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 29, 1996
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)
(708) 208-2200
(Registrant's telephone number, including area code)
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 5, 1996, there were outstanding 8,525,402 shares of Common
Stock, $.05 par value, and 3,243,926 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. An exhibit index is at
page 11.
(1)
RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended February 29, 1996
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Income 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition 7
PART II - OTHER INFORMATION 11
(2)
PART I - FINANCIAL INFORMATION
RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
February 29 May 31
1996 1995
--------- ---------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and equivalents $ 3,786 $ 11,151
Receivables,less allowance of
$1,617 and $1,385 43,877 42,768
Inventories 93,482 81,267
Other 7,692 8,762
--------- ---------
Total current assets 148,837 143,948
Investments 1,851 7,070
Property, plant and equipment, net 16,210 16,388
Other assets 4,546 6,108
--------- ---------
Total assets $ 171,444 $ 173,514
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,931 $ 16,695
Accrued expenses 9,113 11,161
Current portion of long-term debt -- 9,857
--------- ---------
Total current liabilities 21,044 37,713
Long-term debt, less current portion 89,575 79,647
Stockholders' equity:
Common stock, $.05 par value; issued
8,525 at February 29, 1996 and
8,225 at May 31, 1995 426 411
Class B common stock, convertible,
$.05 par value; issued 3,244 at
February 29, 1996 and 3,247 at
May 31, 1995 162 162
Additional paid-in capital 51,718 49,989
Retained earnings 10,570 6,141
Foreign currency translation adjustment (2,051) (686)
Market appreciation on investments,
net of tax -- 137
--------- ---------
Total stockholders' equity 60,825 56,154
--------- ---------
Total liabilities and stockholders $ 171,444 $ 173,514
========= =========
See notes to consolidated condensed financial statements.
(3)
PART I - FINANCIAL INFORMATION
RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
February 28/29 February 28/29
-------- -------- --------- ---------
1996 1995 1996 1995
-------- -------- --------- ---------
(Unaudited) (Unaudited)
Net sales $ 56,367 $ 51,255 $ 175,237 $ 148,670
Costs and expenses:
Cost of products sold 39,551 36,582 123,349 105,924
Selling, general and
administrative expenses 12,724 12,308 39,210 34,833
-------- -------- --------- ---------
52,275 48,890 162,559 140,757
-------- -------- --------- ---------
Operating income 4,092 2,365 12,678 7,913
Other (income) expense:
Interest expense 1,726 1,523 4,969 4,639
Investment income (158) (485) (1,045) (1,022)
Other, net (197) (145) 63 (88)
-------- -------- --------- ---------
1,371 893 3,987 3,529
-------- -------- --------- ---------
Income before income taxes 2,721 1,472 8,691 4,384
Income taxes 900 500 2,900 1,500
-------- -------- --------- ---------
Net Income $ 1,821 $ 972 $ 5,791 $ 2,884
======== ======== ========= =========
Net income per share $ .15 $ .08 $ .49 $ .25
======== ======== ========= =========
Average shares outstanding 12,178 11,642 11,931 11,537
======== ======== ========= =========
See notes to consolidated condensed financial statements.
(4)
PART I - FINANCIAL INFORMATION
RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)(unaudited)
Nine Months Ended
February 28/29
---------------------
1995 1994
-------- --------
Operating Activities:
Net income $ 5,791 $ 2,884
Non-cash charges to income:
Depreciation 1,965 1,985
Amortization of intangibles
and financial costs 256 274
Deferred income taxes 1,785 1,535
Contribution to employee stock
ownership plan 500 500
-------- --------
Total non-cash charges 4,506 4,294
-------- --------
Net income adjusted for non-cash charges 10,297 7,178
Changes in working capital,
net of effects of currency translation:
Accounts receivable (1,596) (2,563)
Inventories (12,738) (3,136)
Other current assets 874 707
Accounts payable (5,103) (655)
Other liabilities (2,000) (5,281)
-------- --------
Net changes in working capital (20,563) (10,928)
-------- --------
Net cash used in operating activities (10,266) (3,750)
-------- --------
Financing Activities:
Proceeds from stock options exercised 1,239 -
Proceeds from borrowings 1,000 -
Payments on debt (929) (2,025)
Cash dividends (1,362) (1,334)
-------- --------
Net cash used in financing activities (52) (3,359)
-------- --------
Investing Activities:
Reduction in investments 4,994 7,767
Capital expenditures (1,823) (1,934)
Other (218) 453
-------- --------
Net cash provided by investing
activities 2,953 6,286
-------- --------
Decrease in cash and equivalents (7,365) (823)
Cash and equivalents at beginning of year 11,151 9,739
-------- --------
Cash and equivalents at end of period $ 3,786 $ 8,916
======== ========
See notes to consolidated condensed financial statements.
(5)
RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Three- and Nine-Month Periods Ended February 29, 1996
(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, 1995.
The marketing and sales operations of the Company are organized in four
strategic business units (SBUs): Electronic Device Group (EDG), Solid State and
Components (SSC), Display Products Group (DPG) and Security Systems Division
(SSD). References hereinafter are to the acronyms noted parenthetically.
Note B -- Income Taxes
The income tax provisions for the three- and nine-month periods ended February
29, 1996 are based on the estimated effective tax rate of 33% for fiscal 1996
income. The effect of expected state income taxes is offset by the utilization
of foreign net operating loss carryforwards and by U.S. foreign sales
corporation tax benefits.
The income tax provision for the three- and nine-month periods ended February
28, 1995 are based on the estimated effective tax rate of 34% for fiscal 1995
income. The effect of expected state income taxes in 1995 was offset by U.S.
foreign sales corporation tax benefits.
(6)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Three- and Nine-Month Periods Ended February 29,1996
Results of Operations
Net sales for the third quarter of fiscal 1996 were $56.4 million, up 10% from
last year's third quarter of $51.3 million. Sales for the nine-month period
were $175.2 million, an 18% increase from $148.7 million in the prior year.
Sales and gross margins by the Company's SBUs are summarized in the following
table along with the sales percentage increase from the prior year and gross
margin percent of sales. 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).
Sales Gross Margin
--------------------------- -------------------------------
1996 1995 % 1996 GM% 1995 GM%
-------- -------- ---- ------- ----- ------- ------
Third Quarter
EDG $ 25,053 $ 26,178 -4% $ 7,478 29.8% $ 7,543 28.8%
SSC 16,234 12,912 26% 4,905 30.2% 4,045 31.3%
DPG 8,501 8,903 -5% 3,194 37.6% 3,028 34.0%
SSD 6,579 3,262 102% 1,405 21.4% 703 21.6%
Corporate - - (166) (646)
-------- -------- ------- --------
Total $ 56,367 $ 51,255 10% $16,816 29.8% $14,673 28.6%
======== ======== ======= =======
Nine Months
EDG $ 80,284 $ 77,119 4% $24,125 30.0% $22,632 29.3%
SSC 50,010 36,432 37% 15,316 30.6% 11,600 31.8%
DPG 26,103 26,031 0% 9,634 36.9% 8,573 32.9%
SSD 18,840 9,088 107% 3,980 21.1% 2,044 22.5%
Corporate - - (1,167) (2,103)
-------- -------- ------- -------
Total $175,237 $148,670 18% $51,888 29.6% $42,746 28.8%
======== ======== ======= =======
In the quarter, sales gains of $3.3 million each were achieved by the Company's
SSC and SSD SBUs. For the third quarter in a row, SSD has more than doubled
their sales over the prior year. Expansion of DPG's sales in Europe
substantially mitigated lower demand in the United States, where one customer's
requirements were lower by $1.0 million in the quarter-to-quarter comparison.
Sales to this high-volume customer were at relatively low gross margins. As a
result, DPG's gross margin increased to 37.6% from 34% a year ago. The 4%
decline in EDG sales was primarily in the broadcast and microwave portions of
its business. EDG
(7)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Three- and Nine-Month Periods Ended February 29,1996
(Unaudited)
third quarter sales were affected by several factors, including severe weather
in the Northeastern United States and delays in U.S. government purchases due
to unresolved budgetary issues. EDG sales outside the United States were
essentially flat. For the nine-month period, the Company experienced growth in
all SBUs.
In the quarter, the Company achieved sales gains in all areas of the world.
North America contributed $2.5 million to the overall sales increase and Europe
achieved the largest percentage increase of 14% or $1.7 million. Trends were
similar on a year-to-date basis. Sales and gross margin by geographic area are
summarized in the following table along with the percentage increase from the
prior year and gross margin percent of sales. Provisions for LIFO,
manufacturing charges and other costs are included under the caption
"Corporate" (in thousands).
Sales Gross Margin
-------------------------- -------------------------------
1996 1995 % 1996 GM% 1995 GM%
-------- -------- ---- ------- ----- ------- -----
Third Quarter
North America $ 32,703 $ 30,183 8% $ 9,511 29.1% $ 8,848 29.3%
Europe 13,631 11,966 14% 4,629 34.0% 3,916 32.7%
Rest of World 10,033 9,106 10% 2,842 28.3% 2,556 28.1%
Corporate - - (166) (647)
-------- -------- ------- -------
Total $ 56,367 $ 51,255 10% $16,816 29.8% $14,673 28.6%
======== ======== ======= =======
Nine Months
North America $101,895 $ 86,818 17% $29,998 29.4% $26,036 30.0%
Europe 42,434 33,917 25% 14,307 33.7% 10,853 32.0%
Rest of World 30,908 27,935 11% 8,750 28.3% 7,960 28.5%
Corporate - - (1,167) (2,103)
-------- -------- ------- -------
Total $175,237 $148,670 18% $51,888 29.6% $42,746 28.8%
======== ======== ======= =======
Gross margins for the third quarter were 29.8%, compared to 28.6% in the prior
year, reflecting higher distribution product margins, primarily in Europe,
lower LIFO expense, and the phase-down of manufacturing and elimination of
related inefficiencies completed in 1995.
On a quarterly basis, selling, general and administrative expense as a percent
of sales improved, declining to 22.6% from 24.0%. Trends were similar on a
year-to-date basis.
The sales growth, combined with proportionately slower growth in costs,
resulted in net income of $1.8 million or $.15 per share for the quarter,
compared to $1.0 million or $.08 per share in the prior year. For the
(8)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Three- and Nine-Month Periods Ended February 29,1996
(Unaudited)
nine-month period, net income of $5.8 million or $.49 per share doubled the
prior year results of $2.9 million or $.25 per share.
Liquidity and Capital Resources
Cash provided by operations, exclusive of working capital requirements, was
$10.3 million in the first nine months of fiscal 1996, compared to $7.2 million
for the first nine months last year. Investments in additional working capital
of $20.6 million in the first nine months of 1996 and $10.9 million last year,
capital expenditures, debt service and dividend payments were funded primarily
by cash generated by operations and liquidation of investments. Interest
payments for the first nine months were $6.8 million in fiscal 1996 and $6.1
million in 1995.
Working capital requirements for the first nine months include inventory
investments of $12.7 million in fiscal 1996 and $3.1 million in fiscal 1995 to
support sales growth. Accounts payable declined $5.1 million, reflecting the
timing of several large payments to vendors.
In the second quarter the Company finalized a $25 million senior revolving
credit note agreement due November 30, 1998 consolidating a $9.8 million long-
term loan and an $8 million short-term loan. The loan bears interest at 125
basis points over LIBOR, which at February 29 resulted in a rate of 7.1%. The
Company borrowed $1.0 million for working capital in the third quarter and $6.2
million was available at February 29 under the agreement for future working
capital or other corporate requirements.
An additional $1.0 million was borrowed in March, 1996 for the acquisition of
certain assets and liabilities of TubeMaster, Inc. TubeMaster is a national
supplier of x-ray tubes, image intensifiers, camera tubes, cameras and complete
image intensifier systems for medical applications.
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 February 29, 1996.
(9)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Three- and Nine-Month Periods Ended February 29,1996
(Unaudited)
In addition, certain of the current agreements contain restrictions relating to
the purchase by the Company of treasury stock or the payment of cash dividends.
At February 29, 1996, $9.1 million was available for such transactions. Payment
of dividends will be considered quarterly based upon corporate performance.
Cash reserves, investments, funds from operations and credit lines are expected
to be adequate to meet the operational needs and future dividends of the
Company.
(10)
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 fiscal year ended May 31, 1995.
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 27 - Financial Data Schedule - page 13.
(b) Reports on Form 8-K - None
(11)
PART II -- OTHER INFORMATION
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 11 , 1996 By \s\ William J. Garry
William J. Garry
Vice President and
Chief Financial Officer
(12)
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