Note C -- Income Taxes
The income tax provisions for the three-month periods ended August 31, 2002 and August 31, 2001 are based on the estimated annual effective tax rate of 36%, representing the U.S. statutory rate of 35% and the net of state and foreign subsidiary tax rates. The higher effective tax rates in foreign jurisdictions are offset by the tax benefits under the extra-territorial income tax regime.

Note D -- Calculation of Earnings per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of Common and Class B Common shares outstanding. Diluted earnings per share is calculated by dividing net income (adjusted for interest savings, net of tax, on assumed bond conversions) by the actual shares outstanding and share equivalents that would arise from the exercise of stock options and the assumed conversion of convertible bonds when such assumptions have a dilutive effect on the calculation. The Company's 8 1/4% and 7 1/4 % convertible debentures are excluded from the calculation in both fiscal 2002 and 2003 as assumed conversion would be anti-dilutive. The per share amounts presented in the Consolidated Condensed Statement of Operations are based on the following amounts (in thousands):

Note E -- Industry and Market Information
The marketing and sales structure of the Company consists of four strategic business units (SBU's): RF & Wireless Communications Group (RFWC), Industrial Power Group (IPG), Security Systems Division (SSD), and Display Systems Group (DSG).

RFWC serves the voice and data telecommunications market and the radio and television broadcast industry predominately for wireless infrastructure applications.

IPG serves a broad range of markets including power supplies, automotive, industrial, semiconductor, alternative energy, medical, industrial maintenance and repair organizations, and audio/amplifier.

SSD provides security systems and related design services into the financial, building security, utilities, government, loss prevention, and transportation markets.

DSG provides system integration and custom product solutions for the medical imaging, custom display, public information, and government markets. The medical monitor business was integrated into DSG in fiscal 2002 and serves the medical imaging market.

In February 2002, the Company sold its Medical Glassware business including the reloading and distribution of X-ray, CT, and image intensifier tubes.

SBUs are managed by Vice Presidents and General Managers who report to the President and Chief Operating Officer. The President evaluates performance and allocates resources, in part, based on the direct operating contribution of each SBU. Direct operating contribution is defined as gross margin less product management and direct selling expenses. In each geographic area, certain sales force expenses are directly charged to SBUs. Other expenses, such as general sales force, regional sales management, and administrative and support expenses are shared and, accordingly, are not included in direct SBU expenses. Administrative expenses including finance, legal, information technology, human resources, logistics, and facility costs are not allocated to SBU results. Inter-segment sales are not significant.

Accounts receivable, inventory, goodwill and certain notes receivable are identified by SBU. Cash, net property, plant and equipment, and other assets are not identifiable by SBU. Accordingly, depreciation and amortization of intangible assets and financing costs are not identifiable by SBU. Operating results for the three-month periods ended August 31, 2002 and August 31, 2001 and identifiable assets as of the end of the respective periods by SBU are summarized in the table below (in thousands). Fiscal 2002 DSG data has been reclassified to include Medical monitors. Fiscal 2002 MSG data was reclassified to include only Medical Glassware, which was sold in February 2002. The reclassifications have been made to conform to the 2003 presentations.

A reconciliation of sales, gross margin, direct operating contribution and assets to the relevant consolidated amounts follows. (Other assets include miscellaneous receivables, manufacturing inventories and sundry assets.) (in thousands):

The Company sells its products to companies in a wide range of 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 Latin America, and vary throughout Europe and the Far East. Estimates of credit losses are recorded in the financial statements based on periodic reviews of outstanding accounts.

Sales and Gross Margin
Net sales for the first quarter of fiscal 2003 were $108.6 million compared to last year's first quarter of $104.7 million. Revenue from continuing operations (excluding MSG) increased 7.4% from the prior year. Sales, percentage changes from the prior year, gross margins and gross margin percent of sales by SBU are summarized in the following table. Warranty provisions, LIFO provisions, freight costs, obsolescence provisions, and gross margins from miscellaneous sales are included under the caption "Corporate" (in thousands).

RFWC's first quarter sales increased 16.5% from fiscal 2002 levels, primarily driven by growth at top-tier original equipment manufacturers (OEM's) in Asia Pacific. Gross margins as a percent of sales decreased from 25.2% in the prior year's first quarter to 22.9% in fiscal 2003 primarily associated with lower markups on an expanded customer base in Asia Pacific.

IPG sales and gross margins in the first quarter of fiscal 2003 were essentially flat to the prior year.

SSD sales increased 9.9% compared to the first quarter of fiscal 2003 due to heightened concerns over security and an acceleration in the conversion from analogue to digital technology. Gross margins increased to 24.3% in the first quarter from 23.5% in the prior year's first quarter as higher margin private label and digital technology products represented a larger percentage of sales.

First quarter sales for DSG decreased 10.6% in fiscal 2003 from 2002 levels primarily due to the postponement of large contract monitor sales in the financial and transportation industry. Gross margins increased to 27.1% from 24.9% in 2002 driven by increased sales of value added products from the Company's engineered solutions model.

MSG revenue decrease of 85.3% from fiscal 2002 was the result of the Medical Glassware business sale completed in February of 2002. Fiscal 2002 sales and gross margins for MSG have been reclassified to include only Medical Glassware products to conform with the fiscal 2003 presentation. All other sales and gross margins previously reported as MSG have been reclassified to Corporate.

Sales, percentage change from the prior year, gross margins and gross margin percent of sales by geographic area are summarized in the following table. The caption, "other", includes sales to export distributors and to countries where the Company does not have offices. Warranty provisions, LIFO provisions, freight costs, obsolescence provisions, and gross margins from miscellaneous sales are included under the caption "Corporate" (in thousands).

North America sales and gross margins for the first quarter of fiscal 2003 remained essentially flat compared to prior year. First quarter sales in Europe were up 8% in fiscal 2003 compared to the prior year, primarily due to strengthening of the euro against the U.S. dollar as well as greater demand for RFWC products. Asia Pacific sales increased 32.6% in the first quarter from the prior year, benefiting from growth in RFWC sales. Asia Pacific gross margins as a percent of sales declined to 24.3% from prior year of 26.0% as the Company recorded lower margins from an expanded customer base of top-tier OEMs. Latin American sales decreased 24.5% from the prior year's first quarter as a result of poor economic conditions.

Selling, General, and Administrative Expenses
Selling, general and administrative expenses were $24,246 in the first quarter of fiscal year 2003 compared to $23,542 in the prior year's first quarter. Investment in additional engineering staff, payroll increases, as well as weakening of the U.S. dollar relative to other currencies, were the primary items causing the increase in SG&A expenses over the prior year. SG&A as a percent of revenue improved from 22.5% in the first quarter of fiscal 2002 to 22.3% in the first quarter of fiscal 2003.

Interest and Other Expenses
Lower interest expense in fiscal 2003 compared to fiscal 2002 is due to the adoption of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, in the first quarter of fiscal 2002, for certain interest rate exchange agreements. In that quarter the Company recorded the change in the fair value of these agreements of $507,000 as well as the amortization of the transitional adjustment of $125,000. In fiscal 2003, the Company designated such agreements as hedges and has subsequently recorded any change in the fair value of such agreements to other accumulated comprehensive income.

Net Results
Net income for the quarter was $284,000 compared to a $354,000 net loss in the prior year.

Liquidity and Capital Resources
Working capital requirements increased $10.6 million in the first quarter of fiscal 2003 due to reductions in accounts payable of $8.7 million and an increase in other working capital compared to the first quarter of the prior year where working capital requirements decreased $7.8 million due to a decrease in accounts receivable of $13.8 million offset by an increase in other working capital.

The loan and debenture agreements contain financial covenants, of which the most restrictive set benchmark levels for tangible net worth, a debt to tangible net worth ratio, senior funded debt to cash flow and annual debt service coverage. Compliance with certain of these covenants was waived by the lenders for the period ended August 31, 2002. The Company was in compliance with the remaining covenants for the period ended August 31, 2002. The Company is currently in process of finalizing an amendment to its credit agreement.

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. 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.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Investors should consider carefully the following risk factors, in addition to the other information included in this quarterly 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 which could affect future performance include, among others, the following:

• Competitive pressures may increase or change through industry consolidation, entry of new competitors, marketing changes or otherwise. There can be no assurance that the Company will be able to continue to compete effectively with existing or potential competitors.
• Technological changes may affect the marketability of inventory on hand.
• General economic or business conditions, domestic and foreign, may be less favorable than expected, resulting in lower sales or lower profit margins than expected.
• Changes in relationships with customers or vendors, the ability to develop new relationships or the business failure of several customers or vendors may affect sales or profitability.
• Political, legislative or regulatory changes may adversely affect the businesses in which the Company operates.
• Changes in securities markets, interest rates or foreign exchange rates may adversely affect the Company's performance or stock price.
• The failure to obtain or retain key executive or technical personnel could affect future performance.
• The Company's growth strategy includes expansion through acquisitions. There can be no assurance that the Company will be able to successfully complete further acquisitions or that past or future acquisitions will not have an adverse impact on the Company's operations.
• The potential future sale of Common Stock shares, possible anti-takeover measures available to the Company, dividend policies, as well as voting control of the Company by Edward J. Richardson, Chairman of the Board and Chief Executive Officer may affect the stock price.
• The continued availability of financing on favorable terms can not be assured.

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company is engaged in legal proceedings arising in the normal course of business. These legal proceedings are not expected to have a material adverse effect on the Company.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits -

99             Statements of Edward J. Richardson, Chairman of the Board and Chief Executive Officer of Richardson Electronics, Ltd and Dario Sacomani, Senior Vice President and Chief Financial Officer of Richardson Electronics, Ltd, as required by Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K -

SIGNATURE

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 thereunto duly authorized.