UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended May 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No. 0-12906
RICHARDSON ELECTRONICS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 36-2096643
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)
40W267 Keslinger Road, LaFox, Illinois 60147
(Address of principal executive offices)
Registrant's telephone number including area code: (630) 208-2200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.05 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
As of August 21, 1997, there were outstanding 8,756,550 shares of Common Stock,
$.05 par value, and 3,243,081 shares of Class B Common Stock, $.05 par value,
which are convertible into Common Stock on a share for share basis, of the
registrant and the aggregate market value of such shares, based on the reported
last sales price of the Common Stock on such date, held by non-affiliates of
the registrant was approximately $50,600,000.
(Cover page continued)
Portions of the 1997 Annual Report to Stockholders of registrant for fiscal
year ended May 31, 1997 are incorporated in Parts I, II, and IV of this
Report. Portions of the registrant's Proxy Statement dated September 3, 1997
for the Annual Meeting of Stockholders scheduled to be held October 7, 1997
which will be filed pursuant to Regulation 14(A) are incorporated by
reference in Part III of this Report. Except as specifically incorporated
herein by reference, the above mentioned Annual Report to Stockholders and
Proxy Statement are not deemed filed as part of this report.
The exhibit index is located at pages 14 through 23.
PART I
Item 1. Business
The registrant (herein with its subsidiaries referred to as the "Company"
or "Richardson") operates in one industry as a specialized international value-
added distributor of electronic components, including vacuum tubes, power
semiconductors, related electronic components and security systems. These
devices are primarily used to control, switch or amplify electrical power or
signals, or as display devices in a variety of industrial, communication,
scientific and other applications. A significant portion of the Company's sales
are of replacement parts. Specialized areas of the original equipment industry
and research and development applications are also served by the Company. The
Company offers a wide range of value-added services, including among others,
labeling, testing, kitting, reloading and repackaging. The Company manufactures
certain of the electron tubes and other components it distributes.
Consolidated sales in 1997 were $255.1 million, up 6% over the prior year.
The Company believes that much of its growth is attributable to its
concentration on specialized areas of the electronics market. Historically, the
Company's primary business was the distribution of electron tubes and it
continues to be a major distributor of these products. In recent years, the
Company has followed the migration of its customers to newer technologies,
capitalizing on its expertise as a value-added distributor. Due to the
significant internal growth in other product offerings, including solid state
components, cathode ray tubes and security systems and related business
acquisitions, these product lines represented 55% of sales in fiscal 1997,
compared to 35% five years ago. The addition of new product lines is primarily
based upon compatibility with the Company's existing customer base. The Company
also seeks new applications and customers for its existing product lines.
The marketing and sales organization of the Company is divided into four
strategic business units (SBUs): Electron Device Group (EDG), Solid State and
Components (SSC), Display Products Group (DPG), and Security Systems Division
(SSD). EDG distributes power grid tubes and continuous wave magnetrons for
industrial heating applications and also thyratrons, ignitrons, receiving tubes
and special purpose tubes which are sold to many industries, including
automotive, steel, plastics and textiles companies. Power grid tube and camera
tube product lines are sold by EDG to the radio and television broadcast
industry. In addition, EDG assists other SBU's to market cathode ray tubes
(CRTs), power semiconductors and related components to the broadcast industry.
EDG also serves the avionics, marine, microwave and communications industries
with product lines including traveling wave tubes, klystrons, planar triodes,
hydrogen thyratrons, magnetrons and display storage tubes.
EDG also distributes high voltage switch tubes and x-ray tubes used in x-
ray imaging equipment and specialty tubes for analytical equipment, as well as
camera tubes, photomultipliers, switch tubes, magnetrons, hydrogen thyratrons
and imaging equipment to the medical industry. The Company believes the
increased emphasis on containment of medical costs offers significant
opportunities to supply the diagnostic medical imaging market, estimated by the
Company at $900 million. The Company's product line of replacement x-ray tubes
has been expanded to include image intensifiers, camera tubes and related
components. In 1996 the Company purchased two North American x-ray tube
reloading value-added facilities. During 1997, the Company continued its
investment in the medical imaging market and acquired a European value added
facility to supply the industry with reloaded x-ray tubes.
SSC distributes RF transistors and amplifiers, communications modules,
passive components, silicon controlled rectifiers, integrated circuits,
semiconductors, high voltage capacitors, resistors, broadcast amplifiers, and
other RF and microwave semiconductors for avionics, broadcast, communications,
data display and industrial applications.
DPG markets data display and instrumentation CRTs that are used in data
display, marine, medical, radar, and avionic applications. It also distributes
flyback transformers and various components for monitor and terminal repair.
SSD distributes closed-circuit television (CCTV) equipment, as well as
burglar, fire, intercommunication, access control and other security related
products, equipment and accessories, for both initial installation and
replacement. In addition, SSD is an approved repair service manufacturing
organization.
Sales trends for each SBU are summarized and analyzed in Management's
Discussion and Analysis on pages 4-5 of the Annual Report to Stockholders for
the Year Ended May 31, 1997 (Annual Report).
The global market for electron tubes served by EDG, is estimated by the
Company to be more than $2 billion. SSC participates in specialized segments of
the semiconductor market, distributing power semiconductors and RF and
microwave semiconductors and passive components. According to industry
estimates, European, United States and Japan-based factory sales for power
semiconductors approximate $6.5 billion. DPG estimates factory sales of CRTs
in the global market approximate $12 billion. The Company estimates that annual
wholesale sales of CCTV and related security equipment served by SSD,
approximate $975 million.
Sales of solid state components, primarily RF semiconductors, have grown
rapidly in recent years. Semiconductors have been replacing electron tubes in
many applications, such as low power television and radio transmitters.
However, in other applications, including higher power broadcasting and certain
industrial equipment, electron tubes are more suitable than semiconductors due
to the higher power capabilities of tubes and their ability to withstand severe
environmental and other conditions which often damage semiconductors.
Semiconductors, however, continue to expand the range of their applications.
Consequently, many parts of the electron tube market in which the Company
participates, are declining. The Company countered the trend in the electron
tube market through several initiatives employed by EDG, including greater
emphasis on international sales and expansion of the sales force serving the
medical diagnostic imaging replacement market. As a result, EDG sales increased
in each of the last three years, despite an overall declining market. (See
"Management`s Discussion and Analysis of Results of Operations and Financial
Condition - Sales and Gross Margin Analysis, EDG" in the Annual Report.)
The Company has found that a replacement market for power semiconductors
exists and that many of its electron tube customers have semiconductor
requirements as well. In addition SSC's sales to original equipment
manufacturers continue to grow, accounting for approximately 64% of the SBU's
1997 sales. SSC's sales increased 9% in 1997, 30% in 1996 and 24% in 1995. In
October 1996, the SSC business unit acquired Compucon Distributors, Inc., a
distributor of interconnect devices operating in the northeastern United
States. (See "Management's Discussion and Analysis of Results of Operations and
Financial Condition - Sales and Gross Margin Analysis, SSC" in the Annual
Report.)
The Company's sales of CRT's and other display products decreased by
18.7% in 1997, largely attributable to the loss of a customer in Europe. Both
1997 and 1996 sales were affected by product shortages as glass manufacturers
were unable to meet demand. (See "Management's Discussion and Analysis of
Results of Operations and Financial Condition - Sales and Gross Margin
Analysis, DPG" in the Annual Report.)
SSD's sales increased 48% in 1997, 86% in 1996, and 26% in 1995. New
investment and redirection of SSD's field sales force were principally
responsible for these significant sales gains. Additionally, in February 1997,
the Company acquired Burtek Systems Inc., a security systems distributor
operating in Canada, with annual sales of $18 million. (See "Management's
Discussion and Analysis of Results of Operations and Financial Condition -
Sales and Gross Margin Analysis, SSD" in the Annual Report.)
Significant Developments
During the third of quarter of 1997, the Company re-evaluated its reserve
estimates for inventory and accounts receivable in light of changed market
conditions and provided for severance costs associated with a corporate
reorganization. These provisions were recorded as a $7.2 million charge to cost
of sales for additional inventory reserves and a $3.8 million charge to
selling, general and administrative expenses for severance and other costs
related to the corporate reorganization. Net of tax, these charges reduced net
income by $6.7 million.
On February 15, 1997, the Company exchanged $40.0 million of new 8 1/4%
convertible debentures for an equivalent face value of its outstanding 7 1/4%
convertible debentures (See Note F to the consolidated financial statements in
the Annual Report). The principal purpose of the exchange was to improve the
Company's future liquidity and capital position by refinancing a sufficient
number of the debentures to eliminate sinking fund requirements until December
15, 2004.
Products
The following is a description of the Company's major products, in order
by descending sales value:
Power Amplifier / Oscillator Tubes are vacuum or gas filled tubes used in
applications where current or voltage amplification and/or oscillation is
required. Some areas of use are: induction heating, diathermy equipment, sonic
generators, communications and radar systems and power supplies for voltage
regulation or amplification.
RF Power Transistors are solid-state high-frequency power amplifiers used
in land mobile, aircraft and satellite communications and in many types of
electronic instrumentation.
Cathode Ray Tubes ("CRTs") are vacuum tubes which convert an electrical
signal into a visual image to display information on computer terminals or
televisions. CRTs are used in various environments, including hospitals,
financial institutions, airports and numerous other applications wherever
electronic data is shared by large user groups. The product line includes both
monochrome and color monitors.
Closed-circuit Television ("CCTV") products include cameras, lenses,
monitors, scanners, time lapse recorders and associated accessories. CCTV
products are used in surveillance applications and monitoring hazardous
environments in the workplace.
Magnetrons are high vacuum oscillator tubes which are used to generate
energy at microwave frequencies. The pulsed magnetron is predominantly used to
generate high energy microwave signals for radar applications. Magnetrons are
also used in heating applications such as microwave ovens and by the medical
industry for sterilization.
High Voltage and Power Capacitors are used in industrial, avionics,
medical and broadcast applications for filtering, high-current by-pass, feed-
through capacitance for harmonic attenuation, pulse shaping, grid and plate
blocking, tuning of tank circuits, antenna coupling, and energy discharge.
Planar Triodes are high frequency triodes manufactured using a special
process to enable them to operate at several thousand megahertz (MHz). Aircraft
instrumentation and television translators use planar triodes.
X-ray Tubes are glass and glass/metal vacuum tubes which generate high-
frequency radiation for use in industrial, analytical and medical equipment.
Stationary anode x-ray tubes are used primarily for inspection and non-
destructive testing of solid materials and in crystallography. Rotating anode
x-ray tubes are primarily used in medical applications, including fluoroscopy
and computer-aided tomography (CAT-scan).
Silicon Controlled Rectifiers (SCR's) and Power Semiconductor Modules are
used in many industrial control applications because of their ability to switch
large amounts of power at high speeds. These silicon power devices are capable
of operating at up to 4,000 volts at 2,000 amperes.
Microwave Diodes are specialized diodes intended for use at microwave and
RF frequencies for oscillator, mixer, switching, and power control, and
amplifier applications in broadcast, avionic, telecommunication, medical and
industrial equipment.
Computer Terminal Components are electronic components used in repair of
computer terminals and monitors, including flyback transformers,
semiconductors, power supplies, controls and switches.
Hydrogen Thyratrons are electron tubes capable of high speed and high
voltage switching. They are used in switching of power to radar magnetrons and
lasers.
Thyratrons and Rectifiers are vacuum or gas filled tubes used to control
the flow of electrical current. Thyratrons are used to control ignitrons,
electric motor speed controls, theatrical lighting and machinery such as
printing presses and various types of medical equipment. Rectifiers are used to
restrict electric current flow to one direction in power supply applications.
Camera Tubes are vacuum tubes used to change a visible light image to an
electronic signal which are then transmitted to a monitor for conversion back
to a visible image. Camera tubes are used in broadcast, security and medical
applications.
Industrial Receiving Tubes are vacuum tubes used to regulate or amplify
small amounts of power in a wide variety of electrical and electronic
equipment. Communications, medical instrumentation, consumer electronics, and
industrial controls are typical applications for this product.
Ignitrons are mercury pool tubes used to control the flow of large amounts
of electrical current. Their primary applications are in welding equipment,
power conversion and power rectification equipment.
Distribution and Marketing
The Company buys, warehouses and distributes more than 78,000 types of
tubes and semiconductors ranging in price from $1 to $91,000 for tubes and $.10
to $4,100 for semiconductors and related components. The Company processes
approximately 725 orders per day averaging $1,410 each (for an average total of
$1,020,000 per day). The Company distributes electron tubes, power, RF and
microwave semiconductors and related products purchased from various sources,
including Communication and Power Industries, Inc. (CPI), Covimag S.A., M/A-
COM, Clinton Electronics Corp., SGS THOMSON, Philips, Varian Associates, Burle
Industries, Inc., UTI Technology, Inc., Triton Services, Inc., New Japan Radio
Corp., Sony Corp., Powerex, RF Products, Hi Sharp Electric Co., Pelco, Ericsson
Components AB, Panasonic Industrial Company, Teletube, General Electric, MPD
Inc., Litton Electron Devices, Huber & Suhner Inc., Jennings, Seiko Optical,
Semtech, and CEIEC. No single outside supplier currently accounts for more than
10% of the Company's purchases in any year, other than CPI, which accounted for
approximately 10%, 13% and 18% of purchases in fiscal 1997, 1996 and 1995,
respectively. The Company believes that the loss of any one supplier would not
cause a material adverse impact on its earnings and revenues.
CPI was formerly a business unit of Varian Associates, Inc. (Varian). On
August 14, 1995 Varian sold the assets and technology related to its electron
device business to the newly formed entity, CPI. CPI retained the same
management and operating personnel as formerly employed by Varian. The Company
believes it has broadened its vendor relationships with the formation of CPI,
as the Company is establishing new distribution agreements with other Varian
divisions.
Covimag is the entity formed to acquire the Company's former Brive, France
manufacturing operation. Formal transfer of ownership occurred in January,
1995. Covimag is managed by the same individuals previously employed by the
Company at this facility. The Company has a three year purchase commitment to
acquire various electron tube types at a cost of approximately $11 million per
year, expiring on December 31, 1997. Under a successor agreement, the Company
will negotiate a purchase commitment on an annual basis. Covimag is highly
dependent on the Company, which is its primary customer. Settlement of
purchases under the contract are at standard terms. Except for the supply
contract, the Company has no other financial commitment to or from Covimag.
Relationships under the supply contract are believed by the Company to be
satisfactory.
In addition to the agreement with Covimag, the Company has marketing
distribution agreements with various manufacturers in the tube, semiconductor,
and CCTV industries. The most significant distributor agreement is with CPI
under which the Company is the exclusive distributor of power grid tubes
throughout the world, with the exception of the United States and certain
Eastern European countries where the Company is one of CPI's stocking
distributors.
Customer orders are taken by the regional sales offices and directed to
the Company's headquarters and distribution facility in LaFox, Illinois or to
one of its international distribution centers. The Company utilizes a
sophisticated data processing network which provides on-line, real-time
interconnection of all sales offices and central distribution operations.
Information on stock availability, customers, and competitive market analyses
are instantly obtainable throughout the entire distribution network.
The Company markets its products to manufacturers and end-users in major
industries, including communications, industrial heating, marine, medical care
and avionics. The Company also sells to customers who purchase for resale,
including electronics distributors and service companies. The Company has
supply contracts, generally for a one-year term, with certain customers, and is
committed pursuant to these contracts to maintain minimum inventories so as to
provide product without significant delay. Management believes that for the
past two fiscal years approximately 20% of the Company's sales were made under
such supply contracts. The Company is not dependent on any single customer for
a significant portion of its sales.
The Company emphasizes sales to replacement markets. Some of these markets
may expand as new equipment utilizing electron tubes continues to be sold. For
example, equipment such as video monitors and computer display terminals which
use cathode ray tubes also present expanding market opportunities for
replacement purposes. New communications equipment using microwave devices
such as traveling wave tubes and klystrons and RF transistors continue to be
developed for applications with high power or high-frequency requirements that
tube technology alone can provide.
The Company's backlog of firm orders scheduled for future delivery within
12 months was $49,200,000, $43,400,000, and $46,300,000 as of May 31, 1997,
1996 and 1995, respectively. The Company's backlog primarily consists of
commercial contracts that require future shipping dates, and the 1997 increase
reflects higher contract levels for EDG while the 1996 decline reflects lower
contract levels for DPG. The Company does not believe that the backlog provides
a reliable indicator of future sales levels.
International
International sales, including export sales, represented approximately
49% of the Company's fiscal 1997 sales. These sales were $123,776,000,
$115,136,000, and $96,644,000 in fiscal years 1997, 1996 and 1995,
respectively. Export sales from the United States were $36,325,000,
$37,913,000, and $38,653,000 in 1997, 1996 and 1995. On May 31, 1997, the
Company had 88 locations throughout the world. See Note K of the "Notes to
Consolidated Financial Statements" of the Annual Report for details of the
Company's international operations, including sales, operating income and
identifiable assets.
Manufacturing
The Company distributes its manufactured products principally under the
trade names "National", "Cetron" and "Amperex". Located principally in LaFox,
Illinois, the Company's manufacturing operations, including value-added
services, accounted for approximately 8% of its product distribution
requirements in fiscal 1997. Such manufacturing operations contributed sales of
approximately $20 million in 1997 and $12 million in 1996 and in 1995. The
increase in sales of manufactured products in 1997 is principally due the
acquisition of x-ray tube and image intensifier reloading facilities in fiscal
1996.
The products currently manufactured by the Company include thyratrons and
rectifiers, power tubes, ignitrons, electronic display tubes, phototubes, SCR
assemblies and spark gap tubes. The Company also reloads and refurbishes
medical x-ray tube housings. The materials used in the manufacturing process
consist of glass bulbs and tubing, nickel, stainless steel and other metals,
plastic and metal bases, ceramics, and a wide variety of fabricated metal
components.
Research and Development
The objective of the Company's research and development is to increase the
number of applications for its products and to develop existing technology with
respect to advanced products. The Company emphasizes product development rather
than basic research. The ability of the Company to compete is, in part,
dependent upon its ability to anticipate changing market needs and to provide
the required products.
At present, a staff of 5 persons are involved, on a full- or part-time
basis, in various phases of product development. The Company's expenditures in
this area were $133,000, $166,000, and $229,000 in 1997, 1996 and 1995.
Employees
As of May 31, 1997, the Company employed 728 individuals on a full time
basis. Of these, 465 are located in the United States, including 62 employed in
administrative and clerical positions, 308 in sales and distribution, and 95 in
value-added and product manufacturing. The Company's foreign subsidiaries
employ an additional 263 individuals engaged in administration, sales and
distribution. All of the Company's employees are non-union.
Competition
Although the Company believes it is a significant distributor of electron
tubes and semiconductors in the United States, it competes worldwide with other
general line distributors and manufacturers and other distributors of
electronic components (including original equipment manufacturers), many of
which are substantially larger and have greater resources than the Company. The
Company also competes against manufacturers of semiconductors, which have
replaced electron tubes in many applications.
Patents and Trademarks
The Company acquired certain manufacturing patents and trademark rights in
connection with acquisitions, including the trademarks "National", "Cetron" and
"Amperex". The Company believes that although the patents and trademarks
obtained have value, they will not be determinative of the Company's success,
which depends principally upon its marketing technical support, product
delivery and the quality and economic value of its products.
Item 2. Properties
The Company's corporate facility and largest distribution center is owned,
located on approximately 300 acres in LaFox, Illinois, consisting of a modern,
single and two-story concrete, brick and steel constructed building containing
approximately 255,000 square feet of manufacturing, warehouse and office space.
The Company also owns a four-story building containing approximately 45,000
square feet of warehouse space on 1.5 acres in Geneva, Illinois. The Company's
United Kingdom subsidiary owns a 12,000 square foot single story brick building
in Lincoln, England which it utilizes as a sales office and warehouse hub for
European sales distribution. The Company's Spanish subsidiary owns 3,510 square
feet of office and warehouse space in a 55,000 square foot industrial concrete
building in Madrid, Spain. The Company's Italian subsidiary owns an office and
warehouse facility located in Florence, Italy of approximately 6,400 square
feet in a brick and concrete industrial condominium complex.
The Company also maintains branch sales offices in or near major cities
throughout the world, including 62 locations in North America, 12 in Europe, 9
in the Far East / Pacific Rim and 3 in Latin America. Additional warehouse
space in Geneva, Illinois is also rented on a short-term basis. The Company
leases production facilities in Texas, Virginia and the Netherlands for its
medical tube reloading operation. The Company also leases a facility from a
trust, of which Edward J. Richardson, Chairman of the Board of the Company, is
the principal beneficiary. Such facility is used by SSD as its sales office and
warehouse. Under the terms of this lease, the Company is obligated to make
rental payments of $68,705 per year, expiring in 1999. In the opinion of
management, the lease is on terms no less favorable to the Company than similar
leases which would be available from unrelated third parties.
Item 3. Legal Proceedings
No material developments have occurred in the matter of "Panache
Broadcasting of Pennsylvania, Inc. v. Richardson Electronics, Ltd. and Varian
Associates, Inc.", pending in the United States District Court for the Northern
District of Illinois, Eastern Division, docket no. 90 C 6400. The complaint
alleges violations of Sections 1 and 2 of the Sherman Act and Section 7 of the
Clayton Act. As previously reported the matter remains primarily in the
discovery stage and the Court has not determined whether the matter may be
maintained as a class action.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended May 31, 1997.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
Incorporated herein by reference to pages 8 (for dividend payments), 13
(for dividend restriction) and 17 (for market data) of the Annual Report.
Item 6. Selected Financial Data
Incorporated herein by reference to page 3 of the Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated herein by reference to pages 4 to 6 of the Annual Report
Item 8. Financial Statements and Supplementary Data
Incorporated herein by reference to pages 7 through 16 of the Annual
Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
No event has occurred within the 24 month period prior to the date of the
Company's most recent financial statements, which would require disclosure
under Item 9 of this Report.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning Directors and Executive Officers of the Company is
contained in the Company's Proxy Statement to be used in connection with its
Annual Meeting of Stockholders scheduled to be held October 7, 1997, under the
captions "ELECTION OF DIRECTORS - Information Relating to Directors, Nominees
and Executive Officers", "ELECTION OF DIRECTORS - Affiliations" and "SECTION 16
FILINGS", which information is incorporated herein by reference.
Item 11. Executive Compensation
Incorporated herein by reference is information concerning executive
compensation contained in the Company's Proxy Statement to be used in
connection with its Annual Meeting of Stockholders scheduled to be held October
7, 1997, under the captions "ELECTION OF DIRECTORS - Directors Compensation"
and "EXECUTIVE COMPENSATION", except for captions "REPORT ON EXECUTIVE
COMPENSATION" and "PERFORMANCE GRAPH".
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners and
management is contained in the Company's Proxy Statement to be used in
connection with its Annual Meeting of Stockholders scheduled to be held October
7, 1997, under the caption "ELECTION OF DIRECTORS - Information Relating to
Directors, Nominees and Executive Officers" and "PRINCIPAL STOCKHOLDERS", which
information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is
contained in the Company's Proxy Statement to be used in connection with its
Annual Meeting of Stockholders scheduled to be held October 7, 1997, under the
caption "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider
Participation", which information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following consolidated financial statements of the registrant and
its subsidiaries included on pages 7 through 16 of the Annual Report are
incorporated herein by reference:
Filing Method
Report of Independent Accountants E
1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - May 31, 1997 and 1996 E
Consolidated Statements of Operations - Years ended E
May 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended E
May 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity - E
Years ended May 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements E
The following consolidated financial information for the fiscal years
1997, 1996 and 1995 is submitted herewith:
2. FINANCIAL STATEMENT SCHEDULES:
II. Valuation and Qualifying Accounts E
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore,
have been omitted.
(b) REPORTS ON FORM 8-K.
None.
(c) EXHIBITS
Filing Method
3(a) Restated Certificate of Incorporation of the NA
Company, incorporated by reference to Appendix
B to the Proxy Statement/ Prospectus dated
November 13, 1986, incorporated by reference
to the Company's Registration Statement on
Form S-4 Commission File No. 33-8696.
3(b) By-laws of the Company, as amended. E
4(a) Specimen forms of Common Stock and Class B NA
Common Stock certificates of the Company
incorporated by reference to Exhibit 4(a)
to the Company's Registration Statement on
Form S-1, Commission File No. 33-10834.
4(b) Indenture between the Company and Continental NA
Illinois National Bank and Trust Company of
Chicago (including form of 7 1/4% Convertible
Subordinated Debentures due December 15, 2006)
incorporated by reference to Exhibit 4(b) to
the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1990.
4(b)(1) First Amendment to the Indenture between the NA
Company and First Trust of Illinois, a National
Association, as successor to Continental
Illinois National Bank and Trust Company of
Chicago, dated February 18, 1997, incorporated
by reference to Exhibit 4(a) to the Company's
Quarterly Report on Form 10-Q for the quarter
ended February 28, 1997.
4(c) Indenture between the Company and American NA
National Bank and Trust Company, as Trustee,
for 8 1/4% Convertible Senior Subordinated
Debentures due June 15, 2006 (including form of
8 1/4% Convertible Senior Subordinated
Debentures due June 15, 2006) incorporated by
reference to Exhibit 10 of the Company's
Schedule 13E-4, filed February 18, 1997.
10(a) $35,000,000 Amended and Restated Senior Revolving NA
Credit Note Facility Agreement dated August 20,
1996 with American National Bank and Trust Company
incorporated by reference to Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 31, 1997.
10(b) Industrial Building Lease, dated April 10, 1996 NA
between the Company and the American National
Bank and Trust, as trustee under Trust No. 56120
dated 2-23-83 incorporated by reference to
Exhibit 10(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1996.
10(c) Revolving credit agreement and term loan dated NA
February 18, 1997 between Richardson Electronics
Acquisition Corporation and First Chicago NBD
Bank, Canada, together with guarantee of the
Company, incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1997.
10(d) The Corporate Plan for Retirement NA
The Profit Sharing / 401(k) Plan
Fidelity Basic Plan Document No. 07 dated
June 1, 1996, incorporated by reference to Exhibit
10(d) to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1996.
10(e) The Company's Amended and Restated Incentive Stock NA
Option Plan effective April 8, 1987 incorporated
by reference to Exhibit 10(m) to the Company's
Annual Report on Form 10-K for the fiscal year
ended May 31, 1987.
10(e)(1) First Amendment to the Company's Amended and NA
Restated Incentive Stock Option Plan effective
April 11, 1989 incorporated by reference to
Exhibit 10(l)(1) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1989.
10(e)(2) Second Amendment to the Company's Amended and NA
Restated Incentive Stock Option Plan effective
April 11, 1989 incorporated by reference to
Exhibit 10(l)(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended
May 31, 1991.
10(e)(3) Third Amendment to the Company's Amended and NA
Restated Incentive Stock Option Plan effective
April 11, 1989 dated August 15, 1996, incorporated
by reference to the Company's Proxy Statement used
in connection with its Annual Meeting of
Stockholders held October 1, 1996.
10(f) The Company's Amended and Restated Employees Stock NA
Purchase Plan, incorporated by reference to the
Company's Proxy Statement used in connection with
its Annual Meeting of Stockholders held
October 2, 1985.
10(f)(1) First Amendment to Amended and Restated Employees NA
Stock Purchase Plan, incorporated by reference to
Appendix D to the Company's Proxy
Statement/Prospectus dated November 13, 1986
included in its Registration Statement on Form S-4,
Commission File No. 33-8686.
10(f)(2) Second Amendment to Amended and Restated Employees NA
Stock Purchase Plan, incorporated by reference to
Appendix E to the Company's Proxy
Statement/Prospectus dated November 13, 1986
included in its Registration Statement on Form S-4,
Commission File No. 33-8696.
10(f)(3) Third Amendment to Amended and Restated Employees NA
Stock Purchase Plan incorporated by reference to
Exhibit 10(m)(3) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1990.
10(f)(4) Fourth Amendment to Amended and Restated Employees NA
Stock Purchase Plan incorporated by reference to
Exhibit 10(m)(4) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1991.
10(f)(5) Fifth Amendment to Amended and Restated Employees NA
Stock Purchase Plan incorporated by reference to
Exhibit 10(m)(5) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1991.
10(f)(6) Sixth Amendment to Amended and Restated Employees NA
Stock Purchase Plan dated August 15, 1996,
incorporated by reference to the Company's Proxy
Statement used in connection with its Annual
Meeting of Stockholders held October 1, 1996.
10(g) Richardson Electronics, Ltd. Employees 1996 Stock NA
Purchase Plan incorporated by reference to
Appendix A of the Company's Proxy Statement dated
September 3, 1996 for its Annual Meeting of
Stockholders held on October 1, 1996.
10(h) Employees Stock Ownership Plan and Trust Agreement, NA
effective as of June 1, 1987, dated July 14, 1994,
incorporated by reference to Exhibit 10(f) to the
Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1994.
10(h)(1) First Amendment to Employees Stock Ownership Plan NA
and Trust Agreement, dated July 12, 1995,
incorporated by reference to Exhibit 10(g)(1) to
the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1995.
10(h)(2) Second Amendment to Employees Stock Ownership Plan NA
and Trust Agreement, dated July 12, 1995, dated
April 10, 1996, incorporated by reference to the
Company's Proxy Statement used in connection with
its Annual Meeting of Stockholders held
October 1, 1996.
10(i) Stock Option Plan for Non-Employee Directors NA
incorporated by reference to Appendix A to the
Company's Proxy Statement dated August 30, 1989
for its Annual Meeting of Stockholders held on
October 18, 1989.
10(j) Richardson Electronics, Ltd. 1996 Stock Option Plan NA
for Non-Employee Directors, incorporated by
reference to Appendix C of the Company's Proxy
Statement dated September 3, 1996 for its Annual
Meeting of Stockholders held on October 1, 1996.
10(k) The Company's Employees' Incentive Compensation Plan NA
incorporated by reference to Appendix A to the
Company's Proxy Statement dated August 31, 1990 for
its Annual Meeting of Stockholders held on
October 9, 1990.
10(k)(1) First Amendment to Employees Incentive Compensation NA
Plan incorporated by reference to Exhibit 10(p)(1)
to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1991.
10(k)(2) Second Amendment to Employees Incentive Compensation NA
Plan dated August 15, 1996, incorporated by reference
to the Company's Proxy Statement used in connection
with its Annual Meeting of Stockholders held
October 1, 1996.
10(l) Richardson Electronics, Ltd. Employees' 1994 NA
Incentive Compensation Plan incorporated by reference
to Exhibit A to the Company's Proxy Statement dated
August 31, 1994 for its Annual Meeting of
Stockholders held on October 11, 1994.
10(l)(1) First Amendment to the Richardson Electronics, Ltd. NA
Employees' 1994 Incentive Compensation Plan dated
August 15, 1996, incorporated by reference to the
Company's Proxy Statement used in connection with
its Annual Meeting of Stockholders held
October 1, 1996.
10(m) Richardson Electronics, Ltd. 1996 Incentive NA
Compensation Plan incorporated by reference to
Appendix B of the Company's Proxy Statement dated
September 3, 1996 for its Annual Meeting of
Stockholders held on October 1, 1996.
10(n) Correspondence outlining Agreement between the NA
Company and Arnold R. Allen with respect to
Mr. Allen's employment by the Company, incorporated
by reference to Exhibit 10(v) to the Company's
Annual Report on Form 10-K, for the fiscal year
ended May 31, 1985.
10(n)(1) Letter dated February 3, 1992 between the Company NA
and Arnold R. Allen outlining Mr. Allen's engagement
as a consultant by the Company, incorporated by
reference to Exhibit 10(r)(1) to the Company's
Annual Report on Form 10-K, for the fiscal year
ended May 31, 1992.
10(n)(2) Letter dated April 1, 1993 between the Company and NA
Arnold R. Allen regarding Mr. Allen's engagement as
consultant by the Company, incorporated by reference
to Exhibit 10(i)(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1994.
10(o) Letter dated January 14, 1992 between the Company NA
and Jacques Bouyer setting forth the terms of
Mr. Bouyer's engagement as a management consultant
by the Company for Europe, incorporated by reference
to Exhibit 10(t)(1) to the Company's Annual Report
on Form 10-K for the fiscal year ended on
May 31, 1992.
10(o)(1) Letter dated January 15, 1992 between the Company NA
and Jacques Bouyer setting forth the terms of
Mr. Bouyer's engagement as a management consultant
by the Company for the United States, incorporated
by reference to Exhibit 10(t)(1) to the Company's
Annual Report on Form 10-K for the fiscal year
ended on May 31, 1992.
10(p) Letter dated January 13, 1994 between the Company NA
and Samuel Rubinovitz setting forth the terms of
Mr. Rubinovitz' engagement as management consultant
by the Company incorporated by reference to Exhibit
10(m) to the Company's Annual Report on Form 10-K
for the fiscal year ended on May 31, 1994.
10(q) Letter dated April 4, 1994 between the Company NA
and Bart F. Petrini setting forth the terms of
Mr. Petrini's employment by the Company,
incorporated by reference to Exhibit 10(o) to
the Company's Annual Report on Form 10-K for
the fiscal year ended on May 31, 1994.
10(r) Letter dated May 20, 1994 between the Company NA
and William J. Garry setting forth the terms of
Mr. Garry's employment by the Company,
incorporated by reference to Exhibit 10(p) to
the Company's Annual Report on Form 10-K for the
fiscal year ended on May 31, 1994.
10(s) Letter dated October 17, 1994 between the Company NA
and Flint Cooper setting forth the terms of
Mr. Cooper's employment by the Company,
incorporated by reference to Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended November 30, 1994.
10(t) Agreement dated January 16, 1997 between the NA
Company and Dennis Gandy setting forth the terms
of Mr. Gandy's employment by the Company,
incorporated by reference to Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for
the quarter ended February 28, 1997.
10(u) Agreement dated March 21, 1997 between the Company NA
and David Gilden setting forth the terms of
Mr. Gilden's employment by the Company,
incorporated by reference to Exhibit 10(c) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1997.
10(v) The Company's Directors and Officers Liability NA
Insurance Policy issued by Chubb Group of Insurance
Companies Policy Number 8125-64-60A, incorporated
by reference to Exhibit 10(t) to the Company's
Annual Report on Form 10-K for the fiscal year
ended May 31, 1991.
10(v)(1) The Company's Directors and Officers Liability NA
Insurance Policy renewal issued by Chubb Group of
Insurance Companies Policy Number 8125-64-60E,
incorporated by reference to Exhibit 10(t)(1)
to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1996.
10(v)(2) The Company's Excess Directors and Officers NA
Liability and Corporate Indemnification Policy
issued St. Paul Mercury Insurance Company Policy
Number 900DX0216, incorporated by reference to
Exhibit 10(t)(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1996.
10(v)(3) The Company's Directors and Officers Liability NA
Insurance Policy issued by CNA Insurance Companies
Policy Number DOX600028634, incorporated by
reference to Exhibit 10(t)(3) to the Company's
Annual Report on Form 10-K for the fiscal year
ended May 31, 1996.
10(w) Distributor Agreement, executed August 8, 1991, NA
between Registrant and Varian Associates, Inc.,
incorporated by reference to Exhibit 10(d) of
the Company's Current Report on Form 8-K for
September 30, 1991.
10(w)(1) Amendment, dated as of September 30, 1991, NA
between Registrant and Varian Associates, Inc.,
incorporated by reference to Exhibit 10(e) of the
Company's Current Report on Form 8-K for
September 30, 1991.
10(w)(2) First Amendment to Distributor Agreement between NA
Varian Associates, Inc. and the Company as of
April 10, 1992, incorporated by reference to
Exhibit 10(v)(5) of the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1992.
10(w)(3) Consent to Assignment and Assignment dated NA
August 4, 1995 between Registrant and Varian
Associates Inc., incorporated by reference to
Exhibit 10(s)(4) of the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1995.
10(w)(4) Final Judgment, dated April 1, 1992, in the matter NA
of "United States of America v. Richardson
Electronics, Ltd.", filed in the United States
District Court for the Northern District of
Illinois, Eastern Division, as Docket No. 91 C 6211
incorporated by reference to Exhibit 10(v)(7) to
the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1992.
10(x) Trade Mark License Agreement dated as of NA
May 1, 1991 between North American Philips
Corporation and the Company incorporated by
reference to Exhibit 10(w)(3) of the Company's
Annual Report on Form 10-K for the fiscal year
ended May 31, 1991.
10(y) Agreement among Richardson Electronics, Ltd., NA
Richardson Electronique S.A., Covelec S.A. (now
known as Covimag S.A.), and Messrs. Denis Dumont
and Patrick Pertzborn, delivered February 23, 1995,
translated from French, incorporated by reference
to Exhibit 10(b) to the Company's Report on Form
8-K dated February 23, 1995.
10(z) Settlement Agreement by and between the United NA
States of America and Richardson Electronics, Ltd.
dated May 31, 1995 incorporated by reference to
Exhibit 10(a) to the Company's Report on Form 8-K
dated May 31, 1995.
10(a)(a) Employment agreement dated as of November 7, 1996 NA
between the Company and Bruce W. Johnson
incorporated by reference to Exhibit (c)(4) of the
Company's Schedule 13 E-4, filed December 18, 1996.
11 Statement re-computation of net income per share. E
13 Annual Report to Stockholders for fiscal year E
ending May 31, 1997 (except for the pages and
information thereof expressly incorporated by
reference in this Form 10-K, the Annual Report to
Stockholders is provided solely for the
information of the Securities and Exchange
Commission and is not deemed "filed" as part of
this Form 10-K).
21 Subsidiaries of the Company. E
23 Consent of Independent Auditors. E
27 Financial Data Schedule. E
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RICHARDSON ELECTRONICS, LTD.
By:/s/ By:/s/
Edward J. Richardson, Bruce W. Johnson,
Chairman of the Board and President and Chief Operating
Chief Executive Officer Officer
By:/s/
William J. Garry
Vice President and
Date: August 27, 1997 Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ /s/
Edward J. Richardson, Chairman Bruce W. Johnson, President,
of the Board, Chief Executive Chief Operating Officer,
Officer(principle executive and Director
officer) and Director August 27, 1997
August 27, 1997
/s/ /s/
William J. Garry, Vice President Ad Ketelaars, Director
and Chief Financial Officer August 27, 1997
(principal financial and accounting
officer) and Director
August 27, 1997
/s/ /s/
Scott Hodes, Director Samuel Rubinovitz, Director
August 27, 1997 August 27, 1997
/s/ /s/
Arnold R. Allen, Director Kenneth J. Douglas, Director
August 27, 1997 August 27, 1997
/s/ /s/
Jacques Bouyer, Director Harold L. Purkey, Director
August 27, 1997 August 27, 1997
The following portions of the Company's Annual Report to Stockholders for
the Year Ended May 31, 1997 are incorporated by reference. The page numbers as
indicated are the same as the printed copy which was distributed to the
shareholders.
<TABLE>
Five-Year Financial Review
<CAPTION>
Statement of Operations Data Year Ended
May 31
(in thousands, except per share amounts) 1997 (1) 1996 1995 (2)
1994 (3) 1993
---------- ---------- ---------
- - ---------- ----------
<S> <C> <C> <C>
<C> <C>
Net sales $ 255,139 $ 239,667 $ 208,118
$ 172,094 $ 159,215
Cost of products sold 187,675 169,123 152,785
151,203 111,620
Selling, general and administrative expenses 62,333 52,974 48,674
41,226 38,070
Other expense, net 7,856 5,559 4,028
5,874 5,023
---------- ---------- ---------
- - ---------- ----------
Income (loss) before income taxes
and extraordinary item (2,725) 12,011 2,631
(26,209) 4,502
Income tax provision (benefit) (1,720) 3,900 150
(6,400) 1,700
---------- ---------- ---------
- - ---------- ----------
Income (loss) before extraordinary item (1,005) 8,111 2,481
(19,809) 2,802
Extraordinary gain (loss), net of tax (488) -- 527
- -- --
---------- ---------- ---------
- - ---------- ----------
Net income (loss) $ (1,493) $ 8,111 $ 3,008
$ (19,809) $ 2,802
========== ==========
========== ========== ==========
Income (loss) per share:
Before extraordinary item $ (.08) $ .68 $ .21
$ (1.75) $ .25
Extraordinary gain (loss), net of tax (.04) -- .05
- -- --
---------- ---------- ---------
- - ---------- ----------
Net income (loss) per share $ (.12) $ .68 $ .26
$ (1.75) $ .25
========== ==========
========== ========== ==========
Dividends per common share $ .16 $ .16 $ .16
$ .16 $ .16
========== ==========
========== ========== ==========
Balance Sheet Data May 31
(dollars in thousands) 1997 1996 1995
1994 1993
---------- ---------- ---------
- - ---------- ----------
Receivables $ 53,333 $ 48,232 $ 42,768
$ 34,901 $ 30,267
Inventories 92,194 94,327 81,267
73,863 86,955
Working capital, net 140,821 133,151 106,235
96,494 103,987
Investments 2,152 2,190 7,070
17,836 29,080
Property, plant and equipment, net 17,526 16,054 16,388
16,932 36,242
Total assets 192,514 180,158 173,514
179,467 205,043
Long-term debt 107,275 92,025 79,647
86,421 98,855
Stockholders' equity 59,590 62,792 56,154
52,573 75,417
</TABLE>
(1) In 1997, the Company recorded special charges for severance and
other costs related to a corporate reorganization and a re-evaluation
of reserve estimates which increased cost of products sold by
$7,200,000 and selling, general and administrative expenses by
$3,800,000. Net of tax, these charges reduced income by $6,712,000, or
$.56 per share. The Company also recorded an extraordinary loss of
$800,000, less a related tax benefit of $312,000, or $.04 per share,
on the exchange of certain of the Company's debentures. (See Note B to
the Consolidated Financial Statements.)
(2) In 1995, the Company recorded a charge which reduced gross margin
by $4,700,000 and net income by $2,300,000, or $.25 per share, for the
settlement of a claim related to a 1989 contract. (See Note B to the
Consolidated Financial Statements.)
(3) In 1994, cost of products sold included a $26,500,000 provision,
of which $21,400,000 was for the disposition of the Company's
manufacturing operations in Brive, France, and $5,100,000 for
incremental costs related to a provision for the phase-down of
domestic manufacturing operations established in 1991. Net of tax,
these charges reduced results of operations by $19,500,000, or $1.72
per share.
3
Management's Discussion and Analysis
Results of Operations
Sales and Gross Margin Analysis
The Company is a value-added distributor and manufacturer, operating in
one industry segment, electronic components. The marketing and sales structure
of the Company is organized in four strategic business units (SBUs): Electron
Device Group (EDG), Solid State and Components (SSC), Display Products Group
(DPG) and Security Systems Division (SSD). Consolidated sales in fiscal 1997
were a record $255.1 million. Sales by SBU and percent of consolidated sales
are presented in the following table:
Sales
(in thousands) 1997 % 1996 % 1995 %
--------- ----- --------- ----- --------- -----
EDG $113,700 44.6 $109,925 45.8 $105,454 50.7
SSC 74,209 29.1 67,976 28.4 52,409 25.2
DPG 29,377 11.5 36,154 15.1 36,502 17.5
SSD 37,853 14.8 25,612 10.7 13,753 6.6
--------- ----- --------- ----- --------- -----
Consolidated $255,139 100.0 $239,667 100.0 $208,118 100.0
========= ===== ========= ===== ========= =====
Gross margin for each SBU and margin as a percent of sales are shown in
the following table. Gross margin reflects the distribution product margin less
overstock, customer returns and other provisions. Manufacturing variances,
warranty provisions, LIFO provisions and miscellaneous costs are included under
the caption "other".
Gross Margins
(in thousands) 1997 % 1996 % 1995 %
---------- ----- --------- ----- --------- -----
EDG $ 32,220 28.3 $ 33,416 30.4 $ 30,884 29.3
SSC 19,923 26.8 20,840 30.7 16,416 31.3
DPG 8,465 28.8 13,156 36.4 12,463 34.1
SSD 8,267 21.8 5,425 21.2 3,037 22.1
---------- ----- --------- ----- --------- ----
Total 68,875 27.0 72,837 30.4 62,800 30.2
Other (1,411) (2,293) (7,467)
---------- ----- --------- ---- --------- ----
Consolidated $ 67,464 26.4 $ 70,544 29.4 $ 55,333 26.6
========== ===== ========= ==== ========= ====
On a geographic basis, the Company categorizes its sales by destination:
North America, Europe and Rest of World. Sales by geographic area and percent
of consolidated sales follow:
Sales
(in thousands) 1997 % 1996 % 1995 %
--------- ----- --------- ----- --------- -----
North America $153,221 60.1 $139,743 58.3 $123,508 59.4
Europe 55,881 21.9 57,219 23.9 46,071 22.1
Rest of World 46,037 18.0 42,705 17.8 38,539 18.5
--------- ----- --------- ----- --------- -----
Consolidated $255,139 100.0 $239,667 100.0 $208,118 100.0
========= ===== ========= ===== ========= =====
North American sales increased 9.6% in 1997, following a 13.1% increase in
1996. In both years, the sales gains were primarily attributable to SSD, and,
to a lesser extent, SSC and EDG. Sales in Europe declined 2.3% in 1997, after a
24.2% increase in 1996. In 1997, significant sales gains by SSD and SSC were
more than offset by a 32.6% decline in DPG European sales from the loss of a
customer. In 1996, SSD, DPG and SSC all had European sales gains in excess of
50%. Rest of World (ROW) sales increased 7.8% in 1997, following a 10.8% gain
in 1996. In both years, the largest ROW sales gains were achieved by SSD and
SSC.
Sales denominated in currencies other than U. S. dollars were 43%, 42%,and
39% of total sales in 1997, 1996 and 1995, respectively. Exchange rate changes
reduced foreign sales by an average of 2.9% in 1997 and increased foreign sales
by 1.0% in 1996. Gross margin for each geographic area and margin as a percent
of sales are shown in the following table.
Gross Margins
(in thousands) 1997 % 1996 % 1995 %
-------- ----- -------- ----- -------- -----
North America $40,514 26.4 $41,257 29.5 $37,100 30.0
Europe 16,194 29.0 19,186 33.5 14,753 32.0
Rest of World 12,167 26.4 12,394 29.0 10,947 28.4
-------- ----- -------- ----- -------- -----
Total 68,875 27.0 72,837 30.4 62,800 30.2
Other (1,411) (2,293) (7,467)
-------- ----- -------- ----- -------- -----
Consolidated $67,464 26.4 $70,544 29.4 $55,333 26.6
======== ===== ======== ===== ======== =====
Sales and gross margin trends are analyzed for each strategic business
unit in the following sections.
Electron Device Group
The vacuum tube industry in which EDG operates is characterized by mature
products, the emergence of tube rebuilders, and vigorous price competition. The
Company estimates that overall industry sales are declining at a 5% to 6%
annual rate. EDG's sales gains of 3.4% in 1997 and 4.2% in 1996 result from a
significant increase in market share. Foreign sales have accounted for about
56.5% of EDG's sales in each of the last three years.
The medical electronics replacement business is a growth segment of the
vacuum tube industry. Demand for replacements for x-ray, computed tomography
(CT), medical resonance imaging (MRI) and radiation therapy components is
expected to continue its growth in response to the emphasis on controlling
rising medical costs. The Company expanded its medical sales force in 1997 and
1996. In addition, in 1996 the Company acquired x-ray tube and image
intensifier reloading facilities in the United States and in 1997 established a
facility in the Netherlands. Sales in this EDG product line increased 56.5% to
$17.5 million in 1997, following a 110% increase in 1996.
Gross margins were affected in 1997 by the special charge for re-
evaluation of overstock provisions, which is described below. Excluding the
special charge, gross margins as a percent of sales increased to 30.6% in 1997,
compared to 30.4% in 1996 and 29.3% in 1995. Gross margin improvement in 1997
and 1996 resulted from additional focus on pricing policies, emphasis on
proprietary product lines and value-added services.
Solid State and Components
SSC operates in several market segments, including the rapidly growing
wireless telecommunications industry. Sales increased 9.2% in 1997 to $74.2
million, following a 29.7% increase in 1996. 1997 sales were adversely impacted
by the loss of one major franchise, which resulted in a $9.6 million decline in
sales. The Company has been successful in replacing a portion of these sales
with products from other vendors and the acquisition of complimentary product
lines. Excluding this lost franchise, SSC sales increased 30.5% in 1997.
International sales represented 37.6%, 36.3% and 36.2% of SSC's sales in 1997,
1996 and 1995, respectively.
4
Gross margins were affected in 1997 by the special charge for re-
evaluation of overstock provisions, which is described below. Excluding the
special charge, gross margins as a percent of sales were 30.1% in 1997,
compared to 30.7% in 1996 and 31.3% in 1995. The gradual decline in margins
reflects competitive pricing pressures and change in product mix.
Display Products Group
DPG sales declined 18.7% in 1997 and 1.0% in 1996. The 1997 sales decline
is largely attributable to the loss of a major customer in Europe. Sales in
both years were hampered by product shortages, primarily for color CRTs, as
glass manufacturers were unable to meet demand. DPG's product mix had been
shifting from monochrome to higher-priced color CRTs for several years. This
trend was reversed in 1997, as color CRT's represented 15.6% of units sold in
1997, compared to 18.0% in 1996 and 16.0% in 1995. International sales
represented 46.1%, 51.4% and 34.9% of DPG's sales in 1997, 1996 and 1995,
respectively.
Gross margins were affected in 1997 by the special charge for re-
evaluation of overstock provisions, which is described below. Excluding the
special charge, gross margins as a percent of sales were 35.1% in 1997,
compared to 36.4% in 1996 and 34.1% in 1995. The margin trend reflects the
shift in product mix.
Security Systems Division
SSD operates in the rapidly expanding security systems market. In February
1997, the Company acquired Burtek Systems Inc. (Burtek), a Canadian security
systems distributor, with annual sales of $18 million. The acquisition follows
the 1995 domestic expansion of this business when the Company doubled the size
of SSD's sales staff. These investments contributed to the 47.8% growth in
sales in 1997 and the 86.2% sales growth in 1996. International sales
represented 47.7% of SSD's sales in 1997, 38.8% in 1996, and 39.3% in 1995.
Gross margins were 21.8%, 21.2% and 22.1% of sales in 1997, 1996 and 1995.
Inventory turnover rates achieved by SSD are significantly higher than the
Company's other SBU's, which mitigates the effect of lower gross margin rates.
Cost of Sales and Gross Margins
The following table reconciles product margins on distribution activities
to gross margins reported in the Statements of Operations:
(% of sales) 1997 1996 1995
-------- -------- --------
Distribution product margin 29.9 % 31.0 % 30.7 %
Overstock provisions (3.0) (0.1) (0.5)
Customer returns and scrap (0.3) (0.7) (0.6)
Manufacturing and warranty costs (0.1) (0.3) (0.5)
Claim Settlement -- -- (2.2)
Other costs (0.1) (0.5) (0.3)
-------- -------- --------
Gross margin 26.4 % 29.4 % 26.6 %
======== ======== ========
Fluctuations in distribution margins primarily reflect the shift in
product mix as SSD sales have increased relative to total sales. Distribution
margins are also affected by changes in selling prices, product costs, and
foreign exchange rate variations. In conjunction with a corporate
reorganization and review of operations, and in response to changed market
conditions, the Company re-evaluated its reserves for overstock inventory in
the third quarter of 1997. As a result of this review, the Company provided a
$7.2 million charge to cost of sales. Average selling prices, exclude the
effects of foreign currency changes, were unchanged in 1997 and increased 2.4%
in 1996.
In May 1995, the Company paid $4.7 million in return for the release of
monetary claims related to a 1989 contract for certain night-vision tubes. This
charge was included in cost of sales. The original claim was in excess of $11
million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses represented 24.4% of sales in
1997, 22.1% in 1996 and 23.4% in 1995. In 1997, selling, general and
administrative expenses included a $3.8 million special charge for severance
and other costs related to a corporate reorganization. Excluding the special
charge, 1997 expenses increased $5.6 million over 1996, reflecting business
acquisitions and the expansion of the EDG medical and SSC sales forces.
Selling, general and administrative expenses in 1996 increased $4.3 million
over 1995 as a result of expansion of the SSC and SSD sales forces, and
incentive payments on higher gross margins.
Other (Income) Expense
Interest expense increased 15% in 1997, primarily due to higher borrowing
levels. Investment income declined to $.4 million in 1997 from $1.2 million in
1996 and $1.9 million in 1995 as a result of lower investment levels and lower
realized capital gains. Foreign exchange and other expenses primarily reflect
changes in the value of the U. S. dollar relative to foreign currencies. A
general strengthening of the dollar in fiscal 1997 and, to a lesser extent in
1996, resulted in net foreign exchange losses, while the weakening of the
dollar in fiscal 1995 generated exchange gains for the Company.
Income Tax Provision
The effective tax rates were 63.1% in fiscal 1997, 32.5% in 1996 and 5.7%
in 1995. The 1997 rate differs from the statutory rate of 34% due to the
utilization of foreign operating losses where no tax benefit was recorded in
prior years, the Company's Foreign Sales Corporation benefit on export sales,
and state income taxes. The 1995 rate differs from the U. S. statutory rate of
34% as a result of the carryback of a $4.7 million contract settlement to prior
years at a 46% statutory rate. The large fluctuations in the effective tax rate
in 1997 and 1995 reflect the magnitude of the tax preference items in relation
to the net income or loss for the year.
Net Income (Loss) and per Share Data
The comparability of net income (loss) and net income (loss) per share for
1997, 1996 and 1995 is affected by several unusual charges. In 1997, the
special charge for severance and other costs related to a corporate
reorganization and the re-evaluation of certain reserves reduced net income by
$6.7 million, or $.56 per share. In addition, the extraordinary loss resulting
from the exchange of bonds reduced net income by $.5 million, or $.04 per
share. In 1995, the settlement of a 1989 contract dispute resulted in a net
reduction in earnings of $2.3 million, or $.25 per share.
5
Financial Condition
Liquidity
Liquidity is provided by the operating activities of the Company, adjusted
for non-cash items, and is reduced by working capital requirements, debt
service, dividends and capital acquisitions. Cash provided by (used in)
operations was $3.6 million in fiscal 1997, $(7.9) million in 1996 and $(6.7)
million in 1995. Substantial investments in working capital to support rising
sales were made in each year; $7.3 million, $22.0 million and $14.6 million in
1997, 1996 and 1995, respectively. Accounts receivable increases in each year
reflect increases in sales levels. Inventory levels were held constant in 1997,
in spite of higher sales, after large investments made in 1996 and 1995.
The Company's market niche as a distributor of electron tubes and
semiconductors for replacement results in relatively high levels of inventory
due to the nature of the product carried and the markets served. Many of these
products represent trailing-edge technology which may not be available from
other sources, and may not be currently manufactured. Also, in many cases, the
products are components of production equipment for which immediate
availability is critical to the customer. Other working capital requirements in
1995 included $6.3 million for severance and other payments related to the
phase-down of manufacturing operations.
The Company has net operating loss carryforwards of $14.5 million for
U. S. federal and state tax purposes, which may reduce cash outflows in future
years. Current earnings levels, excluding the special charges in 1997, are
sufficient to realize these carryforwards before they expire.
The Company has proposed a plan to the Illinois Environmental Protection
Agency to monitor and process soil and groundwater at the LaFox facility.
Contamination is believed to have resulted from practices previously employed
at the site. The present value of the estimated future remediation costs is $.7
million, and is included in accrued liabilities.
Financing
In the first quarter of fiscal 1997, the Company amended its $25 million
senior revolving credit note agreement due November 30, 1998 to increase the
credit line to $35 million. The loan bears interest at prime or 100 basis
points over the London Inter- Bank Offered Rate (LIBOR), at the Company's
option. Net new borrowings under this line in 1997 were $9.1 million, primarily
for business acquisitions and working capital requirements. $4.7 million
remains available under this line at May 31, 1997 for future requirements.
On February 15, 1997, the Company exchanged $40.0 million of new 8 1/4%
convertible debentures for an equivalent face value of its outstanding 7 1/4%
convertible debentures (See Note F). The principal purpose of the exchange was
to improve the Company's future liquidity and capital position by refinancing a
sufficient number of the debentures to eliminate sinking fund requirements
until December 15, 2004.
To complete the acquisition of Burtek, a subsidiary of the Company entered
into a revolving credit agreement and term loan aggregating $6.0 million with
an affiliate of the Company's primary bank. The loan is guaranteed by the
Company, bears interest at the Canadian prime rate and matures in November
1998.
In connection with the Company's outstanding convertible debentures,
certain restrictions relate to the purchase of treasury stock and the payment
of cash dividends. At May 31, 1997, $18.3 million was free of such
restrictions. Annual dividend payments approximate $1.9 million. The policy
regarding payment of dividends is reviewed periodically by the Board of
Directors in light of the Company's operating needs and capital structure.
Investments
At May 31, 1997, the market value of the Company's non-current investment
portfolio was $2.2 million. 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 strategic acquisitions of product lines
or businesses. 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.
Several business acquisitions were made in fiscal 1997. In October 1996,
the SSC business unit acquired Compucon Distributors, Inc., a distributor of
interconnect devices operating in the northeastern United States with annual
sales of $8 million. In February, 1997, the SSD unit acquired Burtek, a
security systems distributor operating in Canada with annual sales of $18
million. The Company also acquired two smaller companies operating in the
wireless communications and diagnostic medical imaging markets, respectively.
Investing activities in 1996 included the acquisition of a medical x-ray tube
reloading facility.
Currency Fluctuations
The Company's foreign denominated assets and liabilities are cash,
accounts receivable, inventory and accounts payable, primarily in member
countries of the European community, and, to a lesser extent, in Canada,
Singapore, Japan and Latin America. The Company monitors its foreign exchange
exposures and may enter into forward contracts to hedge significant
transactions. A portion of the $35 million senior revolving credit note
agreement may be denominated in foreign currencies, at the Company's
discretion. Other tools which may be used to manage foreign exchange exposures
include the use of currency clauses in sales contracts and the use of local
debt to offset asset exposures.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995
Except for the historical information contained herein, the matters
discussed in this Annual Report (including the Annual Report on Form 10-K) are
forward-looking statements relating to future events which involve certain
risks and uncertainties, including those identified herein and in the Annual
Report on Form 10-K.
6
Consolidated Balance Sheets
May 31
(in thousands) 1997 1996
--------- ---------
Assets
Current assets
Cash and equivalents $ 10,012 $ 6,784
Receivables, less allowance of $2,102 and $1,461 53,333 48,232
Inventories 92,194 94,327
Other 10,497 8,062
--------- ---------
Total current assets 166,036 157,405
Investments 2,152 2,190
Property, plant and equipment, net 17,526 16,054
Other assets 6,800 4,509
--------- ---------
Total assets $192,514 $180,158
========= =========
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 12,766 $ 14,503
Accrued liabilities 12,449 9,751
--------- ---------
Total current liabilities 25,215 24,254
Long-term debt 107,275 92,025
Deferred income taxes 434 1,087
--------- ---------
Total liabilities 132,924 117,366
Stockholders' equity
Common Stock, $.05 par value 437 428
Class B Common Stock, convertible, $.05 par value 162 162
Preferred Stock, $1.00 par value -- --
Additional paid-in capital 53,512 52,185
Retained earnings 9,082 12,430
Foreign currency translation adjustment (3,603) (2,413)
--------- ---------
Total stockholders' equity 59,590 62,792
--------- ---------
Total liabilities and stockholders' equity $192,514 $180,158
========= =========
See notes to consolidated financial statements.
7
Consolidated Statements of Operations
Year Ended May 31
(in thousands, except per share amounts) 1997 1996 1995
--------- --------- ---------
Net sales $255,139 $239,667 $208,118
Costs and expenses:
Cost of products sold 187,675 169,123 152,785
Selling, general and administrative
expenses 62,333 52,974 48,674
--------- --------- ---------
250,008 222,097 201,459
--------- --------- ---------
Operating income 5,131 17,570 6,659
Other (income) expense:
Interest expense 7,622 6,624 6,473
Investment income (392) (1,238) (1,863)
Foreign exchange and other 626 173 (582)
--------- --------- ---------
7,856 5,559 4,028
--------- --------- ---------
Income (loss) before income taxes
and extraordinary item (2,725) 12,011 2,631
Income tax provision (benefit) (1,720) 3,900 150
--------- --------- ---------
Income (loss) before extraordinary item (1,005) 8,111 2,481
Extraordinary gain (loss), net of tax (488) -- 527
--------- --------- ---------
Net income (loss) $ (1,493) $ 8,111 $ 3,008
========= ========= =========
Income (loss) per share:
Before extraordinary item $ (.08) $ .68 $ .21
Extraordinary gain (loss), net of tax (.04) -- .05
--------- --------- ---------
Net income (loss) per share $ (.12) $ .68 $ .26
========= ========= =========
Average shares outstanding 11,892 12,002 11,566
========= ========= =========
Dividends per common share $ .16 $ .16 $ .16
========= ========= =========
See notes to consolidated financial statements.
8
Consolidated Statements of Cash Flows
Year Ended May 31
(in thousands) 1997 1996 1995
--------- --------- ---------
Operating Activities:
Net income (loss) $ (1,493) $ 8,111 $ 3,008
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities:
Special charges 11,000 - -
Depreciation 2,627 2,709 2,669
Amortization of intangibles and
financing costs 1,318 360 427
Deferred income taxes (3,305) 2,338 1,310
Stock contribution to employee
ownership plan 800 500 500
--------- --------- ---------
Net adjustments 12,440 5,907 4,906
--------- --------- ---------
Changes in working capital, net of
currency translation effects and
business acquisitions:
Receivables (4,277) (5,310) (7,215)
Inventories 406 (12,920) (5,600)
Other current assets 253 1,567 (429)
Accounts payable (3,719) (3,448) 5,079
Accrued liabilities 28 (1,843) (6,437)
--------- --------- ---------
Net changes in working capital (7,309) (21,954) (14,602)
--------- --------- ---------
Net cash provided by (used in)
operating activities 3,638 (7,936) (6,688)
--------- --------- ---------
Financing Activities:
Proceeds from borrowings 57,890 22,200 8,000
Payments on debt (42,640) (19,679) (6,784)
Proceeds from sale of common stock 536 1,713 145
Cash dividends (1,855) (1,822) (1,779)
--------- --------- ---------
Net cash provided by (used in)
financing activities 13,931 2,412 (418)
--------- --------- ---------
Investing Activities:
Business acquisition (9,902) (1,450) -
Capital expenditures (4,004) (2,352) (2,703)
Sales of investments 3,582 11,425 22,118
Purchases of investments (3,613) (6,660) (11,335)
Other (404) 194 438
--------- --------- ---------
Net cash provided by (used in)
investing activities (14,341) 1,157 8,518
--------- --------- ---------
Increase (decrease) in cash and
equivalents 3,228 (4,367) 1,412
Cash and equivalents at beginning
of year 6,784 11,151 9,739
--------- --------- ---------
Cash and equivalents at end of year $ 10,012 $ 6,784 $ 11,151
========= ========= =========
See notes to consolidated financial statements.
9
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
Shares Issued
--------------- Additional
(shares and dollars Class B Par Paid-in Retained Foreign
in thousands) Common Common Value Capital Earnings Currency Total
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance June 1, 1994 8,056 3,248 $ 565 $ 49,352 $ 4,912 $ (2,256) $ 52,573
Shares contributed to ESOP 133 -- 7 493 -- -- 500
Shares issued under ESPP
and stock option plan 35 -- 1 144 -- -- 145
Conversion of Class B shares
to common shares 1 (1) -- -- -- -- --
Dividends -- -- -- -- (1,779) -- (1,779)
Currency translation -- -- -- -- -- 1,707 1,707
Net income -- -- -- -- 3,008 -- 3,008
-------- -------- -------- -------- -------- -------- --------
Balance May 31, 1995 8,225 3,247 573 49,989 6,141 (549) 56,154
Shares contributed to ESOP 69 -- 3 497 -- -- 500
Shares issued under ESPP
and stock option plan 265 -- 14 1,699 -- -- 1,713
Conversion of Class B shares
to common shares 3 (3) -- -- -- -- --
Dividends -- -- -- -- (1,822) -- (1,822)
Currency translation -- -- -- -- -- (1,864) (1,864)
Net income -- -- -- -- 8,111 -- 8,111
-------- -------- -------- -------- -------- -------- --------
Balance May 31, 1996 8,562 3,244 590 52,185 12,430 (2,413) 62,792
Shares contributed to ESOP 84 -- 5 795 -- -- 800
Shares issued under ESPP
and stock option plan 74 -- 4 532 -- -- 536
Conversion of Class B shares
to common shares 1 (1) -- -- -- -- --
Dividends -- -- -- -- (1,855) -- (1,855)
Currency translation -- -- -- -- -- (1,190) (1,190)
Net loss -- -- -- -- (1,493) -- (1,493)
-------- -------- -------- -------- -------- -------- --------
Balance May 31, 1997 8,721 3,243 $ 599 $ 53,512 $ 9,082 $ (3,603) $ 59,590
======== ======== ======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
10
Notes to Consolidated Financial Statements
Note A -- Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
accounts and operations of the Company and its subsidiaries. All significant
intercompany transactions are eliminated.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash Equivalents: The Company considers short-term investments that have a
maturity of three months or less, when purchased, to be cash equivalents. The
carrying amounts reported in the balance sheet for cash and equivalents
approximate the fair market value of these assets.
Inventories: Inventories are stated at the lower of cost or market. Inventory
costs determined using the last-in, first-out (LIFO) method represent 78% of
total inventories at May 31, 1997 and 84% at May 31, 1996. For the remaining
inventories, cost is determined on the first-in, first-out (FIFO) method. If
the FIFO method had been used for all inventories, the cost of inventories
would have been increased by $4,742,000 at May 31, 1997 and $5,707,000 at May
31, 1996. However, as a result of the increase in overstock reserves recorded
in 1997, the LIFO carrying value of all inventories approximated market value
at May 31, 1997. Substantially all inventories represent finished goods held
for sale.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Provisions for depreciation are computed principally using the straight-
line method for financial reporting purposes. Property, plant and equipment
consist of the following:
May 31
(in thousands) 1997 1996
-------- --------
Land and improvements $ 2,620 $ 2,624
Buildings and improvements 18,251 18,052
Machinery and equipment 25,098 22,020
-------- --------
Property at cost 45,969 42,696
Accumulated depreciation (28,443) (26,642)
-------- --------
Property, net $17,526 $16,054
======== ========
Foreign Currency Translation: Foreign currency transactions and financial
statements are translated into U. S. dollars at current rates, except that
revenues, costs and expenses are translated at average rates during each
reporting period. Gains and losses resulting from foreign currency
transactions are included in income currently. Foreign currency transaction
gains (losses) reflected in operations were $(563,000), $(228,000), and
$316,000 in 1997, 1996, and 1995, respectively. Gains and losses resulting
from translation of foreign subsidiary financial statements are credited or
charged directly to a separate component of shareholders' equity.
Revenue Recognition: Revenues are recorded upon shipment.
Income Taxes: Deferred tax assets and liabilities are established for
differences between financial reporting and tax accounting of assets and
liabilities and are measured using the marginal tax rates.
Stock-Based Compensation: The Company accounts for its stock option plans in
accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations. As such,
compensation expense is recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. On January 1,
1996, the Financial Accounting Standards Board issued Statement (SFAS) No. 123
"Accounting for Stock-Based Compensation", which requires estimation of the
fair value of options granted to employees. As permitted by SFAS No. 123, the
Company has elected to present this estimated fair value information in Note I,
and to continue to apply APB Opinion No. 25 for the determination of
compensation expense.
Earnings per Share: Earnings per share are based on the weighted average number
of Common and Class B Common shares outstanding and share equivalents that
would arise from the exercise of stock options. The Company's outstanding
convertible debentures were not included as share equivalents because the
effect of conversion would be anti-dilutive.
The Financial Accounting Standards Board has issued SFAS No. 128 "Earnings
per Share", which sets new guidelines for the calculation and presentation of
earnings per share data, but prohibits use of the new guidelines prior to
December 15, 1997. The purpose of the new rule is to make reporting in the
United States consistent with international practices. Under SFAS No. 128, net
income per share as currently reported would be replaced by two amounts: basic
earnings per share, which excludes all common stock equivalents, and diluted
earnings per share, which includes all dilutive common stock equivalents.
Amounts computed using these guidelines do not differ significantly from the
currently reported amounts.
Reclassifications: Certain amounts in the 1995 and 1996 financial statements
have been reclassified to conform to the 1997 presentation.
Note B -- Special Charges and Extraordinary Items
In the third quarter of fiscal 1997, the Company re-evaluated its reserve
estimates in light of changed market conditions and provided for severance and
other costs associated with a Corporate reorganization. Inventory reserve
adjustments of $7,200,000 were included in cost of sales, and provisions for
11
accounts receivable, severance and other costs of $3,800,000 were included in
selling, general and administrative expense. Collectively, these charges
amounted to $11,000,000 pre-tax or $6,712,000, net of tax, reducing earnings
per share by $.56.
Also in the third quarter of fiscal 1997, the Company recorded an $800,000
extraordinary charge for the write-off of unamortized debt issuance costs
associated with the Company's 7 1/4% convertible subordinated debentures, which
were exchanged for a new issue (See Note F). Net of tax, the charge was
$488,000, or $.04 per share.
In 1995 the Company paid $4,700,000 to the U. S. Government in return for
a release of monetary claims in connection with a contract completed in 1989.
Also during fiscal 1995, the Company repurchased $4,910,000 at face value of
its 7 1/4% convertible debentures for $3,956,000. Net of unamortized deferred
financing costs of $90,000, and income taxes of $337,000, an extraordinary gain
of $527,000 was recorded.
Note C -- Acquisitions
Several business acquisitions were made in fiscal 1997. In October 1996,
the SSC business unit acquired Compucon Distributors, Inc., a distributor of
interconnect devices operating in the northeastern United States. In February
1997, the SSD unit acquired Burtek Systems, Inc., a security systems
distributor operating in Canada with annual sales of $18,000,000. The Company
also acquired two smaller companies operating in the wireless communications
and diagnostic medical imaging markets, respectively.
Each of the acquisitions was accounted for by the purchase method, and
accordingly, their results of operations are included in the consolidated
statements of operations from the respective dates of acquisition. The impact
of these acquisitions on results of operations was not significant and would
not have been significant if they had been included for the entire year.
Note D -- Marketing Agreements
The Company is party to several marketing distribution agreements with
various manufacturers in the electron tube and semiconductor businesses. The
most significant is a distribution agreement with Communications and Power
Industries, Inc., formerly the Electron Device Group of Varian Associates, Inc.
Product sales under this distribution agreement accounted for 13%, 15%, and
17%, of net sales in fiscal 1997, 1996, and 1995, respectively.
As part of the divestiture of the Company's Brive, France, manufacturing
operations in 1994, the Company entered into a supply agreement with Covimag,
S. A., the corporation created by the local management group to continue
operating the Brive facility. Under this agreement, the Company must purchase
electron tubes valued at approximately $11,000,000 per year through calendar
1997. Under a successor agreement, the Company will negotiate a purchase
commitment on an annual basis.
Note E -- Investments
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" requires investments to be classified as trading, available-for-
sale or held-to-maturity. Management has determined these investments are
properly classified as available-for-sale. The investment portfolio at May 31,
1997 and 1996 is stated at fair value based on quoted market prices or dealers'
quotes and consists of securities available-for-sale, as follows. All of the
bonds held by the Company have a maturity of one year or less.
Gross Gross Estimated
Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
-------- -------- -------- --------
At May 31, 1997:
Equity securities $ 1,766 $ 206 $ (190) $ 1,782
Bonds 370 - - 370
-------- -------- -------- --------
Total investments $ 2,136 $ 206 $ (190) $ 2,152
======== ======== ======== ========
At May 31, 1996:
Equity securities $ 1,571 $ 174 $ (29) $ 1,716
Bonds 510 - (36) 474
-------- -------- -------- --------
Total investments $ 2,081 $ 174 $ (65) $ 2,190
======== ======== ======== ========
Interest and dividend income are accrued as earned. Gains and losses are
recognized in income on the investment portfolio when securities are sold or to
reflect a decline in market value estimated by management to be of a permanent
nature. Investment income includes capital gains of $47,000 in 1997, $1,121,000
in 1996 and $1,205,000 in 1995. Of these amounts, sales of equity securities
generated gains of $30,000 , $1,079,000 and $1,044,000, respectively.
Note F -- Debt Financing
Long-term debt consists of the following:
May 31
(in thousands) 1997 1996
--------- ---------
8 1/4% Convertible debentures due June, 2006 $ 40,000 $ -
7 1/4% Convertible debentures due
December, 2006 30,825 70,825
Floating-rate bank term loan due
November, 1998 (6.6% at May 31, 1997) 30,332 21,200
Revolving credit and term loan due
November, 1998 (4.6% at May 31, 1997) 5,704 -
Other 414 -
--------- ---------
Long-term debt $107,275 $ 92,025
========= =========
On February 15, 1997, the Company exchanged $40,000,000 of new 8 1/4%
convertible debentures for an equivalent face value of its outstanding 7 1/4%
convertible debentures. The new debentures are payable at maturity in June,
2006, and are convertible to common stock at $18.00 per share. The principal
purpose of the exchange was to improve the Company's future liquidity and
capital position by refinancing a sufficient number of the 7 1/4% convertible
debentures to eliminate sinking fund requirements until December 15, 2004. The
12
8 1/4% convertible debentures are subordinated to senior debt.
The 7 1/4% convertible debentures are unsecured and subordinated to other
long-term debt, including the 8 1/4% convertible debentures. Each $1,000
debenture is convertible into the Company's Common Stock at any time prior to
maturity at $21.14 per share. The Company is required to make sinking fund
payments of $3,850,000 in 2004 and $6,225,000 in 2005.
The debenture agreements restrict the use of retained earnings for the
payment of dividends or purchase of treasury stock. As of May 31, 1997,
$18,252,000 was free of such restrictions.
In November 1995, the Company entered into a $25,000,000 senior revolving
credit note agreement due November 1998. Subsequent amendments have increased
this line to $35,000,000. Financial covenants under the agreement set benchmark
levels for tangible net worth, debt to tangible net worth ratio and annual debt
service coverage. The loan bears interest at prime or 100 basis points over
LIBOR, at the Company's option.
To complete the acquisition of Burtek, a subsidiary of the Company entered
into a revolving credit and term loan agreement aggregating $6,000,000 with a
Canadian affiliate of the Company's primary bank. The loan is guaranteed by the
Company, bears interest at the Canadian prime rate and matures in November
1998.
During the next five years, maturities of debt are limited to $36,450,000
in 1999. Cash payments for interest were $7,463,000, $6,445,000, and $6,506,000
in 1997, 1996, and 1995, respectively.
In the following table, the fair values of the Company's 7 1/4% and 8 1/4%
convertible debentures are based on quoted market prices. However, trading in
the Company's bonds is infrequent amd therefore, quoted market prices may not
be indicative of the fair market value of the entire issue. The fair values of
the bank term loans are based on carrying value, adjusted for market interest
rate changes.
(in thousands) 1997 1996
------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- --------- --------- ---------
8 1/4% Convertible
debentures $ 40,000 $ 31,800 $ - $ -
7 1/4% Convertible
debentures 30,825 24,044 70,825 59,847
Floating-rate bank term loan 30,332 30,330 21,200 21,200
Revolving credit and term loan 5,704 5,704 - -
Other 414 414 - -
--------- --------- --------- ---------
Total $107,275 $ 92,292 $ 92,025 $ 81,047
========= ========= ========= =========
Note G -- Income Taxes
The components of income (loss) before income taxes and extraordinary item
are:
(in thousands) 1997 1996 1995
-------- -------- --------
United States $(4,558) $ 9,954 $ 781
Foreign 1,833 2,057 1,850
-------- -------- --------
Income (loss) before taxes
and extraordinary item $(2,725) $12,011 $ 2,631
======== ======== ========
The provision (credit) for income taxes differs from income taxes computed
at the federal statutory tax rate of 34% as a result of the following items:
1997 1996 1995
------ ------ ------
Federal statutory rate 34.0 % 34.0 % 34.0 %
Effect of:
State income taxes, net of
federal tax benefit 11.3 3.5 (1.4)
FSC benefit on export sales 12.3 (3.2) (10.4)
Realization of tax benefit on
prior years' foreign losses 14.7 (2.5) -
Non-deductible foreign losses (7.5) - 6.8
Claim settlement taxed at 46%
carry back year statutory rate - - (22.8)
Other (1.7) 0.7 (0.5)
------ ------ ------
Effective tax rate 63.1 % 32.5 % 5.7 %
====== ====== ======
In 1995, due to the timing and nature of a claim settlement (see Note B),
the Company utilized a ten-year carryback provision permitted by the Internal
Revenue Service.
In 1994, the Company recorded a provision of $21,400,000 for the
disposition of its Brive, France manufacturing facility. Tax benefits of
$8,000,000 will be realized if the disposition of these French operations is
treated as an ordinary loss for U. S. federal tax purposes. A tax benefit of
$5,000,000 was recorded in 1994 based upon alternative tax strategies. The
Company's U. S. federal tax return has been examined for 1994 and submitted to
the Congressional Joint Committee recommending no change to the Company's
ordinary loss position on this issue.
The provisions (credits) for income taxes before extraordinary item
consist of the following:
(in thousands) 1997 1996 1995
Currently payable: -------- -------- --------
Federal $ 299 $ 1,158 $(1,930)
State - 139 (150)
Foreign 609 274 1,250
-------- -------- --------
Total currently payable 908 1,571 (830)
Deferred:
Federal (2,626) 1,806 1,386
State (441) 498 93
Foreign 439 25 (499)
-------- -------- --------
Total deferred (2,628) 2,329 980
-------- -------- --------
Income tax provision (benefit) $(1,720) $ 3,900 $ 150
======== ======== ========
13
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Non-current deferred tax
assets and liabilities are offset on the balance sheet within tax
jurisdictions. Significant components of the Company's deferred tax assets and
liabilities as of May 31, 1997 and 1996 are as follows:
Balance sheet presentation
--------------------------
Current Noncurrent
(in thousands) Asset (1) Liability
--------- ---------
At May 31, 1997:
Deferred tax assets:
Operating loss carryforward $ - $ 1,778
Intercompany profit in inventory 1,422 -
Inventory valuation 6,312 -
Environmental and other reserves - 1,368
Other, net 14 -
--------- ---------
Deferred tax assets 7,748 3,146
Deferred tax liabilities:
Accelerated depreciation - (3,516)
Other, net - (64)
--------- ---------
Net deferred tax $ 7,748 $ (434)
========= =========
At May 31, 1996:
Deferred tax assets:
Operating loss carryforward $ - $ 1,440
Intercompany profit in inventory 1,611 -
Inventory valuation 3,462 -
Environmental and other reserves - 600
Other, net 17 271
--------- ---------
Deferred tax assets 5,090 2,311
Deferred tax liabilities:
Accelerated depreciation - (3,398)
--------- ---------
Net deferred tax $ 5,090 $ (1,087)
========= =========
(1) Included in other current assets on the balance sheet
Operating loss carryforwards of $14,483,000 for U. S. tax purposes expire
in 2009 and 2010. Net income taxes paid (refunds received) were $523,000,
$(1,112,000), and $(361,000) in 1997, 1996, and 1995, respectively.
Note H -- Accrued Liabilities
Accrued liabilities consist of the following:
May 31
(in thousands) 1997 1996
-------- --------
Compensation and payroll taxes $ 4,320 $ 3,558
Interest 2,849 2,690
Income taxes 712 314
Other accrued expenses 4,568 3,189
-------- --------
Accrued liabilities $12,449 $ 9,751
======== ========
Note I -- Stockholders' Equity
The Company has authorized 30,000,000 shares of Common Stock, 10,000,000
shares of Class B Common Stock, and 5,000,000 shares of Preferred Stock. The
Class B Common Stock has ten votes per share and generally votes together with
the Common Stock. The Class B Common Stock has transferability restrictions;
however, it may be converted into Common Stock on a share-for-share basis at
any time. With respect to dividends and distributions, shares of common stock
and Class B common stock rank equally and have the same rights, except that
Class B common stock is limited to 90% of the amount of common stock cash
dividends.
Total common stock issued and outstanding at May 31, 1997 was 8,721,315
shares. An additional 9,387,743 shares of common stock have been reserved for
future issuance under the Employee Stock Purchase and Option Plans and
potential conversion of the convertible debentures and Class B Common Stock.
The Employee Stock Purchase Plan (ESPP) provides substantially all
employees an opportunity to purchase common stock of the Company at 85% of the
stock price at the beginning of the year or the end of the year, whichever is
lower. The plan has reserved 120,687 shares for future issuance.
The Employees' 1996 Incentive Compensation Plan authorizes the issuance of
up to 800,000 shares as incentive stock options, non-qualified stock options or
stock awards. Under this plan and predecessor plans, 1,939,005 shares are
reserved for future issuance. The Plan authorizes the granting of incentive
stock options at the fair market value at the date of grant. Generally, these
options become exercisable over staggered periods and expire up to ten years
from the date of grant.
Under the 1996 Stock Option Plan for Non-Employee Directors and a
predecessor plan, 400,000 shares have been reserved for future issuance
relating to stock options exercisable based on the passage of time. Each option
is exercisable over a period from its date of grant at the market value on the
grant date and expires after ten years.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its option plans. Accordingly, no compensation expense has been
recognized for the Company's option plans in the accompanying Consolidated
Statement of Operations. Applying SFAS No. 123 requires the calculation of the
fair value of options at the date of grant using certain assumptions. The fair
value of options granted was $3.17 in 1997 and $2.81 in 1996. In addition, the
option value of shares offered under the ESPP was $1.50 in 1997 and $1.14 in
1996. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
14
used for grants: $.16 annual dividend rate, expected annual standard deviation
of stock price of 40%, risk free interest rate of 5.2% in 1997 and 5.6% in
1996, and weighted average expected life of 6 years. Had compensation expense
for the Company's option plans and stock purchase plan been determined
consistent with SFAS No. 123, the Company's net income (loss) and net income
(loss) per share would have been as follows:
As Reported Pro Forma
---------------- ----------------
Net Income per Net Income per
(Loss) Share (Loss) Share
--------- ------ --------- -------
Fiscal 1997 $ (1,493) $(.12) $ (1,800) $ (.15)
Fiscal 1996 8,111 0.68 7,977 0.66
The effect of applying SFAS No. 123 in this pro forma disclosure is not
indicative of the effects on future years, because SFAS No. 123 does not apply
to grants issued prior to fiscal 1996.
A summary of the share activity and weighted average exercise prices for
the Company's option plans is as follows:
Outstanding Exercisable
Shares Price Shares Price
---------- ----- --------- -----
At June 1, 1994 1,104,111 $8.00 544,137 $8.44
Granted 296,100 4.02
Exercised (9,000) 3.88
Cancelled (57,918) 11.45
----------
At May 31, 1995 1,333,293 6.99 1,055,499 7.02
Granted 263,450 7.40
Exercised (245,141) 5.71
Cancelled (99,758) 9.91
----------
At May 31, 1996 1,251,844 7.10 855,404 7.16
Granted 285,800 8.00
Exercised (33,030) 4.82
Cancelled (15,812) 7.72
----------
At May 31, 1997 1,488,802 7.31 936,112 7.21
==========
The following table summarizes information about stock options outstanding
as of May 31, 1997:
Outstanding Exercisable
Exercise ---------------------- ----------------------
Price Range Shares Price Life Shares Price Life
---------------- ---------- ------- ---- --------- ------- ----
$ 3.75 to $5.25 181,826 $ 4.16 7.1 135,826 $ 4.03 7.1
$ 6.00 to $7.50 563,360 6.66 6.5 371,080 6.41 5.7
$ 8.00 to $8.125 650,053 8.02 6.8 351,643 8.04 4.8
$10.813 to $12.95 93,563 12.45 5.6 77,563 12.79 4.9
--------- --------
Total 1,488,802 7.31 6.7 936,112 7.21 5.5
========= ========
Note J -- Employee Retirement Plans
The Company's domestic employee retirement plans consist of a profit
sharing plan and a stock ownership plan (ESOP). Annual contributions in cash or
Company stock are made at the discretion of the Board of Directors. In
addition, the profit sharing plan has a 401(k) provision whereby the Company
matches 50% of employee contributions up to 4% of base pay. Charges to expense
for discretionary and matching contributions to these plans were $992,000 in
1997, $1,075,000 in 1996 and $745,000 in 1995. Stock contributions to the ESOP
were $800,000, $500,000 and $500,000 in 1997, 1996 and 1995, respectively,
based on the stock price at the date contributed. Shares are included in the
calculation of earnings per share, and dividends are paid to the ESOP from the
date the shares are contributed. Foreign employees are covered by a variety of
primarily government mandated programs.
Note K -- Industry and Market Information
The Company operates in one industry as a distributor of electronic
components, including vacuum tubes, semiconductors and other products. The
Company invoices its customers and ships from two primary geographic locations:
North America (which services the U. S., Canada, Latin America, and the Far
East) and Europe.
(in thousands) 1997 1996 1995
Sales: --------- --------- ---------
North America $223,277 $211,912 $186,103
Less intersegment transfers 18,728 21,778 15,316
--------- --------- ---------
To unaffiliated customers 204,549 190,134 170,787
--------- --------- ---------
Europe 54,946 51,987 49,244
Less intersegment transfers 4,356 2,454 11,913
--------- --------- ---------
To unaffiliate customers 50,590 49,533 37,331
--------- --------- ---------
Consolidated $255,139 $239,667 $208,118
========= ========= =========
Operating income:
North America $ 1,999 $ 13,040 $ 6,187
Europe 4,949 6,263 1,984
Corporate expense (1,817) (1,733) (1,512)
--------- --------- ---------
Consolidated $ 5,131 $ 17,570 $ 6,659
========= ========= =========
Identifiable assets:
North America $148,026 $143,536 $142,031
Europe 34,905 32,794 21,653
Corporate assets 9,583 3,828 9,830
--------- --------- ---------
Consolidated $192,514 $180,158 $173,514
========= ========= =========
Intersegment transfers originate mainly from the United States or Europe
and are accounted for on an "arm's length" basis with profits eliminated in
consolidation. Export sales shipped directly from the United States were
$36,325,000 in 1997, $37,913,000 in 1996, and $38,653,000 in 1995.
Operating income was reduced by $11,000,000 in North America in 1997 for
valuation reserve adjustments, severance and other costs and by $4,700,000 in
North America in 1995 for the payment of a claim settlement, as described in
Note B. Corporate assets consist primarily of cash and investments.
The Company sells its products to companies in diversified industries and
performs periodic credit evaluations of its customers' financial condition.
Terms are generally on open account, payable net 30 days in North America and
Latin America, and vary throughout Europe and the Far East. Estimates of credit
losses are recorded in the financial statements based on periodic reviews of
outstanding accounts and actual losses have been consistently within
management's estimates.
15
Sales by product line and by geographic destination are summarized in
Management's Discussion and Analysis.
Note L - Litigation
On June 19, 1990, the Company was served with a complaint in "Panache
Broadcasting of Pennsylvania, Inc. v. Richardson Electronics, Ltd.; Varian
Associates, Inc.; and Varian Supply Company (VASCO - a joint venture between
the Company and Varian Associates, Inc.)", in U. S. District Court for the
Eastern Division of Pennsylvania alleging violations of Sections 1 and 2 of the
Sherman Act and Section 7 of the Clayton Act. This action purports to be a
class action on behalf of all persons and businesses in the U. S. "who
purchased electron power tubes from one or more of the defendant corporations
at any time" since the formation of VASCO. The suit seeks treble damages
alleged to be in excess of $100,000, injunctive relief, and attorneys' fees.
The litigation has been transferred to the U. S. District Court for the
Northern District of Illinois, Eastern Division as cause No. 90C6400, and is in
the discovery stage. The Court has not determined whether the action may be
maintained on behalf of a class. The Company is defending itself against this
action. It is not possible at this time to predict the outcome of this legal
action.
Note M -- Selected Quarterly Financial Data
(Unaudited)
Summarized quarterly financial data for 1997 and 1996 follow. There were
no material fourth quarter adjustments in 1997 or 1996.
Third quarter 1997 results include valuation reserve adjustments and severance
and other costs which reduced gross margin by $7,200,000 and net income by
$6,712,000, or $.56 per share, as described in Note B.
(in thousands, except per
share amounts) First Second Third Fourth
1997: -------- -------- -------- --------
Net sales $57,544 $62,167 $64,163 $71,265
Gross margin 16,783 18,738 11,171 20,772
Net income (loss) before
extraordinary item 1,293 1,932 (6,053) 1,823
Extraordinary loss, net of tax - - (488) -
Net income (loss) 1,293 1,932 (6,541) 1,823
Net income (loss) per share
before extraordinary loss $ .11 $ .16 $ (.50) $ .15
Net income (loss) per share $ .11 $ .16 $ (.54) $ .15
1996:
Net sales $57,201 $61,669 $56,367 $64,430
Gross margin 17,138 17,934 16,816 18,656
Net income 1,730 2,240 1,821 2,320
Net income per share $ .15 $ .19 $ .15 $ .19
Report of Independent Auditors
Stockholders and Directors
Richardson Electronics, Ltd.
LaFox, Illinois
We have audited the accompanying consolidated balance sheets of Richardson
Electronics, Ltd. and subsidiaries as of May 31, 1997 and 1996, and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the three years in the period ended May 31, 1997. 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 consolidated financial position of Richardson
Electronics, Ltd. and subsidiaries at May 31, 1997 and 1996, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended May 31, 1997, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
/s/
Chicago, Illinois,
July 8, 1997
16
Stockholder Information
Corporate Headquarters
Richardson Electronics, Ltd.
40W267 Keslinger Road
LaFox, Illinois 60147-0393
(630) 208-2200
E-Mail:[email protected]
Annual Meeting
We encourage all stockholders to attend the annual meeting scheduled for
Tuesday, October 7, 1997 at 3:15 p.m. at the Company's corporate offices.
Further details are available in your proxy materials.
Transfer Agent and Registrar
Continental Stock Transfer Company
2 Broadway, 19th Floor
New York, NY 10004
Auditors
Ernst & Young LLP
233 S. Wacker Drive
Chicago, Illinois 60606
Brokerage Reports
Barrington Research
Forum Capital Management
C. L. King & Associates
Smith Barney Shearson
Market Makers
Barrington Research
William Blair & Co.
Cleary Gull Reiland & McDevitt Inc.
Ernst & Company
Herzog, Heine, Geduld, Inc.
C. L. King & Associates
Smith Barney Shearson
Troster Singer Corp.
Wechsler & Krumholz, Inc.
Form 10K and Other Information
A copy of the Company's Annual Report on Form 10K, filed with the Securities
and Exchange Commission is available without charge upon request. All inquiries
should be addressed to the Investor Relations Department, Richardson
Electronics, Ltd., 40W267 Keslinger Road, LaFox, Illinois 60147-0393. Press
releases and other information can be found on the Internet at the Company's
home page at http://www.rell.com.
Market Price of Common Stock
The common stock is traded on the NASDAQ National Market System under the
symbol "RELL". The number of stockholders of Common Stock and Class B Common
Stock at May 31, 1997 was 656 and 35, respectively. The quarterly market price
ranges of the Company's common stock were as follows:
1997 1996
--------------- ---------------
Fiscal Quarters High Low High Low
------ ------ ------ ------
First 10 1/2 9 8 1/8 7
Second 10 7 11 3/4 6 7/8
Third 10 1/4 8 11 1/4 9
Fourth 8 1/4 6 3/4 11 7/8 9 3/4
Corporate Officers and Board of Directors
Corporate Officers
Edward J. Richardson
Chairman of the Board & Chief Executive Officer
Bruce W. Johnson
President and Chief Operating Officer
Charles J. Acurio
Vice President, Display Products Group
Page Y. Chiang
Vice President & Operations Manager, Security Systems Division
Flint Cooper
Executive Vice President & General Manager, Security Systems Division
William J. Garry
Vice President, Finance & Chief Financial Officer
Joseph C. Grill
Vice President, Human Resources
Kathleen M. McNally
Vice President, Marketing Operations
James R. Patterson
Vice President of Sales, Solid State and Components
Bart Petrini
Vice President & General Manager, Electron Device Group
Robert L. Prince
Vice President, Worldwide Sales Administration
Kevin F. Reilly
Vice President & Chief Information Officer
William G. Seils
Senior Vice President, General Counsel & Corporate Secretary
Ron G. Ware
Treasurer
Board of Directors
Edward J. Richardson (1)
Arnold R. Allen
Consultant
Jacques Bouyer (5)
Consultant
Kenneth J. Douglas (2,3)
Chairman of the Board, West Suburban Hospital Medical Center
William J. Garry
Scott Hodes (2,3,4)
Partner, Law Firm of Ross & Hardies
Bruce W. Johnson
Ad Ketelaars (5)
Chief Executive Officer, Enertel
Harold L. Purkey (2)
President, Forum Capital Markets
Samuel Rubinovitz (1,3,4,5)
Consultant
(1) Executive Committee
(2) Audit Committee
(3) Compensation / Stock Option Committee
(4) Executive Oversight Committee
(5) Strategic Planning Committee
17
<TABLE>
Richardson Electronics, Ltd. and Subsidiaries
Schedule VIII - Valuation and Qualifying Accounts
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
--------------------------
Balance at (1) Charged (2) Charged Balance at
DESCRIPTION Beginning to Costs to Other Deductions End of
of Period and Expenses Accounts - Describe Period
---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended May 31, 1997:
Allowance for sales returns and
doubtful accounts $ 1,461 $ 1,749 $ - $ 1,108 <F1> $ 2,102
Other reserves $ 1,539 $ 900 <F2> $ - $ 483 <F2> $ 1,956
Year ended May 31, 1996:
Allowance for sales returns and
doubtful accounts $ 1,385 $ (42) $ - $ (118) <F1> $ 1,461
Other reserves $ 1,728 $ 400 <F4> $ - $ 589 <F2> $ 1,539
Year ended May 31, 1995:
Allowance for sales returns and
doubtful accounts $ 1,405 $ 199 $ - $ 219 <F1> $ 1,385
Assets held for disposition $15,832 $ - $ - $15,832 <F3> $ -
Liabilities related to disposition $ 5,568 $ - $ - $ 5,568 <F4> $ -
Other reserves $ 2,598 $ - $ - $ 870 <F5> $ 1,728
<FN>
<F1> Uncollectible amounts written off, net of recoveries and foreign currency
translation.
<F2> Provision for corporate reorganization and increase in EPA groundwater
remediation reserve.
<F3> Expenditures made for reserved items
<F4> Provision to increase EPA groundwater remediation reserve
<F5> Asset write offs and costs incurred for the divestiture of the Company's
Brive, France, manufacturing operations.
<F6> Costs incurred for the phase-down of domestic manufacturing and the
disposition of manufactured inventory.
</FN>
</TABLE>
Exhibit 3(b)
BY-LAWS
OF
RICHARDSON ELECTRONICS, LTD.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE.--The registered office shall be
established and maintained at the Office of the United States
Corporation Company, in the City of Dover, in the County of Kent,
in the State of Delaware, and said corporation shall be the
registered agent of this corporation in charge thereof.
SECTION 2. OTHER OFFICES.--The corporation may have other
offices, either within or without the State of Delaware, at such
place or places as the Board of Directors may from time to time
appoint or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS.--Annual meetings of stockholders
for the election of directors and for such other business as may be
stated in the notice of the meeting, shall be held at such place,
either within or without the State of Delaware, and at such time
and date as the Board of Directors, by resolution, shall determine
and as set forth in the notice of the meeting. In the event the
Board of Directors fails to so determine the time, date and place
of meeting, the annual meeting of stockholders shall be held at the
registered office of the corporation in Delaware on the first
Thursday in October of each year.
If the date of the annual meeting shall fall upon a legal
holiday, the meeting shall be held on the next succeeding business
day. At each annual meeting, the stockholders entitled to vote
shall elect a Board of Directors and they may transact such other
corporate business as shall be stated in the notice of the meeting.
SECTION 2. OTHER MEETINGS.--Meetings of stockholders for any
purpose other than the election of directors may be held at such
time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting.
SECTION 3. VOTING.--Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation and
in accordance with the provisions of these By-Laws shall be
entitled to such number of votes, in person or by proxy, for each
share of stock entitled to vote held by such stockholder as
provided in the Certificate of Incorporation or the resolution or
resolutions of the directors establishing the voting rights, if
any, of Preferred Stock or any series thereof, but no proxy shall
be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote
for directors and the vote upon any question before the meeting,
shall be by ballot. All elections for directors shall be decided
by plurality vote; all other questions shall be elected by majority
vote except as otherwise provided by the Certificate of
Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the
ensuing election, arranged in alphabetical order, with the address
of each, and the number of shares held by each, shall be open to
the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 4. QUORUM.--Except as otherwise required by Law, by
the Certificate of Incorporation or by these By-Laws, the presence,
in person or by proxy, of stockholders holding stock of the
corporation entitled to vote having a majority of voting power
shall constitute a quorum at all meetings of the stockholders. In
case a quorum shall not be present at any meeting, a majority in
voting interest of the stockholders entitled to vote thereat,
present in person or by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the
requisite amount of stock entitled to vote shall be represented,
any business may be transacted which might have been transacted at
the meeting as originally noticed; but only those stockholders
entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof.
SECTION 5. SPECIAL PURPOSES.--Special meetings of the
stockholders for any purpose or purposes may be called by the
Chairman of the Board, President or Secretary, or by resolution of
the directors.
SECTION 6. NOTICE OF MEETINGS.--Written notice, stating the
place, date and time of the meeting, and the general nature of the
business to be considered, shall be given to each stockholder
entitled to vote thereat at his address as it appears on the
records of the corporation, not less than ten nor more than sixty
days before the date of the meeting.
SECTION 7. ACTION WITHOUT MEETING.--Unless otherwise provided
by the Certificate of Incorporation, any action required to be
taken at any annual or special meeting of stockholders, or any
action which may be taken at any annual or special meeting, may be
taken without a meeting without prior notice and without a vote, if
a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented
in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM.--The number of directors shall be
ten (10). The directors shall be elected at the annual meeting of
the stockholders and each director shall be elected to serve until
his successor shall be elected and shall qualify.
SECTION 2. RESIGNATIONS.--Any director, member of a committee
or other officer may resign at any time. Such resignation shall be
made in writing, and shall take effect at the time specified
therein, and if no time be specified, at the time of its receipt by
the Chairman of the Board, President or Secretary. The acceptance
of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES.--If the office of any director, member
of a committee or other officer becomes vacant, the remaining
directors in office, though less than a quorum by a majority vote,
may appoint any qualified person to fill such vacancy, who shall
hold office for the unexpired term and until his successor shall be
duly chosen.
SECTION 4. REMOVAL.--Except as hereinafter provided, any
director or directors may be removed either for or without cause at
any time by the affirmative vote of the holders of the shares of
stock outstanding and entitled to vote having a majority of the
voting power, at a special meeting of the stockholders called for
the purpose and the vacancies thus created may be filled, at the
meeting held for the purpose of removal, by the affirmative vote of
a majority in voting interest of the stockholders entitled to vote.
Unless the Certificate of Incorporation otherwise provides,
stockholders may effect removal of a director who is a member of a
classified Board of Directors only for cause. If the Certificate
of Incorporation provides for cumulative voting and if less than
the entire board is to be removed, no director may be removed
without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election
of the entire board of directors, or, if there be classes of
directors, at an election of the class of directors of which he is
a part.
If the holders of any class or series are entitled to elect
one or more directors by the provisions of the Certificate of
Incorporation, these provisions shall apply, in respect to the
removal without cause of a director or directors so elected, to the
vote of the holders of the outstanding shares of that class or
series and not to the vote of the outstanding shares as a whole.
SECTION 5. INCREASE OF NUMBER.--The number of directors may be
increased by amendment of these By-Laws by the affirmative vote of
a majority of the directors, though less than a quorum, or, by the
affirmative vote of a majority in voting interest of the
stockholders, at the annual meeting or at a special meeting called
for that purpose, and by like vote the additional directors may be
chosen at such meeting to hold office until the next annual
election and until their successors are elected and qualify.
SECTION 6. POWERS.--The Board of Directors shall exercise all
of the powers of the corporation except such as are by law, or by
the Certificate of Incorporation of the corporation or by these
By-Laws conferred upon or reserved to the stockholders.
SECTION 7. COMMITTEES.--The Board of Directors may, by
resolution or resolutions passed by a majority of the whole board,
designate one or more committees, each committee to consist of two
or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of
any member of such committee or committees, the member or members
thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution
of the Board of Directors, or in these By-Laws, shall have and may
exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation
or a revocation of a dissolution, or amending the By-Laws of the
corporation; and, unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend
or to authorize the issuance of stock.
SECTION 8. MEETINGS.--The newly elected directors may hold
their first meeting for the purpose or organization and the
transaction of business, if a quorum be present, immediately after
the annual meeting of the stockholders; or the time and place of
such meeting may be fixed by consent in writing of all the
directors.
Regular meetings of the directors may be held without notice
at such places and times as shall be determined from time to time
by resolution of the directors.
Special meetings of the board may be called by the Chairman of
the Board or by the Secretary on the written request of any two
directors on at least two day's notice to each director and shall
be held at such place or places as may be determined by the
directors, or as shall be stated in the call of the meeting.
Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors,
or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at
the meeting.
SECTION 9. QUORUM.--A majority of the directors shall
constitute a quorum for the transaction of business. If at any
meeting of the board there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time
until a quorum is obtained, and no further notice thereof need be
given other than by announcement at the meeting which shall be so
adjourned.
SECTION 10. COMPENSATION.--By resolution of the Board,
Directors may be compensated for their services as directors or as
members of committees, and receive a fixed fee and expenses of
attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the corporation in
any other capacity as an officer, agent or otherwise, and receiving
compensation therefor.
SECTION 11. ACTION WITHOUT MEETING.--Any action required or
permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting, if prior
to such action a written consent thereto is signed by all members
of the board, or of such committee as the case may be, and such
written consent is filed with the minutes of proceedings of the
board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS.--The officers of the corporation shall be
a Chairman of the Board, a President, a Chief Financial Officer, a
Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors
are elected and qualified. In addition, the Board of Directors may
elect one or more Vice-Presidents and such Assistant Secretaries
and Assistant Treasurers as they may deem proper. None of the
officers of the corporation need be directors. The officers shall
be elected at the first meeting of the Board of Directors after
each annual meeting. More than two offices may be held by the same
person.
SECTION 2. OTHER OFFICERS AND AGENTS.--The Board of Directors
may appoint such other officers and agents as it may deem
advisable, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
SECTION 3. CHAIRMAN.--The Chairman of the Board of Directors
shall be the chief executive officer of the corporation. He or she
shall preside at all meetings of the stockholders and of the Board
of Directors; and, subject to the direction and control of the
Board of Directors, he or she shall be in charge of the business of
the corporation and shall direct the policy and management of the
corporation. In general he or she shall discharge all the duties
incident to the position of chief executive officer and such other
duties as may be prescribed by the Board of Directors from time to
time. He or she may sign certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors have authorized to be
executed, except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the corporation, or shall
be required by law to be otherwise signed or executed, and he or
she may accomplish such execution either under or without the seal
of the corporation and either individually or with the Secretary,
any Assistant Secretary, or any other officer thereunto authorized
by the Board of Directors or these By-Laws, according to the
requirements of the form of the instrument. He or she may vote or
execute consents or proxies with respect to all securities which
the corporation is entitled to vote except as and to the extent
such authority shall be vested in a different officer or agent of
the corporation by the Board of Directors.
SECTION 4. PRESIDENT.--The President shall be the chief
operating officer of the corporation and, subject to the direction
and control of the Board of Directors and Chairman of the Board,
shall in general supervise, manage and control all of the
operations, business and affairs of the corporation. In the
absence of the Chairman of the Board, he or she shall preside at
all meetings of the stockholders and of the Board of Directors. He
or she may sign certificates for shares of the corporation, any
deeds, mortgages, bonds, contracts or other instruments which the
Board of Directors have authorized to be executed, except in cases
where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these By-Laws to some
other officer or agent of the corporation, or shall be required by
law to be otherwise signed or executed, and he or she may
accomplish such execution either under or without the seal of the
corporation and either individually or with the Secretary, any
Assistant Secretary, or any other officer thereunto authorized by
the Board of Directors or these By-Laws, according to the
requirements of the form of the instrument. In general he or she
shall perform all duties incident to the office of President and
such other duties as may be prescribed by the Chairman of the Board
or by the Board of Directors from time to time.
SECTION 5. VICE-PRESIDENT.--The Vice President (or in the
event there be more than one Vice President, each of the Vice
Presidents) shall assist the Chairman of the Board and President in
the discharge of their duties as the Chairman of the Board and
President may direct and shall perform such other duties as from
time to time may be assigned to him or her by the Chairman of the
Board or President or by the Board of Directors. In the absence of
the President or in the event of his or her inability or refusal to
act, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated by the
Board of Directors, or by the Chairman of the Board if the Board of
Directors has not made such a designation, or by the President if
neither the Chairman of the Board nor the Board of Directors has
made such a designation, or in the absence of any designation, then
in the order of seniority of tenure as Vice President) shall
perform the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the
President. Except in those instances in which the authority to
execute is expressly delegated to another officer or agent of the
corporation or a different mode of execution is expressly
prescribed by the Board of Directors or these By-Laws, the Vice
President (or each of them if there are more than one) may execute
for the corporation certificates for its shares and any contracts,
deeds, mortgages, bonds or other instruments which the Board of
Directors has authorized to be executed, and he or she may
accomplish such execution either under or without the seal of the
corporation and either individually or with the Secretary, any
Assistant Secretary, or any other officer thereunto authorized by
the Board of Directors, according to the requirements of the form
of the instrument.
SECTION 6. CHIEF FINANCIAL OFFICER.--The Chief Financial
Officer shall be the chief financial officer and principal
accounting officer of the corporation having the duties,
responsibility and authority incident to such position for all
financial and accounting matters involving the corporation. He or
she shall have such other duties, responsibilities and authority as
may be determined by and be responsible to, the Board of Directors,
the Audit Committee, the Chairman of the Board, and the President.
SECTION 7. TREASURER.--The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate
account of receipts and disbursements in books belonging to the
corporation. He or she shall deposit all moneys and other
valuables in the name and to the credit of the corporation in such
depositaries as may be designated by the Board of Directors or
pursuant to their authorization.
The Treasurer shall disburse the funds of the corporation as
may be ordered by the Board of Directors, or the Chairman of the
Board or the President, or the Chief Financial Officer, taking
proper vouchers for such disbursements. He or she shall render to
the Chairman of the Board, the President, the Chief Financial
Officer and Board of Directors at the regular meetings of the Board
of Directors, or whenever they may request it, an account of all
his or her transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he or
she shall give the corporation a bond for the faithful discharge of
his or her duties in such amount and with such surety as the board
shall prescribe. He or she shall be responsible to the Chief
Financial Officer.
SECTION 8. SECRETARY.--The Secretary shall give, or cause to
be given, notice of all meetings of stockholders and directors, and
all other notices required by law or by these By-Laws, and in case
of his or her absence or refusal or neglect so to do, any such
notice may be given by any person thereunto directed by the
Chairman of the Board or the President, or by the directors, or
stockholders, upon whose requisition the meeting is called as
provided in these By-Laws. He or she shall record all the
proceedings of the corporation and of the directors in a book to be
kept for that purpose, and shall perform such other duties as may
be assigned to him or her by the directors or Chairman of the Board
or the President. He or she shall have the custody of the seal of
the corporation and shall affix the same to all instruments
requiring it, when authorized by the directors or the Chairman of
the Board or the President, and attest the same.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
- --Assistant Treasurers and Assistant Secretaries, if any, shall be
elected and shall have such powers and shall perform such duties as
shall be assigned to them, respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK.--Certificates of stock,
signed by the Chairman of the Board, President or Vice-President,
and the Treasurer or an Assistant Treasurer, or Secretary or an
Assistant Secretary, shall be issued to each stockholder certifying
the number of shares owned by him in the corporation. Any of or
all the signatures may be facsimiles.
SECTION 2. LOST CERTIFICATES.--A new certificate of stock may
be issued in the place of any certificate theretofore issued by the
corporation, alleged to have been lost or destroyed, and the
directors may, in their discretion, require the owner of the lost
or destroyed certificate, or his legal representatives, to give the
corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation against
any claim that may be made against it on account of the alleged
loss of any such certificate, or the issuance of any such new
certificate.
SECTION 3. TRANSFER OF SHARES.--The shares of stock of the
corporation shall be transferable only upon its books by the
holders thereof in person or by their duly authorized attorneys or
legal representatives, and upon such transfer the old certificates
shall be surrendered to the corporation by the delivery thereof to
the person in charge of the stock and transfer books and ledgers,
or to such other person as the directors may designate, by whom
they shall be cancelled, and new certificates shall thereupon be
issued. A record shall be made of each transfer and whenever a
transfer shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE.--In order that the
corporation may determine the stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be
more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
SECTION 5. DIVIDENDS.--Subject to the provisions of the
Certificate of Incorporation, the Board of Directors may, out of
funds legally available therefor at any regular or special meeting,
declare dividends upon the capital stock of the corporation as and
when they deem expedient. Before declaring any dividend there may
be set apart out of any funds of the corporation available for
dividends, such sum or sums as the directors from time to time in
their discretion deem proper for working capital or as a reserve
fund to meet contingencies or for equalizing dividends or for such
other purposes as the directors shall deem conducive to the
interests of the corporation.
SECTION 6. SEAL.--The corporate seal shall be circular in form
and shall contain the name of the corporation, the year of its
creation and the words "CORPORATE SEAL DELAWARE." Said seal may be
used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR.--The fiscal year of the corporation
shall be determined by resolution of the Board of Directors.
SECTION 8. CHECKS.--All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued
in the name of the corporation shall be signed by such officer or
officers, agent or agents of the corporation, and in such manner as
shall be determined from time to time by resolution of the Board of
Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE.--Whenever any notice
is required by these By-Laws to be given, personal notice is not
meant unless expressly so stated, and any notice so required shall
be deemed to be sufficient if given by depositing the same in the
United States mail, postage prepaid, addressed to the person
entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on
the day of such mailing. Stockholders not entitled to vote shall
not be entitled to receive notice of any meetings except as
otherwise provided by Statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate
of Incorporation of the corporation or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be
made at any annual meeting of the stockholders or at any special
meeting thereof if notice of the proposed alteration or repeal or
By-Law or By-Laws to be made be contained in the notice of such
special meeting, by the affirmative vote of the stock issued and
outstanding and entitled to vote thereat having a majority of the
voting power, or by the affirmative vote of a majority of the Board
of Directors, at any regular meeting of the Board of Directors, or
at any special meeting of the Board of Directors, if notice of the
proposed alteration or repeal, or By-Law or By-Laws to be made, be
contained in the notice of such special meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 1. GENERAL.--The corporation shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (as
hereinafter defined) as provided in this Article and to the fullest
extent permitted by applicable law, as the same exists or may
hereafter be amended.
SECTION 2. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION.--Indemnitee shall be entitled to the
rights of indemnification provided in this Section 2 if, by reason
of his Corporate Status (as hereinafter defined), he is, or is
threatened to be made, a party to any Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the
corporation. Pursuant to this Section 2, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines
(including, without limitation, excise taxes assessed on an
Indemnitee with respect to an employee benefit plan) and amounts
paid in settlement actually and reasonably incurred by him or on
his behalf in connection with such Proceeding or any claim, issue
or matter therein, if he acted in Good Faith.
SECTION 3. PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION.--Indemnitee shall be entitled to the rights of
indemnification provided in this Section 3 if, by reason of his
Corporate Status, he is, or is threatened to be made, a party to
any Proceeding brought by or in the right of the corporation to
procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments,
penalties and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such Proceeding
if he acted in Good Faith. Notwithstanding the foregoing, no
indemnification against such Expenses, judgments, penalties and
amounts paid in settlement shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall
have been adjudged to be liable to the corporation if applicable
law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses,
judgments, penalties and amounts paid in settlement shall
nevertheless be made by the corporation in such event if and only
to the extent that the Court of Chancery of the State of Delaware,
or the court in which such Proceeding shall have been brought or is
pending, shall determine.
SECTION 4. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS
WHOLLY OR PARTLY SUCCESSFUL.--Notwithstanding any other provision
of this Article, to the extent that Indemnitee is, by reason of his
Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, he shall be indemnified to the
maximum extent permitted by law against all Expenses, judgments,
penalties, fines, and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection
therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one
or more but less than all claims, issues or matters in such
Proceeding, the corporation shall indemnify Indemnitee to the
maximum extent permitted by law against all Expenses, judgments,
penalties, fines, and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue
or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
SECTION 5. INDEMNIFICATION FOR EXPENSES OF A
WITNESS.--Notwithstanding any other provision of this Article, to
the extent that Indemnitee is, by reason of his Corporate Status,
a witness in any Proceeding, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf
in connection therewith.
SECTION 6. ADVANCEMENT OF EXPENSES.--Notwithstanding any
provisions to the contrary in Section 7, the corporation shall
advance all reasonable Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within twenty days
after the receipt by the corporation of a statement or statements
from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence
the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified
against such Expenses. Any advance and undertaking to repay
pursuant to this Section 6 shall be unsecured and interest free.
SECTION 7. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.--
(a) To obtain indemnification under this Article, Indemnitee
shall submit to the corporation a written request, including
therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to
determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the corporation shall, promptly
upon receipt of such a request for indemnification, advise the
Board of Directors in writing that Indemnitee has requested
indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 7(a) hereof, a
determination, if required by applicable law, with respect to
Indemnitee's entitlement thereto shall be made in the specific
case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined)
(unless Indemnitee shall request that such determination be made by
the Board of Directors or the stockholders, in which case by the
person or persons or in the manner provided for in clauses (ii) or
(iii) of this Section 7(b)) in a written opinion to the Board of
Directors, a copy of which shall be delivered to Indemnitee; (ii)
if a Change of Control shall not have occurred, (A) by the Board of
Directors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined), or (B) if a
quorum of the Board of Directors consisting of Disinterested
Directors is not obtainable or, even if obtainable, such quorum of
Disinterested Directors so directs, by Independent Counsel in a
written opinion to the Board of Directors, a copy of which shall be
delivered to Indemnitee or (C) by the stockholders of the
corporation; or (iii) as provided in Section 8(b) of this Article;
and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten
(10) days after such determination. Indemnitee shall cooperate
with the person, persons or entity making such determination with
respect to Indemnitee's entitlement to indemnification, including
providing to such person, persons or entity upon reasonable advance
request any documentation or information which is not privileged or
otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees
and disbursements) incurred by Indemnitee in so cooperating with
the person, persons or entity making such determination shall be
borne by the corporation (irrespective of the determination as to
Indemnitee's entitlement to indemnification) and the corporation
hereby indemnifies and agrees to hold Indemnitee harmless
therefrom.
(c) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 7(b) of this Article, the Independent Counsel shall be
selected as provided in this Section 7(c). If a Change of Control
shall not have occurred, the Independent Counsel shall be selected
by the Board of Directors, and the corporation shall give written
notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change of Control shall have
occurred, the Independent Counsel shall be selected by Indemnitee
(unless Indemnitee shall request that such selection be made by the
Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the corporation
advising it of the identity of the Independent Counsel so selected.
In either event, Indemnitee or the corporation, as the case may be,
may, within 7 days after such written notice of selection shall
have been given, deliver to the corporation or to Indemnitee, as
the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 13 of this Article, and the
objection shall set forth with particularity the factual basis of
such assertion. If such written objection is made, the Independent
Counsel so selected may not serve as Independent Counsel unless and
until a court has determined that such objection is without merit.
If, within 20 days after submission by Indemnitee of a written
request for indemnification pursuant to Section 7(a) hereof, no
Independent Counsel shall have been selected and not objected to,
either the corporation or Indemnitee may petition the Court of
Chancery of the State of Delaware or other court of competent
jurisdiction for resolution of any objection which shall have been
made by the corporation or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by the Court or by such other person
as the Court shall designate, and the person with respect to whom
an objection is so resolved or the person so appointed shall act as
Independent Counsel under Section 7(b) hereof. The corporation
shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 7(b) hereof, and the corporation shall
pay all reasonable fees and expenses incident to the procedures of
this Section 7(c), regardless of the manner in which such
Independent Counsel was selected or appointed. Upon the due
commencement of any judicial proceeding or arbitration pursuant to
Section 9(a)(iii) of this Article, Independent Counsel shall be
discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional
conduct then prevailing).
SECTION 8. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.--
(a) In making a determination with respect to entitlement to
indemnification hereunder, the person, persons or entity making
such determination shall presume that Indemnitee is entitled to
indemnification under this Article if Indemnitee has submitted a
request for indemnification in accordance with Section 7(a) of this
Article, and the corporation shall have the burden of proof to
overcome that presumption in connection with the making by any
person, persons or entity of any determination contrary to that
presumption.
(b) If the person, persons or entity empowered or selected
under Section 7 of this Article to determine whether Indemnitee is
entitled to indemnification shall not have made such determination
within 60 days after receipt by the corporation of the request
therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification
under applicable law; provided, however, that such 60-day period
may be extended for a reasonable time, not to exceed an additional
30 days, if the person, persons or entity making the determination
with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided,
further, that the foregoing provisions of this Section 8(b) shall
not apply (i) if the determination of entitlement to
indemnification is to be made by the stockholders pursuant to
Section 7(b) of this Article and if (A) within 15 days after
receipt by the corporation of the request for such determination
the Board of Directors has resolved to submit such determination to
the stockholders for their consideration at an annual meeting
thereof to be held within 75 days after such receipt and such
determination is made thereat, or (B) a special meeting of
stockholders is called within 15 days after such receipt for the
purpose of making such determination, such meeting is held for such
purpose within 60 days after having been so called and such
determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel
pursuant to Section 7(b) of this Article.
(c) The termination of any Proceeding or of any claim, issue
or matter therein by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not (except
as otherwise expressly provided in this Article) of itself
adversely affect the right of Indemnitee to indemnification or
create a presumption that Indemnitee did not act in Good Faith.
(d) For purposes of any determination of Good Faith,
Indemnitee shall be deemed to have acted in Good Faith if
Indemnitee's action is based on the records or books of account of
the Enterprise, including financial statements, or on information
supplied to Indemnitee by the officers of the Enterprise in the
course of their duties, or on the advice of legal counsel for the
Enterprise or on information or records given or reports made to
the Enterprise by an independent certified public accountant or by
an appraiser or other expert selected with reasonable care by the
Enterprise. The provisions of this Section 7(d) shall not be
deemed to be exclusive or to limit in any way the other
circumstances in which the Indemnitee may be deemed to have met the
applicable standard of conduct set forth in this Article.
(e) The knowledge and/or actions, or failure to act, of any
director, officer, agent or employee of the Enterprise shall not be
imputed to Indemnitee for purposes of determining the right to
indemnification under this Article.
SECTION 9. REMEDIES OF INDEMNITEE.-
(a) In the event that (i) a determination is made pursuant to
Section 7 of this Article that Indemnitee is not entitled to
indemnification under this Article, (ii) advancement of Expenses is
not timely made pursuant to Section 6 of this Article, (iii) the
determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 7(b) of this Article and
such determination shall not have been made and delivered in a
written opinion within 90 days after receipt by the corporation of
the request for indemnification, (iv) payment of indemnification is
not made pursuant to Section 5 of this Article within ten (10) days
after receipt by the corporation of a written request therefor, or
(v) payment of indemnification is not made within ten (10) days
after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made
pursuant to Section 8 of this Article, Indemnitee shall be entitled
to an adjudication in an appropriate court of the State of
Delaware, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses.
Alternatively, Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the
rules of the American Arbitration Association. Indemnitee shall
commence such proceeding seeking an adjudication or an award in
arbitration within 180 days following the date on which Indemnitee
first has the right to commence such proceeding pursuant to this
Section 9(a). The corporation shall not oppose Indemnitee's right
to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made
pursuant to Section 7 of this Article that Indemnitee is not
entitled to indemnification, any judicial proceeding or arbitration
commenced pursuant to this Section 9 shall be conducted in all
respects as a de novo trial, or arbitration, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse
determination. In any judicial proceeding or arbitration commenced
pursuant to this Section 9 the corporation shall have the burden of
proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have
been made pursuant to Section 7 or 8 of this Article that
Indemnitee is entitled to indemnification, the corporation shall be
bound by such determination in any judicial proceeding or
arbitration commenced pursuant to this Section 9, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification
under applicable law.
(d) The corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this
Section 9 that the procedures and presumptions of this Article are
not valid, binding and enforceable and shall stipulate in any such
court or before any such arbitrator that the corporation is bound
by all the provisions of this Article.
(e) In the event that Indemnitee, pursuant to this Section 9,
seeks a judicial adjudication of or an award in arbitration to
enforce his rights under, or to recover damages for breach of, this
Article, Indemnitee shall be entitled to recover from the
corporation, and shall be indemnified by the corporation against,
any and all expenses (of the types described in the definition of
Expenses in Section 13 of this Article) actually and reasonably
incurred by him in such judicial adjudication or arbitration, but
only if he prevails therein. If it shall be determined in said
judicial adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by Indemnitee in connection
with such judicial adjudication or arbitration shall be
appropriately prorated.
SECTION 10. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE;
SUBROGATION.--
(a) The rights of indemnification and to receive advancement
of Expenses as provided by this Article shall not be deemed
exclusive of any other rights to which Indemnitee may at any time
be entitled under applicable law, the Certificate of Incorporation,
the By-Laws, any agreement, a vote of stockholders or a resolution
of directors, or otherwise. The rights conferred by this Article
shall be deemed contract rights and no amendment, alteration or
repeal of this Article or of any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or
omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal. The provisions of this Article
shall continue as to an Indemnitee whose Corporate Status has
ceased and shall inure to the benefit of his heirs, executors and
administrators.
(b) To the extent that the corporation maintains an insurance
policy or policies providing liability insurance for directors,
officers, employees, agents or fiduciaries of the corporation or of
any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such person serves at the
request of the corporation, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director,
officer, employee or agent under such policy or policies.
(c) In the event of any payment under this Article, the
corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee, who shall execute all
papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to
enable the corporation to bring suit to enforce such rights.
(d) The corporation shall not be liable under this Article to
make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received
such payment under any insurance policy, contract, agreement or
otherwise.
(e) The corporation shall have the express authority to enter
into such agreements as the Board of Directors deems appropriate
for the indemnification of present or future directors, officers,
employees or agents of the corporation in connection with their
service to, or status with, any Enterprise.
SECTION 11. SEVERABILITY.--If any provision or provisions of
this Article shall be held to be invalid, illegal or unenforceable
for any reason whatsoever: (a) the validity, legality and
enforceability of the remaining provisions of this Article
(including without limitation, each portion of any Section of this
Article containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired
thereby; and (b) to the fullest extent possible, the provisions of
this Article (including, without limitation, each portion of any
Section of this Article containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
SECTION 12. CERTAIN PERSONS NOT ENTITLED TO INDEMNIFICATION OR
ADVANCEMENT OF EXPENSES.--Notwithstanding any other provision of
this Article, no person shall be entitled to indemnification or
advancement of Expenses under this Article with respect to any
Proceeding, or any claim therein other than to enforce
indemnification rights under this Article, brought or made by him
against the corporation.
SECTION 13. DEFINITIONS.--For purposes of this Article:
(a) "Change in Control" means a change in control of the
corporation occurring after the Effective Date of a nature that
would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A (or in response to any similar item
on any similar schedule or form) promulgated under the Securities
Exchange Act of 1934 (the "Act"), whether or not the corporation is
then subject to such reporting requirement; provided, however,
that, without limitation, such a Change in Control shall be deemed
to have occurred if after the Effective Date (i) any "person" (as
such term is used in Sections 1 3(d) and 1 4(d) of the Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the corporation
representing 50% or more of the combined voting power of the
corporation's then outstanding securities without the prior
approval of at least two-thirds of the members of the Board of
Directors in office immediately prior to such person attaining such
percentage interest; (ii) the corporation is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of
Directors in office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors
thereafter; or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the
Board of Directors (including for this purpose any new director
whose election or nomination for election by the corporation's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning
of such period) cease for any reason to constitute at least a
majority of the Board of Directors.
(b) "Corporate Status" describes the status of a person who
is or was a director, officer, employee, agent or fiduciary of the
corporation or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which
such person is or was serving at the request of the corporation.
(c) "Disinterested Director" means a director of the
corporation who is not and was not a party to the Proceeding in
respect of which indemnification is sought by Indemnitee.
(d) "Effective Date" means September 11, 1986.
(e) "Enterprise" shall mean the corporation and any other
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise of which Indemnitee is or was serving at
the request of the corporation as a director, officer, employee,
agent or fiduciary.
(f) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs transcript costs, fees of experts, witness
fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, and all
other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute
or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(g) "Good Faith" shall mean Indemnitee having acted in good
faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal Proceeding, having had no reasonable cause
to believe Indemnitee's conduct was unlawful.
(h) "Indemnitee" includes any person who is, or is threatened
to be made, a witness in or a party to any Proceeding as described
in Sections 2, 3, 4 or 5 of this Article by reason of his Corporate
Status.
(i) "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and
neither presently is, nor in the past five years has been, retained
to represent (i) the corporation or Indemnitee in any matter
material to either such party, or (ii) any other party to the
Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of
interest in representing either the corporation or Indemnitee in an
action to determine Indemnitee's rights under this Article.
(j) "Proceeding" includes any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution
mechanism, investigation, administrative hearing or any other
threatened, pending or completed proceeding whether civil,
criminal, administrative or investigative, except one initiated by
an Indemnitee. For purposes of the foregoing sentence, a
"Proceeding" shall not be deemed to have been initiated by
Indemnitee where Indemnitee seeks pursuant to Section 9 of this
Article to enforce his rights under this Article.
SECTION 14. NOTICES.--Any notice, request or other
communication required or permitted to be given to the corporation
under this Article shall be in writing and either delivered in
person or sent by telex, telegram or certified or registered mail,
postage prepaid, return receipt requested, to the Secretary of the
corporation and shall be effective only upon receipt by the
Secretary.
SECTION 15. MISCELLANEOUS.--Use of the masculine pronoun shall
be deemed to include usage of the feminine pronoun where
appropriate.
Exhibit 11
Richardson Electronics, Ltd. and Subsidiaries
Computation of Net Income per Share
Net income (loss) per share for 1997, 1996 and 1995 was computed by
dividing net income(loss) by the weighted average number of common and
common share equivalents outstanding. The treasury stock method was applied
to those stock options that would have a dilutive effect on net income per
share. The average market price of the Company's stock was used in
determining primary net income per share, while the year-end market price
(if greater than the average market price) was used in determining fully
diluted net income per share.
The Company's convertible debentures have not been included in the
calculation of net income per share because their effect would be anti-
dilutive. Fully diluted net income per share has not been presented on the
face of the income statement because it does not differ significantly from
primary income per share for each year.
(shares and amounts in thousands)
1997 1996 1995
-------- -------- --------
Primary net income (loss) per share:
Weighted average shares outstanding 11,892 11,659 11,425
Effect of dilutive stock options - 343 141
-------- -------- --------
Total 11,892 12,002 11,566
======== ======== ========
Net income (loss) before
extraordinary item $(1,005) $ 8,111 $ 2,481
Extraordinary gain (loss),
net of tax (488) - 527
-------- -------- --------
Net income (loss) $(1,493) $ 8,111 $ 3,008
======== ======== ========
Per share amounts:
Net income (loss) before
extraordinary item $ (.08) $ .68 $ .21
Extraordinary gain (loss),
net of tax (.04) .05
-------- -------- --------
Net income (loss) per share $ (.12) $ .68 $ .26
======== ======== ========
Fully diluted net income per share:
Weighted average shares outstanding 11,892 11,659 11,425
Effect of dilutive stock options - 363 174
-------- -------- --------
Total 11,892 12,022 11,599
======== ======== ========
Net income (loss) before
extraordinary item $ (1,005) $ 8,111 $ 2,481
Extraordinary gain (loss),
net of tax (488) - 527
-------- -------- --------
Net income (loss) $ (1,493) $ 8,111 $ 3,008
======== ======== ========
Per share amounts:
Net income (loss) before
extraordinary item $ (.08) $ .67 $ .21
Extraordinary gain (loss),
net of tax (.04) .05
-------- -------- --------
Net income (loss) per share $ (.12) $ .67 $ .26
======== ======== ========
Exhibit 21
SUBSIDIARIES
OF
RICHARDSON ELECTRONICS, LTD.
Richardson Electronics Canada, Ltd. Canada
Richardson Electronics (Europe) Ltd. United Kingdom
RESA, SNC France
Richardson France SNC France
Richardson Electronics Italy SRL Italy
Richardson Electronics Iberica, S.A. Spain
Richardson Electronics GmbH Germany
Richardson Electronics Japan K.K. Japan
Richardson Electronics Pte Ltd. Singapore
Richardson Electronics S.A. de C.V. Mexico
Richardson Electronics Benelux B.V. The Netherlands
Richardson Electronics do Brasil Ltda. Brasil
Richardson Electronics Pty Limited Australia
Tubemaster, Inc. United States
Richardson Electronics Korea Limited Korea
Compucon Distributors, Inc. United States
Richardson Electronics (Thailand) Ltd. Thailand
Burtek Systems Inc. Canada
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Annual Report on
Form 10-K for the year ended May 31, 1997 of Richardson Electronics, Ltd.
of our report dated July 8, 1997, included in the 1997 Annual Report to
Stockholders of Richardson Electronics, Ltd.
Our audit also included the financial statement schedule of Richardson
Electronics, Ltd. listed in Item 14(a). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in Post Effective
Amendment Number 1 to Registration Statement Number 2-89888 on Form S-8,
Registration Statement Number 33-36475 on Form S-8, Registration Statement
Number 33-54745 on Form S-8, Registration Statement Number 333-02865 on Form
S-8, Registration Statement Number 333-03965 on Form S-8, Registration
Statement Number 333-04071 on Form S-8, Registration Statement Number
333-04457 on Form S-8 and Registration Statement Number 333-04767 on Form
S-8 of our report dated July 8, 1997, with respect to the consolidated
financial statements incorporated herein by reference, and our report
included in the preceding paragraph with respect to the financial
statement schedule included in the Annual Report on Form 10-K for the
year ended May 31, 1997 of Richardson Electronics, Ltd.
/s/ Ernst & Young LLP
Chicago, Illinois
August 25, 1997
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