RELL FORM 10-Q/A (3) FY05Q1

RELL FORM 10-Q/A (3) FY05Q1	File:20050519-FY05Q1

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Mark One)
[ X ]	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended : *August 28, 2004*
[ ]	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from : ________________ to _________________

RICHARDSON ELECTRONICS, LTD.

(Exact name of registrant as specified in its charter)

*Delaware*	*0-12906*	*36-2096643*

(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

*40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois*		*60147-0393*

(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code:		*(630) 208-2200*




(Former name or former address,if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[ X ] Yes [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

[ X ] Yes [ ] No

As of September 30, 2004, there were outstanding 17,298,214 shares of Common Stock, $.05 par value, inclusive of 3,168,922 shares of Class B Common Stock, $.05 par value, which are convertible into Common Stock of the registrant on a share for share basis.

Table of Contents

Top of Page

RICHARDSON ELECTRONICS, LTD.
FORM 10-Q/A
TABLE OF CONTENTS

INDEX	PAGE



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements		3
Condensed Consolidated Balance Sheets as of August 28, 2004 (as restated) and May 29, 2004		3
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three-Month Periods Ended August 28, 2004 (as restated) and August 30, 2003 (as restated)		4
Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended August 28, 2004 (as restated) and August 30, 2003 (as restated)		5
Notes to the Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3. Quantitative and Qualitative Disclosures About Market Risk		15
Item 4. Controls and Procedures		15

PART II - OTHER INFORMATION
Item 1. Legal Proceedings		16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		16
Item 3. Defaults upon Senior Securities		16
Item 4. Submission of Matters to a Vote of Security Holders		16
Item 5. Other Information		16
Item 6. Exhibits		16

Signature		17
EXPLANATORY NOTE (The Amendment No. 3) Richardson Electronics, Ltd. (the "Company") filed this Amendment No. 3, as well as Amendment No. 2, to its Quarterly Report on Form 10-Q/A for the fiscal quarter ended August 28, 2004 , which was filed with the Securities and Exchange Commission (the "SEC") on May 17, 2005 (the "first amendment filing date"), to file new Exhibits 31.1 and 31.2 that conform to the form of certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. This amendment to the original Form 10-Q amends and restates the original Form 10-Q, as amended in Amendment No. 1 and No. 2, in its entirety, but does not reflect events occurring after the original filing of the Form 10-Q. All information contained in this amendment and the original Form 10-Q is subject to updating and supplementing as provided in the periodic reports filed subsequent to the original filing date with the Securities and Exchange Commission. The filing of this Form 10-Q/A shall not be deemed an admission that the original filing, when made, included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement therein not misleading. EXPLANATORY NOTE (The Amendment No. 1) The Company filed its Amendment No. 1 to its Quarterly Report on Form 10-Q for the fiscal quarter ended August 28, 2004, originally filed October 5, 2004, to reflect certain adjustments to restate the Company's condensed consolidated financial statements. In connection with the Company's independent registered public accounting firm's review of the Company's Form 10-Q for the third quarter of fiscal 2005, an error in the application of Statement of Financial Accounting Standards No. 52, Foreign Currency Translation, was identified that related to the foreign currency translation on intercompany indebtedness with its subsidiaries. The consolidated financial statements for fiscal 2002 and 2003, selected quarterly financial data for fiscal 2003 and fiscal 2004, and the condensed consolidated financial statements for the three- and six-month periods ended August 28, 2004 and November 27, 2004 have been restated to correct this error. The restatement changed net income for the first three months of fiscal 2005 and 2004 from $1,249,000 and $392,000 to net income of $807,000 and net loss of $1,182,000, respectively. Balance Sheet accounts including deferred tax assets of $6,984,000, other assets of $4,417,000, retained earnings of $10,477,000, and accumulated other comprehensive income (loss) of ($11,932,000), all as previously reported, have been restated to $10,871,000, $4,638,000, $4,117,000, and ($1,464,000), respectively. This Form 10-Q/A contains changes of Item I - Financial Statements, and Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations to reflect this restatement.

Part I

Table of Contents

				As of

				August 28,		May 29,
(in thousands, except per share amounts)				2004		2004

				(unaudited) as restated (See Note B)
ASSETS
Current Assets
	Cash		$	12,758		$	16,927
	Receivables, less allowance of $2,616 and $2,516			105,444			106,130
	Inventories			102,994			92,297
	Prepaid expenses			4,623			3,817
	Deferred income taxes, net			11,549			15,922

	Total current assets			237,368			235,093

Property, plant and equipment, net				31,651			30,589
Goodwill				5,688			5,613
Deferred income taxes, net				10,871			6,733
Other assets				4,638			4,917


Total assets			$	290,216		$	282,945




LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
	Accounts payable		$	36,088		$	33,473
	Accrued liabilities			17,516			23,224
	Current portion of long-term debt			3,867			4,027

		Total current liabilities		57,471			60,724

Long-term debt, less current portion				115,329			133,813
Non-current liabilities				338			241

		Total liabilities		173,138			194,778

Stockholders’ Equity
	Common stock ($.05 par value; issued 15,528 shares at August 28, 2004 and 12,524 shares at May 29, 2004)			776			626
	Class B common stock, convertible ($.05 par value; issued 3,169 shares at August 28, 2004 and 3,168 shares at May 29, 2004)			158			158
	Preferred stock ($1.00 par value; no shares issued)			-			-
	Additional paid-in capital			121,779			93,877
	Common stock in treasury, at cost (1,399 shares at August 28, 2004 and 1,437 shares at May 29, 2004)			(8,288	)		(8,515	)
	Retained earnings			4,117			3,408
	Accumulated other comprehensive loss			(1,464	)		(1,387	)

		Total stockholders’ equity		117,078			88,167


Total liabilities and stockholders' equity			$	290,216		$	282,945




See notes to condensed consolidated financial statements.


		Three months ended

(unaudited, in thousands, except per share amounts, as restated (See Note B))		August 28, 2004		August 30, 2003


Net sales		$	138,520	$	119,306
Cost of products sold			104,918		90,191

	Gross margin		33,602		29,115

Selling, general and administrative expenses			29,289		25,845

	Operating income		4,313		3,270
Other expense
	Interest expense		2,257		2,547
	Other, net		928		2,585

	Total other expense		3,185		5,132

	Income (loss) before income taxes		1,128		(1,862	)

Income taxes			321		(680		)

	Net income (loss)	$	807	$	(1,182	)




Net income per share - basic:
	Net income (loss) per share	$	0.05	$	(0.08	)



	Average shares outstanding		15,872		13,925




Net income per share - diluted:
	Net income (loss) per share	$	0.05	$	(0.08	)



	Average shares outstanding		16,124		13,925




Dividends per common share		$	0.04	$	0.04




Statement of comprehensive income (loss):
	Net income (loss)	$	807	$	(1,182	)

	Currency translation		460		(170	)
	Fair value adjustment to market appreciation on investment, net of income tax effect		74		88
	Cash flow hedges, net of income tax effect		41		112

	Comprehensive income (loss)	$	1,382	$	(1,152	)




See notes to condensed consolidated financial statements.

(unaudited, in thousands, as restated (See Note B))		Three months ended

		August 28, 2004			August 30, 2003

OPERATING ACTIVITIES
Net income (loss)		$	807		$	(1,182	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Depreciation		1,302			1,492
	Amortization of intangibles and financing costs		45			75
	Deferred income taxes		306			(680	)
	Other non-cash items in net income		1,186			3,066
	Receivables		802			(1,857	)
	Inventories		(10,590	)		955
	Other current assets		(1,361	)		(33	)
	Accounts payable		2,833			6,128
	Other liabilities		(4,921	)		(1,474	)


Net cash provided by (used in) operating activities			(9,591	)		6,490


FINANCING ACTIVITIES
	Proceeds from borrowings		20,000			6,000
	Payments on debt		(38,756	)		(8,349	)
	Proceeds from stock issuance		27,893			122
	Cash dividends		(679	)		(546	)


Net cash provided by (used in) financing activities			8,458			(2,773	)


INVESTING ACTIVITIES
	Capital expenditures		(2,292	)		(1,270	)
	Earnout payment related to acquisitions		(545	)		(726	)
	Proceeds from sales of available-for-sale securities		144			1,387
	Purchases from sales of available-for-sale securities		(144	)		(1,387	)
	Other		(90	)		-


Net cash used in investing activities			(2,927	)		(1,996	)


	Effect of exchange rate changes on cash		(109	)		(1,212	)
Net decrease in cash			(4,169	)		509
	Cash at beginning of period		16,927			16,874


Cash at end of period		$	12,758		$	17,383




See notes to condensed consolidated financial statements.

     In the second quarter of fiscal 2004, the Company identified an accounting error in a foreign subsidiary which affected previously reported interest expense for seven quarters beginning with the third quarter of fiscal 2002 and ending with the first quarter of fiscal 2004. The error, which aggregated to $738, was corrected by a restatement of these prior periods. The restatement decreased net income $113.9 for the first quarter of fiscal 2004, and decreased diluted earnings per share to $0.03 versus the $0.04 previously reported. The Company filed Form 10-Q/A for the first quarter of fiscal 2004 on January 30, 2004 to reflect these changes.
     In connection with the Company's independent registered public accounting firm's review of the Company's Form 10-Q for the third quarter of fiscal 2005, an error was identified that occurred in the application of Financial Accounting Standards Board Statement No. 52, Foreign Currency Translation, on intercompany indebtedness with its subsidiaries, which affected previously reported currency translation. The consolidated financial statements for fiscal 2002 and 2003, selected quarterly financial data for fiscal 2003 and 2004, and the condensed consolidated financial statements for the three- and six-month periods ended August 28, 2004 and November 27, 2004 have been restated to correct this error.
     A reconciliation of reported net income to restated net income (loss), including the additional interest expense for the first quarter of fiscal 2004 and the impact of the currency translation adjustment for the first quarter of fiscal 2005 and 2004, is provided in the following table:

	First Quarter


	FY 2005			FY 2004


Previously reported net income with additional interest expense	$	1,249		$	392
Currency Translation Adjustment		(442	)		(1,574	)

Restated net income (loss)	$	807		$	(1,182	)




Previously reported basic and diluted net income per share	$	0.08		$	0.03
Currency Translation Adjustment		(0.03	)		(0.11	)

Restated basic and diluted net income (loss) per share	$	0.05		$	(0.08	)

	August 28, 2004 As Reported			Cumulative Adjustment			1^st QTR FY 2005 Adjustment			August 28, 2004 As Restated


Deferred tax assets (non-current)	$	6,984			3,607			280		$	10,871
Other assets	$	4,417			122			99		$	4,638
Retained earnings	$	10,477			(5,918	)		(442	)	$	4,117
Accumulated other comprehensive income (loss)	$	(11,932	)		9,632			836		$	(1,464	)

Description of	Holding length before proceeds				Total

Securities	Less than 12 months		More than 12 months

Period ended on	Fair Value	Unrealized losses	Fair Value	Unrealized losses		Fair Value	Unrealized losses


August 28, 2004
Common Stock	$ 2,052	$ 212	$ 497	$ 12		$ 2,549	$ 224

August 30, 2003
Common Stock	$ 1,125	$ 157	$ 703	$ 421		$ 1,828	$ 578

As a result of the Company’s fiscal 2003 restructuring initiative, a restructuring charge, including severance and lease termination costs of $1,730, was recorded in selling, general and administrative expenses for the year ended May 31, 2003. Severance costs of $328 were paid in fiscal 2003 with the remaining balance payable in fiscal 2004. As of May 28, 2004, the remaining balance was zero. The following table depicts the amounts associated with the activity related to the restructuring initiative through August 30, 2003:

	Restructuring			Paid				Unpaid
		liability		through		Reversal		balance as of
		May 31, 2003		August 30, 2003		of accrual		August 30, 2003


Employee severance and related costs	$	1,192	$	634	$	-	$	558
Lease termination costs		210		-		210		-

Total	$	1,402	$	634	$	210	$	558

	Goodwill and intangible assets not subject to amortization

			RFWC		IPG			SSD		DSG		Total


Balance at May 29, 2004		$	-	$	885		$	1,730	$	3,420	$	6,035
Modification of earnout payment			-		-			-		26		26
Foreign currency translation			-		(11	)		76		-		65

Balance at August 28, 2004		$	-	$	874		$	1,806	$	3,446	$	6,126

	August 28, 2004				May 29, 2004

		Gross		Accumulated		Gross		Accumulated
		Amount		Amortization		Amount		Amortization

Intangible assets subject to amortization:
Deferred financing costs	$	2,193	$	1,977	$	2,192	$	1,935
Patents, trademarks and customer lists		478		464		478		461

Total	$	2,671	$	2,441	$	2,670	$	2,396

Amortization expense for the

	First Quarter

		FY 2005		FY 2004

Intangible assets subject to amortization:
Deferred financing costs	$	42	$	72
Patents and trademarks		3		3

Total	$	45	$	75

		Warranty
		Reserve


Balance at May 29, 2004	$	802
Accruals for products sold		187
Utilization		(45	)

Balance at August 28, 2004	$	944

	First Quarter

		FY 2005		FY 2004

	(as restated)		(as restated)
Numerator for basic and diluted EPS:
Net income (loss)	$	807	$	(1,182	)

Denominator:
Denominator for basic EPS
Weighted average common shares outstanding		15,872		13,925
Effect of dilutive securities:
Unvested restricted stock awards		21		-
Dilutive stock options		231		-

Shares applicable to diluted income (loss) per common share		16,124		13,925

The Company has stock-based compensation plans under which stock options are granted to key managers at the market price of the common stock on the date of grant. Most of these new grants are fully exercisable after five years and have a ten-year life. Two such grants were issued during the three months ended August 28, 2004.

The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB interpretation No. 44,Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB Opinion 25, issued in March 2000, to account for its stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. Statement of Financial Accounting Standard ("SFAS") No. 123, Accounting for Stock-Based Compensation, established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No.123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No.123. The following table illustrates the pro-forma effect on net income attributable to common stockholders if the fair value-based method had been applied to all outstanding and unvested awards and option grants in each period.

	First Quarter

		FY 2005			FY 2004

	(as restated)			(as restated)
Net income (loss), as reported	$	807		$	(1,182	)
Add: Stock-based compensation expense included in reported net income (loss), net of tax		51			60
Deduct: Stock-based compensation expense determined under fair value-based method for all awards, net of taxes		(216	)		(272	)

Pro-forma net income (loss)	$	642		$	(1,394	)




Net income per share, basic and diluted:
Reported net income (loss)	$	0.05		$	(0.08	)
Pro-forma compensation expense, net of taxes		(0.01	)		(0.02	)

Pro-forma net income (loss) per share	$	0.04		$	(0.10	)

		Sales		Gross	Direct Operating				Assets	Goodwill and
		Sales		Margin		Contribution			Assets	Intangibles


	First Quarter							As of

FY 2005								August 28, 2004

RFWC	$	64,427	$	14,670		$	8,045	$	94,246	$	-
IPG		29,647		9,107			6,240		51,974		874
SSD		25,761		6,498			3,497		35,095		1,806
DSG		16,980		4,133			1,816		24,872		3,446

Total	$	136,815	$	34,408		$	19,598	$	206,187	$	6,126




	First Quarter							As of

FY 2004								May 29, 2004

RFWC	$	49,815	$	11,182		$	5,688	$	87,097	$	-
IPG		25,850		7,669			5,437		50,403		876
SSD		25,172		6,361			3,567		33,257		1,739
DSG		16,079		4,259			2,407		23,358		3,420

Total	$	116,916	$	29,471		$	17,099	$	194,115	$	6,035

	First Quarter

		FY 2005			FY 2004


Sales - segments total	$	136,815		$	116,916
Other sales		1,705			2,390

Sales	$	138,520		$	119,306




Gross margin - segments total	$	34,408		$	29,471
Gross margin on other sales		(806	)		(356	)

Gross margin	$	33,602		$	29,115




Segment direct operating contribution	$	19,598		$	17,099
Gross margin on other sales		(806	)		(356	)
Regional selling expenses		(4,539	)		(4,434	)
Administrative expenses		(9,940	)		(9,039	)

Operating income	$	4,313		$	3,270




		As of

	August 28,				May 29,
	2004				2004

	(as restated)
Segment assets	$	206,187		$	194,115
Cash		12,758			16,927
Other current assets		16,172			30,086
Net property		31,651			30,589
Other assets		23,448			11,228

Total assets	$	290,216		$	282,945

By Geographic Area:
				SALES								GROSS MARGIN


		FY 2005		FY 2004	% Change				FY 2005		% of Sales				FY 2004		% of Sales

First Quarter
North America	$	74,385	$	65,431		13.7	%	$	19,014			25.6	%	$	17,556			26.8	%
Europe		29,529		25,366		16.4	%		8,454			28.6	%		7,377			29.1	%
Asia/Pacific		28,789		22,330		28.9	%		6,716			23.3	%		4,939			22.1	%
Latin America		4,865		5,105		-4.7	%		1,294			26.6	%		1,183			23.2	%
Corporate		952		1,074					(1,876	)					(1,940	)

Total	$	138,520	$	119,306		16.1	%	$	33,602			24.3	%	$	29,115			24.4	%

The Company filed a request with the Securities and Exchange Commission (“SEC”) for the withdrawal of its Registration Statement on Form S-4 (File No. 333-113569), as amended, together with all exhibits on September 28, 2004. The registration statement related to a proposed offer to exchange new convertible debt securities for the Company’s outstanding 81/4 % Convertible Senior Subordinated Debentures and 71/4 % Convertible Subordinated Debentures.
On September 28, 2004, the Company announced that its Board of Directors has authorized management to repurchase $12,000,000 of principal amount of the Company’s outstanding 71/4 % Convertible Subordinated Debentures and/or 81/4 % Convertible Senior Subordinated Debentures in the open market, in privately-negotiated transactions or otherwise, subject to compliance with applicable rules of the Securities and Exchange Commission and obtaining the consent of the Banks pursuant to its Bank Credit Facility, which the Company is confident will be provided. The timing and amounts of repurchases, if any, will also depend on market conditions, the Company’s financial condition and other factors. The Company expects to use funds borrowed under its Bank Credit Facility for the repurchases.

By Business Unit:
				SALES								GROSS MARGIN


		FY 2005		FY 2004	% Change				FY 2005		% of Sales				FY 2004		% of Sales

First Quarter
RFWC	$	64,427	$	49,815		29.3	%	$	14,670			22.8	%	$	11,182			22.4	%
IPG		29,647		25,850		14.7	%		9,107			30.7	%		7,669			29.7	%
SSD		25,761		25,172		2.3	%		6,498			25.2	%		6,361			25.3	%
DSG		16,980		16,079		5.6	%		4,133			24.3	%		4,259			26.5	%
Other		1,705		2,390					(806	)					(356	)

Total	$	138,520	$	119,306		16.1	%	$	33,602			24.3	%	$	29,115			24.4	%

     RFWC had a strong quarter with sales increasing 29.3% to $64.4 million from the prior year. The large sales growth was driven by strength in the Passive/Interconnect, Network Access, and Infrastructure product lines with an increase of 72.2%, 31.8%, and 17.2% to $15.1, $24.7, and $17.5 million, respectively. The growth of higher margin Network Access product line led RWFC’s gross margin as a percentage of sales increase of 40 basis points to $14.7 million.
     IPG sales increased 14.7% to $29.6 million from last year. The solid state Power Components product lines posted solid gains of 46.1% to $10.4 million. IPG gross margins as a percentage of sales increased 100 basis points to $9.1 million, due to a favorable product mix of tube sales.
     SSD sales increased 2.3% to $25.8 million compared to the first quarter of fiscal 2004. SSD’s private label sales increased 6.3% to $7.0 million. Gross margins as a percentage of sales decreased 10 basis points to $6.5 million.
     DSG’s first quarter sales increased 5.6% to $17.0 million from a year ago, driven by increased demand in workstations and high-resolution flat panel monitors for the medical market. The Medical Monitors product line posted growth of 12.4% to $7.2 million. DSG’s gross margin as a percentage of sales decreased 220 basis points, primarily due to pricing pressure in Medical Monitors.
     Sales, percentage change from the prior year, gross margin, and gross margin percent of sales by geographic area are summarized in the following table. Previously reported sales under the caption “Direct Export” and some of the “Corporate” sales were identified by geographic area and reclassified accordingly. The caption “Corporate” consists primarily of Freight and Corporate provisions.

By Geographic Area:
				SALES								GROSS MARGIN


		FY 2005		FY 2004	% Change				FY 2005		% of Sales				FY 2004		% of Sales

First Quarter
North America	$	74,385	$	65,431		13.7	%	$	19,014			25.6	%	$	17,556			26.8	%
Europe		29,529		25,366		16.4	%		8,454			28.6	%		7,377			29.1	%
Asia/Pacific		28,789		22,330		28.9	%		6,716			23.3	%		4,939			22.1	%
Latin America		4,865		5,105		-4.7	%		1,294			26.6	%		1,183			23.2	%
Corporate		952		1,074					(1,876	)					(1,940	)

Total	$	138,520	$	119,306		16.1	%	$	33,602			24.3	%	$	29,115			24.4	%

Table of Contents

     Sales in North America increased by 13.7% from the prior year's first quarter. Sales in the United States experienced strong growth in the RFWC product sales. The United States led the sales growth in this region by an increase of 19.7% to $57.2 million, offset by a sales decline in Canada of 2.6% to $17.2 million.
     Sales in Europe grew 16.4% from the prior year. RFWC product sales significantly increased in Israel and the United Kingdom. Israel led the sales growth with an increase of 60.0% to $3.2 million followed by the United Kingdom and then Italy where sales grew 38.2% and 24.4% to $5.0 million and $3.7 million, respectively.
     Sales in Asia/Pacific experienced growth of 28.9%, from the first quarter a year ago, resulting from strong wireless infrastructure and industrial power demand. China, Japan, and Taiwan recognized sales and gross margin growth of over 50%. Sales in China grew 81.1% to $8.5 million, sales in Japan grew 69.7% to $4.6 million, and sales in Taiwan grew 62.3% to $2.7 million.
     In Latin America, sales decreased 4.7%, from the prior year, as lower broadcast demand was partially offset by increased industrial power demand. Sales in Colombia grew 43.6% to $0.9 million while sales in Mexico were down 23.2% to $1.4 million.
     Fiscal 2005 gross margins as a percentage of sales experienced significant fluctuations across the geographic areas, from a decrease of 120 basis points in North America to an increase of 340 basis points in Latin America, principally resulting from changes in the sales mix.

Selling, General and Administrative (SG&A) Expenses

SG&A expenses increased by 13.3% to $29.3 million compared to last year, but decreased as a percentage of sales to last year, from 21.7% to 21.1% . The increased SG&A expenses correlate with the Company's increased revenue. SG&A expenses include a $2.0 million increase in salaries and incentives and a $1 million increase in operating expenses related to services, travel, and supplies, which corresponds with increased sales.

Interest and Other Expenses

     Interest expense decreased 11.4% to $2.3 million from last year as a result of the equity offering and elimination of a fixed rate swap offset by interest on incremental borrowing to fund working capital requirements. Cash payments for interest were $3.6 million for the three-month period ended August 28, 2004.
     Other, net expenses totalled $928 in the first quarter of fiscal 2005, including a foreign exchange loss of $901, and a net investment loss of $51. Other, net expenses totalled $2,585 in the first quarter of fiscal 2004, including a foreign exchange loss of $2,180, a loss of $250 on fixed asset disposition, and a net investment loss of $110.
     During the second quarter of fiscal 2004, the Company identified an accounting error that occurred in its Swedish subsidiary which affected interest expense previously reported for the prior seven quarters in the aggregate amount of $738. On January 30, 2004, the Company filed amended Form 10-K/A for fiscal 2003 and Form 10-Q/A for the period ended August 30, 2003, which increased interest expense reported in those periods (See Note B).
     In connection with the Company's independent registered public accounting firm's review of the Company's Form 10-Q for the third quarter of fiscal 2005, an error in the application of Statement of Financial Accounting Standards No. 52, Foreign Currency Translation, was identified that related to the foreign currency translation on intercompany indebtedness with its subsidiaries. The consolidated financial statements for fiscal 2002 and 2003, selected quarterly financial data for fiscal 2003 and 2004, and the condensed consolidated financial statements for the three- and six month periods ended August 28, 2004 and November 27, 2004 have been restated to correct this error (See Note B). The restatement increased other expense by $713 and $2,538 for the three-month periods of fiscal 2005 and 2004, respectively.

Income Tax Provision

The effective tax rate for the three-month period of fiscal 2005 decreased to 28.5% compared to 36.5% from a year ago. The effective tax rate differs from the statutory rate of 35.0% primarily due to the impact of certain non-tax deductible charges, the Company's foreign sales corporation benefits on export sales, state taxes, and the tax impact of non-U.S. operations. As the Company restated its first quarter fiscal 2004 results because of the accounting error in its Swedish subsidiary associated with the interest expense, no adjustment was made to the income tax provision since the Company does not believe it is more likely than not that the benefits of the foreign losses will be realized. As a result, there were significant fluctuations in the income tax rate in the first half of fiscal 2004. The restatement described above served to decrease income tax expense by $271 and $964 for the three-month periods of fiscal 2005 and 2004, respectively.
Future effective tax rates could be adversely affected by lower than anticipated earnings in countries where the Company has lower statutory rates, changes in the valuation of certain deferred tax assets or liabilities, or changes in tax laws or interpretations thereof. In addition, the Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities and regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.

Net Income

Net income increased substantially from the prior year by 168.3%. The positive increase resulted from the Company's emphasis on growth with cost minimization. Net income for the first quarter was $807, or $0.05 per share, compared to net loss of $1,182, or $0.08 per share, a year ago.

Liquidity and Capital Resources

Cash and cash equivalents were $12.8 million at August 28, 2004, a decrease of $4.2 million from the beginning of the fiscal year. During the first quarter of fiscal 2005, the Company used $9.6 million of cash in operating activities. Working capital requirements increased $13.2 million after excluding cash, currency translation, acquisition, income tax, and short term debt, primarily resulting from an increase of $10.6 million in inventory.
Inventory days were approximately 89 in the first quarter of fiscal 2005, compared with 94 days in the first quarter of fiscal 2004 and 77 days at the end of fiscal 2004. Inventory levels and the associated inventory days reflect the Company's ongoing inventory management efforts. Inventory management remains an area of focus as the Company seeks to balance the need to maintain strategic inventory levels to ensure competitive lead times against the risk of inventory obsolescence because of rapidly changing technology and customer requirements.

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     The Company has a multi-currency revolving credit agreement in the amount of $102.0 million that matures in September of 2005 and bears interest at applicable LIBOR rates plus a margin, varying with certain financial performance criteria. At August 28, 2004, the applicable margin was 200 basis points and $48.4 million was outstanding. Of the $53.6 million which was unborrowed under the total facility, $36.1 million was available due to the borrowing base limitations. As of September 30, 2004, the outstanding borrowings under the credit agreement have become current liabilities. The Company is in discussions with its lending group and expects a renewed long-term agreement will occur in the second fiscal quarter of 2005.
     During the quarter, the Company had an equity offering for 3 million shares of stock that contributed $27.9 million in proceeds that was used to reduce debt. The Company reduced debt by $18.8 million while cash decreased $4.2 million and working capital requirements increased $13.2 million after excluding cash, currency translation, acquisition, income tax, and short term debt. The Company was in compliance with all debt covenants for the period ended August 28, 2004.
     The Company spent approximately $2.3 million on capital projects during first three months of fiscal 2005, primarily related to PeopleSoft development costs and ongoing investments in information technology infrastructure. Management estimates capital expenditures to increase as the PeopleSoft implementation progresses. The $545 earnout payment represents a cash outlay associated with the Pixelink acquisition as the business unit achieved certain operating performance criteria.

Special Note Regarding Forward-Looking Statements, Risk Factors and Analyst Reports

     Except for the historical information contained herein, the matters discussed in this quarter report on Form 10-Q are forward-looking statements relating to future events, which involve certain risks and uncertainties. Further, there can be no assurance that the trends reflected in historical information will continue in the future.
     Investors should consider carefully the following risk factors, in addition to the other information included and incorporated by reference in this quarter 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 that could affect future performance include, among others, the following:

-	The Company has had significant operating and net losses in the past and may have future losses.
-	The Company maintains a significant investment in inventory and has recently incurred significant charges for inventory obsolescence and overstock, and may incur similar charges in the future.
-	If the Company does not maintain effective internal controls over financial reporting, it could be unable to provide timely and reliable financial information.
-	Because the Company derives a significant portion of its revenue by distributing products designed and manufactured by third parties, it may be unable to anticipate changes in the marketplace and, as a result, could lose market share.
-	The Company has exposure to economic downturns and operates in cyclical markets.
-	The Company has significant debt, which could limit its financial resources and ability to compete and may make it more vulnerable to adverse economic events.
-	The Company’s ability to service its debt and meet its other obligations depends on a number of factors beyond its control.
-	If Mr. Richardson’s voting power were insufficient for him to elect a majority of the Company’s board of directors, the Company would be in default under its credit agreement.
-	The Company’s success depends on its executive officers and other key personnel.
-	The Company’s credit agreement and the indentures for its outstanding debentures impose restrictions with respect to various business matters.
-	Potential changes in accounting standards regarding stock option plans could limit the desirability of granting stock options, which could harm the Company’s ability to attract and retain employees, and could also negatively impact its results of operations.
-	The Company faces intense competition in the markets it serves and, if it does not compete effectively, it could significantly harm its operating results.
-	The Company may not be able to continue to make the acquisitions necessary for it to realize its growth strategy or integrate acquisitions successfully.
-	If the Company does not continue to reduce its costs, it may not be able to compete effectively in its markets.
-	The Company’s Industrial Power Group is dependent on a limited number of vendors to supply it with essential products.
-	Economic, political and other risks associated with international sales and operations could adversely affect the Company’s business.
-	The Company is exposed to foreign currency risk.
-	Because the Company generally does not have long-term contracts with its vendors, it may experience shortages of products that could harm its business and customer relationships.
-	The outbreak of severe acute respiratory syndrome, or SARS, or any other disease epidemic, may adversely affect the Company’s business, financial condition and results of operations.

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     For more discussion of such risks, see "Risk Factors" in the Company’s Form 10-K/A filed with the Securities and Exchange Commission on May 16, 2005.
     These risks are not exhaustive. Other sections of this report may include additional factors, which could adversely affect the Company’s business and financial performance. Moreover, the Company operates in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
     Investors should also be aware that while the Company does, from time to time, communicate with securities analysts, it is against the Company’s policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a description of the Company’s market risks, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management and Market Sensitive Financial Instruments” in the Company’s Annual Report on Form 10-K/A for the fiscal year ended May 29, 2004.

ITEM 4. CONTROLS AND PROCEDURES

     The Company maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Act of 1934, as amended (the “Exchange Act”)) designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives. As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including Chairman of the Board and Chief Executive Officer (“CEO”) and Senior Vice President and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective in providing a reasonable assurance of achieving their objective.
     During the fiscal third quarter the Company's independent auditors reported to management and to the audit committee on certain matters involving internal controls that they considered to be material weaknesses. As communicated by the Company's independent auditors, these internal controls related to (i) inappropriate application of certain provisions of Financial Accounting Standards Board Statement No. 52, Foreign Currency Translation, affecting previously issued consolidated financial statements and (ii) the origination and maintenance of contemporaneous documentation of the factual support or key judgments made in connection with the execution of several legal documents that represented important accounting events. The misapplication affected reported currency translation in previously issued consolidated financial statements for fiscal years ending 2002 and 2003, the four quarters of fiscal 2004 and the first two quarters of fiscal 2005.
     During fiscal 2005, the Company has made significant progress on remediating the material weaknesses previously described in the Company's Annual Report on Form 10-K/A for the year ended May 29, 2004, including implementation of the following measures:

-	The Company developed formal procedures for financial statement variance analysis and balance sheet reconciliations. The monthly closing schedule was formally communicated to all subsidiaries. The procedures were put in place during the second quarter of fiscal 2005 and are currently being tested as part of the Sarbanes-Oxley assessment process this fiscal year.
-	The Company improved documentation of management review and reconciliation performance through policies, education and re-enforcement, a balance sheet listing of account owners and approvers, and the implementation of Financial Services Manager, Accounting Manager, Corporate Controller and CFO checklists. These measures were put in place during the second and third quarters of fiscal 2005 and will be tested as part of the Sarbanes-Oxley assessment process this fiscal year.
-	Improvements to the reconciliation process during the migration from local accounting systems to PeopleSoft financials have been made and are expected to continue throughout fiscal 2005 in conjunction with the Company's Sarbanes-Oxely compliance plan.
-	The Information Systems group is in the process of installing several software packages which the Company believes will remediate the internal control issues regarding change management and system monitoring. These remediation efforts are expected to be completed before the end of fiscal 2005 in conjunction with the Company's Sarbanes-Oxley compliance plan.

Except as noted above, there have been no changes in the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.

Part II

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS (in thousands, except where indicated)

No material developments have occurred in the matters reported under the category “Legal Proceedings” in the Registrant’s Report on Form 10-K/A for the fiscal year ended May 29, 2004, except that (i) the claim of one of the two customers of the Company’s German subsidiary who made a claim in fiscal year 2003 in connection with heterojunction field effect transistors was settled without any admission of liability on the part of the Company and without any material consideration from the Company, the settlement amount being paid by the Company’s insurance carrier, and (ii) Microsemi, against whom the Company has filed a complaint to recover damages in excess of $814 for breach of contract, has filed a complaint in the U.S. District Court, Central District of California, Case No. CV04-6108 GHK (JWJx) claiming trademark infringement.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS


31.1		Certification of Edward J. Richardson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Kelly Phillips pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Certification of Edward J. Richardson and Kelly Phillips pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES
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 hereunto duly authorized.

RICHARDSON ELECTRONICS, LTD.

Date:	May 19, 2005	By:	/s/ KELLY PHILLIPS


		Name:	Kelly Phillips

		Title:	Chief Financial Officer

		(on behalf of the Registrant and as Principal financial and accounting officer)

FORM 10-Q/A

Segment assets