Financial Data and Key Metrics Changes - The company reported an operating income of $11,000 for Q3 FY 2020, compared to an operating loss of $0.8 million in Q3 FY 2019 [9][15] - Total net sales for Q3 FY 2020 decreased by 2% to $38.2 million from $39.0 million in the prior year [10] - Gross margin improved to 33.1% in Q3 FY 2020 from 31.5% in Q3 FY 2019, attributed to a favorable product mix and improved manufacturing performance [13] - The company had a net loss of $0.1 million for Q3 FY 2020, an improvement from a net loss of $1.1 million in Q3 FY 2019 [17] Business Line Data and Key Metrics Changes - Canvys net sales increased by $0.3 million or 3.5% in Q3 FY 2020 [10] - PMT net sales decreased by $0.7 million or 2.5%, primarily due to economic softness in the power grid tube market and lower sales in China due to COVID-19 [11] - Richardson Healthcare net sales decreased by $0.2 million or 11.9%, with a significant decline in equipment sales in Latin America, partially offset by a 135% increase in sales of the ALTA750 CT Tube [12][35] Market Data and Key Metrics Changes - More than 20% of the company's business comes from Asia, which was significantly impacted by the Coronavirus during the quarter [5] - The company experienced a decline in sales in Latin America due to ongoing economic issues [36] Company Strategy and Development Direction - The company continues to focus on cash management and has significant cash on hand to weather the impact of COVID-19 [57] - The management believes in the solid healthcare strategy and plans to support RF and wireless technologies for critical infrastructure expansion [58] - The company is positioned to support the rollout of 5G capabilities post-COVID-19, leveraging its unique global go-to-market strategy [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the uncertainty surrounding the COVID-19 situation and is prepared to adapt to changing market conditions [68] - There is an expectation of pent-up demand for healthcare products once the pandemic is under control [41][89] - The management is optimistic about future growth opportunities in the RF and microwave markets despite current challenges [28][52] Other Important Information - The company paid $0.8 million in dividends in Q3 FY 2020 and declared a $0.06 per common share quarterly dividend for Q4 FY 2020 [24] - Cash and investments at the end of Q3 FY 2020 were $43.9 million, down from $49.4 million at the end of Q3 FY 2019 [22] Q&A Session Summary Question: Concerns about executive compensation and cash management - A shareholder expressed concerns about the CEO's salary and suggested a reduction to set an example during tough times, to which the CEO responded that executive incentives have been cut dramatically [61][63] Question: Future cash usage amid COVID-19 - The CEO indicated a wait-and-see approach regarding cash usage and emphasized the importance of cash flow neutrality in the near term [67][68] Question: Operating profit or loss for Canvys - The General Manager of Canvys confirmed that the segment is making an operating contribution and growing year-over-year [73] Question: Synergy between Canvys and other business lines - Management acknowledged the need for better integration and mentioned ongoing improvements to the Canvys website [74][76] Question: Inventory write-downs due to demand falling - The CEO stated that there are no anticipated major write-downs outside of potential impacts from COVID-19 [84] Question: Growth in CT tube sales - Management clarified that the growth in CT tube sales is due to proactive sales efforts and not directly related to COVID-19 [88]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 29, 2020 OR 40W267 Keslinger Road, P.O. Box 393 LaFox, Illinois 60147-0393 (Address of principal executive offices) Registrant's telephone number, including area code: (630) 208-2200 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transit ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from To Commission File Number: 0-12906 RICHARDSON ELECTRONICS, LTD. (Exact name of registrant as specified in its charter) Delaware 36-2096643 (State or other ...

Richardson Electronics, Ltd. (NASDAQ:RELL) Q1 2020 Results Earnings Conference Call October 10, 2019 10:00 AM ET Company Participants Edward Richardson - Chairman, President and CEO Robert Ben - Chief Financial Officer Wendy Diddell - Chief Operating Officer and General Manager, Richardson Healthcare Greg Peloquin - General Manager, Power and Microwave Technologies Group Jens Ruppert - General Manager, Canvys Conference Call Participants Mark Zinski - 21st Century Equity Research Denis Amato - Ancora Adviso ...

[Part I. Financial Information](index=2&type=section&id=Part%20I%2E%20Financial%20Information) Presents the company's unaudited consolidated financial statements and management's analysis for the quarter [Financial Statements](index=2&type=section&id=Item%201%2E%20Financial%20Statements) Unaudited Q1 FY2020 financials show decreased assets, sales, and net income, with increased cash from investment maturities [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets slightly decreased to **$151.0 million** as of August 31, 2019, primarily due to reduced current assets Consolidated Balance Sheet Highlights (in thousands) | Account | August 31, 2019 | June 1, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $46,457 | $42,019 | | Inventories, net | $54,137 | $53,232 | | Total current assets | $124,964 | $130,614 | | Total assets | $150,986 | $153,017 | | **Liabilities & Equity** | | | | Total current liabilities | $24,785 | $28,216 | | Total liabilities | $28,371 | $29,260 | | Total stockholders' equity | $122,615 | $123,757 | [Unaudited Consolidated Statements of Comprehensive Loss](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Q1 FY2020 net sales decreased to **$40.7 million**, resulting in **$0.2 million** net income, down from the prior year Q1 FY2020 vs Q1 FY2019 Performance (in thousands, except per share data) | Metric | Three Months Ended Aug 31, 2019 | Three Months Ended Sep 1, 2018 | | :--- | :--- | :--- | | Net sales | $40,653 | $44,157 | | Gross profit | $12,951 | $13,953 | | Operating income | $103 | $854 | | Net income | $157 | $431 | | Diluted EPS (Common) | $0.01 | $0.03 | | Comprehensive loss | $(559) | $(309) | [Unaudited Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 FY2020 saw **$2.1 million** cash used in operations, **$7.7 million** provided by investing, and a **$4.4 million** overall cash increase Cash Flow Summary (in thousands) | Activity | Three Months Ended Aug 31, 2019 | Three Months Ended Sep 1, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,054) | $(3,630) | | Net cash provided by (used in) investing activities | $7,661 | $(3,372) | | Net cash used in financing activities | $(801) | $(572) | | **Increase (decrease) in cash** | **$4,438** | **$(7,987)** | [Notes to Unaudited Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Detailed notes cover three business segments, new accounting standards, segment performance, and ongoing litigation - The company operates through three reportable segments: Power and Microwave Technologies Group (PMT), Canvys (customized display solutions), and Healthcare (replacement parts for diagnostic imaging)[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) - Effective June 3, 2018, the company adopted the new revenue recognition standard (ASU 2014-09) using the modified retrospective method, which did not have a material impact on the consolidated financial statements[33](index=33&type=chunk) - The company adopted the new lease standard (Topic 842) on June 2, 2019, resulting in the recognition of operating right-of-use assets of **$3.6 million** and finance right-of-use assets of **$0.5 million**[62](index=62&type=chunk) Net Sales by Segment (in thousands) | Segment | Three Months Ended Aug 31, 2019 | Three Months Ended Sep 1, 2018 | | :--- | :--- | :--- | | PMT | $30,567 | $34,769 | | Canvys | $7,277 | $7,173 | | Healthcare | $2,809 | $2,215 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses a **7.9%** consolidated net sales decrease in Q1 FY2020, driven by PMT segment decline, while liquidity remains strong [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Q1 FY2020 net sales declined **7.9%** due to PMT weakness, partially offset by Healthcare growth, with slight gross margin improvement Net Sales by Segment - Q1 FY20 vs Q1 FY19 (in thousands) | Segment | Aug 31, 2019 | Sep 1, 2018 | % Change | | :--- | :--- | :--- | :--- | | PMT | $30,567 | $34,769 | -12.1% | | Canvys | $7,277 | $7,173 | 1.4% | | Healthcare | $2,809 | $2,215 | 26.8% | | **Total** | **$40,653** | **$44,157** | **-7.9%** | - The decrease in PMT sales was mainly due to a continued slowdown in the wafer fab equipment market[97](index=97&type=chunk)[101](index=101&type=chunk) - The increase in Healthcare sales was driven by higher CT tube and parts sales, which also led to an improved gross margin for the segment (**33.9%** vs **28.6%** YoY) due to favorable product mix and manufacturing over-absorption[97](index=97&type=chunk)[103](index=103&type=chunk) - Selling, general and administrative expenses decreased primarily due to lower employee benefits, IT, and bad debt expenses[104](index=104&type=chunk) [Liquidity, Financial Position and Capital Resources](index=21&type=section&id=Liquidity%2C%20Financial%20Position%20and%20Capital%20Resources) The company maintains strong liquidity with **$46.5 million** in cash, sufficient for future needs, despite cash used in operating activities - Cash and cash equivalents stood at **$46.5 million** at August 31, 2019, with **$24.5 million** in North America, **$14.6 million** in Europe, and the remainder in Asia/Pacific and Latin America[109](index=109&type=chunk) - Operating activities used **$2.1 million** in cash, primarily due to a **$4.0 million** decrease in accounts payable and a **$1.4 million** increase in inventory[113](index=113&type=chunk) - Investing activities provided **$7.7 million**, driven by **$8.0 million** in proceeds from maturing investments, partially offset by **$0.3 million** in capital expenditures[116](index=116&type=chunk) - Financing activities used **$0.8 million** for cash dividend payments[118](index=118&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=21&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Foreign currency exchange is the primary financial market risk, managed through normal operating and financing activities - The primary financial risk exposure is foreign currency exchange, as certain operations, assets, and liabilities are denominated in foreign currencies[120](index=120&type=chunk) [Controls and Procedures](index=21&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of August 31, 2019, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[123](index=123&type=chunk) - No changes in internal control over financial reporting occurred during the first quarter of fiscal 2020 that have materially affected, or are reasonably likely to materially affect, the company's internal controls[124](index=124&type=chunk) [Part II. Other Information](index=22&type=section&id=Part%20II%2E%20Other%20Information) Provides updates on legal proceedings, risk factors, stockholder meeting outcomes, and required exhibits [Legal Proceedings](index=22&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is involved in a patent infringement lawsuit where a preliminary injunction was denied, and a loss is not considered probable - Varex Imaging Corporation filed a patent infringement lawsuit against Richardson Electronics regarding U.S. Patent Nos. 6,456,692 and 6,519,317[125](index=125&type=chunk) - On September 30, 2019, the Court denied Varex's Motion for a Preliminary Injunction against the sale of Richardson's ALTA750™ product[125](index=125&type=chunk) - Richardson believes the lawsuit is without merit and a loss is not considered probable or estimable[125](index=125&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A%2E%20Risk%20Factors) No material changes to previously disclosed risk factors have been reported since the last Annual Report on Form 10-K - No material changes to risk factors were reported since the last Annual Report on Form 10-K[126](index=126&type=chunk) [Other Information](index=22&type=section&id=Item%205%2E%20Other%20Information) Stockholders elected directors, ratified the accounting firm, and approved executive compensation at the annual meeting - The annual meeting of stockholders was held on October 8, 2019[127](index=127&type=chunk) - Stockholders approved three key proposals: election of directors, ratification of the independent accounting firm, and an advisory vote on executive compensation[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) [Exhibits](index=23&type=section&id=Item%206%2E%20Exhibits) Lists exhibits filed with the Form 10-Q, including corporate governance documents and Sarbanes-Oxley Act certifications - The report includes certifications from the CEO (Edward J. Richardson) and CFO (Robert J. Ben) pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[131](index=131&type=chunk)

PART I [ITEM 1. Business](index=3&type=section&id=ITEM%201.%20Business) Richardson Electronics, Ltd. is a global provider of engineered solutions and components across three segments, with significant international sales and a diversified customer base - Richardson Electronics, Ltd. is a global provider of engineered solutions, power grid and microwave tubes, power conversion and RF/microwave components, high-value flat panel detector solutions, and customized display solutions[13](index=13&type=chunk)[186](index=186&type=chunk) - The company serves customers across diverse markets including alternative energy, healthcare, aviation, and semiconductor[13](index=13&type=chunk)[186](index=186&type=chunk) - The company operates through three reportable segments: **Power and Microwave Technologies Group (PMT)**, **Canvys – Visual Technology Solutions**, and **Healthcare**[17](index=17&type=chunk)[188](index=188&type=chunk) - International sales constituted approximately **61% of total sales** in fiscal 2019[28](index=28&type=chunk) - No single customer accounted for more than **10% of consolidated net sales** in fiscal 2019, though LAM Research Corporation accounted for **11%** in fiscal 2018[29](index=29&type=chunk)[192](index=192&type=chunk) [ITEM 1A. Risk Factors](index=6&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces diverse risks including liquidity, operational performance, supply chain dependencies, international operations, and regulatory changes - Approximately **59% ($29.3 million)** of cash, cash equivalents, and investments are held by foreign subsidiaries, potentially impacting future liquidity due to repatriation restrictions and tax consequences[34](index=34&type=chunk)[35](index=35&type=chunk) - The company faces risks in achieving sales growth and margin targets due to competitive pressures, inventory obsolescence, and global infrastructure complexity[36](index=36&type=chunk)[37](index=37&type=chunk) - Dependence on a limited number of vendors for essential products poses a risk if suppliers are unable or unwilling to continue business[41](index=41&type=chunk) - Significant international operations expose the company to risks including foreign currency fluctuations, political instability, and trade protection measures[42](index=42&type=chunk)[43](index=43&type=chunk) - A non-cash goodwill impairment charge of **$6.3 million** was recorded in the fourth quarter of fiscal 2019 for the IMES reporting unit[63](index=63&type=chunk) - New tariffs and the evolving trade policy dispute between the United States and China may adversely affect the business, potentially increasing costs or reducing product demand[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=13&type=section&id=ITEM%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[71](index=71&type=chunk) [ITEM 2. Properties](index=14&type=section&id=ITEM%202.%20Properties) The company owns one facility and leases 27 globally, including its corporate headquarters, supporting sales, distribution, manufacturing, testing, and repair across its segments - The company owns **one facility** and leases **27 facilities** globally[73](index=73&type=chunk) - The corporate facility and largest distribution center, located in LaFox, Illinois, is owned and comprises approximately **242,000 square feet** for manufacturing, warehouse, and office space[73](index=73&type=chunk) Key Facility Locations and Segments Served | Location | Leased/Owned | Use | Segment | | :--- | :--- | :--- | :--- | | Woodland Hills, California | Leased | Sales | PMT | | LaFox, Illinois * | Owned | Corporate/Sales/Distribution/Manufacturing | PMT/Canvys/Healthcare | | Marlborough, Massachusetts | Leased | Sales/Distribution/Manufacturing | Canvys | | Fort Mill, South Carolina | Leased | Sales/Distribution/Testing/Repair | Healthcare | | Sao Paulo, Brazil | Leased | Sales/Distribution | PMT | | Beijing, China | Leased | Sales | PMT | | Nanjing, China | Leased | Sales | PMT | | Shanghai, China | Leased | Sales/Distribution | PMT | | Shenzhen, China | Leased | Sales | PMT | | Brive, France | Leased | Manufacturing Support/Testing | PMT | | Nanterre, France | Leased | Sales | PMT | | Donaueschingen, Germany | Leased | Sales/Distribution/Manufacturing | Canvys | | Puchheim, Germany | Leased | Sales | PMT | | Mumbai, India | Leased | Sales | PMT | | Ramat Gan, Israel | Leased | Sales | PMT | | Florence, Italy ** | Leased | Sales | PMT | | Milan, Italy | Leased | Sales | PMT | | Tokyo, Japan | Leased | Sales | PMT | | Mexico City, Mexico | Leased | Sales | PMT | | Amsterdam, Netherlands | Leased | Sales/Distribution/Manufacturing | PMT/Healthcare | | Singapore, Singapore | Leased | Sales/Distribution | PMT | | Seoul, South Korea | Leased | Sales | PMT | | Madrid, Spain | Leased | Sales | PMT | | Taipei, Taiwan | Leased | Sales | PMT/Canvys | | Bangkok, Thailand | Leased | Sales/Distribution | PMT | | Dubai, United Arab Emirates | Leased | Sales/Distribution/Testing/Repair | PMT | | Hook, United Kingdom | Leased | Sales/Distribution/Testing/Repair | PMT | | Lincoln, United Kingdom | Leased | Sales | PMT/Canvys | [ITEM 3. Legal Proceedings](index=14&type=section&id=ITEM%203.%20Legal%20Proceedings) Richardson Electronics Ltd. is involved in a patent infringement lawsuit by Varex Imaging Corporation, which the company believes is without merit and not probable of loss - Varex Imaging Corporation filed a patent infringement lawsuit against Richardson Electronics Ltd. on **October 15, 2018** (Case No. 1:18-cv-06911) in the Northern District of Illinois[76](index=76&type=chunk)[295](index=295&type=chunk) - The lawsuit alleges infringement of U.S. Patent Nos. **6,456,692** and **6,519,317**, specifically targeting Richardson's **ALTA750™** product[76](index=76&type=chunk)[295](index=295&type=chunk) - Richardson believes the lawsuit is without merit and that a loss is not probable or estimable[76](index=76&type=chunk)[295](index=295&type=chunk) PART II [ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=15&type=section&id=ITEM%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'RELL', with specific share counts and dividend payments in fiscal 2019, and no share repurchases - The company's common stock is traded on the NASDAQ Global Select Market under the trading symbol '**RELL**'[81](index=81&type=chunk) - As of **July 22, 2019**, there were **10,956,852 shares** of Common Stock and **2,096,919 shares** of Class B Common Stock outstanding[5](index=5&type=chunk) - Quarterly dividends were **$0.06 per common share** and **$0.054 per Class B common share**, with annual payments of approximately **$3.1 million** in fiscal 2019 and **$3.0 million** in fiscal 2018[80](index=80&type=chunk) - No share repurchases were made in fiscal 2019[79](index=79&type=chunk) High and Low Closing Prices of Common Stock (Fiscal Quarters) | Fiscal Quarter | High (2019) | Low (2019) | High (2018) | Low (2018) | | :--- | :--- | :--- | :--- | :--- | | First | $9.84 | $8.91 | $6.09 | $5.54 | | Second | $9.13 | $6.85 | $6.75 | $5.42 | | Third | $8.70 | $6.81 | $8.21 | $6.27 | | Fourth | $7.52 | $5.08 | $9.74 | $7.66 | [ITEM 6. Selected Financial Data](index=17&type=section&id=ITEM%206.%20Selected%20Financial%20Data) The company's five-year financial data shows fluctuating performance with net losses in most years, increasing net sales, and declining total assets and stockholders' equity Five-Year Financial Review (in thousands, except per share amounts) | Metric | FY 2019 | FY 2018 | FY 2017 | FY 2016 | FY 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $166,652 | $163,212 | $136,872 | $142,016 | $136,957 | | (Loss) income from continuing operations before tax | $(6,311) | $3,860 | $(6,116) | $(6,220) | $(6,994) | | Income tax provision (benefit) | $1,017 | $1,534 | $812 | $546 | $(1,466) | | (Loss) income from continuing operations | $(7,328) | $2,326 | $(6,928) | $(6,766) | $(5,528) | | Income (loss) from discontinued operations | $— | $1,496 | $— | $— | $(31) | | Net (loss) income | $(7,328) | $3,822 | $(6,928) | $(6,766) | $(5,559) | | Total net (loss) income per Common share - Basic | $(0.57) | $0.30 | $(0.55) | $(0.53) | $(0.41) | | Total net (loss) income per Class B common share - Basic | $(0.51) | $0.27 | $(0.49) | $(0.47) | $(0.36) | | Dividends per common share | $0.24 | $0.24 | $0.24 | $0.24 | $0.24 | | Dividends per Class B common share | $0.22 | $0.22 | $0.22 | $0.22 | $0.22 | | Total assets | $153,017 | $166,329 | $157,464 | $168,130 | $184,994 | | Stockholders' equity | $123,757 | $135,181 | $132,327 | $141,675 | $156,652 | [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=ITEM%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion reviews the company's financial performance, condition, and operational changes for fiscal years 2019, 2018, and 2017, highlighting sales growth, net loss, and liquidity - Consolidated net sales increased by **2.1%** to **$166.7 million** in fiscal 2019 compared to fiscal 2018[100](index=100&type=chunk) - The company reported a net loss of **$7.3 million** in fiscal 2019, compared to a net income of **$3.8 million** in fiscal 2018, primarily due to a **$6.3 million** non-cash goodwill impairment charge[100](index=100&type=chunk) - Gross margin decreased to **31.0%** in fiscal 2019 from **33.7%** in fiscal 2018, influenced by product mix, manufacturing under-absorption, and inventory provisions[100](index=100&type=chunk)[102](index=102&type=chunk) - Operating activities used **$2.6 million** of cash in fiscal 2019, primarily due to increases in inventories and accounts receivable, and a decrease in accounts payable[136](index=136&type=chunk) - Cash, cash equivalents, and investments decreased to **$50.0 million** at June 1, 2019, from **$60.5 million** at June 2, 2018[131](index=131&type=chunk) [Business Overview](index=18&type=section&id=Business%20Overview) Richardson Electronics, Ltd. provides engineered solutions and components across three operating segments, with products manufactured in China subject to U.S. tariffs - Richardson Electronics, Ltd. provides engineered solutions, power grid and microwave tubes, power conversion and RF/microwave components, flat panel detector solutions, and customized display solutions[92](index=92&type=chunk) - The company's three operating segments are **Power and Microwave Technologies Group (PMT)**, **Canvys – Visual Technology Solutions**, and **Healthcare**[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - Products manufactured in China are subject to additional U.S. tariffs (**10% to 25%**), potentially negatively affecting sales and gross margins if costs cannot be passed through or demand is reduced[94](index=94&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Fiscal 2019 saw a 2.1% net sales increase but a $7.3 million net loss due to a goodwill impairment charge and decreased gross margin, with detailed segment and geographic performance Net Sales by Segment (in thousands) | Net Sales | FY 2019 | FY 2018 | FY 2017 | FY19 vs. FY18 % Change | FY18 vs. FY17 % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | PMT | $128,902 | $128,296 | $104,226 | 0.5% | 23.1% | | Canvys | $27,968 | $26,683 | $20,534 | 4.8% | 29.9% | | Healthcare | $9,782 | $8,233 | $12,112 | 18.8% | (32.0%) | | Total | $166,652 | $163,212 | $136,872 | 2.1% | 19.2% | Gross Profit by Segment (in thousands) | Gross Profit | FY 2019 | % of Net Sales (FY19) | FY 2018 | % of Net Sales (FY18) | FY 2017 | % of Net Sales (FY17) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | PMT | $40,254 | 31.2% | $43,254 | 33.7% | $33,382 | 32.0% | | Canvys | $9,085 | 32.5% | $8,410 | 31.5% | $5,752 | 28.0% | | Healthcare | $2,396 | 24.5% | $3,418 | 41.5% | $4,749 | 39.2% | | Total | $51,735 | 31.0% | $55,082 | 33.7% | $43,883 | 32.1% | - PMT net sales increased **0.5%** in fiscal 2019, driven by market share growth in electron devices and new technology suppliers in 5G/RF/Microwave, offset by a decline in the semi-wafer fab equipment market, with gross margin decreasing due to product mix and manufacturing under-absorption[104](index=104&type=chunk) - Canvys net sales increased **4.8%** in fiscal 2019, with North American growth partially offset by foreign currency effects in Europe, and gross margin improved due to product mix and foreign currency effects[106](index=106&type=chunk) - Healthcare net sales increased **18.8%** in fiscal 2019, primarily due to the launch of the **ALTA750™ CT Tube** and equipment sales growth, though gross margin significantly decreased due to unfavorable product mix, manufacturing absorption, and high scrap expenses related to the launch[108](index=108&type=chunk) Net Sales by Geographic Area (in thousands) | Net Sales | FY 2019 | FY 2018 | FY 2017 | FY19 vs. FY18 % Change | FY18 vs. FY17 % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | North America | $66,228 | $67,662 | $55,963 | -2.1% | 20.9% | | Asia/Pacific | $34,681 | $32,607 | $27,997 | 6.4% | 16.5% | | Europe | $55,038 | $53,818 | $44,296 | 2.3% | 21.5% | | Latin America | $10,653 | $9,123 | $8,552 | 16.8% | 6.7% | | Other | $52 | $2 | $64 | 2500.0% | (96.9%) | | Total | $166,652 | $163,212 | $136,872 | 2.1% | 19.2% | - Selling, general and administrative expenses increased to **$52.2 million** in fiscal 2019 from **$51.7 million** in fiscal 2018, primarily due to higher legal, severance, and bad debt expenses, partially offset by lower incentive expenses[114](index=114&type=chunk) - A **$6.3 million** non-cash goodwill impairment charge was recorded in the fourth quarter of fiscal 2019, writing off all goodwill associated with the IMES reporting unit[116](index=116&type=chunk) - The effective income tax rate from continuing operations was **(16.1%)** in fiscal 2019, compared to **39.7%** in fiscal 2018, primarily due to a valuation allowance against U.S. state and federal net deferred tax assets and the impact of the Tax Cuts and Jobs Act[118](index=118&type=chunk) - In fiscal 2018, the company recognized a net benefit of **$1.5 million** from discontinued operations, related to an income tax refund from the State of Illinois for the sale of the RF, Wireless and Power Division in 2011[129](index=129&type=chunk) [Liquidity, Financial Position and Capital Resources](index=23&type=section&id=Liquidity,%20Financial%20Position%20and%20Capital%20Resources) The company's liquidity, primarily from cash and investments, decreased to $50.0 million in fiscal 2019, with cash used in operating, investing, and financing activities - Cash, cash equivalents, and investments decreased to **$50.0 million** at June 1, 2019, from **$60.5 million** at June 2, 2018[131](index=131&type=chunk) - Operating activities used **$2.6 million** of cash in fiscal 2019, primarily due to increases in inventories (**$4.2 million**) and accounts receivable (**$2.0 million**), and a decrease in accounts payable (**$2.4 million**)[136](index=136&type=chunk) - Investing activities used **$11.9 million** in fiscal 2019, including **$17.8 million** in investment purchases and **$3.9 million** in capital expenditures, partially offset by **$9.8 million** from investment maturities[139](index=139&type=chunk) - Financing activities used **$2.8 million** in fiscal 2019, mainly for cash dividends paid (**$3.1 million**), partially offset by proceeds from common stock issuance[142](index=142&type=chunk) Contractual Obligations as of June 1, 2019 (in thousands) | | Less than 1 year | 1 - 3 years | 4 - 5 years | More than 5 years | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Lease obligations | $1,586 | $2,216 | $289 | $234 | $4,325 | [Critical Accounting Policies and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant estimates for doubtful accounts, revenue recognition, inventory, goodwill, loss contingencies, and income taxes, including a $6.3 million goodwill impairment charge in fiscal 2019 - Critical accounting policies include allowance for doubtful accounts, revenue recognition, inventory obsolescence, goodwill and other intangible assets, loss contingencies, and income taxes, all requiring significant management estimates[145](index=145&type=chunk)[146](index=146&type=chunk) - Revenue from product sales is recognized upon shipment or delivery when title passes and collectability is assured, with the adoption of **ASU 2014-09** in fiscal 2019 having no material impact on timing or financial statements[148](index=148&type=chunk)[150](index=150&type=chunk) - Inventories are stated at the lower of cost and net realizable value, using a weighted-average cost method, with provisions for obsolete or slow-moving inventories totaling **$1.1 million** in fiscal 2019[151](index=151&type=chunk)[153](index=153&type=chunk) - Goodwill is reviewed annually for impairment, with a **$6.3 million** non-cash impairment charge recorded in fiscal 2019 for the IMES reporting unit due to its fair value falling below carrying value[116](index=116&type=chunk)[154](index=154&type=chunk) - Deferred tax assets are assessed for recoverability, and a valuation allowance of **$11.7 million** was established as of **June 1, 2019**, due to significant cumulative losses in the U.S. jurisdiction[125](index=125&type=chunk) [New Accounting Pronouncements](index=27&type=section&id=New%20Accounting%20Pronouncements) The company adopted ASU 2014-09 in fiscal 2019 with no material impact and is evaluating ASU 2016-02 (Leases) and ASU 2016-13 (Credit Losses) for future implementation - The company adopted **ASU 2014-09, Revenue from Contracts with Customers**, effective **June 3, 2018**, using the modified retrospective method, with no material impact on consolidated financial statements[165](index=165&type=chunk) - **ASU 2016-02, Leases**, is effective for the company on **June 2, 2019**, and will require recording Right-of-Use (ROU) assets and lease liabilities on the balance sheet for leases longer than 12 months[166](index=166&type=chunk)[168](index=168&type=chunk) - The company is evaluating **ASU 2016-13, Financial Instruments—Credit Losses**, effective for periods beginning after **December 15, 2019**, which introduces an expected loss approach for credit losses on financial instruments[169](index=169&type=chunk) - The company elected not to early adopt **ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income**[170](index=170&type=chunk) [ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=ITEM%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is foreign currency exchange rate fluctuations, which are managed without derivative instruments, and a hypothetical 10% unfavorable change would significantly impact financial metrics - The primary financial risk is foreign currency exchange, as certain operations, assets, and liabilities are denominated in foreign currencies[172](index=172&type=chunk) - The company manages foreign exchange exposures through currency clauses in sales contracts and local debt to offset asset exposures, but does not use derivative instruments or forward contracts[174](index=174&type=chunk) - A hypothetical **10% unfavorable change** in the U.S. dollar against foreign currencies would have resulted in an estimated **$10.5 million lower net sales** in fiscal 2019, **$4.7 million decline in total assets**, and **$1.1 million decrease in total liabilities**[175](index=175&type=chunk) [ITEM 8. Financial Statements and Supplementary Data](index=31&type=section&id=ITEM%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for fiscal years 2019, 2018, and 2017, including balance sheets, income statements, cash flow statements, and detailed notes, reflecting a net loss and decreased assets in fiscal 2019 Consolidated Balance Sheets (in thousands) | Asset/Liability | June 1, 2019 | June 2, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $42,019 | $60,465 | | Accounts receivable, net | $24,296 | $22,892 | | Inventories, net | $53,232 | $50,720 | | Total current assets | $130,614 | $137,824 | | Property, plant and equipment, net | $19,111 | $18,232 | | Goodwill | $— | $6,332 | | Intangible assets, net | $2,763 | $3,014 | | Total assets | $153,017 | $166,329 | | Accounts payable | $16,943 | $19,603 | | Accrued liabilities | $11,273 | $10,343 | | Total current liabilities | $28,216 | $29,946 | | Total liabilities | $29,260 | $31,148 | | Total stockholders' equity | $123,757 | $135,181 | Consolidated Statements of Comprehensive (Loss) Income (in thousands) | Metric | FY 2019 | FY 2018 | FY 2017 | | :--- | :--- | :--- | :--- | | Net sales | $166,652 | $163,212 | $136,872 | | Gross profit | $51,735 | $55,082 | $43,883 | | Selling, general and administrative expenses | $52,156 | $51,729 | $49,854 | | Impairment of goodwill | $6,332 | $— | $— | | Operating (loss) income | $(6,776) | $3,629 | $(5,762) | | (Loss) income from continuing operations before income taxes | $(6,311) | $3,860 | $(6,116) | | Income tax provision | $1,017 | $1,534 | $812 | | (Loss) income from continuing operations | $(7,328) | $2,326 | $(6,928) | | Income from discontinued operations | $— | $1,496 | $— | | Net (loss) income | $(7,328) | $3,822 | $(6,928) | | Comprehensive (loss) income | $(9,304) | $5,272 | $(6,784) | Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | FY 2019 | FY 2018 | FY 2017 | | :--- | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(2,563) | $2,952 | $1,809 | | Net cash (used in) provided by investing activities | $(11,874) | $4,152 | $(3,787) | | Net cash used in financing activities | $(2,817) | $(2,951) | $(3,001) | | Effect of exchange rate changes on cash and cash equivalents | $(1,192) | $985 | $(148) | | (Decrease) increase in cash and cash equivalents | $(18,446) | $5,138 | $(5,127) | | Cash and cash equivalents at end of period | $42,019 | $60,465 | $55,327 | Selected Quarterly Financial Data (Unaudited) (in thousands, except per share amounts) | Description | Q1 FY19 | Q2 FY19 | Q3 FY19 | Q4 FY19 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $44,157 | $41,314 | $39,018 | $42,163 | | Gross profit | $13,953 | $12,971 | $12,299 | $12,512 | | Income (loss) from continuing operations | $431 | $(304) | $(1,078) | $(6,377) | | Net income (loss) | $431 | $(304) | $(1,078) | $(6,377) | | Net income (loss) Common stock - basic | $0.03 | $(0.02) | $(0.08) | $(0.50) | | Net income (loss) Class B common stock - basic | $0.03 | $(0.02) | $(0.08) | $(0.44) | [ITEM 9A. Controls and Procedures](index=57&type=section&id=ITEM%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of June 1, 2019, with no material changes in the most recent fiscal quarter - The company's disclosure controls and procedures were evaluated and deemed effective as of **June 1, 2019**[315](index=315&type=chunk)[316](index=316&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of **June 1, 2019**, based on the COSO framework[319](index=319&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[321](index=321&type=chunk) [ITEM 9B. Other Information](index=57&type=section&id=ITEM%209B.%20Other%20Information) No other information is reported under this item - No other information is reported under this item[322](index=322&type=chunk) PART III [ITEM 10. Directors, Executive Officers and Corporate Governance](index=58&type=section&id=ITEM%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance will be provided in the Proxy Statement for the Annual Meeting of Stockholders on October 8, 2019 - Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement for the Annual Meeting of Stockholders on **October 8, 2019**[324](index=324&type=chunk) [ITEM 11. Executive Compensation](index=58&type=section&id=ITEM%2011.%20Executive%20Compensation) Details concerning executive compensation will be disclosed in the Proxy Statement for the Annual Meeting of Stockholders on October 8, 2019 - Information on executive compensation is incorporated by reference from the Proxy Statement for the Annual Meeting of Stockholders on **October 8, 2019**[325](index=325&type=chunk) [ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=58&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and related stockholder matters will be provided in the Proxy Statement, with details on outstanding options and securities available for future issuance as of June 1, 2019 - Information on security ownership is incorporated by reference from the Proxy Statement for the Annual Meeting of Stockholders on **October 8, 2019**[326](index=326&type=chunk) Equity Compensation Plan Information as of June 1, 2019 | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Per Share Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) | | :--- | :--- | :--- | :--- | | Equity Compensation Plans Approved by Security Holders | 1,340,155 | $9.01 | 1,173,421 | | Equity Compensation Plans Not Approved by Security Holders | 23,564 (1) | $12.95 (1) | — | | Total | 1,363,719 | $9.08 | 1,173,421 | [ITEM 13. Certain Relationships and Related Transactions, and Director Independence](index=58&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information concerning certain relationships, related transactions, and director independence will be included in the Proxy Statement for the Annual Meeting of Stockholders on October 8, 2019 - Information on certain relationships, related transactions, and director independence is incorporated by reference from the Proxy Statement for the Annual Meeting of Stockholders on **October 8, 2019**[328](index=328&type=chunk) [ITEM 14. Principal Accountant Fees and Services](index=58&type=section&id=ITEM%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services will be provided in the Proxy Statement for the Annual Meeting of Stockholders on October 8, 2019 - Information on principal accountant fees and services is incorporated by reference from the Proxy Statement for the Annual Meeting of Stockholders on **October 8, 2019**[329](index=329&type=chunk) PART IV [ITEM 15. Exhibits and Financial Statement Schedules](index=59&type=section&id=ITEM%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules filed as part of the Form 10-K report, including consolidated financial statements and the independent auditor's report - The section includes an index to consolidated financial statements: Balance Sheets, Statements of Comprehensive (Loss) Income, Statements of Cash Flows, Statements of Stockholders' Equity, and Notes to Consolidated Financial Statements[332](index=332&type=chunk)[333](index=333&type=chunk) - The Report of **BDO USA, LLP**, Independent Registered Public Accounting Firm, is also included[334](index=334&type=chunk) - All other financial statement schedules are omitted because the required information is included in the consolidated financial statements or notes, or is not applicable[334](index=334&type=chunk) - A comprehensive list of exhibits, including purchase agreements, corporate governance documents, incentive plans, employment agreements, and certifications, is provided[337](index=337&type=chunk)[338](index=338&type=chunk) [ITEM 16. Form 10-K Summary](index=60&type=section&id=ITEM%2016.%20Form%2010-K%20Summary) The company has not provided a Form 10-K Summary - No Form 10-K Summary is provided[335](index=335&type=chunk)

Financial Data and Key Metrics Changes - For Q4 FY 2019, net sales were $42.2 million, a decrease of 7.3% from $45.5 million in Q4 FY 2018 [8][15] - Gross margin for Q4 FY 2019 was 29.7%, down from 34.1% in the same quarter last year, primarily due to a less favorable product mix and higher production costs [9][10] - Operating expenses decreased to $12.5 million in Q4 FY 2019 from $13.7 million in Q4 FY 2018, resulting in a decrease in operating expenses as a percentage of net sales [11][12] - The company reported a net loss of $6.4 million for Q4 FY 2019, compared to a net income of $1.7 million in Q4 FY 2018 [15] - For FY 2019, net sales were $166.7 million, an increase of 2.1% from $163.2 million in FY 2018 [16] - The overall net loss for FY 2019 was $7.3 million, including a goodwill impairment charge of $6.3 million [25] Business Line Data and Key Metrics Changes - PMT sales in Q4 FY 2019 were $32.1 million, down from $37.2 million in Q4 FY 2018, with gross margins decreasing to 30.7% from 34.3% [29] - Richardson Healthcare sales grew by 68.8% in Q4 FY 2019, driven by increased demand for replacement CT tubes and parts [41] - Canvys reported sales of $7.3 million in Q4 FY 2019, an increase of 10.8% over the same period last year, with a slight decrease in gross margin [51][52] Market Data and Key Metrics Changes - The semiconductor wafer fab equipment market experienced a significant downturn, impacting PMT sales [5][29] - The 5G infrastructure market is showing strong growth, with expectations of 20% to 30% growth in the coming year [75][76] - The healthcare market is expanding, particularly in Latin America, with a focus on CT tube sales [44][49] Company Strategy and Development Direction - The company is focused on returning to profitability while investing in future growth initiatives [6][25] - There is a commitment to improving efficiencies and leveraging existing global infrastructure to support growth in new technology partnerships [33][39] - The company aims to enhance its position in the 5G market and is actively working with suppliers to ensure sufficient inventory [65] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for growth in FY 2020, contingent on the recovery of the semiconductor wafer fab business [71][72] - The company is experiencing strong demand in the PMG and Healthcare sectors, which are expected to drive sales growth [72][64] - Management acknowledged challenges in the semiconductor market but remains confident in the company's ability to adapt and grow [39][39] Other Important Information - The company has a cash position of $50 million at the end of FY 2019, with plans to repatriate additional foreign cash [25][27] - The company is awaiting CE approval for its ALTA tubes, which is critical for sales in Europe [47][48] Q&A Session Summary Question: Guidance for fiscal year 2020 - Management expects sales growth, largely dependent on the semiconductor wafer fab business recovery [71][72] Question: 5G investment progress - The rollout of 5G is expected to show significant growth, with the company shipping over $25 million into the 5G market in FY 2019 [75][76] Question: Healthcare growth expectations - Management anticipates good growth in Healthcare, particularly in CT tube sales [80] Question: Operating cash flow for FY 2020 - Management expects operating cash flow to be close to the previous year's figure of minus $2.6 million [81] Question: Drivers of PMT sales decline - The decline was primarily due to a significant drop in the semi-wafer fab market, which could not be offset by growth in other areas [88][90] Question: Inventory issues in Healthcare - Inventory issues were mainly related to older Toshiba systems, leading to price deterioration [102][104] Question: Goodwill impairment explanation - The impairment was an accounting procedure, and management does not believe it reflects a loss of value in the IMES unit [125]

Part I. [Financial Information](index=2&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Q3 FY2019 financial statements show decreased assets and equity, a net loss, and negative operating cash flow [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets and stockholders' equity decreased as of March 2, 2019, primarily due to reduced cash and cash equivalents Consolidated Balance Sheet Highlights (in thousands) | Account | March 2, 2019 (Unaudited) | June 2, 2018 (Audited) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $33,869 | $60,465 | | Inventories, net | $53,094 | $50,720 | | Investments - current | $15,500 | $0 | | Total current assets | $128,930 | $137,824 | | Total assets | $158,048 | $166,329 | | **Liabilities & Equity** | | | | Accounts payable | $14,052 | $19,603 | | Total current liabilities | $25,344 | $29,946 | | Total liabilities | $26,573 | $31,148 | | Total stockholders' equity | $131,475 | $135,181 | [Unaudited Consolidated Statements of Comprehensive (Loss) Income](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) Q3 and nine-month FY2019 results show a net loss, reversing prior-year income due to decreased sales and lower gross margins Q3 FY2019 vs Q3 FY2018 (in thousands) | Metric | Q3 2019 | Q3 2018 | | :--- | :--- | :--- | | Net sales | $39,018 | $41,645 | | Gross profit | $12,299 | $14,067 | | Operating (loss) income | ($798) | $967 | | Net (loss) income | ($1,078) | $527 | | Diluted EPS (Common) | ($0.08) | $0.04 | Nine Months FY2019 vs Nine Months FY2018 (in thousands) | Metric | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | | Net sales | $124,489 | $117,722 | | Gross profit | $39,223 | $39,589 | | Operating (loss) income | ($398) | $1,754 | | Net (loss) income | ($951) | $2,083 | | Diluted EPS (Common) | ($0.07) | $0.17 | [Unaudited Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to $5.2 million, driven by net loss and working capital changes, alongside significant investment purchases Cash Flow Summary - Nine Months Ended (in thousands) | Activity | March 2, 2019 | March 3, 2018 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($5,227) | ($292) | | Net cash (used in) provided by investing activities | ($18,666) | $4,898 | | Net cash used in financing activities | ($2,086) | ($2,240) | | **(Decrease) increase in cash and cash equivalents** | **($26,596)** | **$4,555** | [Unaudited Consolidated Statement of Stockholders' Equity](index=6&type=section&id=Unaudited%20Consolidated%20Statement%20of%20Stockholders'%20Equity) Stockholders' equity decreased by $3.7 million, primarily due to a net loss, dividend payments, and foreign currency translation losses - Stockholders' equity declined by **$3.7 million** over the nine-month period, from **$135.2 million** to **$131.5 million**[15](index=15&type=chunk) - Key drivers of the equity decrease were the net loss of **$951 thousand** and cash dividends paid of **$2.3 million**[15](index=15&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail business segments, accounting policies, revenue recognition, goodwill status, and ongoing litigation - The company operates in three segments: Power and Microwave Technologies Group (PMT), Canvys (customized displays), and Healthcare (replacement parts for diagnostic imaging)[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) - The company adopted the new revenue recognition standard (ASU 2014-09) on June 3, 2018, using the modified retrospective method, which did not have a material impact on the consolidated financial statements[30](index=30&type=chunk) - Goodwill of **$6.3 million** is entirely related to the IMES reporting unit within the Healthcare segment. While IMES is experiencing lower than forecasted results, no impairment has been recorded, with the annual assessment to be completed in Q4[52](index=52&type=chunk)[54](index=54&type=chunk) - The company is involved in a patent infringement lawsuit filed by Varex Imaging Corporation regarding the ALTA750 TM product. Richardson believes the lawsuit is without merit and a loss is not probable or estimable[89](index=89&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 sales decline, nine-month sales growth, gross margin compression, shift to operating loss, and sufficient but reduced liquidity [Results of Operations](index=20&type=section&id=MD%26A_Results_of_Operations) Q3 FY19 net sales declined, nine-month sales grew, gross margin compressed, and the company reported operating and net losses Net Sales by Segment - Q3 FY19 vs Q3 FY18 (in thousands) | Segment | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | PMT | $29,725 | $31,869 | -6.7% | | Canvys | $6,954 | $7,585 | -8.3% | | Healthcare | $2,339 | $2,191 | 6.8% | | **Total** | **$39,018** | **$41,645** | **-6.3%** | Net Sales by Segment - Nine Months FY19 vs FY18 (in thousands) | Segment | Nine Months 2019 | Nine Months 2018 | % Change | | :--- | :--- | :--- | :--- | | PMT | $96,822 | $91,056 | 6.3% | | Canvys | $20,625 | $20,057 | 2.8% | | Healthcare | $7,042 | $6,609 | 6.6% | | **Total** | **$124,489** | **$117,722** | **5.7%** | - The decrease in Q3 PMT sales was due to a slowdown in wafer fab markets, while the increase in nine-month PMT sales was driven by growth with new technology partners for 5G infrastructure[106](index=106&type=chunk)[107](index=107&type=chunk) - Consolidated gross margin fell to **31.5%** in Q3 FY19 from **33.8%** in Q3 FY18, primarily due to unfavorable product mix, higher costs in Healthcare for tube development, and comparison to positive manufacturing variances in the prior year[109](index=109&type=chunk) - SG&A expenses were flat at **$13.1 million** for Q3 FY19 compared to Q3 FY18, as higher legal and severance costs were offset by lower incentive compensation[117](index=117&type=chunk) [Liquidity, Financial Position and Capital Resources](index=23&type=section&id=MD%26A_Liquidity_Financial_Position_and_Capital_Resources) Liquidity decreased to $49.4 million, with significant cash used in operations, investing, and financing, though management deems it sufficient - Total cash and investments were **$49.4 million** at March 2, 2019, consisting of **$33.9 million** in cash and **$15.5 million** in short-term CD investments[127](index=127&type=chunk) - Cash used in operating activities of **$5.2 million** was primarily due to the net loss and a **$5.4 million** decrease in accounts payable and a **$3.3 million** increase in inventory[131](index=131&type=chunk) - Investing activities used **$18.7 million**, which included **$17.8 million** for purchases of investments (CDs) and **$3.2 million** in capital expenditures[134](index=134&type=chunk) - The company repatriated **$8.2 million** from foreign entities in Japan, Korea, Germany, and France during the first nine months of fiscal 2019[127](index=127&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is foreign currency exchange, managed through normal operations without derivative instruments - The primary financial risk is identified as foreign currency exchange[139](index=139&type=chunk) - The company does not utilize derivative instruments to manage its foreign currency exposure[120](index=120&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 2, 2019, with no material changes to internal controls during Q3 FY2019 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 2, 2019[142](index=142&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the third quarter of fiscal 2019[143](index=143&type=chunk) Part II. [Other Information](index=25&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending a patent infringement lawsuit by Varex Imaging Corporation, believing the claim is without merit - Varex Imaging Corporation filed a patent infringement lawsuit against Richardson Electronics regarding its ALTA750™ product[145](index=145&type=chunk) - Richardson believes the lawsuit lacks merit and considers a loss neither probable nor estimable at this time[145](index=145&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the last Annual Report on Form 10-K - No material changes to risk factors were reported since the last Annual Report on Form 10-K[146](index=146&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is listed in the table of contents, but no specific information is provided in the report body [Other Information](index=25&type=section&id=Item%205.%20Other%20Information) A press release was issued on April 9, 2019, reporting Q3 FY2019 financial results and declaring a cash dividend - A press release was issued on April 9, 2019, reporting Q3 FY2019 results and declaring a cash dividend[147](index=147&type=chunk) [Exhibits](index=26&type=section&id=Item%206.%20Exhibits) The report includes key exhibits such as CEO/CFO certifications, the Q3 FY2019 press release, and XBRL financial statements - Key exhibits filed include Sarbanes-Oxley certifications, a press release, and XBRL data[150](index=150&type=chunk)

Richardson Electronics, Ltd. (NASDAQ:RELL) Q3 2019 Earnings Conference Call April 10, 2019 10:00 AM ET CompanyParticipants Edward Richardson - Chairman, CEO & President Robert Ben - EVP, CFO, CAO & Corporate Secretary Wendy Diddell - EVP & COO Gregory Peloquin - EVP, Power & Microwave Technologies Group Jens Ruppert - EVP &GM, Canvys Conference Call Participants Eric Landry - BML Capital Management Mark Zinski - 21st Century Equity Research Howard Brous - Wunderlich Securities George Melas - MKH Management ...

Financial Data and Key Metrics Changes - Net sales for Q2 FY2019 were $41.3 million, a 5.7% increase from $39.1 million in Q2 FY2018 [11] - Gross margin decreased to 31.4% from 34.2% in the same quarter last year, primarily due to product mix and manufacturing variances [12] - Operating loss of $0.5 million reported for Q2 FY2019, compared to operating income of $0.8 million in Q2 FY2018 [15] - Overall net loss of $0.3 million for Q2 FY2019, compared to net income of $1.7 million in Q2 FY2018 [20] - For the first six months of FY2019, net sales were $85.5 million, a 12.3% increase from $76.1 million in the same period last year [20] Business Line Data and Key Metrics Changes - PMT sales increased to $32.3 million in Q2 FY2019 from $30.0 million in Q2 FY2018, reflecting a 7.5% growth [31] - Healthcare sales rose to $2.5 million in Q2 FY2019, up 7.6% from $2.3 million in Q2 FY2018, driven by strong CT tube sales [47] - Canvys sales were $6.5 million in Q2 FY2019, a decrease of 3.1% compared to the same period last year, but year-to-date sales are nearly 10% above the first half of FY2018 [62] Market Data and Key Metrics Changes - PMT experienced growth in key markets such as 5G wireless infrastructure, SATCOM, and defense communications [35] - Canvys received new orders from both medical and non-medical OEM customers, indicating strong demand in North America and Europe [65] Company Strategy and Development Direction - The company is focused on proving the quality of its ALTA750 CT tube to gain market share from OEMs [73] - P3 agreements are being utilized to alleviate customer concerns regarding alternative parts [50] - The company is exploring additional acquisitions and partnerships in the healthcare market to expand internationally [60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the semiconductor wafer fab market but noted strong growth from new technology partners [82] - The company is optimistic about continued growth in PMT and Canvys, despite some headwinds in the semiconductor market [42][72] - Management highlighted the importance of training and support for customers transitioning from OEM services [74] Other Important Information - Cash and investments at the end of Q2 FY2019 were $53.2 million, down from $59.3 million at the end of Q2 FY2018 [28] - The board approved a share repurchase program allowing for the repurchase of up to $9 million in common stock [76] Q&A Session Summary Question: What are the largest drivers of the slowing growth rate? - Management indicated that the semiconductor wafer fab market has been the slowest growth area, but new technology partnerships have helped maintain overall growth [81][82] Question: Is there any impact from the U.S.-China trade situation? - Management reported no significant impact from tariffs, describing the situation as more of an administrative challenge rather than a business slowdown [114] Question: What is the outlook for free cash flow? - Management indicated that free cash flow usage for the year might be slightly higher than previously guided, estimating a negative cash flow of $4 million to $4.5 million in the second half [99] Question: How is the 5G rollout progressing in different regions? - Management noted that China is ahead in implementing 5G infrastructure compared to North America, with expectations for significant growth in the second half of 2019 [101][102]