The following portions of the Company's Annual Report to Stockholders for
the Year Ended May 31, 1996 are incorporated by reference. The page numbers as
indicated are the same as the printed copy which was distributed to the
shareholders.
Five-Year Financial Review
Statement of Operations Data Year Ended May 31
(in thousands, except per share amounts) 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Net sales $239,667 $208,118 $172,094 $159,215 $158,789
Cost of products sold 169,123 148,085 124,703 111,620 109,600
Other charges <F1> -- 4,700 26,500 -- --
Selling, general and administrative expenses 52,974 48,674 41,226 38,070 40,947
Other expense, net 5,559 4,028 5,874 5,023 5,385
-------- -------- -------- -------- --------
Income (loss) before income taxes
and extraordinary item 12,011 2,631 (26,209) 4,502 2,857
Income tax provision (benefit) 3,900 150 (6,400) 1,700 1,150
-------- -------- -------- -------- --------
Income (loss) before extraordinary item 8,111 2,481 (19,809) 2,802 1,707
Extraordinary gain, net of tax -- 527 -- -- --
-------- -------- -------- -------- --------
Net income (loss) $ 8,111 $ 3,008 $(19,809) $ 2,802 $ 1,707
======== ======== ======== ======== ========
Net income (loss) per share:
Before extraordinary item $ .68 $ .21 $ (1.75) $ .25 $ .15
Extraordinary gain, net of tax -- .05 -- -- --
-------- -------- -------- -------- --------
Net income (loss) per share $ .68 $ .26 $ (1.75) $ .25 $ .15
======== ======== ======== ======== ========
Dividends per common share $ .16 $ .16 $ .16 $ .16 $ .16
======== ======== ======== ======== ========
Balance Sheet and Other Data May 31
(dollars in thousands) 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Receivables $48,232 $42,768 $34,901 $30,267 $27,488
Inventories 94,327 81,267 73,863 86,955 84,427
Working capital, net 133,151 106,235 96,494 103,987 103,165
Investments 2,190 7,070 17,836 29,080 28,785
Property, plant and equipment, net 16,054 16,388 16,932 36,242 39,328
Total assets 180,158 173,514 179,467 205,043 205,837
Long-term debt 92,025 79,647 86,421 98,855 101,456
Stockholders' equity 62,792 56,154 52,573 75,417 76,009
Employees at May 31 582 540 654 683 655
Stockholders 740 758 785 778 819
<FN>
<F1> In 1995, the Company recorded a charge of $4,700,000 for the
settlement of a claim related to a 1989 contract. In 1994, the
Company established a $26,500,000 provision, including $21,400,000
to dispose of its manufacturing operations in Brive, France, and
$5,100,000 for incremental costs related to a provision established
in 1991.
</FN>
Page 10
Management's Discussion and Analysis
Results of Operations
Sales and Gross Margin
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 1996
were a record $239.7 million. Sales and gross margin by SBU are presented in
the following table. Gross margin for each SBU reflects the distribution
product margin less overstock and other inventory provisions. Manufacturing
variances and miscellaneous costs are included under the caption "other".
Sales
(in thousands) 1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
EDG $109,925 45.8 $105,454 50.7 $ 91,736 53.2
SSC 67,976 28.4 52,409 25.2 42,274 24.6
DPG 36,154 15.1 36,502 17.5 27,150 15.8
SSD 25,612 10.7 13,753 6.6 10,934 6.4
-------- ----- -------- ----- -------- -----
Consolidated $239,667 100.0 $208,118 100.0 $172,094 100.0
======== ===== ======== ===== ======== =====
Gross Margins
(in thousands) 1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
EDG $ 33,416 30.4 $ 30,884 29.3 $ 27,897 30.4
SSC 20,840 30.7 16,416 31.3 14,117 33.4
DPG 13,156 36.4 12,463 34.1 9,090 33.5
SSD 5,425 21.2 3,037 22.1 2,468 22.6
-------- ----- -------- ----- -------- -----
Total 72,837 30.4 62,800 30.2 53,572 31.1
Other (2,293) (2,767) (6,181)
-------- ----- -------- ----- -------- -----
Consolidated $ 70,544 29.4 $ 60,033 28.8 $ 47,391 27.5
======== ===== ======== ===== ======== =====
On a geographic basis, the Company categorizes its sales by destination:
North America, Europe and Rest of World. Sales and gross margin by geographic
area were as follows:
Sales
(in thousands) 1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
North America $139,743 58.3 $123,508 59.4 $102,870 59.8
Europe 57,219 23.9 46,071 22.1 37,699 21.9
Rest of World 42,705 17.8 38,539 18.5 31,525 18.3
-------- ----- -------- ----- -------- -----
Consolidated $239,667 100.0 $208,118 100.0 $172,094 100.0
======== ===== ======== ===== ======== =====
Gross Margins
(in thousands) 1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
North America $ 41,257 29.5 $ 37,100 30.0 $ 32,054 31.2
Europe 19,186 33.5 14,753 32.0 12,012 31.9
Rest of World 12,394 29.0 10,947 28.4 9,506 30.2
-------- ----- -------- ----- -------- -----
Total 72,837 30.4 62,800 30.2 53,572 31.1
Other (2,293) (2,767) (6,181)
-------- ----- -------- ----- -------- -----
Consolidated $ 70,544 29.4 $ 60,033 28.8 $ 47,391 27.5
======== ===== ======== ===== ======== =====
Double-digit sales growth was achieved by each geographic area in 1996.
Sales growth was particularly strong in Europe in 1996 and 1995, at 24% and
22%, respectively, reflecting the Company's expansion of its specialty sales
force concept to Europe and the improvement in European economic conditions
since 1994. Sales denominated in currencies other than U. S. dollars were 42%,
39% and 37% of total sales in 1996, 1995 and 1994, respectively. Foreign
exchange rate changes increased sales by an average of 1% in 1996 and 5% in
1995.
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.
Overall industry sales are declining at approximately a 7% annual rate. EDG's
sales gains of 4% in 1996 and 15% in 1995 result from a significant increase in
market share.
The medical electronics replacement market is a growth segment of the
vacuum tube industry. Demand in the replacement market 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 1996, with further expansion planned for 1997. In addition, the Company
acquired an x-ray tube and image intensifier reloading facility in March, 1996.
Medical sales increased 110% to $11 million in 1996, following a 64% increase
in 1995.
The primary factor in EDG's 1995 sales growth was a greater emphasis on
overseas markets, as international sales increased 19%, reflecting sales force
expansion and improved economic conditions in Europe.
Gross margins as a percent of sales increased to 30.4% in 1996, compared
to 29.3% in 1995 and 30.4% in 1994. Gross margin improvement in 1996 resulted
from additional focus on pricing policies and emphasis on proprietary product
lines. The margin decline in 1995 resulted from higher costs for products
previously manufactured by the Company and now purchased.
Solid State and Components
SSC operates in several markets, including the rapidly growing wireless
and telecommunications industries. Sales increased 30% in 1996 to $68.0
million, following a 24% increase in 1995. International sales represented 36%,
36% and 37% of SSC's sales in 1996, 1995 and 1994, respectively.
Gross margins were 30.7%, 31.3% and 33.4% of sales in 1996, 1995 and 1994.
New vendor relationships established during 1996 are expected to have a
positive influence on future margins.
Display Products Group
DPG sales were flat in 1996 at $36.2 million, following a 34% increase in
1995. Sales growth has been hampered by product shortages, as CRT manufacturers
were unable to meet demand. Sales declines in North America were offset by
European sales gains of 57% to $15.5 million.
Page 11
Staff additions and product line expansion contributed to the European sales
gains. DPG's product mix is shifting from monochrome CRTs to higher-priced
color CRTs, which have increased from 11% of units sold in 1994 to 16% in 1995
and 18% in 1996. International sales represented 51%, 35% and 33% of DPG's
sales in 1996, 1995 and 1994, respectively.
Gross margins as a percent of sales increased to 36.4% in 1996, from 34.1%
in 1995 and 33.5% in 1994. The improving trend reflects a larger contribution
from European sales at better margins, a shift in product mix from monochrome
to higher margin color CRT's and industry shortages.
Security Systems Division
SSD operates in the rapidly expanding closed-circuit television market.
The Company made a substantial investment in SSD in 1995, doubling the size of
its sales staff. This strategy contributed to the 86% growth in sales in 1996
and the 26% sales growth in 1995. International sales represented 39% of SSD's
sales in 1996 and 1995, and 40% in 1994.
Gross margins were 21.2%, 22.1% and 22.6% of sales in 1996, 1995 and 1994.
Inventory turnover rates achieved by SSD are significantly higher that 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) 1996 1995 1994
-------- -------- --------
Distribution product margin 31.0 % 30.7 % 32.1 %
Customer returns and scrap (0.7) (0.6) (0.6)
Manufacturing and warranty costs (0.3) (0.5) (2.9)
Overstock provisions (0.1) (0.5) (0.9)
Other costs (0.5) (0.3) (0.2)
-------- -------- --------
Gross margin 29.4 % 28.8 % 27.5 %
======== ======== ========
Fluctuations in distribution margins reflect the effects of product costs,
foreign exchange rate variations, and changes in product mix. Gross margins
have improved steadily, from 27.5% of sales in 1994 to 28.8% in 1995 and 29.4%
in 1996. The 1996 improvement reflects higher distribution margins and lower
overstock provisions, while the 1995 improvement was primarily due to the
elimination of manufacturing inefficiencies. Average selling prices, excluding
the effects of foreign currency changes, increased 2.4% in 1996 and declined
1.1% in 1995.
Other Charges
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. The
original claim was in excess of $11.0 million.
In 1994, the Company recorded a charge of $26.5 million to provide for the
phase-down of manufacturing activity, including $21.4 million for asset write-
downs and costs related to the transfer of the Company's Brive, France,
operations to local management. The balance, $5.1 million, was for the phase-
down of domestic manufacturing operations. See Note B for details.
Selling, General and Administrative Expenses
Selling, general and administrative expenses represented 22.1% of sales in
1996, 23.4% in 1995 and 24.0% in 1994. At $53.0 million, 1996 expenses
increased $4.3 million over 1995, reflecting the expansion of the SSC, SSD and
international sales forces, and incentive payments on higher gross margins.
Other (Income) Expense
Interest expense increased 2.3% in 1996 due to higher borrowing levels.
Interest expense declined 15% in 1995 due to the elimination of the debt on the
Company's facility in Brive, France. Title to this facility was transferred to
the mortgage holder in exchange for cancellation of the debt. Investment income
was $1.2 million in 1996, $1.9 million in 1995 and $2.4 million in 1994.
Investment income declined in 1996 and 1995, as the result of lower investment
levels and lower realized capital gains.
Income Tax Provision
The effective tax rates were 32% in fiscal 1996, 6% in 1995 and 24% in
1994. The 1996 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 and the Company's Foreign Sales Corporation benefit on export
sales, partially offset by state income taxes. The 1995 rate differs from the
U. S. statutory rate of 34% as a result of the carryback of the $4.7 million
contract settlement to prior years at a 46% statutory rate. The 1994 rate
differs from the 34% U. S. statutory rate primarily as a result of the
provision for the disposition of the Company's French manufacturing operations,
which for financial reporting purposes resulted in a U. S. tax benefit at a
lower rate (See Note F to the accompanying consolidated financial statements).
Net Income (Loss) and per Share Data
The comparability of net income and net income per share for 1996, 1995
and 1994 is affected by two unusual charges described above, the 1995 contract
settlement and the 1994 phase-down provision for manufacturing operations. In
addition, 1995 net income included an extraordinary gain on the repurchase of
bonds. The following table presents the net income (loss) trend on a comparable
basis and reconciles to net income (loss) as reported in the Consolidated
Statement of Operations:
Page 12
(in thousands) 1996 1995 1994
-------- -------- --------
Net income (loss), comparable
basis $ 8,111 $ 4,781 $ (309)
Contract settlement, net of tax - (2,300) -
Extraordinary gain, net of tax - 527 -
Phase-down provision, net of tax - - (19,500)
-------- -------- --------
Net income (loss), as reported $ 8,111 $ 3,008 $(19,809)
======== ======== ========
Net income (loss) per share,
comparable basis $ .68 $ .41 $ (.03)
Contract settlement, net of tax - (.25) -
Extraordinary gain, net of tax - .05 -
Phase-down provision, net of tax - - (1.72)
-------- -------- --------
Net income (loss) per share,
as reported $ .68 $ .21 $ (1.75)
======== ======== ========
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 operations,
exclusive of working capital requirements, was $14.0 million in fiscal 1996,
$7.9 million in 1995 and $5.8 million in 1994. Increased investments in working
capital of $22.0 million in 1996, $14.6 million in 1995 and $8.1 million in
1994 and debt service and dividend payments were met from cash generated by
operations, liquidation of investments and additional borrowings.
Working capital requirements included higher receivable and inventory
balances to support sales growth. 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 federal and state net operating loss carryforwards of $6.0
million on a tax basis which are available to reduce future tax liabilities.
Current earnings levels 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 November 1995, the Company obtained a $25 million senior revolving
credit note agreement due November 1998, consolidating a $9.8 million long-term
loan and an $8.0 million short-term loan and providing an additional
availability of $7.2 million. In June 1996, the agreement was amended to $30
million, of which $5.8 million was available for future working capital or
other corporate requirements.
In connection with the Company's outstanding 7 1/4% convertible
debentures, certain restrictions relate to the purchase of treasury stock and
the payment of cash dividends. At May 31, 1996, $ 11.2 million was free of such
restrictions. Annual dividend payments approximate $1.8 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, 1996, 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.
Investing activities in 1996 included the acquisition of a medical x-ray
tube reloading facility for $1.45 million.
Currency Fluctuations
The Company's foreign denominated assets and liabilities are cash,
accounts receivable and accounts payable, primarily in member countries of the
European community, and, to a lesser extent, in Canada, Singapore and Japan.
The Company monitors its foreign exchange exposures and may enter into forward
contracts to hedge significant transactions. A portion of the $25 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.
Page 13
Consolidated Balance Sheets
May 31
------------------
(in thousands) 1996 1995
-------- --------
Assets
Current assets
Cash and equivalents $ 6,784 $ 11,151
Receivables, less allowance of $1,461 and $1,385 48,232 42,768
Inventories 94,327 81,267
Other 8,062 8,762
-------- --------
Total current assets 157,405 143,948
Investments 2,190 7,070
Property, plant and equipment, net 16,054 16,388
Other assets 4,509 6,108
-------- --------
Total assets $180,158 $173,514
======== ========
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 14,503 $ 16,695
Accrued liabilities 9,751 11,161
Short-term debt and current maturities of
long-term debt -- 9,857
-------- --------
Total current liabilities 24,254 37,713
Long-term debt, less current portion 92,025 79,647
Deferred income taxes 1,087 --
-------- --------
Total liabilities 117,366 117,360
Stockholders' equity
Common Stock, $.05 par value 428 411
Class B Common Stock, convertible, $.05 par value 162 162
Preferred Stock, $1.00 par value -- --
Additional paid-in capital 52,185 49,989
Retained earnings 12,430 6,141
Foreign currency translation adjustment (2,478) (686)
Market appreciation on investments, net of tax 65 137
-------- --------
Total stockholders' equity 62,792 56,154
-------- --------
Total liabilities and stockholders' equity $180,158 $173,514
======== ========
See notes to consolidated financial statements.
Page 14
Consolidated Statements of Operations
Year Ended May 31
----------------------------
(in thousands, except per share amounts) 1996 1995 1994
-------- -------- --------
Net sales $239,667 $208,118 $172,094
Costs and expenses:
Cost of products sold 169,123 148,085 124,703
Other charges -- 4,700 26,500
Selling, general and administrative
expenses 52,974 48,674 41,226
-------- -------- --------
222,097 201,459 192,429
-------- -------- --------
Operating income (loss) 17,570 6,659 (20,335)
Other (income) expense:
Interest expense 6,624 6,473 7,631
Investment income (1,238) (1,863) (2,442)
Other 173 (582) 685
-------- -------- --------
5,559 4,028 5,874
-------- -------- --------
Income (loss) before income taxes
and extraordinary item 12,011 2,631 (26,209)
Income tax provision (benefit) 3,900 150 (6,400)
-------- -------- --------
Income (loss) before extraordinary item 8,111 2,481 (19,809)
Extraordinary gain on bond repurchase,
net of income taxes of $337 -- 527 --
-------- -------- --------
Net income (loss) $ 8,111 $ 3,008 $(19,809)
======== ======== ========
Net income (loss) per share before
extraordinary item $ .68 $ .21 $ (1.75)
Extraordinary gain, net of tax -- .05 --
-------- -------- --------
Net income (loss) per share $ .68 $ .26 $ (1.75)
======== ======== ========
Average shares outstanding 12,002 11,566 11,299
======== ======== ========
Dividends per common share $ .16 $ .16 $ .16
======== ======== ========
See notes to consolidated financial statements.
Page 15
Consolidated Statements of Cash Flows
Year Ended May 31
----------------------------
(in thousands) 1996 1995 1994
-------- -------- --------
Operating Activities:
Net income (loss) $ 8,111 $ 3,008 $(19,809)
Adjustments to reconcile net income
(loss) to cash used in
operating activities:
Depreciation 2,709 2,669 4,753
Amortization of intangibles and
financing costs 360 427 964
Deferred income taxes 2,338 1,310 (6,717)
Stock contribution to employee
ownership plan 500 500 125
Phase-down of manufacturing operations -- -- 26,500
-------- -------- --------
Net adjustments 5,907 4,906 25,625
-------- -------- --------
Net income (loss) adjusted for
non-cash items 14,018 7,914 5,816
-------- -------- --------
Changes in working capital, net of
currency translation effects and
business acquisition:
Receivables (5,310) (7,215) (5,132)
Inventories (12,920) (5,600) 1,197
Other current assets 1,567 (429) (928)
Accounts payable (3,448) 5,079 (770)
Accrued liabilities (1,843) (6,437) (2,485)
-------- -------- --------
Net changes in working capital (21,954) (14,602) (8,118)
-------- -------- --------
Net cash used in operating activities (7,936) (6,688) (2,302)
-------- -------- --------
Financing Activities:
Proceeds from borrowings 22,200 8,000 13,770
Payments on debt (19,679) (6,784) (16,641)
Proceeds from sale of common stock 1,713 145 71
Cash dividends (1,822) (1,779) (1,754)
-------- -------- --------
Net cash provided by (used in) financing
activities 2,412 (418) (4,554)
-------- -------- --------
Investing Activities:
Sales of investments 11,425 22,118 29,796
Purchases of investments (6,660) (11,335) (18,343)
Capital expenditures (2,352) (2,703) (2,164)
Business acquisition (1,450) -- --
Other 194 438 208
-------- -------- --------
Net cash provided by investing activities 1,157 8,518 9,497
-------- -------- --------
Increase (decrease) in cash and
equivalents (4,367) 1,412 2,641
Cash and equivalents at beginning
of year 11,151 9,739 7,098
-------- -------- --------
Cash and equivalents at end of year $ 6,784 $ 11,151 $ 9,739
======== ======== ========
See notes to consolidated financial statements.
Page 16
Consolidated Statements of Stockholders' Equity
Shares Issued
--------------- Additional Market
(shares and dollars Class B Par Paid-in Retained Foreign Appre-
in thousands) Common Common Value Capital Earnings Currency ciation
Total
------ ------ ------ ------- ------- ------- ------ -------
Balance June 1, 1993 8,019 3,248 $ 563 $49,158 $26,475 $ (779) $ -- $75,417
Shares contributed to ESOP 20 -- 1 124 -- -- -- 125
Shares issued under ESPP
and stock option plan 17 -- 1 70 -- -- -- 71
Dividends -- -- -- -- (1,754) -- -- (1,754)
Currency translation -- -- -- -- -- (1,604) -- (1,604)
Cumulative effect of adoption
of FASB Statement 115 -- -- -- -- -- -- 127 127
Net loss -- -- -- -- (19,809) -- -- (19,809)
------ ------ ------ ------- ------- ------- ------ -------
Balance May 31, 1994 8,056 3,248 565 49,352 4,912 (2,383) 127 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 -- -- -- -- -- 1,697 -- 1,697
Market appreciation -- -- -- -- -- -- 10 10
Net income -- -- -- -- 3,008 -- -- 3,008
------ ------ ------ ------- ------- ------- ------ -------
Balance May 31, 1995 8,225 3,247 573 49,989 6,141 (686) 137 56,154
Shares contributed to ESOP 69 -- 3 497 -- -- -- 500
Shares issued under ESPP
and stock option plan 273 -- 14 1,699 -- -- -- 1,713
Conversion of Class B shares
to common shares 3 (3) -- -- -- -- -- --
Dividends -- -- -- -- (1,822) -- -- (1,822)
Currency translation -- -- -- -- -- (1,792) -- (1,792)
Market appreciation -- -- -- -- -- -- (72) (72)
Net income -- -- -- -- 8,111 -- -- 8,111
------ ------ ------ ------- ------- ------- ------ -------
Balance May 31, 1996 8,570 3,244 $ 590 $52,185 $12,430 $(2,478) $ 65
$62,792
====== ====== ====== ======= ======= ======= ======
=======
See notes to consolidated financial statements.
Page 17
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. Domestic
inventory costs are determined using the last-in, first-out (LIFO) method and
represent 84% of total inventories at May 31, 1996 and 1995. The remaining
inventories are costed on the first-in, first-out (FIFO) method. If the FIFO
method, which approximates current costs, had been used for all inventories,
the total amount of inventories would have been increased by $5,707,000 and
$5,742,000 at May 31, 1996 and 1995, respectively. 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 and accelerated methods for income
tax purposes. Property, plant and equipment consist of the following:
May 31
-------------------
(in thousands) 1996 1995
-------- --------
Land and improvements $ 2,624 $ 2,741
Buildings and improvements 18,052 18,068
Machinery and equipment 22,020 20,039
-------- --------
Property at cost 42,696 40,848
Accumulated depreciation (26,642) (24,460)
-------- --------
Property, net $ 16,054 $ 16,388
======== ========
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 $(228,000), $316,000, and
$(607,000) in 1996, 1995, and 1994, respectively. Gains and losses resulting
from translation of foreign 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 enacted marginal tax rates.
Stock-Based Compensation: The Company accounts for stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25 and generally
recognizes no compensation expense when options are issued. The Financial
Accounting Standards Board has issued Statement No. 123 "Accounting for Stock-
Based Compensation", which requires estimation of the fair value of options
granted to employees and will be effective for the Company in fiscal 1997.
Because the Company plans to elect supplemental foot-note disclosure of this
information rather than including the estimated cost as an expense in arriving
at net income, adoption of this Statement will not affect future earnings
presented in the Statement of Operations.
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
7 1/4% Convertible Subordinated Debentures were not included as share
equivalents because the effect of conversion would be anti-dilutive.
Reclassifications: Certain amounts in the 1994 and 1995 financial statements
have been reclassified to conform to the 1996 presentation.
Note B -- Other Charges
In 1995, the Company paid $4.7 million to the Government in return for a
release of monetary claims in connection with a contract completed in 1989.
In 1994, the Company recorded a charge of $26,500,000 to provide for the
costs and asset write-downs from the phase-down of its manufacturing
operations. Of the charge, $21,400,000 provided for the disposition of the
Company's Brive, France facility, which was transferred to local management in
1995. The costs incurred were consistent with the provision made in 1994, and
no further charges were recorded in 1995 or 1996.
The balance of the charge, $5,100,000, related to the phase-down of
domestic manufacturing operations, which was substantially completed in 1995.
An element of the charge was for estimated clean-up costs and environmental
monitoring related to handling practices previously employed for certain
solvents at the Company's LaFox, Illinois facility. The Company has proposed a
plan to the Illinois Environmental Protection Agency to monitor and process
soil and groundwater at the facility. The costs incurred for the phase-down
Page 18
were consistent with the 1994 provision, and no further charges were recorded,
except for a $450,000 charge to cost of sales in 1996 to increase the reserve
for environmental remediation costs. The present value of costs of remediation
are estimated to be $700,000 and are included in accrued liabilities. The
estimated cost of certain litigation also included in the provision is
discussed further in Note K.
Note C -- 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 15%, 17%, and
18%, of net sales in fiscal 1996, 1995, and 1994, respectively.
As part of the divestiture of the Company's Brive manufacturing
operations, the Company entered into a supply agreement with Covimag, SA, the
corporation created by the local management group to continue operating the
Brive facility. Under this agreement, the Company has agreed to purchase
electron tubes valued at approximately $11.0 million per year through calendar
1997.
Note D -- Investments
Financial Accounting Standards Board Statement 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, 1996 and 1995 is stated at fair value based on
quoted market prices or dealers' quotes and consists of securities available-
for-sale, as follows:
Gross Gross Estimated
Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
-------- -------- -------- --------
At May 31, 1996:
Equity securities $ 1,571 $ 174 $ (29) $ 1,716
Bonds 510 - (36) 474
-------- -------- -------- --------
Total investments $ 2,081 $ 174 $ (65) $ 2,190
======== ======== ======== ========
At May 31, 1995:
Equity securities $ 3,929 $ 567 $ (333) $ 4,163
Bonds 2,916 140 (149) 2,907
-------- -------- -------- --------
Total investments $ 6,845 $ 707 $ (482) $ 7,070
======== ======== ======== ========
The maturity schedule for securities available-for-sale at May 31, 1996 is
as follows:
Estimated
Fair
(in thousands) Cost Value
-------- --------
Due in one year or less $ 324 $ 324
Due after one year through five years 186 150
-------- --------
Total bonds 510 474
Equity securities 1,571 1,716
-------- --------
Total investments $ 2,081 $ 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 considered by management to be of a permanent
nature. Investment income includes capital gains of $1,121,000 in 1996,
$1,205,000 in 1995 and $1,292,000 in 1994. Of these amounts, sales of equity
securities generated gains of $1,079,000, $1,044,000 and $739,000,
respectively.
Note E -- Debt Financing
Long-term debt consists of the following:
May 31
-------------------
(in thousands) 1996 1995
-------- --------
7 1/4% Convertible subordinated debentures
due 2006 $ 70,825 $ 70,825
Floating-rate bank term loan due
November, 1998 (6.6% at May 31, 1996) 21,200 10,679
-------- --------
Total debt 92,025 81,504
Less current maturities - 1,857
-------- --------
Long-term debt, net $ 92,025 $ 79,647
======== ========
The 7 1/4% convertible subordinated debentures are unsecured and
subordinated to other long-term debt. Each $1,000 debenture is convertible into
the Company's Common Stock at any time prior to maturity at $21.14 per share
and is redeemable by the Company at a premium through December 15, 1996 and
thereafter at par. The Company is required to make sinking fund payments on
December 15 annually to 2005 in order to retire 75% of the original $83,000,000
issue prior to maturity. Debentures with a face amount of $12,175,000 were
repurchased and will be used to satisfy a portion of the sinking fund
requirement. Remaining sinking fund requirements for the next five years are
$275,000 in fiscal 1998 and $6,225,000 in fiscal 1999, 2000 and 2001. The
debenture agreement restricts the use of retained earnings for the payment of
dividends or purchase of treasury stock. As of May 31, 1996, $11,219,000 was
free of such restrictions.
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.
In November 1995, the Company entered into a $25,000,000 senior revolving
credit note agreement due November 1998 consolidating a then outstanding
$9,800,000 long-term loan and an $8,000,000 short-term loan. 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 125 basis points over LIBOR, which at May 31, 1996 resulted in a
rate of 6.6%. In June 1996, the senior revolving credit agreement was increased
to $30,000,000, of which $5,800,000 was available for future working capital or
other corporate requirements.
Page 19
Aggregate maturities of debt during the next five years are: $275,000 in
1998, $27,424,900 in 1999, $6,225,000 in 2000 and 2001. Cash payments for
interest were $6,445,000, $6,506,000, and $7,710,000 in 1996, 1995, and 1994,
respectively.
In the following table, the fair value of the Company's 7 1/4% convertible
debentures is based on quoted market prices. The fair value of floating-rate
bank term loans is based on carrying value.
(in thousands) 1996 1995
------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- -------- -------- --------
7 1/4% Convertible
debentures $ 70,825 $ 59,847 $ 70,825 $ 56,306
Bank term loans 21,200 21,200 18,679 18,679
-------- -------- -------- --------
Total $ 92,025 $ 81,047 $ 89,504 $ 74,985
======== ======== ======== ========
Note F -- Income Taxes
The components of income (loss) before income taxes and extraordinary item
are:
(in thousands) 1996 1995 1994
--------- --------- ---------
United States $ 9,954 $ 781 $ (2,284)
Foreign 2,057 1,850 (23,925)
--------- --------- ---------
Income (loss) before taxes $ 12,011 $ 2,631 $(26,209)
========= ========= =========
The differences between the provision (credit) for income taxes and
income taxes computed at the federal statutory tax rate of 34% are as follows:
(in thousands) 1996 1995 1994
--------- --------- ---------
Federal income tax at statutory rate $ 4,084 $ 895 $ (8,911)
Effect of:
State income taxes, net of
federal tax benefit 421 (38) (1,203)
FSC benefit on export sales (386) (273) (258)
Realization of tax benefit on prior
years' foreign losses (298) - -
Non-deductible foreign losses - 180 9,036
U.S. tax benefit on disposition
of French manufacturing - - (5,000)
Claim settlement taxed at 46%
carry back year statutory rate - (600) -
Other 79 (14) (64)
--------- --------- ---------
Income tax provision (benefit) $ 3,900 $ 150 $ (6,400)
========= ========= =========
In 1995, due to the timing and nature of the claim settlement (see Note
B), the Company utilized a ten year carryback provision permitted by the
Internal Revenue Service.
Tax benefits of $8,000,000 will be realized if the disposition of the
Company's French operations is treated as an ordinary loss for federal tax
purposes (see Note B). A tax benefit of $5,000,000 was recorded in 1994 based
upon alternative tax strategies.
The provisions (credits) for income taxes before extraordinary item
consist of the following:
(in thousands) 1996 1995 1994
--------- --------- ---------
Currently payable:
Federal $ 1,158 $ (1,930) $ 137
State 139 (150) -
Foreign 274 1,250 196
--------- --------- ---------
Total currently payable 1,571 (830) 333
--------- --------- ---------
Deferred:
Federal 1,806 1,386 (4,455)
State 498 93 (1,822)
Foreign 25 (499) (456)
--------- --------- ---------
Total deferred 2,329 980 (6,733)
--------- --------- ---------
Income tax provision (benefit) $ 3,900 $ 150 $ (6,400)
========= ========= =========
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, 1996 and 1995 are as follows:
Non- Non-
Current current current
(in thousands) Asset (1) Asset (2) Liability
--------- --------- ---------
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)
========= ========= =========
At May 31, 1995:
Deferred tax assets:
Operating loss carryforward $ - $ 4,933 $ -
Intercompany profit in inventory 1,619 - -
Inventory valuation 2,557 - -
Other, net 19 480 -
--------- --------- ---------
Deferred tax assets 4,195 5,413 -
Deferred tax liabilities:
Accelerated depreciation - (3,276) -
--------- --------- ---------
Net deferred tax $ 4,195 $ 2,137 $ -
========= ========= =========
(1) Included in other current assets on the balance sheet
(2) Included in other assets on the balance sheet
Available operating loss carryforwards for domestic losses expire in 2010.
Net income taxes paid (refunds received) were $(1,112,000), $(361,000), and
$3,053,000 in 1996, 1995, and 1994, respectively. The Company's United States
federal tax returns have been audited through 1992.
Page 20
Note G -- Accrued Liabilities
Accrued liabilities consist of the following:
May 31
---------------------
(in thousands) 1996 1995
--------- ---------
Compensation and payroll taxes $ 3,558 $ 4,592
Interest 2,690 2,511
Income taxes 314 530
Other accrued expenses 3,189 3,528
--------- ---------
Accrued liabilities $ 9,751 $ 11,161
========= =========
Note H -- 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 at May 31, 1996 was 8,569,895 shares. An
additional 9,125,085 shares of Common Stock have been reserved for future
issuance under the Employee Stock Purchase and Option Plans and potential
conversion of the 7 1/4% 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 its
fair market value. The plan has reserved 150,000 shares for future issuance.
On July 10, 1996, the Board of Directors approved the Employees 1996
Incentive Compensation Plan, the 1996 Stock Option Plan for Non-Employee
Directors and Employees 1996 Stock Purchase Plan. The plans are subject to
shareholders' approval, which will be voted at the annual meeting on October 1,
1996. The following information assumes shareholders' approval.
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, 1,484,856 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 qualified stock options exercisable based on the passage of time.
Additionally, 490,739 shares have been reserved for future issuance to
employees as Non-Qualified Stock Options. Each option is exercisable over a
period from its date of grant at the market value on the date of grant and
expires ten years from the date of grant.
The following table contains further information on the stock option
plans:
Incentive Stock Options 1996 1995 1994
--------- --------- ---------
Outstanding, June 1 620,750 434,221 444,813
Granted 243,450 246,100 40,150
Exercised (162,014) (9,000) -
Canceled (36,780) (50,571) (50,742)
--------- --------- ---------
Outstanding, May 31 665,406 620,750 434,221
========= ========= =========
Price range at May 31 $3.75 to $3.75 to $6.00 to
$8.125 $8.125 $8.125
Exercisable at May 31 366,466 478,270 199,111
Available for grant at May 31 819,450 254,900 -
========= ========= =========
Non-Qualified Stock
Options 1996 1995 1994
--------- --------- ---------
Outstanding, June 1 712,543 669,890 493,532
Granted 20,000 50,000 208,100
Exercised (83,127) - -
Canceled (62,978) (7,347) (31,742)
--------- --------- ---------
Outstanding, May 31 586,438 712,543 669,890
========= ========= =========
Price range at May 31 $3.75 to $3.75 to $5.25 to
$12.95 $12.95 $12.95
Exercisable at May 31 488,938 577,229 345,026
Available for grant at May 31 304,301 161,324 204,477
========= ========= =========
Note I -- 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 3% of base pay. Effective 1997, the
Company will increase this matching limit to 4% of base pay. Charges to expense
for discretionary and matching contributions to these plans were $1,075,000 in
1996, $745,000 in 1995 and $740,000 in 1994. Stock contributions to the ESOP
were $500,000 , $500,000 and $125,000 in 1996, 1995 and 1994, 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 J -- Industry and Market Information
The Company operates in one industry as a distributor of electronic
components, including vacuum tubes and semiconductors. The Company invoices its
customers and makes shipments from two primary geographic locations: North
America (which services the U. S., Canada, Latin America, and the Far East) and
Europe.
Page 21
(in thousands) 1996 1995 1994
--------- --------- ---------
Sales:
North America $211,912 $186,103 $154,205
Less intersegment transfers 21,778 15,316 13,691
--------- --------- ---------
To unaffiliated customers 190,134 170,787 140,514
--------- --------- ---------
Europe 51,987 49,244 40,367
Less intersegment transfers 2,454 11,913 8,787
--------- --------- ---------
To unaffiliated customers 49,533 37,331 31,580
--------- --------- ---------
Consolidated $239,667 $208,118 $172,094
========= ========= =========
Operating income (loss):
North America $ 13,040 $ 6,187 $ 6,235
Europe 6,263 1,984 (25,054)
Corporate expenses (1,733) (1,512) (1,516)
--------- --------- ---------
Consolidated $ 17,570 $ 6,659 $(20,335)
========= ========= =========
Identifiable assets:
North America $143,536 $142,031 $119,033
Europe 32,794 21,653 35,310
Corporate assets 3,828 9,830 25,124
--------- --------- ---------
Consolidated $180,158 $173,514 $179,467
========= ========= =========
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
$37,913,000 in 1996, $38,653,000 in 1995, and $29,667,000 in 1994.
Operating income was reduced by $4,700,000 in North America in 1995 for
the payment of a claim settlement, and by $5,100,000 in North America and
$21,400,000 in Europe in 1994 for the provision for phase-down of manufacturing
operations, 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
vary elsewhere based on local customary practices. Estimates of credit losses
are recorded in the financial statements based on periodic reviews of
outstanding accounts and actual losses consistently have been within
management's estimates.
Sales by product line and by geographic destination are summarized in
Management's Discussion and Analysis.
Note K -- Litigation
On September 30, 1991, the Company reached a settlement with the U. S.
Department of Justice (DOJ) which prohibits the Company from collecting tube
carcasses otherwise available to tube rebuilders, provides certain restrictions
on its dealings with Varian Associates, Inc. with respect to power grid tubes
and re-quires the Company to obtain DOJ approval for the acquisition of any
company (or its power grid tube assets) engaged in the rebuilding, manufacture,
or distribution of power grid tubes, except under limited circumstances.
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 vigorously defending itself and
the VASCO joint venture against this action.
While it is not possible at this time to predict the outcome of this legal
action, in the opinion of management, the disposition of the lawsuit and other
matters mentioned above will not have a material effect on financial position.
Note L -- Selected Quarterly Financial Data
(Unaudited)
Summarized quarterly financial data for 1996 and 1995 follow. There were
no material fourth quarter adjustments in 1996 or 1995. See Note B regarding
the 1995 claim settlement.
(in thousands, except per
share amounts) First Second Third Fourth
--------- --------- --------- ---------
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
1995:
Net sales $46,407 $51,008 $51,255 $59,448
Gross margin 13,503 14,570 14,673 17,287
Claim settlement - - - (4,700)
Net income (loss) before
extraordinary item 784 1,128 972 (403)
Extraordinary gain,
net of tax - - - 527
Net income 784 1,128 972 124
Net income (loss) per share
before extraordinary gain $ .07 $ .10 $ .08 $ (.04)
Net income per share $ .07 $ .10 $ .08 $ .01
Page 22
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, 1996 and 1995, and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the three years in the period ended May 31, 1996. 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, 1996 and 1995, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended May 31, 1996, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Chicago, Illinois,
July 10, 1996
Stockholder Information
Corporate Offices
Richardson Electronics, Ltd.
40W267 Keslinger Road
LaFox, Illinois 60147
(630) 208-2200
Annual Meeting
We encourage all stockholders to attend the annual meeting scheduled
for Tuesday, October 1, 1995 at 3:15 p.m. at the Company's corporate
offices. Further details are available in your proxy materials.
Transfer Agent and Registrar
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Auditors
Ernst & Young LLP
233 S. Wacker Drive
Chicago, Illinois 60606
Form 10K
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.
Market Price of Common Stock
The common stock is traded on the NASDAQ National Market System under the
symbol "RELL". Press releases and other information can be found on the
Internet at the Company's home page at http://www.rell.com. The number of
stockholders of Common Stock and Class B Common Stock at May 31, 1996 was
707 and 37, respectively. The quarterly market price ranges of the
Company's common stock were as follows:
1996 1995
---------------- ----------------
Fiscal Quarters High Low High Low
------ ------ ------ ------
First 8 1/8 7 5 1/2 3 3/4
Second 11 3/4 6 7/8 9 4 1/2
Third 11 1/4 9 8 1/2 6 5/8
Fourth 11 7/8 9 3/4 8 1/8 6 3/4
Page 23
Corporate Officers
Edward J. Richardson
Chairman of the Board, President & Chief Executive 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
Dennis R. Gandy
Executive Vice President, Corporate Development & Assistant Secretary
William J. Garry
Vice President, Finance & Chief Financial Officer
David Gilden
Vice President, Latin American Sales
Joseph C. Grill
Vice President, Human Resources
Joel Levine
Senior Vice President & General Manager, Solid State and Components
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
Ronald 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
Dennis R. Gandy (1)
William J. Garry
Scott Hodes (2,3,4)
Partner, Law Firm of Ross & Hardies
Ad Ketelaars
Chief Executive Officer, Enertel
Joel Levine
Harold L. Purkey (2)
Senior Managing Director,
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
Page 24