Net income $ 209,000 $ 535,000 $ 2,868,000 $ 1,893,000
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Earnings per Share $0.02 $0.09 $0.36 $0.32
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Weighted Average number
of shares outstanding 9,054,000 5,889,000 8,036,000 5,889,000
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>

<PAGE>

RICHEY ELECTRONICS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)

DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------

ASSETS

CURRENT ASSETS
Cash and cash equivalents $572,000 $9,000
Trade receivables 25,622,000 11,167,000
Inventories 31,450,000 14,913,000
Deferred income taxes 3,948,000 1,427,000
Other current assets 1,481,000 435,000
------------ ------------
Total current assets $63,073,000 $27,951,000
------------ ------------
LEASEHOLD IMPROVEMENTS, EQUIPMENT,
FURNITURE AND FIXTURES, net $3,469,000 $1,017,000
------------ ------------
OTHER ASSETS AND INTANGIBLES
Deferred income taxes $4,979,000 $2,430,000
Intangibles, net 0 3,261,000
Other 1,161,000 80,000
Costs in excess of net assets of
acquired business 46,259,000 274,000
------------ ------------
$52,399,000 $6,045,000
------------ ------------
$118,941,000 $35,013,000
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current maturities of long-term debt $835,000 $1,600,000
Notes payable, revolving line of credit 0 8,843,000
Accounts payable 18,250,000 10,457,000
Accrued expenses 6,088,000 1,734,000
Accrued restructuring costs 3,824,000 --
------------ ------------
Total current liabilities $28,997,000 $22,634,000
------------ ------------
Accrued restructuring costs, long-term $900,000 --
------------ ------------
Long-term Debt
Subordinated notes payable $2,982,000 $3,594,000
Other long-term debt 58,670,000 --
------------ ------------
61,852,000 3,594,000
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock $0 $0
Common stock 9,000 6,000
Additional paid-in-capital 20,976,000 5,240,000
Retained earnings 6,407,000 3,539,000
------------ ------------
Total stockholders' equity $27,392,000 $8,785,000
------------ ------------
$118,941,000 $35,013,000
------------ ------------
------------ ------------

<PAGE>

RICHEY ELECTRONICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

TWELVE MONTHS ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1995 1994
----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income 2,868,000 1,893,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 912,000 765,000
Deferred income taxes 1,065,000 1,157,000
Restructuring costs accrued 1,450,000 --
Changes in operating assets and liabilities:
(increase) in trade receivables (2,448,000) (1,107,000)
(increase) in inventories (2,727,000) (1,518,000)
(increase) decrease in other assets (280,000) 14,000
increase (decrease) in accounts payable
and accrued expenses (624,000) 2,820,000
---------- -----------

Net cash provided by operating activities 236,000 4,024,000
--------- -----------

CASH FLOWS (USED IN) INVESTING ACTIVITIES
Purchase of leasehold improvements and equipment (1,316,000) (401,000)
Payment of acquisitions and restructuring costs (2,025,000) (2,512,000)
----------- -----------
Net cash (used in) investing activities (3,341,000) (2,913,000)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Net advances (repayments) on revolving line of credit (8,943,000) 1,848,000
Borrowings under long-term revolving line of credit 1,974,000 --
Payments on long-term debt (5,202,000) (2,957,000)
Proceeds from issuance of common stock, net of
offering expenses of $446,000 15,739,000 --

----------- -----------

Net cash provided by (used in) financing activities 3,668,000 (1,109,000)
----------- -----------
Increase in cash and cash equivalents 563,000 2,000

CASH AND CASH EQUIVALENTS
Beginning 9,000 7,000
----------- -----------
Ending 572,000 9,000
----------- -----------
----------- -----------

</TABLE>

<PAGE>

RICHEY ELECTRONICS, INC.

UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

The following Unaudited Pro Forma Condensed Statement of Operations is
derived from the unaudited statement of income of Richey Electronics for the
year ended December 31, 1995 and the unaudited consolidated statement of income
of Electrical Distribution Acquisition Company ("EDAC") and its wholly-owned
subsidiary, Deanco, Inc. for the period ended December 19, 1995, and assumes
that the Deanco Acquisition was consummated as of January 1, 1995.

The Unaudited Pro Forma Condensed Statement of Operations does not purport
to represent what the Company's results or financial condition would actually
have been if the Deanco Acquisition had occurred on the date indicated or to
project the Company's results or financial condition for or at any future period
or date. The pro forma adjustments, as described in the accompanying data, are
based on available information and certain assumptions that management believes
are reasonable.

The unaudited pro forma information with respect to the Deanco Acquisition
is based on the historical financial statements of the business acquired. The
Deanco Acquisition has been accounted for under the purchase method of
accounting.

<PAGE>

RICHEY ELECTRONICS, INC.

UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

Pro Forma
EDAC and Adjustments
Richey Deanco for Pro Forma for
Historical Historical Acquisition Acquisition
---------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $ 117,057 $ 99,926 $ 216,983
Cost of goods sold . . . . . . . . . . . . . . 89,080 74,804 163,884
---------- ---------- ------------ -------------
Gross profit . . . . . . . . . . . . . . . . . 27,977 25,122 53,099
Operating Expenses:
Selling, warehouse, general and 762 (c)
administrative and amortization . . . . . . 20,874 21,558 (4,500)(d) 38,694

Restructuring costs . . . . . . . . . . . . . . 1,450 -- (1,450)(a) --
---------- ---------- ------------ -------------
Operating income . . . . . . . . . . . . . . . 5,653 3,564 5,188 14,405
Interest expense, net . . . . . . . . . . . 867 2,829 2,400 (e) 6,096
(476)(b)
Other expense (income) . . . . . . . . . . . . -- 598 3 (c) 125
---------- ---------- ------------ -------------
Income before income taxes . . . . . . . . . . 4,786 137 3,261 8,184
Income tax expense . . . . . . . . . . . . . . 1,918 264 1,625 (f) 3,807
---------- ---------- ------------ -------------
Net income (loss) . . . . . . . . . . . . . . . 2,868 (127) 1,636 4,377
---------- ---------- ------------ -------------
---------- ---------- ------------ -------------
Earnings per common share . . . . . . . . . . $ 0.36 -- $ 0.54
---------- -------------
---------- -------------

</TABLE>

The accompanying notes are an integral part of the pro forma statement of
operations (unaudited).

<PAGE>

RICHEY ELECTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(in thousands)

The pro forma adjustments associated with the statement of operations
represent those items directly attributable to the Deanco Acquisition and are as
follows:

<S> <C>
(a) Material non-recurring charges for restructuring costs of $1,450 charged to the Company's
fourth quarter 1995 income statement have been eliminated.

(b) Material non-recurring charge for write-off of Deanco deferred debt costs of $476 as a result
of the refinancing of the combined operations have been eliminated.

(c) Amortization of goodwill and deferred debt costs have been adjusted to reflect the following:
Elimination of goodwill amortization in Deanco's income statement . . . . . . . . . . . . . . . . . . . . . .$ (359)

Goodwill amortization for a full year in the Company's income statement as the result of the
Deanco Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,121
------
$ 762
------
------
Elimination of amortization of deferred debt costs for Deanco . . . . . . . . . . . . . . . . . . . . . . . $ (122)

Amortization of deferred debt costs associated with Senior Credit Facility. . . . . . . . . . . . . . . . . . 125
------
$ 3
------
------
(d) The Company anticipates the following annual cost savings directly attributable to the Deanco Acquisition:

Closure of seven redundant operating facilities and related lease costs . . . . . . . . . . . . . . . . . . . $ 625

Salary and related benefit costs associated with the termination of approximately 60 people,
principally corporate and management personnel, as the result of the closure
of redundant facilities, consolidation of warehouse facilities and elimination
of Deanco corporate staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,555

Fringe benefit savings, as the Company's benefit plans were adopted for
the combined operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 350

Expected salary cost and benefit savings associated with consolidation of redundant branches . . . . . . . . .$ 550

Expected savings resulting from the elimination of duplicate corporate expenses . . . . . . . . . . . . . . . .$ 200

Elimination of management fee contract for services to Deanco that terminated at the date
of the Deanco Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 220
------
$4,500

In addition to the cost savings initiatives described above directly attributable to the Deanco Acquisition, all of which
are pro forma adjustments, the Company estimates it can eliminate an additional $1,000 of annual costs through further
reductions in branch operating expenses, freight and advertising costs.

<PAGE>

(e) Interest expense has been increased to reflect the following assumptions:

Additional debt to fund payment of stock payment notes of $34,106 was outstanding for
the full year at a borrowing rate of 8.2% on the Revolving Line of Credit. . . . . . . . . . . . . . . . . . . . . $2,800

Notes payable to former EDAC management and stockholders had been financed at a
borrowing rate of 8.2% for the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (50)

Average bank debt outstanding for Deanco has been assumed to incur interest at a
borrowing rate of 8.2% for the period from January 1, 1995 to
December 19, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (350)
------
$ 2,400
------
------
The effect on income of the interest rate varying by 1/8% from the amount used in this
calculation would be approximately $75 before taxes.

(f) The pro forma adjustments to income taxes are based on a 40% tax rate applied to taxable income. Taxable income is income
before provision for income taxes plus non-deductible goodwill.

</TABLE>