RICHARDSON ELECTRONICS LTD/DE, 10-Q, 2001-01-12

RICHARDSON ELECTRONICS LTD/DE
10-Q, 2001-01-12
ELECTRONIC PARTS & EQUIPMENT, NEC

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

(X)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

November 30, 2000

_______________________________________________________________________

( )

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from

____________________________

__________________________________

Commission file number

0-12906

____________________

RICHARDSON ELECTRONICS, LTD.

____________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)

Delaware

36-2096643

____________________________________________________________________________________________________________

(State of incorporation or organization)

(I.R.S. Employer Identification No.)

40W267 Keslinger Road, PO Box 393, LaFox, Illinois 60147

____________________________________________________________________________________________________________

(Address of principal executive offices and zip code)

(630) 208-2200

____________________________________________________________________________________________________________

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sec-

tions 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)

( )

As of January 10, 2001, there were outstanding 10,149,647 shares of Common Stock, $.05 par value,

and 3,231,562 shares of Class B Common Stock, $.05 par value, which are convertible into Common

Stock on a share-for-share basis.

This Quarterly Report on Form 10-Q contains 17 pages. An exhibit index is at page 17.

(1)

Richardson Electronics, Ltd. and Subsidiaries

Form 10-Q

For the Three- and Six-Month Periods Ended November 30, 2000 and 1999

INDEX

Page

__________

PART I - FINANCIAL INFORMATION

Consolidated Condensed Balance Sheets

Consolidated Condensed Income Statements

Consolidated Condensed Statements of Cash Flows

Notes to Consolidated Condensed Financial Statements

Management's Discussion and Analysis of Results

of Operations and Financial Condition

PART II - OTHER INFORMATION

(2)

Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands)

					November 30	May 31
					2000	2000
					_______________	________________
					(Unaudited)
ASSETS
Current assets:
	Cash and equivalents				$ 17,370	$ 11,832
	Receivables, less allowance of $3,204 and $2,991				95,238	77,821
	Inventories				138,194	119,224
	Other				14,078	13,346
					_______________	________________
		Total current assets			264,880	222,223
Property, plant and equipment					68,304	64,091
	Less accumulated depreciation				(40,708)	(38,240)
					_______________	________________
			Property, plant and equipment, net		27,596	25,851
Other assets					16,893	16,851
					_______________	________________
		Total assets			$ 309,369	$ 264,925
					===============	===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable				$ 40,970	$ 30,882
	Accrued expenses				16,460	14,452
	Notes payable and current portion of long-term debt				1,694	2,619
					_______________	________________
		Total current liabilities			59,124	47,953
Long-term debt, less current portion					140,722	117,643
Deferred income taxes					5,255	5,336
Stockholders' equity:
	Common stock, $.05 par value; issued 11,884 at
		November 30, 2000 and 11,670 at May 31, 2000			594	583
	Class B common stock, convertible, $.05 par value; issued
		3,232 at November 30, 2000 and at May 31, 2000			162	162
	Additional paid-in capital				88,280	84,514
	Common stock in treasury, at cost; 1,738 shares at
		November 30, 2000 and 1,915 at May 31, 2000			(10,233)	(11,045)
	Retained earnings				43,016	34,184
	Foreign currency translation adjustment				(17,551)	(14,405)
					_______________	________________
		Total stockholders' equity			104,268	93,993
					_______________	________________
		Total liabilities and stockholders' equity			$ 309,369	$ 264,925
					===============	===============


See notes to consolidated condensed financial statements.

				(3)

Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Income Statements
For the Three- and Six- Month Periods Ended November 30, 2000 and 1999
(unaudited) (in thousands, except per share amounts)

			Three Months			Six Months
			______________________________			______________________________
			2000		1999	2000	1999
			_____________		_____________	_____________	_____________
Net sales			$ 131,079		$ 97,578	$ 251,185	$ 193,142
Cost of products sold			96,918		71,017	185,391	140,913
			___________		___________	___________	___________
	Gross margin		34,161		26,561	65,794	52,229
Selling, general and administrative
	Expenses		23,730		20,042	46,024	39,629
			___________		___________	___________	___________
		Operating income	10,431		6,519	19,770	12,600
Other (income) expense:
	Interest expense		2,649		2,167	5,124	4,442
	Investment income		(66)		(290)	(108)	(417)
	Other, net		(4)		(17)	22	65
			___________		___________	___________	___________
			2,579		1,860	5,038	4,090
			___________		___________	___________	___________
		Income before income taxes	7,852		4,659	14,732	8,510
Income taxes			2,660		1,390	4,860	2,540
			___________		___________	___________	___________
		Net income	$ 5,192		$ 3,269	$ 9,872	$ 5,970
			============		============	============	============
Net income per share - basic:
		Net income per share	$ .39		$ .26	$ .74	$ .47
			============		============	============	============
		Average shares outstanding	13,364		12,647	13,282	12,635
			============		============	============	============
Net income per share - diluted:
		Net income per share	$ .34		$ .26	$ .66	$ .47
			============		============	============	============
		Average shares outstanding	17,631		12,759	17,580	12,722
			============		============	============	============
Dividends per common share			$ .04		$ .04	$ .08	$ .08
			============		============	============	============
Comprehensive income:
	Net income		$ 5,192		$ 3,269	$ 9,872	$ 5,970
	Foreign currency translation		(2,227)		(1,386)	(3,146)	(388)
			___________		___________	___________	___________
		Comprehensive income	$ 2,965		$ 1,883	$ 6,726	$ 5,582
			============		============	============	============


See notes to consolidated condensed financial statements.

				(4)

Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
For the Six-Month Periods Ended November 30, 2000 and 1999
(unaudited) (in thousands)

							2000		1999
							___________		___________
Operating Activities:
	Net income						$ 9,872		$ 5,970

	Non-cash charges to income:
		Depreciation					2,740		2,317
		Amortization of intangibles and financing costs					500		378
		Deferred income taxes					(242)		1,329
		Contribution to employee stock ownership plan					1,310		-
							___________		___________
			Total non-cash charges				4,308		4,024
							___________		___________
	Changes in working capital, net of effects of
		currency translation and business acquisitions:
			Accounts receivable				(18,638)		(8,487)
			Inventories				(20,574)		(1,459)
			Other current assets				(668)		875
			Accounts payable				9,640		3,931
			Other liabilities				1,569		2,706
							___________		___________
				Net changes in working capital			(28,671)		(2,434)
							___________		___________
				Net cash (used in) provided by
				operating activities			(14,491)		7,560
							___________		___________
Financing Activities:
	Proceeds from borrowings						35,855		4,077
	Payments on debt						(12,535)		(6,362)
	Proceeds from stock issuance						3,278		360
	Cash dividends						(1,039)		(967)
							___________		___________
				Net cash provided by (used in)
				financing activities			25,559		(2,892)
							___________		___________

Investing Activities:
	Capital expenditures						(4,621)		(3,433)
	Business acquisitions						(1,997)		(655)
	Investments, notes receivable and other						1,088		(1,080)
							___________		___________
				Net cash used in investing activities			(5,530)		(5,168)
							___________		___________
				Increase (decrease) in cash and equivalents			5,538		(500)

Cash and equivalents at beginning of year							11,832		12,569
							___________		___________

				Cash and equivalents at end of period			$ 17,370		$ 12,069
						===========		===========


See notes to consolidated condensed financial statements.

					(5)

Richardson Electronics, Ltd. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
Three- and Six-Month Periods Ended November 30, 2000 and 1999
(Unaudited)

Note A -- Basis of Presentation

The accompanying unaudited Consolidated Condensed Financial Statements (Statements) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the periods covered have been reflected in the Statements. Certain information and footnotes necessary for a fair presentation of the financial position and results of operations in conformity with generally accepted accounting principles have been omitted in accordance with the aforementioned instructions. It is suggested that the Statements be read in conjunction with the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2000.

The Statements are presented for the second quarter and first six months of fiscal 2001 (periods ended November 30, 2000) compared to second quarter and first six months of fiscal 2000 (periods ended November 30, 1999). The Company accounts for its results of operations on a 52/53 week period ending on the Saturday nearest May 31 each year. Results for the first six months include 26 weeks in fiscal 2001 and 27 weeks in fiscal 2000. Results for the second quarter include 13 weeks in both years.

Note B -- Income Taxes

The income tax provisions for the six-month periods ended November 30, 2000 and November 30, 1999 are based on the estimated annual effective tax rates of 33% and 30%, respectively. The effective rate is less than the U.S. federal statutory rate of 34% due to U.S. foreign sales corporation tax benefits and utilization of previously unrecognized foreign net operating loss carryforwards, partially offset by state income taxes. The effective tax rate in fiscal 2001 is higher than in fiscal 2000 because the U.S. Federal statutory rate increases from 34% to 35% on pretax income levels above $10 million and, additionally, tax benefits become proportionately less as pre-tax income increases.

In the first quarter of fiscal 2001, the annual effective tax rate was estimated to be 32%. The reported tax rate for the second quarter of fiscal 2001 of 34% was necessary to arrive at a six-month rate equal to the estimated annual effective rate of 33%.

Note C -- Calculation of Earnings per Share

Basic earnings per share is calculated by dividing net income by the weighted average number of Common and Class B Common shares outstanding.

(6)

Diluted earnings per share is calculated by dividing net income (adjusted for interest savings, net of tax, on assumed bond conversions) by the actual shares outstanding and share equivalents that would arise from the exercise of stock options and the assumed conversion of convertible bonds. Out-of-the-money (exercise price higher than market price) stock options are excluded from the calculation because they are anti-dilutive. The Company's 8 1/4% and 7 1/4% convertible debentures are excluded from the calculation in fiscal 2000 as assumed conversion would be anti-dilutive. The per share amounts presented in the Consolidated Condensed Income Statement are based on the following amounts:

			Second Quarter		Six Months
			______________________		______________________
			FY 2001	FY 2000	FY 2001	FY 2000
			________	________	________	________
Numerator for basic EPS:
	Net income		$ 5,192	$ 3,269	$ 9,872	$ 5,970
			========	========	========	========
Denominator for basic EPS:
	Shares outstanding, June 1		12,987	12,623	12,987	12,623
	Additional shares issued		377	24	295	12
			________	________	________	________
		Average shares outstanding	13,364	12,647	13,282	12,635
			========	========	========	========
Numerator for diluted EPS:
	Net income		$ 5,192	$ 3,269	$ 9,872	$ 5,970
	Interest savings, net of tax, on
		assumed conversion of bonds	865	-	1,730	-
			________	________	________	________
		Adjusted net income	$ 6,057	$ 3,269	$ 11,602	$ 5,970
			========	========	========	========
Denominator for diluted EPS:
	Average shares outstanding		13,364	12,647	13,282	12,635
	Effect of dilutive stock options		587	112	618	87
	Assumed conversion of bonds		3,680	-	3,680	-
			________	________	________	________
		Average shares outstanding	17,631	12,759	17,580	12,722
			========	========	========	========

Note D -- Industry and Market Information

The Company completed the reorganization of its marketing and sales structure into five strategic business units (SBU's) in the fourth quarter of fiscal 2000. Historical data for fiscal 2000 has been restated to conform to the new organizational structure. The new units are: RF & Wireless Communications Group (Wireless), Industrial Power Group (Industrial), Medical Systems Group (Medical), Security Systems Division (Security) and Display Systems Group (Display).

Wireless serves the rapidly expanding wireless voice and data telecommunications industry and radio and television broadcast industry. Industrial serves a broad range of customers including the steel, automotive, textile, plastics, semiconductor, marine and avionics industries.

(7)

Medical serves the medical imaging market, providing system upgrade and integration services in addition to a wide range of diagnostic imaging components. Security provides security systems and related design services with an emphasis on closed circuit television (CCTV). Display provides system integration and custom product solutions for the public information display, financial, point-of-sale and general data display markets.

SBUs are managed by Vice Presidents and General Managers who report to the President and Chief Operating Officer. The President evaluates performance and allocates resources, in part, based on the direct operating contribution of each SBU. Direct operating contribution is defined as gross margin less product management and direct selling expenses. In North America and Europe, the sales force is organized by SBU and, accordingly, these costs are included in direct expenses. In Latin America, Asia / Pacific and the rest of the world, some of the regional sales force is shared and, accordingly, is not included in direct expenses. Inter-segment sales are not significant.

Accounts receivable, inventory, goodwill and certain notes receivable are identified by SBU. Cash, net property and other assets are not identifiable by SBU. Accordingly, depreciation, amortization expense and financing costs are not identifiable by SBU. Operating results for the three- and six-month periods ended November 30, 2000 and November 30, 1999 and identifiable assets as of the end of the respective periods by SBU are summarized in the following tables (in thousands):

Second Quarter		Sales	Margin		Contribution	Assets
		______________	______________		______________	______________
FY 2001
	Wireless	$ 63,899	$ 16,950		$ 11,540	$ 115,716
	Industrial	23,296	8,184		6,742	44,538
	Medical	10,361	2,289		1,274	26,909
	Security	21,979	5,102		1,787	35,443
	Display	11,544	2,725		1,508	21,983
		___________	___________		___________	___________
	Total	$ 131,079	$ 35,250		$ 22,851	$ 244,589
		===========	===========		===========	===========

FY 2000
	Wireless	$ 34,984	$ 9,594		$ 6,273	$ 77,862
	Industrial	21,296	7,557		5,765	41,202
	Medical	10,328	2,062		1,148	24,571
	Security	21,193	5,026		1,784	31,720
	Display	9,777	2,590		1,488	22,515
		___________	___________		___________	___________
	Total	$ 97,578	$ 26,829		$ 16,458	$ 197,870
		===========	===========		===========	===========
				(8)


Six months		Sales	Margin		Contribution	Assets
		______________	______________		______________	______________
FY 2001
	Wireless	$ 121,005	$ 32,002		$ 21,915	$ 115,716
	Industrial	45,827	16,178		13,349	44,538
	Medical	20,257	4,496		2,589	26,909
	Security	42,644	9,909		4,027	35,443
	Display	21,452	5,069		2,616	21,983
		___________	___________		___________	___________
	Total	$ 251,185	$ 67,654		$ 44,496	$ 244,589
		===========	===========		===========	===========

FY 2000
	Wireless	$ 66,365	$ 18,047		$ 11,588	$ 77,862
	Industrial	42,410	15,139		11,645	41,202
	Medical	20,744	4,020		2,212	24,571
	Security	41,799	9,907		4,265	31,720
	Display	21,824	5,867		3,616	22,515
		___________	___________		___________	___________
	Total	$ 193,142	$ 52,980		$ 33,326	$ 197,870
		===========	===========		===========	===========

Reconciliations of gross margin, direct operating contribution and assets to the relevant consolidated amounts follow. (Other assets includes miscellaneous receivables, manufacturing inventories and sundry assets.) (in thousands):

		Second Quarter		Six Months
		_______________________		_______________________
		FY 2001	FY 2000	FY2001	FY2000
		__________	__________	__________	__________
Gross margin - segments total		$ 35,250	$ 26,829	$ 67,654	$ 52,980
Manufacturing variances and other costs		(1,089)	(268)	(1,860)	(751)
		__________	__________	__________	__________
	Gross margin	$ 34,161	$ 26,561	$ 65,794	$ 52,229
		==========	==========	==========	==========
Segment profit contribution		$ 22,851	$ 16,458	$ 44,496	$ 33,326
Manufacturing variances and other costs		(1,089)	(268)	(1,860)	(751)
Regional selling expenses		(7,668)	(6,651)	(11,714)	(10,053)
Administrative expenses		(3,831)	(3,061)	(11,320)	(9,963)
		__________	__________	__________	__________
	Operating income	$ 10,263	$ 6,478	$ 19,602	$ 12,559
		==========	==========	==========	==========
Segment assets		$ 244,589	$ 197,870
Cash and equivalents		17,370	12,069
Other current assets		15,034	8,450
Net property		27,596	24,057
Other assets		4,780	3,672
		__________	__________
	Total assets	$ 309,369	$ 246,118
		==========	==========

The Company sells its products to companies in a wide range of industries and performs periodic credit evaluations of its customers' financial condition.

(9)

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.

Note E -- Derivative Financial Instruments

The Company is exposed to potential changes in interest rates under its revolving credit agreements. The Company uses interest rate swap agreements to manage its exposure to interest rate changes.

In June 1998, the FASB issued statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by FASB Statements Nos. 137 and 138. The Company is required to adopt this statement on June 1, 2001. The Company does not expect adoption of this statement to have a significant impact on its financial position or results of operations.

(10)

Richardson Electronics, Ltd. and Subsidiaries
Management's Discussion and Analysis
Of Results of Operations and Financial Condition
Three- and Six-Month Periods Ended November 30, 2000 and 1999
(Unaudited)

Results of Operations
Sales and Gross Margin

Net sales for the second quarter of fiscal 2001 were $131.1 million, the Company's seventh consecutive record quarter. Sales increased 34.3% over last year's second quarter of $97.6 million. Sales for the six-month period were $251.2 million, an increase of 30.1%. Sales, percentage change from the prior year, gross margins and gross margin percent of sales by SBU are summarized in the following table. Gross margins for each SBU include provisions for returns and overstock. Provisions for LIFO, manufacturing charges and other costs are included under the caption "Corporate" (in thousands).

Sales

Gross Margin

_________________________________

_____________________________________________

GM% of

FY 2001

FY 2000

Change

FY 2001

Sales

FY 2000

Sales

_________

_______

_________

________

_________

________

Second Quarter

Wireless

$ 63,899

$ 34,984

82.7%

$ 16,950

26.5%

$ 9,594

27.4%

Industrial

23,296

21,296

9.4%

8,184

35.1%

7,557

35.5%

Medical

10,361

10,328

0.3%

2,289

22.1%

2,062

20.0%

Security

21,979

21,193

3.7%

5,102

23.2%

5,026

23.7%

Display

11,544

9,777

18.1%

2,725

23.6%

2,590

26.5%

Corporate

(1,089)

(268)

_________

Total

$ 131,079

$ 97,578

34.3%

$ 34,161

26.1%

$ 26,561

27.2%

=========

========

=========

Six Months

Wireless

$ 121,005

$ 66,365

82.3%

$ 32,002

26.4%

$ 18,047

27.2%

Industrial

45,827

42,410

8.1%

16,178

35.3%

15,139

35.7%

Medical

20,257

20,744

-2.3%

4,496

22.2%

4,020

19.4%

Security

42,644

41,799

2.0%

9,909

23.2%

9,907

23.7%

Display

21,452

21,824

-1.7%

5,069

23.6%

5,867

26.9%

Corporate

(1,860)

(751)

_________

Total

$ 251,185

$193,142

30.1%

$ 65,794

26.2%

$ 52,229

27.0%

=========

========

=========

Wireless' second quarter sales increased 82.7% from fiscal 2000 levels, based upon increased demand for RF / microwave components to support the expansion of the cellular infrastructure and deliveries under a telematics contract for an original equipment manufacturer. Telematics is a new technology used in automobiles for all types of wireless communications. The gross margin rate for Wireless declined to 26.5% from 27.4% last year, primarily due to several large volume contracts at lower margins. Sales levels and gross margin rates for the six-month periods reflect similar trends as the quarter results.

(11)

Industrial's second quarter sales increased 9.4%, primarily in microwave generators and DC power component products. Sales levels and gross margin rates for the six-month periods reflect similar trends as the quarter results.

Sales of the Medical SBU in fiscal 2001 were comparable to the prior year's second quarter. Sales of high resolution monitors increased 67.9% to $7.6 million, offset by declines in sales of x-ray tubes, image intensifiers and medical logistics services. Gross margins increased to 22.1% of sales in fiscal 2001 compared to 20.0% in the second quarter of fiscal 2000. The margin improvement reflects better operating efficiencies in tube reloading and lower customer return levels. Certain low-margin sales contracts also affected fiscal 2000 margins. The six-month results reflect the same sales and margin trends, but gains in monitor sales did not fully offset the decline in other sales.

Security sales increased by 3.7% for the second quarter 2001 from fiscal 2000 levels. Gross margins declined slightly to 23.2% from 23.7%. The six-month results reflect the same sales and margin trends.

Second quarter sales for Display increased 18.1% in fiscal 2001 from 2000 levels, reflecting several large contract sales (ranging from $240,000 to over $1.0 million). Gross margins declined to 23.6% from 26.5% as the large contract sales were at lower margin rates. The gross margin rate is also affected by a shift in sales from high-margin CRT's to monitors and integrated systems. Sales for the six-month period were 1.7% below the prior year, as the first quarter of fiscal 2000 included two contracts which aggregated $4.8 million. Prospects for the balance of the current year are expected to offset the effect of these contracts on full year comparisons. Gross margins as a percent of sales decreased to 23.6% in fiscal 2001 from 26.9% in fiscal 2000, reflecting the shift in product mix from CRT's to monitors.

Sales, percentage change from the prior year, gross margins and gross margin percent of sales by geographic area are summarized in the following table. Prior year amounts have been restated to be comparable to the current year's classifications. The caption, "other", includes sales to export distributors and to countries where the Company does not have offices . Provisions for LIFO, manufacturing charges and other costs are included under the caption "Corporate" (in thousands).

(12)

Sales

Gross Margin

__________________________________

______________________________________________

GM% of

FY 2001

FY 2000

Change

FY 2001

Sales

FY 2000

Sales

___________

_________

________

__________

_________

________

Second Quarter

North America

$ 82,674

$ 63,713

29.8%

$ 20,858

25.2%

$ 16,351

25.7%

Europe

24,092

18,950

27.1%

7,248

30.1%

5,802

30.6%

Asia / Pacific

13,642

8,206

66.2%

4,285

31.4%

2,871

35.0%

Latin America

6,845

4,635

47.7%

1,838

26.9%

1,282

27.7%

Other

3,826

2,074

84.5%

1,021

26.7%

523

25.2%

Corporate

(1,089)

(268)

__________

________

_________

________

Total

$ 131,079

$ 97,578

34.3%

$ 34,161

26.1%

$ 26,561

27.2%

==========

========

=========

========

Six Months

North America

$ 160,621

$126,307

27.2%

$ 41,298

25.7%

$ 32,610

25.8%

Europe

45,222

37,400

20.9%

13,206

29.2%

11,369

30.4%

Asia / Pacific

25,352

15,581

62.7%

7,736

30.5%

5,181

33.3%

Latin America

12,959

9,600

35.0%

3,557

27.4%

2,733

28.5%

Other

7,031

4,254

65.3%

1,857

26.4%

1,087

25.6%

Corporate

(1,860)

(751)

__________

________

_________

________

Total

$ 251,185

$193,142

30.1%

$ 65,794

26.2%

$ 52,229

27.0%

==========

========

=========

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North American sales growth of 29.8% in the second quarter and 27.2% year to date reflect growth in all of the Company's strategic business units, led by demand for Wireless products. European sales gains of 27.1% for the quarter and 20.9% year to date are due to Wireless sales growth. Period to period sales comparisons in Europe were adversely affected by the decline in the euro relative to the U.S. dollar. The change in exchange rates reduced reported sales for Europe by approximately 15% for year to date comparative purposes.

Asia Pacific sales increased by 66.2% in the second quarter and 62.7% year to date, primarily benefiting from growth in the sale of Wireless products. Latin American sales grew 47.7% for the quarter and 35.0% year to date, benefitting primarily from broadcast equipment sales by the Wireless group and growth in both Security and Medical product sales.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses improved as a percentage of sales, declining to 18.1% in the second quarter of fiscal 2001 from 20.5% in the same period last year, reflecting the strong sales growth and the Company's continued emphasis on its program to maximize operating efficiencies.

(13)

Interest and Other Expenses

Interest costs in the first half of fiscal 2001 increased 15.4% compared to fiscal 2000 due to higher interest rates on the Company's revolving credit debt and increased borrowing levels.

Net Results

Net income for the second quarter was $5.2 million or $.34 per diluted share, compared to $3.3 million or $.26 per share in the prior year. Net income for the six-month period was $9.9 million, or $.66 per diluted share, compared to $6.0 million or $.47 per share in the prior year.

Liquidity and Capital Resources

Cash used in operations was $14.5 million in the first half of fiscal 2001, compared to cash provided by operations of $7.6 million in the prior year period. To fund the 30.1% increase in sales, the Company increased its investment in working capital by $28.7 million in the current year compared to a $2.4 million increase last year. While days sales outstanding were consistent in year to year comparisons at 58 days, accounts receivable increased $18.6 million in 2001 and $8.5 million in 2000, reflecting the growth in sales. Inventory turnover improved in the first half of fiscal 2001 to 3.00 from 2.68 a year ago as the Company continued its program to improve asset utilization. The increase in inventories of $20.6 million in fiscal 2001, primarily for product line expansion, compared to an increase of $1.5 million in 2000. Accounts payable increased by $9.6 million in fiscal 2001 due to higher purchasing levels.

On July 28, 2000, the Company refinanced its revolving credit facility and Canadian credit agreement with an $85 million multi-currency revolving credit facility. The agreement matures in July 2004 and bears interest at applicable LIBOR rates plus a margin, presently 150 basis points. In addition, the Company entered into certain interest rate swap arrangements for the term of the facility, fixing the interest rate on $33.9 million at an average rate of 8.3%.

The Company's loan agreements contain various financial and operating covenants which set benchmark levels for tangible net worth, debt / tangible net worth ratio and annual debt service coverage. The Company was in compliance with these covenants at November 30, 2000.

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. 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.

(14)

Euro Currency Conversion

On January 1, 1999, eleven member countries of the European Union began conversion to a common currency, the Euro. From January 1, 1999 until January 1, 2002, companies operating in Europe must be able to process business transactions either in legacy currencies or in Euros. After January 1, 2002, all transactions will be processed only in Euros.

The Company has modified its transaction processing systems to accommodate the Euro and dual currency processing requirements without significant additional costs. While the exact impact on pricing is indeterminable, the Company believes that since most of its pricing is based on U.S. dollar costs, the effect of conversion to the Euro has not been significant.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Investors should consider carefully the following risk factors, in addition to the other information included and incorporated by reference in this quarterly report on Form 10-Q. All statements other than statements of historical facts included in this report are statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. The words "expect," "estimate," "anticipate," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations; (ii) the Company's financing plans; (iii) the Company's business and growth strategies, including potential acquisitions; and (iv) other plans and objectives for future operations. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those predicted in the forward-looking statements or which may be anticipated from historical results or trends. In addition to the information contained in the Company's other filings with the Securities and Exchange Commission, factors which could affect future performance include, among others, the following:

(15)

Competitive pressures may increase or change through industry consolidation, entry of new competitors, marketing changes or otherwise. There can be no assurance that the Company will be able to continue to compete effectively with existing or potential competitors.

Technological changes may affect the marketability of inventory on hand.

General economic or business conditions, domestic and foreign, may be less favorable than expected, resulting in lower sales or lower profit margins than expected.

Changes in relationships with customers or vendors, the ability to develop new relationships or the business failure of several customers or vendors may affect sales or profitability.

Political, legislative or regulatory changes may adversely affect the businesses in which the Company operates.

Changes in securities markets, interest rates or foreign exchange rates may adversely affect the Company's performance or stock price.

The failure to obtain or retain key executive or technical personnel could affect future performance.

The Company's growth strategy includes expansion through acquisitions. There can be no assurance that the Company will be able to successfully complete further acquisitions or that past or future acquisitions will not have an adverse impact on the Company's operations.

The potential future sale of Common Stock shares, possible anti-takeover measures available to the Company, dividend policies, as well as voting control of the Company by Edward J. Richardson, Chairman of the Board and Chief Executive Officer may affect the stock price.

The continued availability of financing on favorable terms can not be assured.

(16)

ITEM 1. LEGAL PROCEEDINGS

No material developments have occurred in the matters reported under the category "Legal Proceedings" in the Registrant's Report on Form 10-K for the fiscal year ended May 31, 2000.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits - None

(b) Reports on Form 8-K - None

SIGNATURE

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

RICHARDSON ELECTRONICS, LTD.

Date

January 12, 2001

/S/

William J. Garry

________________________

_____________________________________

William J. Garry

Senior Vice President and

Chief Financial Officer

(17)

Total current assets

LIABILITIES AND STOCKHOLDERS' EQUITY

Total current liabilities

Total stockholders' equity

Note E -- Derivative Financial Instruments