355948--8/31/2006--RICHARDSON_ELECTRONICS

related topics

{debt, indebtedness, cash}

{customer, product, revenue}

{operation, international, foreign}

{control, financial, internal}

{competitive, industry, competition}

{condition, economic, financial}

{tax, income, asset}

{acquisition, growth, future}

{personnel, key, retain}

{regulation, change, law}

The Company has had significant operating and net losses in the past and may have future losses. The Company has exposure to economic downturns and operates in cyclical markets. 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 faces intense competition in the markets it serves and, if it does not compete effectively, it could significantly harm its operating results. If the Company does not continue to reduce its costs, it may not be able to compete effectively in its markets. 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 Company s EDG is dependent on a limited number of vendors to supply it with essential products. The Company maintains a significant investment in inventory and has incurred significant charges for inventory obsolescence and overstock, and may incur similar charges in the future. The Company may not be able to continue to make the acquisitions necessary for it to realize its growth strategy or integrate acquisitions successfully. Economic, political, and other risks associated with international sales and operations could adversely affect the Company s business. The Company s success depends on its executive officers and other key personnel Changes in accounting standards regarding stock option plans, which the Company is required to adopt for its fiscal 2007, 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 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. The Company s credit agreement and the indentures for its outstanding notes impose restrictions with respect to various business matters. The Company was not in compliance with certain financial covenants of the Company s credit agreement for the quarters ended March 4, 2006, September 3, 2005, and May 28, 2005, and may not be able to comply with these financial covenants in the future. The Company is exposed to foreign currency risk. If the Company does not maintain effective internal controls over financial reporting, it could be unable to provide timely and reliable financial information.

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355948--8/31/2006--RICHARDSON_ELECTRONICS_LTD/DE