Exhibit 99.2
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information is based on historical financial statements of Richardson Electronics, Ltd. and its subsidiaries (the Company), including certain pro forma adjustments, and has been prepared to illustrate the pro forma effect of the disposition of Burtek Systems Corp. and the Security Systems Division (SSD/Burtek).
The condensed consolidated balance sheet as of March 3, 2007 filed in the Company’s Form 10-Q on April 12, 2007 presented the assets to be disposed of as assets held for use, as the assets did not yet meet the criteria to classify as held for sale. The sale of SSD/Burtek will be accounted for as discontinued operations in conformity with Statement of Financial Accounting Standards No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, for the fiscal year ended June 2, 2007.
The unaudited pro forma condensed consolidated balance sheet is presented as of March 3, 2007 and reflects the historical financial position of the Company with pro forma adjustments to reflect the disposition of SSD/Burtek as if the sale had been consummated on that date. The unaudited pro forma condensed consolidated statement of operations for the nine months ended March 3, 2007 and the pro forma consolidated statement of operations for the fiscal year ended June 3, 2006 reflect the disposition of SSD/Burtek as if the sale had been consummated as of May 29, 2005. In accordance with pro forma accounting rules, no gain or loss from the actual divestment is reflected in the unaudited pro forma condensed consolidated statement of operations or the unaudited pro forma consolidated statement of operations.
The unaudited pro forma financial information has been prepared based upon available information and management estimates; actual amounts may differ from those estimated amounts. The unaudited pro forma financial information should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the period ended March 3, 2007 and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 3, 2006. The unaudited pro forma information is presented for illustrative purposes only, and is not necessarily indicative of what the Company’s financial position or results of operations would have been had the transaction been consummated as of and for the periods presented, nor is such information indicative of the Company’s results of operations or financial position for any future period or date.
Richardson Electronics, Ltd.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 3, 2007
(in thousands, except per share amounts)
Historical | Pro Forma Adjustments | Pro Forma Total | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 12,363 | $ | — | $ | 12,363 | ||||||
Receivables, less allowance of $2,060 | 115,474 | (19,089 | )(1) | 96,385 | ||||||||
Inventories | 131,007 | (18,108 | )(1) | 112,899 | ||||||||
Prepaid expenses | 7,635 | (332 | )(1) | 7,303 | ||||||||
Deferred income taxes | 1,057 | — | 1,057 | |||||||||
Total current assets | 267,536 | (37,529 | ) | 230,007 | ||||||||
Non-current assets: | ||||||||||||
Property, plant and equipment, net | 31,647 | (2,280 | )(1) | 29,367 | ||||||||
Goodwill | 13,179 | (1,706 | )(1) | 11,473 | ||||||||
Other intangible assets, net | 2,016 | (1,073 | )(1)(2) | 943 | ||||||||
Non-current deferred income taxes | 1,335 | — | 1,335 | |||||||||
Assets held for sale | 1,243 | — | 1,243 | |||||||||
Other assets | 1,831 | — | 1,831 | |||||||||
Total non-current assets | 51,251 | (5,059 | ) | 46,192 | ||||||||
Total assets | $ | 318,787 | $ | (42,588 | ) | $ | 276,199 | |||||
Liabilities and Stockholders’ Equity | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 56,407 | $ | (5,224 | )(1) | $ | 51,183 | |||||
Accrued liabilities | 28,479 | 3,054 | (1)(3)(4) | 31,533 | ||||||||
Current portion of long-term debt | 16 | — | 16 | |||||||||
Total current liabilities | 84,902 | (2,170 | ) | 82,732 | ||||||||
Non-current liabilities: | ||||||||||||
Long-term debt, less current portion | 133,433 | (80,000 | )(5) | 53,433 | ||||||||
Non-current liabilities | 1,803 | — | 1,803 | |||||||||
Total non-current liabilities | 135,236 | (80,000 | ) | 55,236 | ||||||||
Total liabilities | 220,138 | (82,170 | ) | 137,968 | ||||||||
Commitments and contingencies | — | — | — | |||||||||
Stockholders’ equity | ||||||||||||
Common stock, $0.05 par value; issued 15,813 shares at March 3, 2007 and 15,663 shares at June 3, 2006 | 791 | — | 791 | |||||||||
Class B common stock, convertible, $0.05 par value; issued 3,048 shares at March 3, 2007 and 3,093 shares at June 3, 2006 | 152 | — | 152 | |||||||||
Preferred stock, $1.00 par value, no shares issued | — | — | ||||||||||
Additional paid-in-capital | 118,536 | — | 118,536 | |||||||||
Common stock in treasury, at cost, 1,249 shares at March 3, 2007 and 1,261 shares at June 3, 2006 | (7,404 | ) | — | (7,404 | ) | |||||||
Accumulated deficit | (18,028 | ) | 41,901 | (6) | 23,873 | |||||||
Accumulated other comprehensive income | 4,602 | (2,319 | )(1) | 2,283 | ||||||||
Total stockholders’ equity | 98,649 | 39,582 | 138,231 | |||||||||
Total liabilities and stockholders’ equity | $ | 318,787 | $ | (42,588 | ) | $ | 276,199 | |||||
Richardson Electronics, Ltd.
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the Nine-Month Period Ended March 3, 2007
(in thousands, except per share amounts)
Statements of Operations | Historical | Pro Forma Adjustments | Pro Forma Total | |||||||||
Net sales | $ | 491,702 | $ | (80,657 | )(7) | $ | 411,045 | |||||
Cost of sales | 370,756 | (59,211 | )(7) | 311,545 | ||||||||
Gross profit | 120,946 | (21,446 | ) | 99,500 | ||||||||
Selling, general, and administrative expenses | 107,386 | (15,639 | )(7) | 91,747 | ||||||||
Gain on disposal of assets | (2,098 | ) | — | (2,098 | ) | |||||||
Operating income | 15,658 | (5,807 | ) | 9,851 | ||||||||
Other (income) expense: | ||||||||||||
Interest expense | 8,486 | (4,275 | )(8) | 4,211 | ||||||||
Investment income | (885 | ) | — | (885 | ) | |||||||
Foreign exchange loss | 315 | (34 | )(7) | 281 | ||||||||
Retirement of long-term debt expenses | 2,540 | — | 2,540 | |||||||||
Other, net | 74 | (72 | )(7) | 2 | ||||||||
Total other expense | 10,530 | (4,381 | ) | 6,149 | ||||||||
Income (loss) from continuing operations before income taxes | 5,128 | (1,426 | ) | 3,702 | ||||||||
Income tax provision | 4,108 | (2,503 | )(7) | 1,605 | ||||||||
Income (loss) from continuing operations | $ | 1,020 | $ | 1,077 | $ | 2,097 | ||||||
Income (loss) from continuing operations per common share—basic: | ||||||||||||
Common stock | $ | 0.06 | $ | (0.06 | ) | $ | 0.12 | |||||
Common stock average shares outstanding | 14,493 | 14,493 | 14,493 | |||||||||
Class B common stock | $ | 0.05 | $ | (0.06 | ) | $ | 0.11 | |||||
Class B common stock average shares outstanding | 3,048 | 3,048 | 3,048 | |||||||||
Income (loss) from continuing operations per common share—diluted: | ||||||||||||
Common stock | $ | 0.06 | $ | (0.06 | ) | $ | 0.12 | |||||
Common stock average shares outstanding | 17,638 | 17,638 | 17,638 | |||||||||
Class B common stock | $ | 0.05 | $ | (0.06 | ) | $ | 0.11 | |||||
Class B common stock average shares outstanding | 3,048 | 3,048 | 3,048 | |||||||||
Dividends per common share | $ | 0.120 | $ | 0.120 | $ | 0.120 | ||||||
Dividends per Class B common share | $ | 0.108 | $ | 0.108 | $ | 0.108 | ||||||
Richardson Electronics, Ltd.
Unaudited Pro Forma Consolidated Statements of Operations
For the Fiscal Year Ended June 3, 2006
(in thousands, except per share amounts)
Statements of Operations | Historical | Pro Forma Adjustments | Pro Forma Total | |||||||||
Net sales | $ | 637,940 | $ | (108,843 | )(7) | $ | 529,097 | |||||
Cost of sales | 482,171 | (81,564 | )(7) | 400,607 | ||||||||
Gross profit | 155,769 | (27,279 | ) | 128,490 | ||||||||
Selling, general, and administrative expenses | 139,640 | (19,407 | )(7) | 120,233 | ||||||||
Gain (loss) on disposal of assets | 3 | (157 | )(7) | (154 | ) | |||||||
Operating income | 16,126 | (7,715 | ) | 8,411 | ||||||||
Other (income) expense: | ||||||||||||
Interest expense | 9,809 | (3,528 | )(8) | 6,281 | ||||||||
Investment income | (411 | ) | — | (411 | ) | |||||||
Foreign exchange loss | 724 | (12 | )(7) | 712 | ||||||||
Other, net | 428 | (125 | )(7) | 303 | ||||||||
Total other expense | 10,550 | (3,665 | ) | 6,885 | ||||||||
Income (loss) from continuing operations before income taxes | 5,576 | (4,050 | ) | 1,526 | ||||||||
Income tax provision | 8,218 | (3,365 | )(7) | 4,853 | ||||||||
Income (loss) from continuing operations | $ | (2,642 | ) | $ | (685 | ) | $ | (3,327 | ) | |||
Income (loss) from continuing operations per common share—basic: | ||||||||||||
Common stock | $ | (0.15 | ) | $ | 0.04 | $ | (0.19 | ) | ||||
Common stock average shares outstanding | 14,315 | 14,315 | 14,315 | |||||||||
Class B common stock | $ | (0.14 | ) | $ | 0.03 | $ | (0.17 | ) | ||||
Class B common stock average shares outstanding | 3,093 | 3,093 | 3,093 | |||||||||
Income (loss) from continuing operations per common share—diluted: | ||||||||||||
Common stock | $ | (0.15 | ) | $ | 0.04 | $ | (0.19 | ) | ||||
Common stock average shares outstanding | 14,315 | 14,315 | 14,315 | |||||||||
Class B common stock | $ | (0.14 | ) | $ | 0.03 | $ | (0.17 | ) | ||||
Class B common stock average shares outstanding | 3,093 | 3,093 | 3,093 | |||||||||
Dividends per common share | $ | 0.160 | $ | 0.160 | $ | 0.160 | ||||||
Dividends per Class B common share | $ | 0.144 | $ | 0.144 | $ | 0.144 | ||||||
Richardson Electronics, Ltd.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. Basis of Pro Forma Presentation
On April 6, 2007, Burtek Systems Corp. (Burtek Systems), Richardson Electronics, Ltd. (the Company), and certain other subsidiaries of the Company entered into an Acquisition Agreement (Agreement) with Honeywell International Inc. (Honeywell) pursuant to which Honeywell agreed to purchase Burtek Systems and the Security Systems Division (SSD/Burtek). The transaction is structured as a sale of all of the stock of Burtek Systems and all of the other assets primarily used or held for use in SSD/Burtek. Subject to certain limited exceptions, Honeywell is not assuming any pre-closing obligations or liabilities of SSD/Burtek. The total consideration to be paid by Honeywell to the Company pursuant to the Agreement is $80.0 million, net of cash and debt other than certain assumed liabilities. The consideration is subject to downward adjustments related to working capital thresholds.
The accompanying unaudited pro forma financial statements for the period ended March 3, 2007 and for the fiscal year ended June 3, 2006 are presented herein because SSD/Burtek has not been presented as discontinued operations in the Company’s consolidated financial statements for periods preceding the signing of the Agreement. As a result, the historical results have been adjusted on a pro forma basis to give effect of the disposition of SSD/Burtek. The unaudited pro forma financial information has been prepared based upon available information and management estimates; actual amounts may differ from those estimated amounts.
The unaudited pro forma condensed consolidated balance sheet is presented as of March 3, 2007 and reflects the historical financial position of the Company with pro forma adjustments to reflect the disposition of SSD/Burtek as if the sale had been consummated on that date. The unaudited pro forma condensed consolidated statement of operations for the nine months ended March 3, 2007 and the pro forma consolidated statement of operations for the fiscal year ended June 3, 2006 reflect the disposition of SSD/Burtek as if the sale had been consummated as of May 29, 2005. In accordance with pro forma accounting rules, no gain or loss from the actual divestment is reflected in the unaudited pro forma condensed consolidated statement of operations or the unaudited pro forma consolidated statement of operations.
2. Pro Forma Adjustments
The unaudited pro forma condensed consolidated balance sheet and the condensed consolidated and consolidated statements of operations give effect to the following pro forma adjustments:
Balance Sheet
(1) | To reflect the elimination of assets and liabilities associated with SSD/Burtek included in the Company’s historical condensed consolidated and consolidated financial statements. |
(2) | To reflect the net book value of deferred financing costs associated with the Company’s credit agreement. The Company is required to negotiate a new credit agreement when SSD/Burtek is sold. As a result, the unamortized deferred financing costs of $0.8 million associated with the Company’s current credit agreement will be expensed upon the sale. |
(3) | To reflect estimated legal, consulting and other costs of $3.8 million directly associated with the sale of SSD/Burtek. |
(4) | To reflect estimated tax liability of $0.6 million associated with the gain on the sale of SSD/Burtek in foreign locations. |
(5) | To reflect estimated net cash proceeds of approximately $80.0 million from the sale of SSD/Burtek as if the sale occurred on March 3, 2007. The Company is required to use the proceeds from the sale of SSD/Burtek to repay debt outstanding under its current credit agreement. |
(6) | To reflect the estimated net after-tax gain of approximately $41.9 million related to the sale of SSD/Burtek. The actual net gain to be reported in discontinued operations in the Company’s statement of operations is subject to change pending final determination of the working capital of SSD/Burtek, transaction costs, and other adjustments. |
Statement of Operations
(7) | To reflect the elimination of the financial results of SSD/Burtek. |
(8) | To reflect the interest expense associated with the Company’s credit agreement. The Company is required to use the proceeds from the sale of SSD/Burtek to repay debt outstanding under its current credit agreement. In accordance with EITF No. 87-24,Allocation of Interest to Discontinued Operations, interest on debt that is required to be repaid as a result of the disposal transaction has been allocated to the discontinued operations. |