Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - RICHARDSON ELECTRONICS LTD/DE | d8k.htm |
| EX-99.1 - PRESS RELEASE - RICHARDSON ELECTRONICS LTD/DE | dex991.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As previously reported on October 1, 2010, Richardson Electronics, Ltd. (the “Company,” “we,” “our”), and Arrow Electronics, Inc. (“Arrow”) entered into an Acquisition Agreement (the “Acquisition Agreement”). Pursuant to the Acquisition Agreement, Arrow agreed to acquire all of the assets primarily used or held for use in, and certain liabilities of, the Company’s RF, Wireless & Power Division (“RFPD”), as well as certain other Company assets, including its information technology assets (the “Transaction”).
For the quarterly period ended November 27, 2010, the Company reported RFPD as a discontinued operation in the unaudited condensed consolidated balance sheet as of November 27, 2010, and the unaudited condensed consolidated statements of income for the three and six months ended November 27, 2010, and the consolidated statements of income for the three and six months ended November 28, 2009.
On March 1, 2011, the Company and Arrow closed the Transaction. The total consideration paid by Arrow on the closing date was $238.8 million which included an estimated pre-closing working capital adjustment. The final purchase price is subject to a post-closing working capital adjustment.
The following unaudited condensed consolidated financial statements are presented to illustrate the effects of the Transaction. The unaudited pro forma condensed consolidated balance sheet as of November 27, 2010, illustrates the estimated effects of the Transaction as if the sale had occurred on May 29, 2010, and includes the retention of net proceeds and an adjustment to retained earnings for the estimated gain on the sale of the Transaction. The unaudited pro forma condensed consolidated statement of income for the fiscal year ended May 29, 2010, illustrate the estimated effects of the Transaction as if the Transaction took place on May 30, 2009, the last day of our fiscal year 2009.
The unaudited pro forma condensed consolidated financial statements presented are for informational purposes only and do not purport to present what our results would have been had the Transaction actually occurred on the dates presented or to project our results of operations or financial position for any future period. The pro forma financial statements are based upon currently available information, preliminary estimates, and certain assumptions that are believed to be reasonable and represent all material information that is necessary to fairly present the pro forma financial statements.
The unaudited pro forma condensed consolidated financial statements, including the notes thereto, should be read in conjunction with: (i) our audited consolidated financial statements and the notes thereto for the year ended May 29, 2010, and (ii) our unaudited consolidated financial statements and the notes thereto for the three and six months ended November 27, 2010.
Richardson Electronics, Ltd.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(in thousands)
| Q2 FY 2011 | ||||||||||||||||
| As of November 27, 2010 | ||||||||||||||||
| As Reported |
Pro Forma Adjustments |
Notes | Pro forma | |||||||||||||
| Assets |
||||||||||||||||
| Current Assets: |
||||||||||||||||
| Cash and cash equivalents |
$ | 33,033 | $ | 197,457 | (a) | $ | 230,490 | |||||||||
| Receivables |
22,008 | — | 22,008 | |||||||||||||
| Inventories |
26,491 | — | 26,491 | |||||||||||||
| Prepaid expenses |
1,388 | — | 1,388 | |||||||||||||
| Deferred income taxes |
346 | — | 346 | |||||||||||||
| Discontinued Assets |
173,168 | (173,168 | ) | (b) | — | |||||||||||
| Total current assets |
256,434 | 24,289 | 280,723 | |||||||||||||
| Non-current assets: |
||||||||||||||||
| Property, plant and equipment, net |
5,752 | — | 5,752 | |||||||||||||
| Non-Current deferred income taxes |
1,550 | — | 1,550 | |||||||||||||
| Other non-current assets |
358 | — | 358 | |||||||||||||
| Total non-current assets |
7,660 | — | 7,660 | |||||||||||||
| Total assets |
$ | 264,094 | $ | 24,289 | $ | 288,383 | ||||||||||
| Liabilities and Stockholders’ Equity |
||||||||||||||||
| Current liabilities: |
||||||||||||||||
| Accounts payable |
$ | 18,750 | $ | — | $ | 18,750 | ||||||||||
| Accrued liabilities |
10,864 | — | 10,864 | |||||||||||||
| Current portion of long-term debt |
18,000 | — | 18,000 | |||||||||||||
| Discontinued Liabilities |
60,990 | (60,990 | ) | (c) | — | |||||||||||
| Total Current Liabilities |
108,604 | (60,990 | ) | 47,614 | ||||||||||||
| Non-current liabilities: |
||||||||||||||||
| Long-term income tax liabilities |
346 | — | 346 | |||||||||||||
| Other non-current Liabilities |
494 | — | 494 | |||||||||||||
| Discontinued operations—non-current liabilities |
3,265 | (3,265 | ) | (d) | — | |||||||||||
| Total Non-Current Liabilities |
4,105 | (3,265 | ) | 840 | ||||||||||||
| Total liabilities |
$ | 112,709 | $ | (64,255 | ) | $ | 48,454 | |||||||||
| Stockholders’ Equity |
||||||||||||||||
| Common stock |
814 | 814 | ||||||||||||||
| Class B common stock |
152 | 152 | ||||||||||||||
| Additional paid-in-capital |
123,065 | 123,065 | ||||||||||||||
| Common stock in treasury |
(8,665 | ) | (8,665 | ) | ||||||||||||
| Retained earnings (accumulated deficit) |
28,061 | 88,544 | (e) | 116,605 | ||||||||||||
| Accumulated other comprehensive income |
7,958 | 7,958 | ||||||||||||||
| Total stockholders’ equity |
$ | 151,385 | $ | 88,544 | $ | 239,929 | ||||||||||
| Total liabilities and stockholders’ equity |
$ | 264,094 | $ | 24,289 | $ | 288,383 | ||||||||||
Richardson Electronics, Ltd.
Unaudited As Reported and Pro Forma Condensed Consolidated Income Statements
(in thousands, except per share amounts)
| YTD Q2 FY 2011 | FY 2010 | |||||||||||||||||
| For the six months ended November 27, 2010 |
For the twelve months ended May 29, 2010 | |||||||||||||||||
| As Reported | As Reported | Pro Forma Adjustments |
Notes | Pro Forma | ||||||||||||||
| Net sales |
$ | 78,490 | $ | 491,847 | $ | 356,475 | (f) | $ | 135,372 | |||||||||
| Cost of sales |
55,304 | 373,836 | 279,748 | (f) | 94,088 | |||||||||||||
| Gross margin |
23,186 | 118,011 | 76,727 | 41,284 | ||||||||||||||
| % of net sales |
29.5 | % | 24.0 | % | 21.5 | % | 30.5 | % | ||||||||||
| Selling, general, and administrative expenses |
21,743 | 95,841 | 52,241 | (f) | 43,600 | |||||||||||||
| % of net sales |
27.7 | % | 19.5 | % | 14.7 | % | 32.2 | % | ||||||||||
| (Gain) loss on disposal of assets |
2 | 19 | (1 | ) | 20 | |||||||||||||
| Operating Income (Loss) |
1,441 | 22,151 | 24,487 | (2,336 | ) | |||||||||||||
| % of net sales |
1.8 | % | 4.5 | % | 6.9 | % | -1.7 | % | ||||||||||
| Other (income) expense |
||||||||||||||||||
| Interest expense |
106 | 3,973 | 2,834 | (g) | 1,139 | |||||||||||||
| Investment income |
— | (113 | ) | (81 | ) | (g) | (32 | ) | ||||||||||
| Foreign exchange loss |
316 | 1,116 | — | 1,116 | ||||||||||||||
| Other, net |
(10 | ) | 73 | — | 73 | |||||||||||||
| Total |
412 | 5,049 | 2,753 | 2,296 | ||||||||||||||
| Income (loss) before taxes |
1,029 | 17,102 | 21,734 | (4,632 | ) | |||||||||||||
| Income tax provision (benefit) |
408 | (166 | ) | 214 | (h) | (380 | ) | |||||||||||
| Income (loss) from continuing operations |
$ | 621 | $ | 17,268 | $ | 21,520 | $ | (4,252 | ) | |||||||||
| Income (loss) from continuing operations: |
||||||||||||||||||
| Per common share - basic |
$ | 0.04 | $ | 0.99 | $ | 1.23 | $ | (0.24 | ) | |||||||||
| Per common share - diluted |
$ | 0.03 | $ | 0.96 | $ | 1.20 | $ | (0.24 | ) | |||||||||
| Per Class B common shares - basic |
$ | 0.03 | $ | 0.89 | $ | 1.11 | $ | (0.22 | ) | |||||||||
| Per Class B common shares - diluted |
$ | 0.03 | $ | 0.88 | $ | 1.11 | $ | (0.23 | ) | |||||||||
| Weighted average number of shares: |
||||||||||||||||||
| Common shares - basic |
14,725 | 14,766 | 14,766 | 14,766 | ||||||||||||||
| Common shares - diluted |
18,010 | 18,915 | 18,915 | 14,766 | ||||||||||||||
| Class B common shares - basic |
3,038 | 3,048 | 3,048 | 3,048 | ||||||||||||||
| Class B common shares - diluted |
3,038 | 3,048 | 3,048 | 3,048 | ||||||||||||||
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
| 1. | Basis of Presentation |
As previously reported, on October 1, 2010, Richardson Electronics, Ltd. (the “Company,” “we,” “our”), and Arrow Electronics, Inc. (“Arrow”) entered into an Acquisition Agreement (the “Acquisition Agreement”). Pursuant to the Acquisition Agreement, Arrow agreed to acquire all of the assets primarily used or held for use in, and certain liabilities of, the Company’s RF, Wireless & Power Division (“RFPD”), as well as certain other Company assets, including its information technology assets (the “Transaction”).
On March 1, 2011, the Company and Arrow closed the Transaction. The total consideration paid by Arrow on the closing date was $238.8 million which included an estimated pre-closing working capital adjustment. The final purchase price is subject to a post-closing working capital adjustment.
The following unaudited condensed consolidated financial statements are presented to illustrate the effects of the Transaction. The unaudited pro forma condensed consolidated balance sheet as of November 27, 2010, illustrates the estimated effects of the Transaction as if the sale had occurred on May 29, 2010, and includes the retention of net proceeds and an adjustment to retained earnings for the estimated gain on the sale of the Transaction. The unaudited pro forma condensed consolidated statement of income for the fiscal year ended May 29, 2010, illustrate the estimated effects of the Transaction as if the Transaction took place on May 30, 2009, the last day of our fiscal year 2009.
The unaudited pro forma condensed consolidated income statements do not reflect any of the following:
Interest Income
We have not yet determined how we will use the proceeds. We may use them for a variety of purposes, including any or all of the following: bolt-on acquisitions, repurchases of outstanding shares of common stock, dividends to stockholders, and general corporate purposes.
We have not included any interest income in the unaudited pro forma condensed consolidated statements of income for the fiscal year ended May 29, 2010. Assuming we invest the cash proceeds, estimated interest income for the fiscal year ended May 29, 2010, would have been approximately $1.9 million. The interest rate assumed is 0.9% and was based on the average interest rates for the one year Certificate of Deposit Index.
Material non-recurring charges or credits
We expect to incur severance charges relating to the realignment of our cost structure after the consummation of the Transaction which we believe will be material to our consolidated financial statements. We are not yet able to estimate the severance expense and related tax effects and have therefore excluded them from our unaudited pro forma condensed consolidated income statement.
| 2. | Notes to Unaudited Pro Forma Adjustments |
| (a) | To record the net proceeds from the Transaction. This includes purchase price, estimated pre-closing working capital adjustment, estimated taxes and other expenses directly related to the Transaction which includes legal fees and other professional fees. |
(Amounts in 000’s)
| Q2 FY 11 As of 11/27/2010 |
||||
| Purchase Price |
$ | 211,788 | ||
| Working Capital Adjustment |
16,567 | |||
| Total Consideration |
$ | 228,355 | ||
| Transaction Costs |
3,000 | |||
| Net Proceeds (before tax) |
$ | 225,355 | ||
| Taxes on Gain from Sale ** |
27,898 | |||
| Net Proceeds (after tax) |
$ | 197,457 | ||
| ** | See Footnote (e) |
| (b) | This adjustment includes all assets both current and non-current that are either included in the Transaction or become discontinued as a result of the Transaction. |
| (c) | This adjustment includes all current liabilities that are either included in the Transaction or become discontinued as a result of the Transaction. |
| (d) | This adjustment includes all non-current liabilities that become discontinued as a result of the Transaction. |
| (e) | To record adjustments to Retained Earnings to reflect the gain on sale, and the elimination of discontinued assets and liabilities. |
(Amounts in 000’s)
| Q2 FY 11 As of 11/27/2010 |
||||
| Purchase Price |
$ | 211,788 | ||
| Working Capital Adjustment |
16,567 | |||
| Transaction Costs |
3,000 | |||
| Net Proceeds (before tax) |
$ | 225,355 | ||
| RFPD Net Assets: |
||||
| Receivables |
85,558 | |||
| Inventory |
62,050 | |||
| Property, Plant, and Equipment |
8,457 | |||
| Other assets |
1,651 | |||
| Payables |
47,641 | |||
| Net Assets |
$ | 110,075 | ||
| Gain on Sale |
$ | 115,280 | ||
| Taxes on Gain from Sale ** |
27,898 | |||
| Net Gain on Sale |
$ | 87,382 | ||
| Q2 FY 11 As of 11/27/2010 |
||||
| Net gain on sale |
$ | 87,382 | ||
| Discontinued assets |
(15,452 | ) | ||
| Discontinued liabilities |
16,614 | |||
| Total Pro Forma adjustment to Retained Earnings |
$ | 88,544 | ||
| ** | The estimated effective tax rate on the gain was calculated using the federal statutory rate of 35% and the state rate of 1.8%, adjusted for the following items: foreign taxes at other rates (-2.6%); net decrease in valuation allowance from the realization of deferred tax assets (-9.4%); and other miscellaneous benefits (-0.6%). After these adjustments, the overall effective tax rate on the gain was estimated to be approximately 25%. |
| (f) | To record adjustments that eliminate revenue, cost of sales, and selling, general and administrative costs (SG&A) that relate to RFPD. This includes support function personnel costs such as information technology, finance, and supply chain that transfer with the Transaction. This adjustment also includes costs that become discontinued as a result of the Transaction. |
| (g) | To record an adjustment to eliminate interest expense allocated to RFPD based on the net assets of RFPD to be sold in connection with the Transaction. |
| (h) | To record an adjustment to eliminate the tax provision resulting from the Transaction. The tax rate was calculated using the federal statutory rate, adjusted for state income taxes, foreign taxes at other rates, and adjustments to our valuation allowance for deferred tax assets. After these adjustments, the pro forma effective tax rate from income from continuing operations was 8.2% for the year ended May 29, 2010. |