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 February 28, 1995
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 April 10, 1995, there were outstanding 8,196,400 shares of Common
Stock, $.05 par value, and 3,247,145 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 14 pages. An exhibit index is at
page 13.
(1)
Richardson Electronics, Ltd. and Subsidiaries
Form 10-Q
For the Quarter Ended February 28, 1995
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)
Part 1 - Financial Information
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands)
February 28 May 31
1995 1994
--------- ---------
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and equivalents 8,916 $9,739
Receivables, less allowances of $1,327
and $1,405 38,003 34,901
Inventories 78,404 73,863
Assets held for disposition, less valuation
reserves of $16,361 and $15,832 9,755 10,274
Other 7,662 8,190
--------- ---------
TOTAL CURRENT ASSETS 142,740 136,967
Investments 9,953 17,836
Property, Plant and Equipment 40,033 41,608
Less accumulated depreciation (23,733) (24,676)
--------- ---------
16,300 16,932
Other Assets 6,380 7,732
--------- ---------
TOTAL ASSETS $175,373 $179,467
========= =========
See notes to consolidated condensed financial statements.
(3)
Part 1 - Financial Information
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands)
February 28 May 31
1995 1994
--------- ---------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $10,791 $10,925
Accrued expenses 9,243 11,839
Liabilities related to disposition 13,435 15,842
Current portion of long-term debt 1,865 1,867
--------- ---------
TOTAL CURRENT LIABILITIES 35,334 40,473
Long-term debt, less current portion 84,398 86,421
Stockholders' Equity
Common stock, $.05 par value; issued
8,196 at February 28, 1995 and
8,056 at May 31, 1994 410 403
Class B Common Stock, convertible, $.05 par
value; issued 3,247 at February 28, 1995
and 3,247 at May 31, 1994 162 162
Preferred stock, $1.00 par value -- --
Additional paid-in capital 49,874 49,352
Retained earnings 6,462 4,912
Foreign currency translation adjustment (1,323) (2,383)
Market valuation of investments, net
of tax 56 127
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 55,641 52,573
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $175,373 $179,467
========= =========
See notes to consolidated condensed financial statements.
(4)
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
February 28 February 28
-------- --------- ----------- ---------
1995 1994 1995 1994
-------- --------- --------- ---------
Net sales $51,255 $43,051 $148,670 $123,097
Costs and expenses:
Cost of products sold 36,582 30,952 105,924 89,008
Selling, general and
administrative expenses 12,308 10,118 34,833 28,536
-------- --------- --------- ---------
48,890 41,070 140,757 117,544
-------- --------- --------- ---------
Operating income 2,365 1,981 7,913 5,553
Other (income) expense:
Interest expense 1,523 1,856 4,639 5,609
Investment income (485) (405) (1,022) (2,069)
Other, net (145) 92 (88) 498
-------- --------- --------- ---------
893 1,543 3,529 4,038
-------- --------- --------- ---------
Income before income taxes 1,472 438 4,384 1,515
Income taxes 500 180 1,500 600
-------- --------- --------- ---------
Net Income $972 $258 $2,884 $915
======== ========= ========= =========
Net income per share $.08 $.02 $.25 $.08
======== ========= ========= =========
Average shares outstanding 11,642 11,302 11,537 11,303
======== ========= ========= =========
See notes to consolidated condensed financial statements.
(5)
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(in thousands)(unaudited)
Nine Months Ended
February 28
-------------------------
1995 1994
--------- ---------
OPERATING ACTIVITIES
Net income $2,884 $915
Non-cash charges to income:
Depreciation 1,985 3,476
Amortization of intangibles
and financing costs 274 760
Deferred income taxes 1,535 278
Common stock awards and contribution
to employee stock ownership plan 505 193
--------- ---------
Total non-cash charges 4,299 4,707
--------- ---------
Net income, adjusted for non-cash
charges 7,183 5,622
Changes in working capital, net of effects
of currency translation:
Receivables (2,563) (1,711)
Inventories (3,136) (1,806)
Other current assets 707 (379)
Accounts payable (655) (2,329)
Other liabilities (5,281) (5,355)
--------- ---------
Net changes in working capital (10,928) (11,580)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (3,745) (5,958)
--------- ---------
FINANCING ACTIVITIES
Payments on debt (2,025) (3,901)
Cash dividends (1,334) (1,317)
Proceeds from borrowings -- 753
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (3,359) (4,465)
--------- ---------
INVESTING ACTIVITIES
Reduction in investments 7,767 8,940
Capital expenditures (1,934) (1,161)
Other 448 85
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 6,281 7,864
--------- ---------
DECREASE IN CASH AND EQUIVALENTS (823) (2,559)
Cash and equivalents at beginning of year 9,739 7,098
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $8,916 $4,539
========= =========
See notes to consolidated condensed financial statements.
(6)
Richardson Electronics, Ltd. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
Nine Months Ended February 28, 1995
(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 provisions for the three- and nine-month periods ended February
28, 1995 are based on the estimated effective tax rate of 34% for 1995 income,
as expected state income taxes are offset by U.S. foreign sales corporation tax
benefits. The income tax provisions for the three- and nine-month periods
ended February 28, 1994 are based on the estimated effective tax rate of 40%
for fiscal 1994 income. The fiscal 1994 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. Subsequent to February 28, 1995, the Company
transfered the Brive operating assets to the local management group and the
Brive facility to the City of Brive, in exchange for extinguishment of the
related mortgage liability. These transfers were completed during the fourth
(7)
Richardson Electronics, Ltd. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
Nine Months Ended February 28, 1995
(Unaudited)
quarter of 1995. The Company has also entered into a three year purchase
agreement with the local management group, whereby the Company has committed to
purchase $8,682,000, $10,820,000 and $ 11,212,000, respectively in the first,
second and final year of the contract. Costs incurred in the first nine months
of 1995 related to the manufacturing phase-down were consistent with
management's projections included in the 1994 charge.
(8)
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Three- and Nine-Month Periods Ended February 28, 1995
Results of Operations
Net sales for the quarter ended February 28, 1995 were a record $51,225,000, up
19% from last year's third quarter of $43,051,000. Sales for the nine-month
period were $148,670,000, a 21% increase from $123,097,000 in the prior year.
Sales and gross margin by the Company's strategic business units ("SBU") in
1995 were as follows (Gross margins for each SBU include provisions for returns
and overstock. Provisions for LIFO, manufacturing charges and other costs are
included under the caption "Corporate") (in thousands):
Change Gross Change
Sales from 1994 Margin from 1994
--------- --------- --------- ---------
Third Quarter
Electron Device Group $ 26,178 12% $ 7,542 5%
Solid State & Components 12,912 22% 4,050 16%
Display Products Group 8,903 35% 3,030 39%
Security Systems Division 3,262 23% 703 21%
Corporate 0 (652)
--------- --------- --------- ---------
Consolidated $ 51,255 19% $ 14,673 21%
========= ========= ========= =========
Nine Months
Electron Device Group $ 77,119 14% $ 22,632 7%
Solid State & Components 36,432 23% 11,600 16%
Display Products Group 26,031 42% 8,573 39%
Security Systems Division 9,088 16% 2,044 16%
Corporate 0 (2,103)
--------- --------- --------- ---------
Consolidated $ 148,670 21% $ 42,746 25%
========= ========= ========= =========
Sales and product margin by geographic area in 1995 were as follows (Product
margins exclude inventory and manufacturing provisions, which are not practical
to identify by geographic area.) (in thousands):
Change Gross Change
Sales from 1994 Margin from 1994
--------- --------- --------- ---------
Third Quarter
North America $ 30,183 19% $ 9,074 14%
Europe 11,966 26% 4,002 20%
Rest of World 9,106 11% 2,628 8%
--------- --------- --------- ---------
Consolidated $ 51,255 19% $ 15,704 15%
========= ========= ========= =========
Nine Months
North America $ 86,818 19% $ 26,443 13%
Europe 33,917 24% 11,094 21%
Rest of World 27,935 22% 8,180 12%
--------- --------- --------- ---------
Consolidated $ 148,670 21% $ 45,717 14%
========= ========= ========= =========
(9)
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Three- and Nine-Month Periods Ended February 28, 1995
(Unaudited)
The gross margin for the first nine months was 28.8%, compared to 27.7% in the
prior year, reflecting the elimination of charges for manufacturing
inefficiencies at the Company's production facility in Brive, France.
Underabsorbed costs included in the determination of operating results in the
first nine months of 1995 were $779,000, all of which were associated with the
Company's LaFox, Illinois facility. In the prior-year comparable period, such
costs were $3,991,000 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 results. A loss of
approximately $449,000 related to Brive operations was charged against the 1994
reserve in 1995. Costs charged against the reserve, in the aggregate, were
consistent with management's original estimate. 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 30.8% from 32.5%.
Selling, general, and administrative expenses for the first nine months of
fiscal 1995 were $34,833,000, an increase of $6,297,000 from the prior year,
primarily due to personnel additions for expansion of the specialty sales
program and incentive payments on increased gross margins. Selling, general
and administrative expenses as a percent of sales were comparable between
periods at 23.4% in 1995 and 23.2% in 1994.
Sales, gross margins and operating expense trends on a quarterly basis were
comparable to year to date results.
Interest expense for the first nine months declined 17% to $4,639,000,
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. The
trend for interest expense was similar on a quarterly basis. Investment income
for the first nine months declined 51% to $1,022,000, reflecting lower
investment levels in the current period and higher realized capital gains in
last year's first nine months. Third quarter investment income was slightly
higher than the prior year.
(10)
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Three- and Nine-Month Periods Ended February 28, 1995
(Unaudited)
Liquidity and Capital Resources
Cash provided by operations, exclusive of working capital requirements, was
$7,183,000 in the first nine months of 1995, compared to $5,622,000 for the
same period last year. Higher working capital requirements in the first nine
months of 1995 were $10,928,000, including a $3,136,000 increase in
inventories to support sales growth in the Display Products Group and Solid
State & Components strategic business units, $2,563,000 in higher receivable
balances and $2,936,000 for severance, professional fees and other
disbursements related to the phase-down of manufacturing operations.
Funding for the current year activity and for scheduled debt repayments was
obtained through the liquidation of $7,767,000 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.
Additional working capital requirements in 1994 were $11,580,000, including a
$2,000,000 payment to the Internal Revenue Service in settlement of audits for
1986 through 1990, as well as increases in receivables, and inventories and
reductions in current liabilities.
Certain of the Company's loan agreements contain various financial and
operating covenants which set benchmark levels for tangible net worth, the
ratio of debt to tangible net worth and annual debt service coverage. The
Company was in compliance with these covenants at February 28, 1995.
In addition, certain of these agreements contain restrictions relating to the
purchase of treasury stock or the payment of cash dividends. At February 28,
1995, $3,126,000 was available for such transactions. Payment of dividends
will be considered quarterly based upon corporate performance.
At February 28, 1995, the Company's non-current investment portfolio was
$9,953,000, carried in the accompanying consolidated condensed balance sheet at
market value. 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.
(11)
Part II--OTHER INFORMATION
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
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) Exhibit 10(a) Incorporation by reference to Exhibit 10(a) to the
Company's Current Report on Form 8-K dated February 23, 1995.
Exhibit 10(b) Incorporation by reference to Exhibit 10(b) to the
Company's Current Report on Form 8-K dated February 23, 1995.
Exhibit 27 - Financial Data Schedule - page 15.
(b) Reports on Form 8-K - A Form 8-K was filed on February 23, 1995
reporting under Item 2 certain agreements between the Company, the City of
Brive, and certain management employees from the Brive, France manufacturing
facility, in relation to the disposition by transfer of the Brive manufacturing
operations and assets, as described in Note C of the Notes to the Consolidated
Condensed Financial Statements.
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 April 10 , 1995 By _______________________
William J. Garry
Vice President and
Chief Financial Officer
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