UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission file number 0-12906
RICHARDSON ELECTRONICS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 36-2096643
(State of incorporation or organization) (I.R.S. Employer Identification No.)
40W267 Keslinger Road, LaFox, Illinois 60147
(Address of principal executive offices and zip code)
(Registrant's telephone number, including area code: (708) 208-2200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of October 11, 1994, there were outstanding 8,190,386 shares of Common
Stock, $.05 par value, and 3,247,159 shares of Class B Common Stock, $.05 par
value, which are convertible into Common Stock on a share for share basis.
This Quarterly Report on Form 10-Q contains 13 pages. It does not contain an
exhibit index.
(1)
INDEX
Page
PART 1 - FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Income 5
Consolidated Condensed Statements of Cash Flow 6
Notes to Consolidated Condensed Financial Statements 7
Management's Discussion and Analysis of the Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION 12
(2)
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands)
August 31 May 31
1994 1994
--------- ---------
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and equivalents $8,194 $9,739
Receivables, less allowances of $1,461
and $1,405 34,152 34,901
Inventories:
Finished products 76,882 72,136
Work in process 620 1,049
Materials 1,253 678
--------- ---------
78,755 73,863
Assets held for disposition, less valuation
reserves of $16,900 and $15,832 10,232 10,274
Other 8,322 8,190
--------- ---------
TOTAL CURRENT ASSETS 139,655 136,967
Investments 14,631 17,836
Property, Plant and Equipment 39,671 41,608
Less accumulated depreciation (22,965) (24,676)
--------- ---------
16,706 16,932
Other Assets 7,229 7,797
--------- ---------
TOTAL ASSETS $178,221 $179,532
========= =========
See notes to consolidated condensed financial statements.
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands, except per share amounts)
August 31 May 31
1994 1994
--------- ---------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $11,145 $10,925
Accrued expenses 9,202 11,839
Liabilities related to disposition 15,760 15,842
Current portion of long-term debt 1,867 1,867
--------- ---------
TOTAL CURRENT LIABILITIES 37,974 40,473
Long-term debt, less current portion 85,955 86,421
Deferred income taxes 57 65
Stockholders' Equity
Common stock, $.05 par value; issued
8,190 at August 31, 1994 and
8,056 at May 31, 1994 409 403
Class B Common Stock, convertible, $.05 par
value; issued 3,247 at August 31, 1994
and 3,247 at May 31, 1994 162 162
Preferred stock, $1.00 par value -- --
Additional paid-in capital 49,845 49,352
Retained earnings 5,252 4,912
Foreign currency translation adjustment (1,647) (2,383)
Market appreciation on investments, net of
tax 214 127
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 54,235 52,573
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $178,221 $179,532
========= =========
See notes to consolidated condensed financial statements.
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
August 31
----------- ---------
1994 1993
--------- ---------
Net sales $46,407 $35,846
Costs and expenses:
Cost of products sold 32,904 25,883
Selling, general and
administrative expenses 10,980 8,874
Interest expense 1,549 1,862
Investment income (246) (1,001)
Other (income) expense, net 6 128
--------- ---------
45,193 35,746
--------- ---------
Income before income taxes 1,214 100
Income taxes 430 40
--------- ---------
Net income $784 $60
========= =========
Net income per share $.07 $.01
========= =========
Average shares outstanding 11,428 11,308
========= =========
See notes to consolidated condensed financial statements.
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(in thousands)(unaudited)
Three Months Ended
August 31
-----------------------
1994 1993
--------- ---------
OPERATING ACTIVITIES
Net income $784 $60
Non-cash charges to income:
Depreciation 681 1,174
Amortization of intangibles
and financing costs 86 241
Deferred income taxes 381 109
Common stock awards and contribution
to employee stock ownership plan 505 67
--------- ---------
Total non-cash charges 1,653 1,591
--------- ---------
Net income, adjusted for non-cash
charges 2,437 1,651
Changes in working capital, net of effects
of currency translation:
Accounts receivable 1,182 2,569
Inventories (3,997) (2,630)
Other current assets (73) (1,792)
Accounts payable 7 (2,759)
Other liabilities (2,956) (5,234)
--------- ---------
Net changes in working capital (5,837) (9,846)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (3,400) (8,195)
--------- ---------
FINANCING ACTIVITIES
Payments on debt (466) (676)
Cash dividends (445) (438)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (911) (1,114)
--------- ---------
INVESTING ACTIVITIES
Reduction in investments 3,347 4,515
Capital expenditures (607) (325)
Other 26 122
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,766 4,312
--------- ---------
DECREASE IN CASH AND EQUIVALENTS (1,545) (4,997)
Cash and equivalents at beginning of year 8,194 2,101
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $6,649 ($2,896)
========= =========
See notes to consolidated condensed financial statements.
Richardson Electronics, Ltd. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note A -- Basis of Presentation
The accompanying unaudited Consolidated Condensed Financial Statements
("Statements") have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to
Form 10-Q. In the opinion of management, all adjustments necessary for a fair
presentation of the results of operations for the periods covered have been
reflected in the Statements. Certain information and footnotes necessary for a
fair presentation of the financial position and results of operations in
conformity with generally accepted accounting principles have been omitted in
accordance with the aforementioned instructions. It is suggested that the
Statements be read in conjunction with the Financial Statements and Notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
May 31, 1994.
Note B -- Income Taxes
The income tax provision of $430,000 for the three months ended August 31, 1994
is based on the estimated effective tax rate of 35% for fiscal 1995 income.
This rate differs from the applicable federal statutory rate of 34% principally
as a result of state income taxes. The income tax provision of $60,000 for the
three months ended August 31, 1993 is based on the estimated effective tax rate
of 40% for fiscal 1994 income. This rate differs from the applicable federal
statutory rate of 34% principally as a result of state income taxes and foreign
operating losses for which the related tax benefit will not be recognized until
the future foreign earnings are realized.
Note C -- Phase-down of Manufacturing Operations
The Company recorded a charge of $26,500,000 in the fourth quarter of 1994 to
provide for the phase-down of its manufacturing operations, including
$21,400,000 for planned sale or dissolution of its Brive, France facility and
$5,100,000 for incremental costs related to a 1991 provision to phase down its
domestic manufacturing operation. Negotiations are continuing with local
management regarding their proposed buy-out of the Brive operation. First
quarter costs related to the manufacturing phase-down were consistent with
management's projections included in the fiscal 1994 charge.
Richardson Electronics, Ltd. and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net sales for the quarter ended August 31, 1994 were $46,407,000, up 29% from
last year's first quarter of $35,846,000. Sales by the Company's Display
Products Group increased 71% to $8,615,000. Sales by the Solid State &
Components Group increased 31% to $11,322,000, while Electron Device Group
sales increased 21% to $23,840,000 and Security Systems Division sales
increased 11% to $2,630,000.
On a geographic basis, North American sales for the current quarter were
$27,388,000, a 22% increase over the prior year. Sales for the European region
were up 43%, to $10,167,000. Sales for the Rest of the World (ROW) region
increased 39% to $8,852,000. The ROW region consists primarily of Latin
America and the far east.
Gross margin for the first quarter was 29.1%, compared to 27.8% in the prior
year, reflecting lower charges for manufacturing inefficiencies. Underabsorbed
costs included in the determination of operating results in the current quarter
were $328,000, all of which were associated with the Company's LaFox, Illinois
facility. In the prior year comparable quarter, such costs were $1,625,000
relating to manufacturing in both LaFox and Brive.
Operating losses related to Brive and anticipated to be incurred during 1995
prior to the sale or dissolution of this operation were included in the 1994
charge (See Note C of the accompanying Notes to the Consolidated Condensed
Financial Statements) and therefore did not affect 1995 first quarter results.
A loss of approximately $390,000 related to the Brive operation was charged
against the 1994 reserve and was consistent with management's estimates made in
establishing the reserve. The gross margin improvement related to
manufacturing was partially offset by changes in product mix and competitive
pricing, which caused product margins on distribution sales to decline to 31.0%
from 33.5%.
Selling, general, and administrative expenses for the first quarter of fiscal
1995 were $10,980,000, an increase of $2,106,000 from the prior year, as a
result of payroll additions for the specialty sales program and higher
incentive payments related to gross margins. Selling expense as a percent of
sales declined to 23.7% from 24.8%.
Interest expense declined 17% to $1,549,000, reflecting lower debt levels and
the elimination of interest on a mortgage encumbering the Brive facility, as
such interest expense was included in the determination of the Brive operating
loss charged against the 1994 reserve. Investment income declined 75% to
$246,000, reflecting lower investment levels in the current quarter and high
realized capital gains in last year's first quarter.
Liquidity and Capital Resources
Cash provided by operations, exclusive of working capital requirements, was
$2,437,000 in the first quarter of fiscal 1995, compared to $1,651,000 for the
first quarter last year. Higher working capital requirements of $5,837,000 in
the current quarter and $9,846,000 last year and debt service and dividend
payments were met from cash generated by operations and by liquidation of
investments. Working capital requirements are affected by the timing of semi-
annual interest payments under the Company's long-term debt agreements. First
quarter interest payments totaled $2,916,000 in fiscal 1995 and $3,251,000 in
fiscal 1994.
Additional working capital requirements in fiscal 1995 included a $3,997,000
increase in inventories to support sales growth in the DPG and SSC business
units and $1,382,000 for expenditures related to the phase-down of
manufacturing operations. Additional working capital requirements in fiscal
1994 included a $2,000,000 payment to the Internal Revenue Service in
settlement of audits for fiscal 1986 through 1990 and a payment of $1,700,000
to the French government for value added taxes which were refunded in the
second quarter of 1994.
Funding for the current year activity and for scheduled debt repayments was
obtained through the liquidation of $3,347,000 from the long-term investment
portfolio. Cash reserves, investments and funds from operations are expected
to be adequate to meet the operational needs and future dividends of the
Company.
Certain of the Company's loan agreements contain various financial and
operating covenants which set benchmark levels for tangible net worth, debt /
tangible net worth ratio and annual debt service coverage. The Company was in
compliance with these covenants at August 31, 1994.
In addition, certain of these agreements contain restrictions on the Company
relating to the purchase of treasury stock or the payment of cash dividends.
At August 31, 1994, $1,893,000 was available for such transactions. Payment of
dividends will be considered quarterly based upon corporate performance.
At August 31, 1994, the market value of the Company's non-current investment
portfolio totaled $14,631,000. Included in the portfolio are high-yield
investments for which management periodically evaluates the associated market
risk. The investments are being maintained for corporate purposes which may
include short-term operating needs and the evaluation of opportunities for the
Company's expansion.
ITEM 1. LEGAL PROCEEDINGS
No material developments have occurred in the matters reported
under the category "Legal Proceedings" in the Registrant's Report
on Form 10-K for the fiscal year ended May 31, 1994.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None.
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.
RICHARDSON ELECTRONICS, LTD.
Date October 12 , 1994 By /s/ William J. Garry
William J. Garry
Vice President and
Chief Financial Officer
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