0001387131-15-002925.txt : 20151008 0001387131-15-002925.hdr.sgml : 20151008 20151008160632 ACCESSION NUMBER: 0001387131-15-002925 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20150829 FILED AS OF DATE: 20151008 DATE AS OF CHANGE: 20151008 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RICHARDSON ELECTRONICS LTD/DE CENTRAL INDEX KEY: 0000355948 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 362096643 STATE OF INCORPORATION: DE FISCAL YEAR END: 0601 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12906 FILM NUMBER: 151150917 BUSINESS ADDRESS: STREET 1: 40W267 KESLINGER RD STREET 2: PO BOX 393 CITY: LAFOX STATE: IL ZIP: 60147 BUSINESS PHONE: 630 208-2200 MAIL ADDRESS: STREET 1: 40W267 KESLINGER ROAD STREET 2: P.O. BOX 393 CITY: LAFOX STATE: IL ZIP: 60147 10-Q 1 rell-10q_082915.htm QUARTERLY REPORT

 

 

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 August 29, 2015

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 jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

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

 


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.    ☐ Yes     ☒  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months or for such shorter period that the registrant was required to submit and post such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer Accelerated Filer
       
Non-Accelerated Filer ☐  (Do not check if a smaller reporting company) Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

As of October 5, 2015, there were outstanding 10,725,453 shares of Common Stock, $0.05 par value and 2,140,644 shares of Class B Common Stock, $0.05 par value, which are convertible into Common Stock of the registrant on a share for share basis.

 

 
 

 

TABLE OF CONTENTS

 

 

   

Page

 

Part I. Financial Information  
     
Item 1. Financial Statements 2
  Consolidated Balance Sheets 2
  Unaudited Consolidated Statements of Comprehensive Loss 3
  Unaudited Consolidated Statements of Cash Flows 4
  Unaudited Consolidated Statement of Stockholders’ Equity 5
  Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
Item 4. Controls and Procedures 23
     
Part II. Other Information  
     
Item 1. Legal Proceedings 24
Item 1A. Risk Factors 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 5. Other Information 24
Item 6. Exhibits 24
Signatures 25
Exhibit Index 26

 

 

 

1 
 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

Richardson Electronics, Ltd.

Consolidated Balance Sheets

(in thousands, except per share amounts)

   Unaudited  Audited
   August 29,
2015
  May 30, 
 2015
Assets      
Current assets:      
Cash and cash equivalents  $68,426   $74,535 
Accounts receivable, less allowance of $283   23,989    20,753 
Inventories, net   41,188    38,769 
Prepaid expenses and other assets   2,289    1,696 
Deferred income taxes   782    804 
Income tax receivable   381    929 
Investments - current   6,342    23,692 
Total current assets   143,397    161,178 
Non-current assets:          
Property, plant and equipment, net   10,832    10,081 
Goodwill   3,746    —   
Intangible assets, net   6,528    743 
Non-current deferred income taxes   1,463    1,443 
Investments - non-current   10,511    11,549 
Total non-current assets   33,080    23,816 
Total assets  $176,477   $184,994 
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable   14,293    15,768 
Accrued liabilities   9,348    10,144 
Total current liabilities   23,641    25,912 
Non-current liabilities:          
Non-current deferred income tax liabilities   1,179    1,209 
Other non-current liabilities   995    1,221 
Total non-current liabilities   2,174    2,430 
Total liabilities   25,815    28,342 
Stockholders’ equity          
Common stock, $0.05 par value; issued 11,357 shares at August 29, 2015, and 11,530 shares at May 30, 2015   568    577 
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,141 shares at August 29, 2015 and at May 30, 2015   107    107 
Preferred stock, $1.00 par value, no shares issued   —      —   
Additional paid-in-capital   62,312    63,252 
Common stock in treasury, at cost, 394 shares at August 29, 2015, and no shares at May 30, 2015   (2,269)   —   
Retained earnings   86,932    89,141 
Accumulated other comprehensive income   3,012    3,575 
Total stockholders’ equity   150,662    156,652 
Total liabilities and stockholders’ equity  $176,477   $184,994 

  

2 
 

 

Richardson Electronics, Ltd.

Unaudited Consolidated Statements of Comprehensive Loss

(in thousands, except per share amounts)

 

 

   Three Months Ended
   August 29,
2015
  August 30, 
 2014
Statements of Comprehensive Loss      
Net sales  $37,071   $34,699 
Cost of sales   25,809    24,041 
Gross profit   11,262    10,658 
Selling, general, and administrative expenses   12,267    11,182 
(Gain) loss on disposal of assets   (1)   9 
Operating loss   (1,004)   (533)
Other (income) expense:          
Investment/interest income   (191)   (256)
Foreign exchange (gain) loss   182    (57)
Other, net   36    (2)
Total other income   27    (315)
Loss before income taxes   (1,031)   (218)
Income tax provision (benefit)   368    (135)
Net loss   (1,399)   (83)
Foreign currency translation loss, net of tax   (503)   (968)
Fair value adjustments on investments gain (loss)   (60)   25 
Comprehensive loss  $(1,962)  $(1,026)
Loss per share:          
Common shares - Basic  $(0.10)  $(0.01)
Class B common shares - Basic  $(0.10)  $(0.01)
Common shares - Diluted  $(0.10)  $(0.01)
Class B common shares - Diluted  $(0.10)  $(0.01)
Weighted average number of shares:          
Common shares - Basic   11,486    11,822 
Class B common shares - Basic   2,141    2,182 
Common shares - Diluted   11,486    11,822 
Class B common shares - Diluted   2,141    2,182 
Dividends per common share  $0.060   $0.060 
Dividends per Class B common share  $0.054   $0.054 

 

3 
 

 

Richardson Electronics, Ltd.

Consolidated Statements of Cash Flows

(in thousands)

 

   Three Months Ended
   August 29,
2015
  August 30, 
 2014
Operating activities:      
Net loss  $(1,399)  $(83)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:          
Depreciation and amortization   485    366 
Gain on sale of investments   (11)   (3)
Gain on disposal of assets   (1)   —   
Share-based compensation expense   90    120 
Deferred income taxes   1    (79)
Change in assets and liabilities, net of effect of acquired business:          
Accounts receivable   (2,525)   (372)
Income tax receivable   548    2,308 
Inventories, net   (593)   (2,110)
Prepaid expenses and other assets   (581)   135 
Accounts payable   (1,521)   101 
Accrued liabilities   (804)   (662)
Non-current deferred income tax liabilities   228    —   
Long-term liabilities-accrued pension   (465)   —   
Other   35    (49)
Net cash used in operating activities   (6,513)   (328)
Investing activities:          
Cash consideration paid for acquired business   (12,209)   —   
Capital expenditures   (984)   (834)
Proceeds from maturity of investments   18,350    30,482 
Purchases of investments   —      (32,362)
Proceeds from sales of available-for-sale securities   100    37 
Purchases of available-for-sale securities   (100)   (37)
Other   60    (28)
Net cash provided by (used in) investing activities   5,217    (2,742)
Financing activities:          
Repurchase of common stock   (3,308)   (488)
Proceeds from issuance of common stock   —      158 
Cash dividends paid   (806)   (828)
Other   (4)   1 
Net cash used in financing activities   (4,118)   (1,157)
Effect of exchange rate changes on cash and cash equivalents   (695)   (441)
Decrease in cash and cash equivalents   (6,109)   (4,668)
Cash and cash equivalents at beginning of period   74,535    102,752 
Cash and cash equivalents at end of period  $68,426   $98,084 

 

 

4 
 

 

Richardson Electronics, Ltd.

Consolidated Statement of Stockholders’ Equity

(in thousands)

 

   Common  Class B
Common
  Par
Value
  Additional
Paid In
Capital
  Common
Stock in
Treasury
  Retained
Earnings
  Accumulated
Other
Comprehensive
Income
  Total
Balance May 30, 2015:   11,530    2,141   $684   $63,252   $—     $89,141   $3,575   $156,652 
Comprehensive loss                                        
Net loss   —      —      —      —      —      (1,399)   —      (1,399)
Foreign currency translation   —      —      —      —      —      —      (503)   (503)
Fair value adjustments on investments   —      —      —      —      —      —      (60)   (60)
Share-based compensation:                                        
Stock options   —      —      —      90    —      —      —      90 
Common stock:                                        
Repurchase of common stock   —      —      —      —      (3,308)   —      —      (3,308)
Cancellation of treasury stock   (173)   —      (9)   (1,030)   1,039    —      —      —   
Other   —      —      —      —      —      (4)   —      (4)
Dividends paid to:                                        
Common ($0.06 per share)   —      —      —      —      —      (690)   —      (690)
Class B ($0.054 per share)   —      —      —      —      —      (116)   —      (116)
Balance August 29, 2015:   11,357    2,141   $675   $62,312   $(2,269)  $86,932   $3,012   $150,662 

 

  

 

5 
 

 

RICHARDSON ELECTRONICS, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.  DESCRIPTION OF THE COMPANY

Richardson Electronics, Ltd. is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high value displays, flat panel detector solutions and replacement parts for diagnostic imaging equipment; and customized display solutions.  We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure.

Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing, and visual technology solutions. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, medical, and communication applications.

On June 15, 2015, Richardson Electronics, Ltd (“the Company”), acquired certain assets of International Medical Equipment and Services, Inc. (“IMES”), for a purchase price of $12.2 million.

IMES, based in South Carolina, provides reliable, cost-saving solutions worldwide for major brands of CT and MRI equipment. This acquisition positions Richardson Healthcare to provide cost effective diagnostic imaging replacement parts and training to hospitals, diagnostic imaging centers, medical institutions, and independent service organizations. IMES offers an extensive selection of replacement parts, as well as an interactive training center, on-site test bays and experienced technicians who provide 24/7 customer support. Replacement parts are readily available and triple tested to provide peace of mind when uptime is critical. IMES core operations will remain in South Carolina. Richardson Healthcare will expand IMES’ replacement parts and training offerings geographically leveraging the Company’s global infrastructure.

We have three operating segments, which we define as follows:

Power and Microwave Technologies Group ("PMT"), launched in July 2015, combines EDG’s core engineered solutions, power grid and microwave tube business with new RF and power technologies. As a manufacturer and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair—all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in alternative energy, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar, and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.

Canvys provides customized display solutions serving the corporate enterprise, financial, industrial, and OEM markets.

Healthcare manufactures, distributes and services high value replacement parts for the healthcare market including hospitals, medical centers, independent service organizations, and multi-vendor service providers. Products include power grid tubes, hydrogen thyratrons, klystrons, magnetrons; Image Systems medical displays and workstations for picture archiving and communication systems (“PACS”); visual solutions for operating rooms/surgical environments; digital radiography solutions including replacement flat panel detectors and upgrades; and additional replacement components currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings, and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.

 

6 
 

 

We currently have operations in the following major geographic regions: North America, Asia/Pacific, Europe, and Latin America.

2.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements.

Our fiscal quarter ends on the Saturday nearest the end of the quarter-ending month. The first three months of fiscal 2016 and 2015 contained 13 weeks, respectively.

In the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results of interim periods have been made. All inter-company transactions and balances have been eliminated. The unaudited consolidated financial statements presented herein include the accounts of our wholly owned subsidiaries. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of our operations for the three months ended August 29, 2015, are not necessarily indicative of the results that may be expected for the fiscal year ending May 28, 2016.

The financial information contained in this report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May 30, 2015, that we filed on July 28, 2015.

On June 15, 2015, the Company completed the acquisition of IMES. The results of the operations have been consolidated with our results following the acquisition date. For a more complete discussion of the transaction, refer to Note 4.

3.  CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Inventories: Our consolidated inventories are stated at the lower of cost or market, generally using a weighted-average cost method. Our inventories include approximately $35.8 million of finished goods and $5.4 million of raw materials and work-in-progress as of August 29, 2015, as compared to approximately $33.7 million of finished goods and $5.1 million of raw materials and work-in-progress as of May 30, 2015.

At this time, we do not anticipate any material risks or uncertainties related to possible future inventory write-downs. Provisions for obsolete or slow moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets, and assumptions about future demand and market conditions. If future demand, changes in the industry, or market conditions differ from management's estimates, additional provisions may be necessary. The inventory reserve as of August 29, 2015, was $3.1 million compared to $3.0 million as of May 30, 2015.

Revenue Recognition: Our product sales are recognized as revenue upon shipment, when title passes to the customer, when delivery has occurred or services have been rendered, and when collectability is reasonably assured. We also record estimated discounts and returns based on our historical experience. Our products are often manufactured to meet the specific design needs of our customers’ applications. Our engineers work closely with customers to ensure that our products will meet their needs. Our customers are under no obligation to compensate us for designing the products we sell.

Loss Contingencies: We accrue a liability for loss contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible losses can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. If we determine that there is at least a reasonable possibility that a loss may have been incurred, we will include a disclosure describing the contingency.

 

7 
 

 

Intangible Assets: Intangible assets are initially recorded at their fair market values determined on quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized on a straight-line basis over their useful lives.

Income Taxes: We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and determine the need for a valuation allowance based on a number of factors, including both positive and negative evidence. These factors include historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences, and the implementation of tax planning strategies. In circumstances where we, or any of our affiliates, have incurred three years of cumulative losses which constitute significant negative evidence, positive evidence of equal or greater significance is needed to overcome the negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards.

4. ACQUISITION

On June 15, 2015, Richardson Electronics, Ltd (“the Company”), acquired certain assets of International Medical Equipment and Services, Inc. (“IMES”), for a purchase price of $12.2 million.

IMES, based in South Carolina, provides reliable, cost-saving solutions worldwide for major brands of CT and MRI equipment. This acquisition positions Richardson Healthcare to provide cost effective diagnostic imaging replacement parts and training to hospitals, diagnostic imaging centers, medical institutions, and independent service organizations. IMES offers an extensive selection of replacement parts, as well as an interactive training center, on-site test bays and experienced technicians who provide 24/7 customer support. Replacement parts are readily available and triple tested to provide peace of mind when uptime is critical. IMES core operations will remain in South Carolina. Richardson Healthcare plans to expand IMES’ replacement parts and training offerings geographically to leverage the Company’s global infrastructure.

The consideration paid by the Company to IMES at closing was $12.2 million in cash. The following table summarizes the preliminary fair values of the assets acquired at the date of the closing of the acquisition (in thousands):

Accounts receivable  $743 
Inventories   1,690 
Property, plant and equipment   230 
Goodwill   3,746 
Other intangibles   5,800 
Net assets acquired  $12,209 

 

Intangible assets include trade names with an estimated life of 3 years for $0.7 million, customer relationships with an estimated life of 20 years for $4.5 million, technology with an estimated life of 10 years for $0.4 million, and non-compete agreements with an estimated life of 5 years for $0.2 million.

The approximate fair values of the assets acquired related to the IMES acquisition are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of the assets acquired. Such changes could result in material variances between the Company’s future financial fair values recorded and expenses associated with these items.

In connection with the Agreement, the Company also entered into an Employment, Non-Disclosure, and Non-Compete Agreement (“Employment Agreement”) with Lee A. McIntyre III as the Company’s Executive Vice President, IMES. During the term of his employment, Mr. McIntyre will earn an annual base salary of $300,000. In addition to his base salary, he will be entitled to an annual bonus equal to 20% of the EBITDA of IMES provided that the EBITDA of the business is at least $2.0 million inclusive of the bonus payment. The annual bonus payment will terminate after five years.

 

8 
 

 

5. GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying value of goodwill are as follows (in thousands):

   Goodwill
    
Balance at May 30, 2015  $—   
Premium Paid for IMES Acquisition   3,746 
Balance at August 29, 2015  $3,746 

Goodwill is initially recorded based on the premium paid for acquisitions and is subsequently tested for impairment, using the first day of our fourth quarter as the measurement date. We test goodwill for impairment annually and whenever events or circumstances indicates an impairment may have occurred, such as a significant adverse change in the business climate, loss of key personnel or a decision to sell or dispose of a reporting unit. The goodwill balance in its entirety relates to our Healthcare segment.

Intangible assets are initially recorded at their fair market values determined on quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized on a straight-line basis over their useful lives.

Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements, and technology acquired in connection with our acquisitions. Intangible assets subject to amortization as well as amortization expense are as follows (in thousands):

   Intangible Assets Subject  to
Amortization as of
   August 29, 2015  May 30, 2015
Gross Amounts:          
Trade Name  $729   $29 
Customer Relationship   5,450    948 
Non-compete Agreements   247    47 
Technology   400    —   
Total Gross Amounts  $6,826   $1,024 
Accumulated Amortization:          
Trade Name  $29   $29 
Customer Relationship   245    221 
Non-compete Agreements   24    31 
Technology   —      —   
Total Accumulated Amortization  $298   $281 
           
Net Intangibles  $6,528   $743 

  

9 
 

 

The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table (in thousands):

   Amortization
Expense
Fiscal Year      
 Remaining 2016   $567 
 2017    595 
 2018    593 
 2019    360 
 2020    350 
 Thereafter    4,063 
 Total amortization expense   $6,528 

 

The weighted average number of years of amortization expense remaining is 17.8 years.

6.  INVESTMENTS

As of August 29, 2015, we had approximately $16.3 million invested in time deposits and certificates of deposit (“CD”). Of these, $6.3 million mature in less than twelve months and $10 million mature in more than twelve months. The fair value of these investments is equal to the face value of each time deposit and CD.

As of May 30, 2015, we had approximately $34.7 million invested in time deposits and CD’s. Of this, $23.7 million mature in less than twelve months and $10.9 million mature in more than twelve months. The fair value of these investments is equal to the face value of each time deposit and CD.

We also have investments in equity securities, all of which are classified as available-for-sale and are carried at their fair value based on quoted market prices. Our investments, which are included in non-current assets, had a carrying amount of $0.5 million at August 29, 2015, and $0.6 million at May 30, 2015. Proceeds from the sale of securities were $0.1 million during the first quarter of fiscal 2016 and less than $0.1 million during the first quarter of fiscal 2015. We reinvested proceeds from the sale of securities, and the cost of the equity securities sold was based on a specific identification method. Gross realized gains and losses on those sales were $0.1 million during the first quarter of fiscal 2016 and less than $0.1 million during the first quarter of fiscal 2015. Net unrealized holding gains of less than $0.1 million during the first quarter of fiscal 2016 and fiscal 2015, have been included in accumulated other comprehensive loss.

7.  WARRANTIES

We offer warranties for the limited number of specific products we manufacture. We also provide extended warranties for some products we sell that lengthen the period of coverage specified in the manufacturer’s original warranty. Our warranty terms generally range from one to three years.

We estimate the cost to perform under the warranty obligation and recognize this estimated cost at the time of the related product sale. We record expense related to our warranty obligations as cost of sales in our consolidated statements of comprehensive income (loss). Each quarter, we assess actual warranty costs incurred on a product-by-product basis and compare the warranty costs to our estimated warranty obligation. With respect to new products, estimates are based generally on knowledge of the products, the extended warranty period, and warranty experience.

 

10 
 

 

Warranty reserves are established for costs that are expected to be incurred after the sale and delivery of products under warranty. Warranty reserves are included in accrued liabilities on our consolidated balance sheets. The warranty reserves are determined based on known product failures, historical experience, and other available evidence. Warranty reserves were approximately $0.2 million as of August 29, 2015, and as of May 30, 2015.

8.  LEASE OBLIGATIONS, OTHER COMMITMENTS, AND CONTINGENCIES

We lease certain warehouse and office facilities and office equipment under non-cancelable operating leases. Rent expense during the first three months of fiscal 2016 was $0.5 million and $0.4 million during the first three months of fiscal 2015. Our future lease commitments for minimum rentals, including common area maintenance charges and property taxes during the next five years are as follows (in thousands):

Fiscal Year  Payments
Remaining 2016   $1,040 
2017    643 
2018    341 
2019    273 
2020    224 
Thereafter    264 

 

9. INCOME TAXES

The effective income tax rate during the first three months of fiscal 2016 was a tax provision of (35.7%), as compared to a tax provision of 61.8% during the first three months of fiscal 2015. The difference in rate during the first three months of fiscal 2016, as compared to the first three months of fiscal 2015, reflects the impact of changes in our geographical distribution of income (loss), the recording of additional valuation allowance against all of our U.S. state and federal net deferred tax assets, and our positions with respect to ASC 740-30, Income Taxes - Other Considerations or Special Areas (“ASC 740-30”). The (35.7%) effective income tax rate differs from the federal statutory rate of 34.0% as a result of our geographical distribution of income (loss), the increase in uncertain tax positions as a result of an income tax audit in Germany, and the recording of a valuation allowance against all of our U.S. state and federal net deferred tax assets.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal 2011 are closed for examination under the statute of limitation for U.S. federal, U.S. state and local, or non-U.S. tax jurisdictions. We are also currently under examination in Germany (fiscal 2009 through 2011) and Thailand (fiscal 2008 through 2011). Our primary foreign tax jurisdictions are Germany and the Netherlands. We have tax years open in Germany beginning in fiscal 2008 and the Netherlands beginning in fiscal 2010.

We have historically determined that certain undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. Accordingly, we have provided a deferred tax liability totaling $5.0 million as of August 29, 2015, on foreign earnings of $37.6 million. In addition, as of August 29, 2015, approximately $20.9 million of cumulative positive earnings of some of our foreign subsidiaries are still considered permanently reinvested pursuant to ASC 740-30. Due to various tax attributes that are continuously changing, it is not practicable to determine what, if any, tax liability might exist if such earnings were to be repatriated.

As of August 29, 2015, our worldwide liability for uncertain tax positions related to continuing operations is $0.2 million, excluding interest and penalties, as compared to no liabilities for uncertain tax positions as of May 30, 2015. We record penalties and interest relating to uncertain tax positions in the income tax expense line item within the unaudited consolidated statements of income and comprehensive income. It is not expected that there will be a change in the unrecognized tax benefits within the next 12 months.

 

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Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant component of objective evidence evaluated was the cumulative income or loss incurred in each jurisdiction over the three-year period ended August 29, 2015. Such objective evidence limits the ability to consider other subjective evidence such as future income projections. We considered other positive evidence in determining the need for a valuation allowance in the U.S. including the repatriation of foreign earnings which we do not consider permanently reinvested in certain of our foreign subsidiaries. The weight of this positive evidence is not sufficient to outweigh other negative evidence in evaluating our need for a valuation allowance in the U.S. jurisdiction.

On the basis of this evaluation, as of August 29, 2015, a valuation allowance of $5.5 million has been established to record only the portion of the deferred tax asset that will more likely than not be realized. The valuation allowance relates to deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred as well as valuation allowance for all domestic federal and state net deferred tax assets considering the cumulative losses for the U.S. jurisdiction. Our valuation allowance increased $0.3 million for additional domestic federal and state net deferred tax assets generated during the first quarter of fiscal 2016 due to additional losses in the U.S. jurisdiction. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

10.  CALCULATION OF EARNINGS PER SHARE

We have authorized 17,000,000 shares of common stock, and 3,000,000 shares of Class B common stock. The Class B common stock has 10 votes per share and has transferability restrictions; however, Class B common stock may be converted into common stock on a share-for-share basis at any time. With respect to dividends and distributions, shares of common stock and Class B common stock rank equally and have the same rights, except that Class B common stock cash dividends are limited to 90% of the amount of Class A common stock cash dividends.

In accordance with ASC 260-10, Earnings Per Share (“ASC 260”), our Class B common stock is considered a participating security requiring the use of the two-class method for the computation of basic and diluted earnings per share. The two-class computation method for each period reflects the cash dividends paid per share for each class of stock, plus the amount of allocated undistributed earnings per share computed using the participation percentage which reflects the dividend rights of each class of stock. Basic and diluted earnings per share were computed using the two-class method as prescribed in ASC 260. The shares of Class B common stock are considered to be participating convertible securities since the shares of Class B common stock are convertible on a share-for-share basis into shares of common stock and may participate in dividends with common stock according to a predetermined formula which is 90% of the amount of Class A common stock cash dividends.

 

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The earnings per share (“EPS”) presented in our unaudited consolidated statements of comprehensive income (loss) are based on the following amounts (in thousands, except per share amounts):

   For the Three Months Ended
   August 29, 2015  August 30, 2014
   Basic  Diluted  Basic  Diluted
Numerator for Basic and Diluted EPS:            
Net loss  $(1,399)  $(1,399)  $(83)  $(83)
Less dividends:                    
Common stock   690    690    710    710 
Class B common stock   116    116    118    118 
Undistributed losses  $(2,205)  $(2,205)  $(911)  $(911)
Common stock undistributed losses  $(1,888)  $(1,888)  $(781)  $(781)
Class B common stock undistributed losses   (317)   (317)   (130)   (130)
Total undistributed losses  $(2,205)  $(2,205)  $(911)  $(911)
Denominator for basic and diluted EPS:                    
Common stock weighted average shares   11,486    11,486    11,822    11,822 
Class B common stock weighted average shares, and shares under if-converted method for diluted EPS   2,141    2,141    2,182    2,182 
Effect of dilutive securities                    
Dilutive stock options        —           —   
Denominator for diluted EPS adjusted for weighted average shares and assumed conversions        13,627         14,004 
Net loss per share:                    
Common stock  $(0.10)  $(0.10)  $(0.01)  $(0.01)
Class B common stock  $(0.10)  $(0.10)  $(0.01)  $(0.01)

Note: Common stock options that were anti-dilutive and not included in diluted earnings per common share for the first quarter of fiscal 2016 and fiscal 2015 were 887,564 and 674,564, respectively.

 

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11.  SEGMENT REPORTING

During the first quarter of fiscal 2015, we created a new strategic business unit called Healthcare. As hospitals remain under pressure to reduce costs while serving a much larger customer base, there is a growing demand for independent sources of high value replacement parts for diagnostic imaging. Having access to parts that are tested and in stock enables hospitals to terminate expensive service contracts with OEM and instead use third party service providers or in-house technicians. With our global infrastructure, technical sales team, and experience servicing the healthcare market, we are well positioned to take advantage of this market opportunity. Over time, our plan is to expand our position from being the leader in power grid tubes to a key player in the high growth, high profile healthcare industry.

In accordance with ASC 280-10, Segment Reporting, we have identified three reportable segments: PMT, Canvys, and Healthcare.

Power and Microwave Technologies Group ("PMT"), launched in July 2015, combines EDG’s core engineered solutions, power grid and microwave tube business with new RF and power technologies. As a manufacturer and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair—all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in alternative energy, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar, and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.

Canvys provides customized display solutions serving the corporate enterprise, financial, industrial, and OEM markets.

Healthcare manufactures, distributes and services high value replacement parts for the healthcare market including hospitals, medical centers, independent service organizations, and multi-vendor service providers. Products include power grid tubes, hydrogen thyratrons, klystrons, magnetrons; Image Systems medical displays and workstations for picture archiving and communication systems (“PACS”); visual solutions for operating rooms/surgical environments; digital radiography solutions including replacement flat panel detectors and upgrades; and additional replacement components currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings, and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.

 

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The CEO evaluates performance and allocates resources primarily based on the gross profit of each segment.

Operating results by segment are summarized in the following table (in thousands):

   Three Months Ended
   August 29, 2015  August 30, 2014
PMT      
Net Sales  $27,195   $27,438 
Gross Profit   8,138    8,686 
Canvys          
Net Sales  $6,681   $5,968 
Gross Profit   1,709    1,656 
Healthcare          
Net Sales  $3,195   $1,293 
Gross Profit   1,415    316 

 

Geographic net sales information is primarily grouped by customer destination into five areas: North America; Asia/Pacific; Europe; Latin America; and Other.

Net sales and gross profit by geographic region are summarized in the following table (in thousands):

   Three Months Ended
   August 29, 2015  August 30, 2014
Net Sales      
North America  $17,792   $14,699 
Asia/Pacific   6,132    6,505 
Europe   11,358    11,049 
Latin America   1,607    2,321 
Other (1)   182    125 
Total  $37,071   $34,699 
Gross Profit          
North America  $6,199   $5,183 
Asia/Pacific   1,956    2,119 
Europe   3,341    3,719 
Latin America   625    878 
Other (1)   (859)   (1,241)
Total  $11,262   $10,658 

 


(1)Other includes primarily net sales not allocated to a specific geographical region, unabsorbed value-add costs, and other unallocated expenses.

We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition. Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe, and Latin America. Estimates of credit losses are recorded in the financial statements based on monthly reviews of outstanding accounts.

 

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12.  LITIGATION

We are involved in several pending judicial proceedings concerning matters arising in the ordinary course of business. While the outcome of litigation is subject to uncertainties, based on information available at the time the financial statements were issued, we determined disclosure of contingencies relating to any of our pending judicial proceedings was not necessary because there is less than a reasonable possibility that a material loss will be incurred.

13.  FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists; therefore requiring an entity to develop its own assumptions.

As of August 29, 2015, we held investments that are required to be measured at fair value on a recurring basis. Our investments consist of time deposits and CDs, where face value is equal to fair value, and equity securities of publicly traded companies for which market prices are readily available.

Investments measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of August 29, 2015, and May 30, 2015, were as follows (in thousands):

   Level 1
August 29, 2015     
Time deposits/CDs  $16,315 
Equity securities   538 
Total  $16,853 
May 30, 2015     
Time deposits/CDs  $34,665 
Equity securities   576 
Total  $35,241 

 

14.  Related Party Transaction

On June 15, 2015, the Company entered into a lease agreement for the IMES facility with LDL, LLC. The Executive Vice President of IMES, Lee A. McIntyre III, has an ownership interest in LDL, LLC.  The lease agreement provides for monthly payments over five years with total future minimum lease payments of $0.7 million.  Rental expense related to this lease amounted to less than $0.1 million for the three months ended August 29, 2015.  The Company shall be entitled to extend the term of the lease for a period of an additional five years by notifying the landlord in writing of its intention to do so within six months of the expiration of the initial term.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. The terms “may,” “should,” “could,” “anticipate,” “believe,” “continues,” “estimate,” “expect,” “intend,” “objective,” “plan,” “potential,” “project” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A, of our Annual Report on Form 10-K filed on July 28, 2015. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events or otherwise.

In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree 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 our responsibility.

INTRODUCTION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist the reader in better understanding our business, results of operations, financial condition, changes in financial condition, critical accounting policies and estimates, and significant developments. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes appearing elsewhere in this filing. This section is organized as follows:

  Business Overview - a brief synopsis of our Company for the periods ended August 29, 2015, and August 30, 2014.
     
  Results of Operations – an analysis and comparison of our consolidated results of operations for the three month periods ended August 29, 2015, and August 30, 2014, as reflected in our consolidated statements of comprehensive loss.
     
  Liquidity, Financial Position, and Capital Resources – a discussion of our primary sources and uses of cash for the three month periods ended August 29, 2015, and August 30, 2014, and a discussion of changes in our financial position.

 

Business Overview

Richardson Electronics, Ltd. is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high value displays, flat panel detector solutions and replacement parts for diagnostic imaging equipment; and customized display solutions.  We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure.

 

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Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing, and visual technology solutions. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, medical, and communication applications.

On June 15, 2015, Richardson Electronics, Ltd (“the Company”), acquired certain assets of International Medical Equipment and Services, Inc. (“IMES”), for a purchase price of $12.2 million.

IMES, based in South Carolina, provides reliable, cost-saving solutions worldwide for major brands of CT and MRI equipment. This acquisition positions Richardson Healthcare to provide cost effective diagnostic imaging replacement parts and training to hospitals, diagnostic imaging centers, medical institutions, and independent service organizations. IMES offers an extensive selection of replacement parts, as well as an interactive training center, on-site test bays and experienced technicians who provide 24/7 customer support. Replacement parts are readily available and triple tested to provide peace of mind when uptime is critical. IMES core operations will remain in South Carolina. Richardson Healthcare plan to expand IMES’ replacement parts and training offerings geographically to leverage the Company’s global infrastructure.

We have three operating segments which we define as follows:

Power and Microwave Technologies Group ("PMT"), launched in July 2015, combines EDG’s core engineered solutions, power grid and microwave tube business with new RF and power technologies. As a manufacturer and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair—all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in alternative energy, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar, and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.

Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial, and medical original equipment manufacturers (“OEM”) markets.

Healthcare manufactures, distributes and services high value replacement parts for the healthcare market including hospitals, medical centers, independent service organizations, and multi-vendor service providers. Products include power grid tubes, hydrogen thyratrons, klystrons, magnetrons; Image Systems medical displays and workstations for picture archiving and communication systems (“PACS”); visual solutions for operating rooms/surgical environments; digital radiography solutions including replacement flat panel detectors and upgrades; and additional replacement components currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings, and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.

We currently have operations in North America, Asia/Pacific, Europe, and Latin America.

RESULTS OF OPERATIONS

FINANCIAL SUMMARY – THREE MONTHS ENDED AUGUST 29, 2015

Net sales for the first quarter of fiscal 2016 were $37.1 million, an increase of 6.8%, compared to net sales of $34.7 million during the first quarter of fiscal 2015.
     
  Gross margin decreased to 30.4% during the first quarter of fiscal 2016, compared to 30.7% during the first quarter of fiscal 2015.  

 

 

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  Selling, general, and administrative expenses increased to $12.3 million, or 33.1% of net sales, for the first quarter of fiscal 2016, compared to $11.2 million, or 32.2% of net sales, for the first quarter of fiscal 2015.  
     
  Operating loss during the first quarter of fiscal 2016 was $1 million, compared to an operating loss of $0.5 million, or 1.5% of net sales during the first quarter of fiscal 2015.  
     
  Net loss during the first quarter of fiscal 2016 was $1.4 million, compared to net loss of $0.1 million, during the first quarter of fiscal 2015.

 

Net Sales and Gross Profit Analysis

Net sales by segment and percent change for the first quarter of fiscal 2016 and 2015 were as follows (in thousands):

Net Sales  Three Months Ended  FY16 vs. FY15
   August 29, 2015  August 30, 2014  % Change
PMT  $27,195   $27,438    -0.9%
Canvys   6,681    5,968    11.9%
Healthcare   3,195    1,293    147.1%
Total  $37,071   $34,699    6.8%

During the first quarter of fiscal 2016 consolidated net sales increased 6.8% compared to the first quarter of fiscal 2015. Sales for PMT declined slightly, sales for Canvys increased 11.9%, and sales for Healthcare increased 147.1%, which was primarily due to the acquisition of IMES.

Gross profit by segment and percent change for the first quarter of fiscal 2016 and 2015 were as follows (in thousands):

Gross Profit  Three Months Ended  FY16 vs. FY15
   August 29, 2015  August 30, 2014  % Change
PMT  $8,138   $8,686    -6.3%
Canvys   1,709    1,656    3.2%
Healthcare   1,415    316    347.8%
Total  $11,262   $10,658    5.7%

Gross profit reflects the distribution and manufacturing product margin less manufacturing variances, inventory obsolescence charges, customer returns, scrap and cycle count adjustments, engineering costs, unabsorbed manufacturing labor and overhead, and other provisions.

Consolidated gross profit was $11.3 million during the first quarter of fiscal 2016, compared to $10.7 million during the first quarter of fiscal 2015. Consolidated gross margin as a percentage of net sales decreased to 30.4% during the first quarter of fiscal 2016, from 30.7% during the first quarter of fiscal 2015, primarily due to shifts in product and geographic mix and sales of IMES products.

 

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Power and Microwave Technologies Group

PMT net sales decreased 0.9% to $27.2 million during the first quarter of fiscal 2016, from $27.4 million during the first quarter of fiscal 2015.  Sales for the marine market and specialty products manufactured in LaFox and sold primarily into the semiconductor capital equipment market increased. These increases were offset by a decline in the industrial heating and broadcast markets. Gross margin as a percentage of net sales decreased to 29.9% during the first quarter of fiscal 2016, as compared to 31.7% during the first quarter of fiscal 2015, due to an increase in unabsorbed labor and overhead costs in our LaFox manufacturing facility along with a shift in product mix and currency fluctuations.

Canvys

Canvys net sales increased 11.9% to $6.7 million during the first quarter of fiscal 2016, from $6.0 million during the first quarter of fiscal 2015.  Sales in our North America and Europe OEM markets both increased due to increased demand from our key customers, which had been delaying new program startups in the prior year. Gross margin as a percentage of net sales decreased to 25.6% during the first quarter of fiscal 2016 as compared to 27.7% during the first quarter of fiscal 2015, due to continued price pressure and currency fluctuations.       

Healthcare

Healthcare net sales increased 147.1% to $3.2 million during the first quarter of fiscal 2016, from $1.3 million during the first quarter of fiscal 2015. Sales increased primarily from the acquisition of IMES, while sales also increased in the PACS display market. Gross margin as a percentage of net sales increased to 44.3% during the first quarter of fiscal 2016 as compared to 24.4% during the first quarter of fiscal 2015 due to product mix. The IMES products carry significantly higher margins than the PACS display sales.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased to $12.3 million during the first quarter of fiscal 2016 from $11.2 million during the first quarter of fiscal 2015. The increase in SG&A of $1.1 million was due to expenses related to the IMES acquisition and additional investments in our Richardson Healthcare to support its growth objectives.

Other Income/Expense

Other income/expense was less than $0.1 million of expense during the first quarter of fiscal 2016, compared to income of $0.3 million during the first quarter of fiscal 2015. Other income/expense during the first quarter of fiscal 2016 included $0.2 million of investment income offset by $0.2 million of foreign exchange losses. Other income/expense during the first quarter of fiscal 2015 included $0.3 million of investment and interest income. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. We currently do not utilize derivative instruments to manage our exposure to foreign currency.

 

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Income Tax Provision

The effective income tax rate during the first three months of fiscal 2016 was a tax provision of (35.7%), as compared to a tax provision of 61.8% during the first three months of fiscal 2015. The difference in rate during the first three months of fiscal 2016, as compared to the first three months of fiscal 2015, reflects the impact of changes in our geographical distribution of income (loss), the recording of additional valuation allowance against all of our U.S. state and federal net deferred tax assets, and our positions with respect to ASC 740-30, Income Taxes - Other Considerations or Special Areas (“ASC 740-30”). The (35.7%) effective income tax rate differs from the federal statutory rate of 34.0% as a result of our geographical distribution of income (loss), the increase in uncertain tax positions as a result of an income tax audit in Germany, and the recording of a valuation allowance against all of our U.S. state and federal net deferred tax assets.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal 2011 are closed for examination under the statute of limitation for U.S. federal, U.S. state and local, or non-U.S. tax jurisdictions. We are also currently under examination in Germany (fiscal 2009 through 2011) and Thailand (fiscal 2008 through 2011). Our primary foreign tax jurisdictions are Germany and the Netherlands. We have tax years open in Germany beginning in fiscal 2008 and the Netherlands beginning in fiscal 2010.

Net Loss and Per Share Data

Net loss during the first quarter of fiscal 2016 was $1.4 million, or ($0.10) per diluted common share and ($0.10) per Class B diluted common share, as compared to net loss of $0.1 million during the first quarter of fiscal 2015, or ($0.01) per diluted common share and ($0.01) per Class B diluted common share.

LIQUIDITY, FINANCIAL POSITION, AND CAPITAL RESOURCES

Our growth and cash needs have been primarily financed through income from operations. Cash and cash equivalents for the first quarter ended August 29, 2015, were $68.5 million. In addition, CDs and time deposits classified as short-term investments were $6.3 million and long-term investments were $10.5 million, including equity securities of $0.5 million. Cash and investments at August 29, 2015, consisted of $30.8 million in North America, $13.1 million in Europe, $0.7 million in Latin America, and $40.7 million in Asia/Pacific. As of May 30, 2015, cash and cash equivalents were $74.5 million. In addition, CDs and time deposits classified as short-term investments were $23.7 million and long-term investments were $11.5 million, including equity securities of $0.6 million. Cash and investments as of May 30, 2015, consisted of $51.1 million in North America, $16.6 million in Europe, $0.7 million in Latin America, and $41.3 million in Asia/Pacific.

Cash Flows from Operating Activities

The cash used in operating activities primarily resulted from our net loss, adjusted for non-cash items, and changes in our operating assets and liabilities.

Operating activities used $6.5 million of cash during the first quarter of fiscal 2016. We had net loss of $1.4 million during the first quarter of fiscal 2016, which included non-cash stock-based compensation expense of $0.1 million associated with the issuance of stock option awards and depreciation and amortization expense of $0.5 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities, net of effects of acquired businesses, was a use of cash of $5.7 million during the first quarter of fiscal 2016, due primarily to the increase in our accounts receivable of $2.5 million, the decrease in our accounts payable of $1.5 million, the increase in inventories of $0.6 million, the increase in prepaid expenses of $0.6 million, and the decrease in accrued liabilities of $0.8 million.

Operating activities used $0.3 million of cash during the first quarter of fiscal 2015. We had net loss of $0.1 million during the first quarter of fiscal 2015, which included non-cash stock-based compensation expense of $0.1 million associated with the issuance of stock option awards and depreciation and amortization expense of $0.4 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities, net of effects of acquired businesses, used $0.6 million of cash during the first quarter of fiscal 2015, due primarily to the increase in our inventory of $2.1 million, the increase in our accounts receivable of $0.4 million, the decrease in accrued liabilities of $0.7 million, partially offset by a decrease to our income tax receivable of $2.3 million. The increase in our inventory of $2.1 million primarily relates to inventory purchases for new product offerings. The decrease in our income tax receivable of $2.3 million was due to the receipt of an income tax refund.

 

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Cash Flows from Investing Activities

The cash flow from investing activities has consisted primarily of purchases and maturities of investments, capital expenditures, and any business acquisition activity.

Cash provided by investing activities of $5.2 million during the first quarter of fiscal 2016, included proceeds from the maturities of investments of $18.4 million, offset by the acquisition of IMES of $12.2 million and $1 million in capital expenditures. Capital expenditures of $1 million relates primarily to our Healthcare growth initiatives.

Cash used in investing activities of $2.7 million during the first quarter of fiscal 2015, included proceeds from the maturities of investments of $30.5 million, offset by the purchase of investments of $32.4 million and $0.8 million in capital expenditures primarily due to our new IT Platform.

Our purchases and proceeds from investments consist of time deposits and CDs. Purchasing of future investments may vary from period to period due to interest and foreign currency exchange rates.

Cash Flows from Financing Activities

The cash flow from financing activities primarily consists of repurchases of common stock and cash dividends paid.

Cash used in financing activities of $4.1 million during the first three months of fiscal 2016, resulted from $3.3 million of cash used to repurchase common stock under our share repurchase authorization and $0.8 million of cash used to pay dividends.

Cash used in financing activities of $1.2 million during the first three months of fiscal 2015, resulted from $0.5 million of cash used to repurchase common stock under our share repurchase authorization and $0.8 million of cash used to pay dividends, offset by $0.2 million of proceeds from the issuance of common stock.

Dividend payments for the first three months of fiscal 2016 were approximately $0.8 million. All future payments of dividends are at the discretion of the Board of Directors. Dividend payments will depend on earnings, capital requirements, operating conditions, and such other factors that the Board may deem relevant.

We believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs for the fiscal year ending May 28, 2016.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Risk Management and Market Sensitive Financial Instruments

We are exposed to many different market risks with the various industries we serve. The primary financial risk we are exposed to is foreign currency exchange, as certain operations, assets, and liabilities of ours are denominated in foreign currencies. We manage these risks through normal operating and financing activities.

The interpretation and analysis of these disclosures should not be considered in isolation since such variances in exchange rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect our operations. Additional disclosure regarding various market risks are set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended May 30, 2015, filed July 28, 2015.

ITEM 4. CONTROLS AND PROCEDURES

 

(a)Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of August 29, 2015.

Disclosure controls and procedures are intended to provide reasonable assurance that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b)Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the first quarter of fiscal 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

23 
 

 

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

 

From time to time we or our subsidiaries are involved in legal actions that arise in the ordinary course of our business. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any current claims, including the above mentioned legal matters, will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

ITEM 1A. RISK FACTORS

 

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended May 30, 2015, filed July 28, 2015.

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

 

Period Ended  Total Number of Shares Purchased  Average Price Paid per Share  Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs  Dollar Amount of Shares Purchased Under the Plans or Programs  Amount Remaining Under the Share Repurchase Authorization
 30-May-15                       $14,625,569 
 29-Aug-15    567,213   $5.83    567,213   $3,307,543   $11,318,026 
TOTAL    567,213   $5.83    567,213   $3,307,543      

  

ITEM 5. OTHER INFORMATION

 

Results of Operation and Financial Condition and Declaration of Dividend

On October 7, 2015, we issued a press release reporting results for our first quarter ended August 29, 2015, and the declaration of a cash dividend. A copy of the press release is furnished as Exhibit 99.1 to this Form 10-Q and incorporated by reference herein.

ITEM 6. EXHIBITS

 

See exhibit index which is incorporated by reference herein.

 

24 
 

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

 

  RICHARDSON ELECTRONICS, LTD.
       
Date:  October 8, 2015 By: /s/    Robert J. Ben
     

Robert J. Ben

Chief Financial Officer

 (on behalf of the Registrant and

as Principal Financial Officer)

 

25 
 

 

Exhibit Index

(c)   EXHIBITS
     

Exhibit

Number

  Description
3.1   Amended and Restated Certificate of Incorporation of the Company, incorporated by reference to Annex III of the Proxy Statement dated August 21, 2015.
3.2   Amended and Restated By-Laws of the Company, incorporated by reference to Exhibit 3.2 on the Company’s Report on Form 10-Q for the quarterly period ended December 3, 2011.
31.1   Certification of Edward J. Richardson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed pursuant to Part I).
31.2   Certification of Robert J. Ben pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed pursuant to Part I).
32   Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed pursuant to Part I).
99.1   Press release, dated October 7, 2015.
101   The following financial information from our Quarterly Report on Form 10-Q for the first quarter of fiscal 2016, filed with the SEC on October 8, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as of August 29, 2015, and May 30, 2015, (ii) the Unaudited Consolidated Statements of Comprehensive Income for the three months ended August 29, 2015, and August 30, 2014, (iii) the Unaudited Consolidated Statements of Cash Flows for the three months ended August 29, 2015, and August 30, 2014, (iv) the Unaudited Consolidated Statement of Stockholder’s Equity as of August 29, 2015, and (v) Notes to Unaudited Consolidated Financial Statements.

 

 

 

EX-31.1 2 ex31-1.htm ERTIFICATION OF EDWARD J. RICHARDSON PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

RICHARDSON ELECTRONICS, LTD. - 10-Q

 

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Edward J. Richardson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Richardson Electronics, Ltd. for the period ended August 29, 2015;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: October 8, 2015
 
Signature: /s/ Edward J. Richardson
 
Edward J. Richardson
Chairman of the Board and Chief Executive Officer

 

 

 

 

EX-31.2 3 ex31-2.htm CERTIFICATION OF ROBERT J. BEN PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

RICHARDSON ELECTRONICS, LTD. - 10-Q

 

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Robert J. Ben, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Richardson Electronics, Ltd. for the period ended August 29, 2015;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: October 8, 2015
 
Signature: /s/ Robert J. Ben
 
Robert J. Ben
Chief Financial Officer

 

 

 

 

EX-32 4 ex32.htm CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

RICHARDSON ELECTRONICS, LTD. - 10-Q

Exhibit 32

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Richardson Electronics, Ltd. (the “Company”) on Form 10-Q for the period ended August 29, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward J. Richardson, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Edward J. Richardson  
Edward J. Richardson  
Chairman of the Board and Chief Executive Officer  
October 8, 2015  

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Richardson Electronics, Ltd. (the “Company”) on Form 10-Q for the period ended August 29, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert J. Ben, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Robert J. Ben  
Robert J. Ben  
Chief Financial Officer  
October 8, 2015  

 

 

 

EX-99.1 5 ex99-1.htm PRESS RELEASE

 

RICHARDSON ELECTRONICS, LTD. - 10-Q

 

Exhibit 99.1

 

 

 

Press Release

For Immediate Release

For Details Contact:   40W267 Keslinger Road
Edward J. Richardson Robert J. Ben PO BOX 393
Chairman and CEO EVP & CFO LaFox, IL 60147-0393 USA
Phone: (630) 208-2340 (630) 208-2203 (630) 208-2200 | Fax: (630) 208-2550

 

RICHARDSON ELECTRONICS REPORTS FIRST QUARTER FISCAL 2016 RESULTS AND DECLARES QUARTERLY CASH DIVIDEND

 

 

LaFox, IL, October 7, 2015: Richardson Electronics, Ltd. (NASDAQ: RELL) today reported financial results for its first quarter ended August 29, 2015. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend.

Net sales for the first quarter of fiscal 2016 were $37.1 million, a 6.8% increase, compared to net sales of $34.7 million in the prior year. The sales increase primarily reflects growth in the Canvys business of 11.9% and Healthcare business of 147.1%, which included the net sales for International Medical Equipment Systems (“IMES”), acquired in June of this year. Gross margin increased to $11.3 million, or 30.4% of net sales during the first quarter of fiscal 2016, compared to $10.7 million, or 30.7% of net sales during fiscal 2015.

Operating expenses increased to $12.3 million for the first quarter of fiscal 2016, compared to $11.2 million for the first quarter of fiscal 2015. The $1.1 million increase in expenses is due to including the expenses of IMES and investments in the Richardson Healthcare and PMT business units in support of its growth objectives.

As a result, operating loss for the first quarter of fiscal 2016 was $1.0 million, compared to an operating loss for the first quarter of fiscal 2015 of $0.5 million.

Other expense for the first quarter of fiscal 2016 was less than $0.1 million, compared to income of $0.3 million for the first quarter of fiscal 2015.

Net loss for the first quarter of fiscal 2016 was $1.4 million, compared to net loss of $0.1 million during the first quarter of last year.

CASH DIVIDEND

The Company also announced today that its Board of Directors declared a $0.06 quarterly dividend per share to holders of common stock and a $0.054 cash dividend per share to holders of Class B common stock. The dividend will be payable on November 20, 2015, to common stockholders of record on November 6, 2015.

 

 
 

 

Cash and investments at the end of our first quarter of fiscal 2016 were $85.3 million. During the first quarter of fiscal 2016, the Company repurchased 567,000 shares of its common stock. As of today, the Company has 10.7 million outstanding shares of common stock and 2.1 million outstanding shares of Class B common stock.

OUTLOOK

“We are pleased with the IMES transaction that closed during the first quarter. The integration of IMES is going well, and our expanded management team is aggressively pursuing new business opportunities,” said Edward J. Richardson, Chairman, Chief Executive Officer, and President. “Our multi-pronged growth strategy will enable us to increase our product offering, enhance our service capabilities, and expand our customer base while taking advantage of our existing global infrastructure. We will continue to evaluate acquisition targets and make prudent investments in our growth initiatives. We look forward to improving our operating performance, delivering enhanced customer service and returning value to our shareholders,” Mr. Richardson concluded.

CONFERENCE CALL INFORMATION

On Thursday, October 8, 2015, at 9:00 a.m. CT, Edward J. Richardson, Chairman and Chief Executive Officer, and Robert J. Ben, Chief Financial Officer, will host a conference call to discuss the Company’s first quarter results for fiscal 2016. A question and answer session will be included as part of the call’s agenda. To listen to the call, please dial (888) 339-2688 and enter passcode 20539434 approximately five minutes prior to the start of the call. A replay of the call will be available beginning at 12:00 a.m. CT on October 9, 2015, for seven days. The telephone numbers for the replay are (USA) (888) 286-8010 and (International) (617) 801-6888; passcode 60014595.

FORWARD-LOOKING STATEMENTS

This release includes certain “forward-looking” statements as defined by the Securities and Exchange Commission. Statements in this press release regarding the Company’s business which are not historical facts represent “forward-looking” statements that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K filed on July 28, 2015. The Company assumes no responsibility to update the “forward-looking” statements in this release as a result of new information, future events, or otherwise.

ABOUT RICHARDSON ELECTRONICS, LTD.

Richardson Electronics, Ltd. is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high value displays, flat panel detector solutions and replacement parts for diagnostic imaging equipment; and customized display solutions. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure. More information is available at www.rell.com.

Richardson Electronics common stock trades on the NASDAQ Global Select Market under the ticker symbol RELL.

 

 
 

 

Richardson Electronics, Ltd.

Consolidated Balance Sheets

(in thousands, except per share amounts)

 

   Unaudited  Audited
   August 29,
2015
  May 30, 
 2015
Assets      
Current assets:      
Cash and cash equivalents  $68,426   $74,535 
Accounts receivable, less allowance of $283   23,989    20,753 
Inventories, net   41,188    38,769 
Prepaid expenses and other assets   2,289    1,696 
Deferred income taxes   782    804 
Income tax receivable   381    929 
Investments - current   6,342    23,692 
Total current assets   143,397    161,178 
Non-current assets:          
Property, plant and equipment, net   10,832    10,081 
Goodwill   3,746    —   
Intangible assets, net   6,528    743 
Non-current deferred income taxes   1,463    1,443 
Investments - non-current   10,511    11,549 
Total non-current assets   33,080    23,816 
Total assets  $176,477   $184,994 
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable   14,293    15,768 
Accrued liabilities   9,348    10,144 
Total current liabilities   23,641    25,912 
Non-current liabilities:          
Non-current deferred income tax liabilities   1,179    1,209 
Other non-current liabilities   995    1,221 
Total non-current liabilities   2,174    2,430 
Total liabilities   25,815    28,342 
Stockholders’ equity          
Common stock, $0.05 par value; issued and 11,357 shares at August 29, 2015, and 11,530 shares at May 30, 2015   568    577 
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,141 shares at August 29, 2015 and at May 30, 2015   107    107 
Preferred stock, $1.00 par value, no shares issued   —      —   
Additional paid-in-capital   62,312    63,252 
Common stock in treasury, at cost, 394 shares at August 29, 2015, and no shares at May 30, 2015   (2,269)   —   
Retained earnings   86,932    89,141 
Accumulated other comprehensive income   3,012    3,575 
Total stockholders’ equity   150,662    156,652 
Total liabilities and stockholders’ equity  $176,477   $184,994 

 

 
 

 

Richardson Electronics, Ltd.

Unaudited Consolidated Statements of Comprehensive Loss

(in thousands, except per share amounts)

 

   Three Months Ended
   August 29,
2015
  August 30, 
 2014
Statements of Comprehensive Loss      
Net sales  $37,071   $34,699 
Cost of sales   25,809    24,041 
Gross profit   11,262    10,658 
Selling, general, and administrative expenses   12,267    11,182 
(Gain) loss on disposal of assets   (1)   9 
Operating loss   (1,004)   (533)
Other (income) expense:          
Investment/interest income   (191)   (256)
Foreign exchange (gain) loss   182    (57)
Other, net   36    (2)
Total other income   27    (315)
Loss before income taxes   (1,031)   (218)
Income tax provision (benefit)   368    (135)
Net loss   (1,399)   (83)
Foreign currency translation loss, net of tax   (503)   (968)
Fair value adjustments on investments gain (loss)   (60)   25 
Comprehensive loss  $(1,962)  $(1,026)
Loss per share:          
Common shares - Basic  $(0.10)  $(0.01)
Class B common shares - Basic  $(0.10)  $(0.01)
Common shares - Diluted  $(0.10)  $(0.01)
Class B common shares - Diluted  $(0.10)  $(0.01)
Weighted average number of shares:          
Common shares - Basic   11,486    11,822 
Class B common shares - Basic   2,141    2,182 
Common shares - Diluted   11,486    11,822 
Class B common shares - Diluted   2,141    2,182 
Dividends per common share  $0.060   $0.060 
Dividends per Class B common share  $0.054   $0.054 

 

 

 
 

 

Richardson Electronics, Ltd.

Consolidated Statements of Cash Flows

(in thousands)

 

   Three Months Ended
   August 29,
2015
  August 30, 
 2014
Operating activities:      
Net loss  $(1,399)  $(83)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:          
Depreciation and amortization   485    366 
Gain on sale of investments   (11)   (3)
Gain on disposal of assets   (1)   —   
Share-based compensation expense   90    120 
Deferred income taxes   1    (79)
Change in assets and liabilities, net of effect of acquired business:          
Accounts receivable   (2,525)   (372)
Income tax receivable   548    2,308 
Inventories, net   (593)   (2,110)
Prepaid expenses and other assets   (581)   135 
Accounts payable   (1,521)   101 
Accrued liabilities   (804)   (662)
Non-current deferred income tax liabilities   228    —   
Long-term liabilities-accrued pension   (465)   —   
Other   35    (49)
Net cash used in operating activities   (6,513)   (328)
Investing activities:          
Cash consideration paid for acquired business   (12,209)   —   
Capital expenditures   (984)   (834)
Proceeds from maturity of investments   18,350    30,482 
Purchases of investments   —      (32,362)
Proceeds from sales of available-for-sale securities   100    37 
Purchases of available-for-sale securities   (100)   (37)
Other   60    (28)
Net cash provided by (used in) investing activities   5,217    (2,742)
Financing activities:          
Repurchase of common stock   (3,308)   (488)
Proceeds from issuance of common stock   —      158 
Cash dividends paid   (806)   (828)
Other   (4)   1 
Net cash used in financing activities   (4,118)   (1,157)
Effect of exchange rate changes on cash and cash equivalents   (695)   (441)
Decrease in cash and cash equivalents   (6,109)   (4,668)
Cash and cash equivalents at beginning of period   74,535    102,752 
Cash and cash equivalents at end of period  $68,426   $98,084 

 

 

 
 

 

Richardson Electronics, Ltd.

Net Sales and Gross Profit

For the First Quarter of Fiscal 2016 and Fiscal 2015

(in thousands)

 

By Strategic Business Unit:

 

Net Sales         
   Q1 FY 2016  Q1 FY 2015  % Change
PMT  $27,195   $27,438    (0.9)%
Canvys   6,681    5,968    11.9%
Healthcare   3,195   $1,293    147.1%
Total  $37,071   $34,699    6.8%

 

Gross Profit            
   Q1 FY 2016  % of Net Sales  Q1 FY 2015  % of Net Sales
PMT  $8,138    29.9%  $8,686    31.7%
Canvys   1,709    25.6%   1,656    27.7%
Healthcare   1,415    44.3%   316    24.4%
Total  $11,262    30.4%  $10,658    30.7%

 

 

 

 

 

 

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-465000 6528000 200000 200000 5000000 37600000 20900000 200000 5500000 300000 <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt"><b>1. &#160;DESCRIPTION OF THE COMPANY</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-indent: 0.5in">Richardson Electronics, Ltd. is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high value displays, flat panel detector solutions and replacement parts for diagnostic imaging equipment; and customized display solutions.&#160; We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. The Company&#146;s strategy is to provide specialized technical expertise and &#147;engineered solutions&#148; based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-indent: 0.5in">Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing, and visual technology solutions. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, medical, and communication applications.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-indent: 0.5in">On June 15, 2015, Richardson Electronics, Ltd (&#147;the Company&#148;), acquired certain assets of International Medical Equipment and Services, Inc. (&#147;IMES&#148;), for a purchase price of $12.2 million.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-indent: 0.5in">IMES, based in South Carolina, provides reliable, cost-saving solutions worldwide for major brands of CT and MRI equipment. This acquisition positions Richardson Healthcare to provide cost effective diagnostic imaging replacement parts and training to hospitals, diagnostic imaging centers, medical institutions, and independent service organizations. IMES offers an extensive selection of replacement parts, as well as an interactive training center, on-site test bays and experienced technicians who provide 24/7 customer support. Replacement parts are readily available and triple tested to provide peace of mind when uptime is critical. IMES core operations will remain in South Carolina. Richardson Healthcare will expand IMES&#146; replacement parts and training offerings geographically leveraging the Company&#146;s global infrastructure.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-indent: 0.5in">We have three operating segments, which we define as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-indent: 0.5in">Power and Microwave Technologies Group (&#34;PMT&#34;), launched in July 2015, combines EDG&#146;s core engineered solutions, power grid and microwave tube business with new RF and power technologies. As a manufacturer and authorized distributor, PMT&#146;s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair&#151;all through our existing global infrastructure. PMT&#146;s focus is on products for power, RF and microwave applications for customers in alternative energy, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar, and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-indent: 0.5in">Canvys provides customized display solutions serving the corporate enterprise, financial, industrial, and OEM markets.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Healthcare manufactures, distributes and services high value replacement parts for the healthcare market including hospitals, medical centers, independent service organizations, and multi-vendor service providers. Products include power grid tubes, hydrogen thyratrons, klystrons, magnetrons; Image Systems medical displays and workstations for picture archiving and communication systems (&#147;PACS&#148;); visual solutions for operating rooms/surgical environments; digital radiography solutions including replacement flat panel detectors and upgrades; and additional replacement components currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings, and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify; text-indent: 0.5in">We currently have operations in the following major geographic regions: North America, Asia/Pacific, Europe, and Latin America.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt"><b>2. &#160;BASIS OF PRESENTATION</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: left; text-indent: 0.5in">The accompanying unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (&#147;GAAP&#148;) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: left; text-indent: 0.5in">Our fiscal quarter ends on the Saturday nearest the end of the quarter-ending month. The first three months of fiscal 2016 and 2015 contained 13 weeks, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: left; text-indent: 0.5in">In the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results of interim periods have been made. All inter-company transactions and balances have been eliminated. The unaudited consolidated financial statements presented herein include the accounts of our wholly owned subsidiaries. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of our operations for the three months ended August&#160;29, 2015, are not necessarily indicative of the results that may be expected for the fiscal year ending May&#160;28, 2016.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: left; text-indent: 0.5in">The financial information contained in this report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May&#160;30, 2015, that we filed on July&#160;28, 2015.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: left; text-indent: 0.5in">On June 15, 2015, the Company completed the acquisition of IMES. The results of the operations have been consolidated with our results following the acquisition date. 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Provisions for obsolete or slow moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets, and assumptions about future demand and market conditions. If future demand, changes in the industry, or market conditions differ from management's estimates, additional provisions may be necessary. The inventory reserve as of August 29, 2015, was $3.1 million compared to $3.0 million as of May 30, 2015.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: left; text-indent: 0.5in"><b>Revenue Recognition:</b>&#160;Our product sales are recognized as revenue upon shipment, when title passes to the customer, when delivery has occurred or services have been rendered, and when collectability is reasonably assured. We also record estimated discounts and returns based on our historical experience. 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Bank Time Deposits, Fair Value Disclosure Canvys. Commitments and Contingencies Disclosure [Line Items] Commitments and Contingencies Disclosure [Table] Stock that is subordinate to all other stock of the issuer. No definition available. Computation Of Earnings Per Share Line Items Denominator for Basic and Diluted Earnings Per Share [Abstract] Amount of paid and unpaid Claa B common stock dividends declared with the form of settlement in cash. Document Documentand Entity Information [Abstract] Earnings Per Share [Table] Fair Value Measurements [Abstract] Finite Lived Intangible Assets Future Amortization Expense [Line Items] Finite Lived Intangible Assets Future Amortization Expense [Table] Finite lived intangible assets remaining amortization expense period. Future Lease Obligations [Abstract] Goodwill Impairment [Member] Components of an entity that engage in business activities from which they may earn revenue and incur expenses, including transactions with other components of the same entity. IMES [Member] Income Tax [Line Items] Income Tax [Table] Liabilities For Uncertain Tax Positions Excluding Interests And Penalties The percentage rate of Class A dividends as computed for Class B dividend limitation. Lower limit of the provided range (less than). Minimum EBITDA in order for executive vice president to receive annual bonus Numerator for Basic and Diluted Earnings Per Share [Abstract] Components of an entity that engage in business activities from which they may earn revenue and incur expenses, including transactions with other components of the same entity. Unallocated geographical area. Warranties [Line Items] Warranties [Table] Warranty reserves. The approximate term of the warranty, No definition available. Assets, Current Assets, Noncurrent Assets [Default Label] Liabilities, Current Liabilities, Noncurrent Liabilities Treasury Stock, Value Stockholders' Equity Attributable to Parent Liabilities and Equity Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property Operating Income (Loss) Nonoperating Income (Expense) Comprehensive Income (Loss), Net of Tax, Attributable to Parent Gain (Loss) on Sale of Investments Assets Disposed of by Method Other than Sale, in Period of Disposition, Gain (Loss) on Disposition Deferred Income Taxes and Tax Credits Increase (Decrease) in Accounts Receivable Increase (Decrease) in Income Taxes Receivable Increase (Decrease) in Inventories Increase (Decrease) in Prepaid Expense Increase (Decrease) in Accounts Payable Increase (Decrease) in Accrued Liabilities Increase (Decrease) in Income Taxes Increase (Decrease) in Other Operating Assets and Liabilities, Net Net Cash Provided by (Used in) Operating Activities Payments to Acquire Businesses, Net of Cash Acquired Payments to Acquire Productive Assets Payments to Acquire Long-term Investments Payments to Acquire Available-for-sale Securities Payments for (Proceeds from) Other Investing Activities Net Cash Provided by (Used in) Investing Activities Payments for Repurchase of Common Stock Payments of Dividends Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Stock Repurchased During Period, Value Stockholders' Equity, Other Common Stock, Dividends, Per Share, Cash Paid Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Inventory Business Acquisition, Goodwill, Expected Tax Deductible Amount Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net Intangible Assets, Net (Including Goodwill) Finite-Lived Intangible Assets, Net Operating Leases, Future Minimum Payments Due, Next Twelve Months Operating Leases, Future Minimum Payments, Due in Two Years Operating Leases, Future Minimum Payments, Due in Three Years Operating Leases, Future Minimum Payments, Due in Four Years Operating Leases, Future Minimum Payments, Due in Five Years Operating Leases, Future Minimum Payments, Due Thereafter Undistributed Earnings, Basic Investments, Fair Value Disclosure CommitmentsAndContingenciesDisclosureLineItems CommitmentsAndContingenciesDisclosureTable DocumentDocumentandEntityInformationAbstract FairValueMeasurementsAbstract FiniteLivedIntangibleAssetsFutureAmortizationExpenseLineItems FiniteLivedIntangibleAssetsFutureAmortizationExpenseTable IncomeTaxLineItems IncomeTaxTable EX-101.PRE 14 rell-20150829_pre.xml XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT XML 15 R39.htm IDEA: XBRL DOCUMENT v3.3.0.814
INCOME TAXES (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Aug. 29, 2015
Aug. 30, 2014
Income Tax Disclosure [Abstract]    
Effective income tax rate (35.70%) 61.80%
Federal statutory tax rate 34.00%  
Deferred Tax Liabilities, Undistributed Foreign Earnings $ 5,000  
Cumulative positive earnings of foreign subsidiaries 37,600  
Permanently reinvested cumulative earnnings of foreign subsidiaries 20,900  
Liability for uncertain tax positions related to continuing operations, excluding interest and penalties 200  
Deferred tax valuation allowance 5,500  
Change in valuation allowance $ 300  
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GOODWILL AND INTANGIBLE ASSETS (Detail) - USD ($)
$ in Thousands
Aug. 29, 2015
May. 30, 2015
Finite-Lived Intangible Assets [Line Items]    
Finite Lived Intangible Assets Gross $ 6,826 $ 1,024
Finite Lived Intangible Assets Accumulated Amortization 298 281
Intangible Assets, Net (Including Goodwill) 6,528 743
Trade Names [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite Lived Intangible Assets Gross 729 29
Finite Lived Intangible Assets Accumulated Amortization 29 29
Customer Relationships [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite Lived Intangible Assets Gross 5,450 948
Finite Lived Intangible Assets Accumulated Amortization 245 221
Noncompete Agreements [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite Lived Intangible Assets Gross 247 47
Finite Lived Intangible Assets Accumulated Amortization 24 $ 31
Technology-Based Intangible Assets [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite Lived Intangible Assets Gross $ 400  

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LEASE OBLIGATIONS, OTHER COMMITMENTS, AND CONTINGENCIES (Tables)
3 Months Ended
Aug. 29, 2015
Commitments and Contingencies Disclosure [Abstract]  
Schedule of the future lease commitments for minimum rentals

Our future lease commitments for minimum rentals, including common area maintenance charges and property taxes during the next five years are as follows (in thousands):

Fiscal Year  Payments
Remaining 2016   $1,040 
2017    643 
2018    341 
2019    273 
2020    224 
Thereafter    264 

 

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SEGMENT REPORTING (Detail) - USD ($)
$ in Thousands
3 Months Ended
Aug. 29, 2015
Aug. 30, 2014
Segment Reporting Information [Line Items]    
Net sales $ 37,071 $ 34,699
Gross Profit 11,262 10,658
PMT [Member]    
Segment Reporting Information [Line Items]    
Net sales 27,195 27,438
Gross Profit 8,138 8,686
Canvys [Member]    
Segment Reporting Information [Line Items]    
Net sales 6,681 5,968
Gross Profit 1,709 1,656
Healthcare [Member]    
Segment Reporting Information [Line Items]    
Net sales 3,195 1,293
Gross Profit $ 1,415 $ 316
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LEASE OBLIGATIONS, OTHER COMMITMENTS, AND CONTINGENCIES (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Aug. 29, 2015
Aug. 30, 2014
Commitments and Contingencies Disclosure [Abstract]    
Rent expense under operating leases $ 500 $ 400
XML 22 R9.htm IDEA: XBRL DOCUMENT v3.3.0.814
BASIS OF PRESENTATION
3 Months Ended
Aug. 29, 2015
Accounting Policies [Abstract]  
BASIS OF PRESENTATION

2.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements.

Our fiscal quarter ends on the Saturday nearest the end of the quarter-ending month. The first three months of fiscal 2016 and 2015 contained 13 weeks, respectively.

In the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results of interim periods have been made. All inter-company transactions and balances have been eliminated. The unaudited consolidated financial statements presented herein include the accounts of our wholly owned subsidiaries. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of our operations for the three months ended August 29, 2015, are not necessarily indicative of the results that may be expected for the fiscal year ending May 28, 2016.

The financial information contained in this report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May 30, 2015, that we filed on July 28, 2015.

On June 15, 2015, the Company completed the acquisition of IMES. The results of the operations have been consolidated with our results following the acquisition date. For a more complete discussion of the transaction, refer to Note 4.

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SEGMENT REPORTING (Details 1) - USD ($)
$ in Thousands
3 Months Ended
Aug. 29, 2015
Aug. 30, 2014
Segment Reporting Information [Line Items]    
Net sales $ 37,071 $ 34,699
Total, Gross Profit 11,262 10,658
North America [Member]    
Segment Reporting Information [Line Items]    
Net sales 17,792 14,699
Total, Gross Profit 6,199 5,183
Asia Pacific [Member]    
Segment Reporting Information [Line Items]    
Net sales 6,132 6,505
Total, Gross Profit 1,956 2,119
Europe [Member]    
Segment Reporting Information [Line Items]    
Net sales 11,358 11,049
Total, Gross Profit 3,341 3,719
Latin America [Member]    
Segment Reporting Information [Line Items]    
Net sales 1,607 2,321
Total, Gross Profit 625 878
Other [Member]    
Segment Reporting Information [Line Items]    
Net sales [1] 182 125
Total, Gross Profit [1] $ (859) $ (1,241)
[1] Other includes primarily net sales not allocated to a specific geographical region, unabsorbed value-add costs, and other unallocated expenses.
XML 25 R29.htm IDEA: XBRL DOCUMENT v3.3.0.814
CRITICAL ACCOUNTING POLICIES AND ESTIMATES (Details Narrative) - USD ($)
$ in Thousands
Aug. 29, 2015
May. 30, 2015
Accounting Policies [Abstract]    
Finished Goods Included in inventories $ 35,800 $ 33,700
Raw material and Work in progress included in inventories 5,400 5,100
Inventory Reserves $ 3,100 $ 3,000
XML 26 R28.htm IDEA: XBRL DOCUMENT v3.3.0.814
FAIR VALUE MEASUREMENTS (Tables)
3 Months Ended
Aug. 29, 2015
Fair Value Disclosures [Abstract]  
Schedule of investments measured at fair value on a recurring basis

Investments measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of August 29, 2015, and May 30, 2015, were as follows (in thousands):

   Level 1
August 29, 2015     
Time deposits/CDs  $16,315 
Equity securities   538 
Total  $16,853 
May 30, 2015     
Time deposits/CDs  $34,665 
Equity securities   576 
Total  $35,241 
XML 27 R44.htm IDEA: XBRL DOCUMENT v3.3.0.814
FAIR VALUE MEASUREMENTS (Details) - Fair Value, Measurements, Recurring [Member] - Fair Value, Inputs, Level 1 [Member] - USD ($)
$ in Thousands
Aug. 29, 2015
May. 30, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Time deposits/CDs $ 16,315 $ 34,665
Equity securities 538 576
Investments, Fair Value Disclosure $ 16,853 $ 35,241
XML 28 R30.htm IDEA: XBRL DOCUMENT v3.3.0.814
ACQUISITIONS (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Jun. 15, 2015
Aug. 29, 2015
Aug. 30, 2014
Cash consideration paid for acquired businesses   $ (12,209)
Intangibles assets acquired $ 5,800    
Trade Names [Member]      
Intangibles assets acquired $ 700    
Finite lived intangible asset useful life 3 years    
Customer Relationships [Member]      
Intangibles assets acquired $ 4,500    
Finite lived intangible asset useful life 20 years    
Technology-Based Intangible Assets [Member]      
Intangibles assets acquired $ 400    
Finite lived intangible asset useful life 10 years    
Noncompete Agreements [Member]      
Intangibles assets acquired $ 200    
Finite lived intangible asset useful life 5 years    
IMES [Member] | Executive Vice President [Member]      
Executive base compensation $ 300    
Annual bonus based on percent of EBITDA 20.00%    
Minimum EBITDA to receive annual bonus $ 2,000    
XML 29 R31.htm IDEA: XBRL DOCUMENT v3.3.0.814
ACQUISITIONS (Details)
$ in Thousands
Jun. 15, 2015
USD ($)
Business Combinations [Abstract]  
Accounts receivable $ 743
Inventories 1,690
Property, plant and equipment 230
Goodwill 3,746
Other intangibles 5,800
Net assets acquired $ 12,209
XML 30 R8.htm IDEA: XBRL DOCUMENT v3.3.0.814
DESCRIPTION OF THE COMPANY
3 Months Ended
Aug. 29, 2015
Accounting Policies [Abstract]  
DESCRIPTION OF THE COMPANY

1.  DESCRIPTION OF THE COMPANY

Richardson Electronics, Ltd. is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high value displays, flat panel detector solutions and replacement parts for diagnostic imaging equipment; and customized display solutions.  We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure.

Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing, and visual technology solutions. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, medical, and communication applications.

On June 15, 2015, Richardson Electronics, Ltd (“the Company”), acquired certain assets of International Medical Equipment and Services, Inc. (“IMES”), for a purchase price of $12.2 million.

IMES, based in South Carolina, provides reliable, cost-saving solutions worldwide for major brands of CT and MRI equipment. This acquisition positions Richardson Healthcare to provide cost effective diagnostic imaging replacement parts and training to hospitals, diagnostic imaging centers, medical institutions, and independent service organizations. IMES offers an extensive selection of replacement parts, as well as an interactive training center, on-site test bays and experienced technicians who provide 24/7 customer support. Replacement parts are readily available and triple tested to provide peace of mind when uptime is critical. IMES core operations will remain in South Carolina. Richardson Healthcare will expand IMES’ replacement parts and training offerings geographically leveraging the Company’s global infrastructure.

We have three operating segments, which we define as follows:

Power and Microwave Technologies Group ("PMT"), launched in July 2015, combines EDG’s core engineered solutions, power grid and microwave tube business with new RF and power technologies. As a manufacturer and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair—all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in alternative energy, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar, and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.

Canvys provides customized display solutions serving the corporate enterprise, financial, industrial, and OEM markets.

Healthcare manufactures, distributes and services high value replacement parts for the healthcare market including hospitals, medical centers, independent service organizations, and multi-vendor service providers. Products include power grid tubes, hydrogen thyratrons, klystrons, magnetrons; Image Systems medical displays and workstations for picture archiving and communication systems (“PACS”); visual solutions for operating rooms/surgical environments; digital radiography solutions including replacement flat panel detectors and upgrades; and additional replacement components currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings, and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.

We currently have operations in the following major geographic regions: North America, Asia/Pacific, Europe, and Latin America.

XML 31 R32.htm IDEA: XBRL DOCUMENT v3.3.0.814
GOODWILL AND INTANGIBLE ASSETS (Details Narrative)
3 Months Ended
Aug. 29, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
Finite Lived Intangible Assets Remaining Amortization Expense Period 17 years 9 months 18 days
XML 32 R40.htm IDEA: XBRL DOCUMENT v3.3.0.814
CALCULATION OF EARNINGS PER SHARE (Details Narrative) - shares
3 Months Ended
Aug. 29, 2015
Aug. 30, 2014
Computation Of Earnings Per Share [Line Items]    
Limit of cash dividends Class B common stock 90.00%  
Common stock options anti-dilutive 887,564 674,564
Common Stock [Member]    
Computation Of Earnings Per Share [Line Items]    
Common stock shares, authorized 17,000,000  
Common Class B [Member]    
Computation Of Earnings Per Share [Line Items]    
Common stock shares, authorized 3,000,000  
XML 33 R2.htm IDEA: XBRL DOCUMENT v3.3.0.814
Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Aug. 29, 2015
May. 30, 2015
Current assets:    
Cash and cash equivalents $ 68,426 $ 74,535
Accounts receivable, less allowance of $283 23,989 20,753
Inventories, net 41,188 38,769
Prepaid expenses and other assets 2,289 1,696
Deferred income taxes 782 804
Income tax receivable 381 929
Investments - current 6,342 23,692
Total current assets 143,397 161,178
Non-current assets:    
Property, plant and equipment, net 10,832 10,081
Goodwill 3,746  
Intangibles, net 6,528 743
Non-current deferred income taxes 1,463 1,443
Investments - non-current 10,511 11,549
Total non-current assets 33,080 23,816
Total assets 176,477 184,994
Current liabilities:    
Accounts payable 14,293 15,768
Accrued liabilities 9,348 10,144
Total current liabilities 23,641 25,912
Non-current liabilities:    
Non-current deferred income tax liabilities 1,179 1,209
Other non-current liabilities 995 1,221
Total non-current liabilities 2,174 2,430
Total liabilities $ 25,815 28,342
Stockholders' equity    
Preferred stock, $1.00 par value, no shares issued  
Additional paid-in-capital $ 62,312 63,252
Common stock in treasury, at cost, 394 shares at August 29, 2015, and no shares at May 30, 2015 (2,269)  
Retained earnings 86,932 89,141
Accumulated other comprehensive income 3,012 3,575
Total stockholders' equity 150,662 156,652
Total liabilities and stockholders' equity 176,477 184,994
Common Stock [Member]    
Stockholders' equity    
Common stock, $0.05 par value; issued 11,357 shares at August 29, 2015, and 11,530 shares at May 30 2015; Class B common stock, convertible, $0.05 par value; issued and outstanding 2,141 shares at August 29, 2015, and at May 30, 2015 568 577
Common Class B [Member]    
Stockholders' equity    
Common stock, $0.05 par value; issued 11,357 shares at August 29, 2015, and 11,530 shares at May 30 2015; Class B common stock, convertible, $0.05 par value; issued and outstanding 2,141 shares at August 29, 2015, and at May 30, 2015 $ 107 $ 107
XML 34 R45.htm IDEA: XBRL DOCUMENT v3.3.0.814
RELATED PARTY TRANSACTION (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Jun. 15, 2015
Jun. 15, 2014
Aug. 29, 2015
Aug. 30, 2014
Rental expense     $ 500 $ 400
IMES [Member] | Less than [Member]        
Rental expense   $ 100    
IMES [Member] | Executive Vice President [Member]        
Total future minimum lease payments $ 700      
Lease term 5 years      
Renewal term 5 years      
XML 35 R6.htm IDEA: XBRL DOCUMENT v3.3.0.814
Consolidated Statement of Stockholders' Equity - 3 months ended Aug. 29, 2015 - USD ($)
shares in Thousands, $ in Thousands
Common Stock [Member]
Common Class B [Member]
Par Value [Member]
Additional Paid In Capital
Common Stock in Treasury
Retained Earnings
Accumulated Other Comprehensive Income
Total
Beginning Balance at May. 30, 2015     $ 684 $ 63,252   $ 89,141 $ 3,575 $ 156,652
Beginning Balance (in shares) at May. 30, 2015 11,530 2,141            
Comprehensive loss                
Net loss           (1,399)   (1,399)
Foreign currency translation             (503) (503)
Fair value adjustments on investments             (60) $ (60)
Share-based compensation:                
Stock options       90        
Common stock:                
Repurchase of common stock         $ (3,308)      
Cancellation of treasury stock     (9) (1,030) 1,039    
Treasury stock (in shares) (173)              
Other           (4)    
Dividends paid to:                
Common ($0.06 per share)           (690)   $ (690)
Class B ($0.054 per share)           (116)   (116)
Ending Balance at Aug. 29, 2015     $ 675 $ 62,312 $ (2,269) $ 86,932 $ 3,012 $ 150,662
Ending Balance (in shares) at Aug. 29, 2015 11,357 2,141            
XML 36 R35.htm IDEA: XBRL DOCUMENT v3.3.0.814
INVESTMENTS (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Aug. 29, 2015
Aug. 30, 2014
May. 30, 2015
May. 30, 2014
Investment [Line Items]        
Investment, less than twelve months $ 6,342   $ 23,692  
Investment, greater than twelve months 10,511   11,549  
Available for sale - equity securities 500   $ 600  
Available for sale securities - gross unrealized gains and losses 100      
Available for sale securities - gross realized gains and losses 100      
Net unrealized holding gains included in AOCI 100 $ 100    
Less than [Member]        
Investment [Line Items]        
Available for sale securities - gross unrealized gains and losses   100    
Available for sale securities - gross realized gains and losses   $ 100    
Time Deposits and Cetificate of Deposits[Member]        
Investment [Line Items]        
Investments, carrying value 16,300     $ 34,700
Investment, less than twelve months 6,300     23,700
Investment, greater than twelve months $ 10,000     $ 10,900
XML 37 R22.htm IDEA: XBRL DOCUMENT v3.3.0.814
CRITICAL ACCOUNTING POLICIES AND ESTIMATES (Policies)
3 Months Ended
Aug. 29, 2015
Accounting Policies [Abstract]  
Inventories

Inventories: Our consolidated inventories are stated at the lower of cost or market, generally using a weighted-average cost method. Our inventories include approximately $35.8 million of finished goods and $5.4 million of raw materials and work-in-progress as of August 29, 2015, as compared to approximately $33.7 million of finished goods and $5.1 million of raw materials and work-in-progress as of May 30, 2015.

At this time, we do not anticipate any material risks or uncertainties related to possible future inventory write-downs. Provisions for obsolete or slow moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets, and assumptions about future demand and market conditions. If future demand, changes in the industry, or market conditions differ from management's estimates, additional provisions may be necessary. The inventory reserve as of August 29, 2015, was $3.1 million compared to $3.0 million as of May 30, 2015.

Revenue Recognition

Revenue Recognition: Our product sales are recognized as revenue upon shipment, when title passes to the customer, when delivery has occurred or services have been rendered, and when collectability is reasonably assured. We also record estimated discounts and returns based on our historical experience. Our products are often manufactured to meet the specific design needs of our customers’ applications. Our engineers work closely with customers to ensure that our products will meet their needs. Our customers are under no obligation to compensate us for designing the products we sell.

Loss Contingencies

Loss Contingencies: We accrue a liability for loss contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible losses can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. If we determine that there is at least a reasonable possibility that a loss may have been incurred, we will include a disclosure describing the contingency.

Intangible Assets

Intangible Assets: Intangible assets are initially recorded at their fair market values determined on quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized on a straight-line basis over their useful lives.

Income Taxes

Income Taxes: We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and determine the need for a valuation allowance based on a number of factors, including both positive and negative evidence. These factors include historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences, and the implementation of tax planning strategies. In circumstances where we, or any of our affiliates, have incurred three years of cumulative losses which constitute significant negative evidence, positive evidence of equal or greater significance is needed to overcome the negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards.

XML 38 R36.htm IDEA: XBRL DOCUMENT v3.3.0.814
WARRANTIES (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Aug. 29, 2015
May. 30, 2015
Warranties [Line Items]    
Warranty reserves $ 200 $ 200
Minimum [Member]    
Warranties [Line Items]    
Warranty term 1 year  
Maximum [Member]    
Warranties [Line Items]    
Warranty term 3 years  
XML 39 R24.htm IDEA: XBRL DOCUMENT v3.3.0.814
GOODWILL AND INTANGIBLE ASSETS (Tables)
3 Months Ended
Aug. 29, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of changes in carrying value of Goodwill

Changes in the carrying value of goodwill are as follows (in thousands):

   Goodwill
    
Balance at May 30, 2015  $—   
Premium Paid for IMES Acquisition   3,746 
Balance at August 29, 2015  $3,746 
Intangible assets subject to amortization

Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements, and technology acquired in connection with our acquisitions. Intangible assets subject to amortization as well as amortization expense are as follows (in thousands):

   Intangible Assets Subject  to
Amortization as of
   August 29, 2015  May 30, 2015
Gross Amounts:          
Trade Name  $729   $29 
Customer Relationship   5,450    948 
Non-compete Agreements   247    47 
Technology   400    —   
Total Gross Amounts  $6,826   $1,024 
Accumulated Amortization:          
Trade Name  $29   $29 
Customer Relationship   245    221 
Non-compete Agreements   24    31 
Technology   —      —   
Total Accumulated Amortization  $298   $281 
           
Net Intangibles  $6,528   $743 
Schedule of the amortization expense for the next five years

The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table (in thousands):

   Amortization
Expense
Fiscal Year      
 Remaining 2016   $567 
 2017    595 
 2018    593 
 2019    360 
 2020    350 
 Thereafter    4,063 
 Total amortization expense   $6,528 
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Consolidated Statement of Stockholders' Equity (Parenthetical)
3 Months Ended
Aug. 29, 2015
$ / shares
Common Stock [Member]  
Dividends per common share $ .06
Common Class B [Member]  
Dividends per common share $ 0.054
XML 42 R3.htm IDEA: XBRL DOCUMENT v3.3.0.814
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
shares in Thousands, $ in Thousands
Aug. 29, 2015
May. 30, 2015
Accounts receivable, allowance $ 283 $ 283
Preferred stock, par value $ 1.00 $ 1.00
Common stock in treasury 394  
Common Stock [Member]    
Common stock, par value $ 0.05 $ 0.05
Common stock, shares issued 11,357 11,530
Common stock, shares outstanding 11,357 11,530
Common Class B [Member]    
Common stock, par value $ 0.05 $ 0.05
Common stock, shares issued 2,141 2,141
Common stock, shares outstanding 2,141 2,141
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CALCULATION OF EARNINGS PER SHARE
3 Months Ended
Aug. 29, 2015
Earnings Per Share [Abstract]  
CALCULATION OF EARNINGS PER SHARE

10.  CALCULATION OF EARNINGS PER SHARE

We have authorized 17,000,000 shares of common stock, and 3,000,000 shares of Class B common stock. The Class B common stock has 10 votes per share and has transferability restrictions; however, Class B common stock may be converted into common stock on a share-for-share basis at any time. With respect to dividends and distributions, shares of common stock and Class B common stock rank equally and have the same rights, except that Class B common stock cash dividends are limited to 90% of the amount of Class A common stock cash dividends.

In accordance with ASC 260-10, Earnings Per Share (“ASC 260”), our Class B common stock is considered a participating security requiring the use of the two-class method for the computation of basic and diluted earnings per share. The two-class computation method for each period reflects the cash dividends paid per share for each class of stock, plus the amount of allocated undistributed earnings per share computed using the participation percentage which reflects the dividend rights of each class of stock. Basic and diluted earnings per share were computed using the two-class method as prescribed in ASC 260. The shares of Class B common stock are considered to be participating convertible securities since the shares of Class B common stock are convertible on a share-for-share basis into shares of common stock and may participate in dividends with common stock according to a predetermined formula which is 90% of the amount of Class A common stock cash dividends.

The earnings per share (“EPS”) presented in our unaudited consolidated statements of comprehensive income (loss) are based on the following amounts (in thousands, except per share amounts):

   For the Three Months Ended
   August 29, 2015  August 30, 2014
   Basic  Diluted  Basic  Diluted
Numerator for Basic and Diluted EPS:            
Net loss  $(1,399)  $(1,399)  $(83)  $(83)
Less dividends:                    
Common stock   690    690    710    710 
Class B common stock   116    116    118    118 
Undistributed losses  $(2,205)  $(2,205)  $(911)  $(911)
Common stock undistributed losses  $(1,888)  $(1,888)  $(781)  $(781)
Class B common stock undistributed losses   (317)   (317)   (130)   (130)
Total undistributed losses  $(2,205)  $(2,205)  $(911)  $(911)
Denominator for basic and diluted EPS:                    
Common stock weighted average shares   11,486    11,486    11,822    11,822 
Class B common stock weighted average shares, and shares under if-converted method for diluted EPS   2,141    2,141    2,182    2,182 
Effect of dilutive securities                    
Dilutive stock options        —           —   
Denominator for diluted EPS adjusted for weighted average shares and assumed conversions        13,627         14,004 
Net loss per share:                    
Common stock  $(0.10)  $(0.10)  $(0.01)  $(0.01)
Class B common stock  $(0.10)  $(0.10)  $(0.01)  $(0.01)

Note: Common stock options that were anti-dilutive and not included in diluted earnings per common share for the first quarter of fiscal 2016 and fiscal 2015 were 887,564 and 674,564, respectively.

 

XML 44 R1.htm IDEA: XBRL DOCUMENT v3.3.0.814
Document and Entity Information - shares
3 Months Ended
Aug. 29, 2015
Oct. 05, 2015
Document Information [Line Items]    
Entity Central Index Key 0000355948  
Entity Registrant Name RICHARDSON ELECTRONICS LTD/DE  
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Aug. 29, 2015  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q1  
Trading Symbol RELL  
Current Fiscal Year End Date --05-31  
Entity Well-known Seasoned Issuer No  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Filer Category Accelerated Filer  
Common Stock [Member]    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   10,725,453
Common Class B [Member]    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   2,140,644
XML 45 R18.htm IDEA: XBRL DOCUMENT v3.3.0.814
SEGMENT REPORTING
3 Months Ended
Aug. 29, 2015
Segment Reporting [Abstract]  
SEGMENT REPORTING

11.  SEGMENT REPORTING

During the first quarter of fiscal 2015, we created a new strategic business unit called Healthcare. As hospitals remain under pressure to reduce costs while serving a much larger customer base, there is a growing demand for independent sources of high value replacement parts for diagnostic imaging. Having access to parts that are tested and in stock enables hospitals to terminate expensive service contracts with OEM and instead use third party service providers or in-house technicians. With our global infrastructure, technical sales team, and experience servicing the healthcare market, we are well positioned to take advantage of this market opportunity. Over time, our plan is to expand our position from being the leader in power grid tubes to a key player in the high growth, high profile healthcare industry.

In accordance with ASC 280-10, Segment Reporting, we have identified three reportable segments: PMT, Canvys, and Healthcare.

Power and Microwave Technologies Group ("PMT"), launched in July 2015, combines EDG’s core engineered solutions, power grid and microwave tube business with new RF and power technologies. As a manufacturer and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair—all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in alternative energy, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar, and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.

Canvys provides customized display solutions serving the corporate enterprise, financial, industrial, and OEM markets.

Healthcare manufactures, distributes and services high value replacement parts for the healthcare market including hospitals, medical centers, independent service organizations, and multi-vendor service providers. Products include power grid tubes, hydrogen thyratrons, klystrons, magnetrons; Image Systems medical displays and workstations for picture archiving and communication systems (“PACS”); visual solutions for operating rooms/surgical environments; digital radiography solutions including replacement flat panel detectors and upgrades; and additional replacement components currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings, and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.

 

The CEO evaluates performance and allocates resources primarily based on the gross profit of each segment.

Operating results by segment are summarized in the following table (in thousands):

   Three Months Ended
   August 29, 2015  August 30, 2014
PMT      
Net Sales  $27,195   $27,438 
Gross Profit   8,138    8,686 
Canvys          
Net Sales  $6,681   $5,968 
Gross Profit   1,709    1,656 
Healthcare          
Net Sales  $3,195   $1,293 
Gross Profit   1,415    316 

Geographic net sales information is primarily grouped by customer destination into five areas: North America; Asia/Pacific; Europe; Latin America; and Other.

Net sales and gross profit by geographic region are summarized in the following table (in thousands):

   Three Months Ended
   August 29, 2015  August 30, 2014
Net Sales      
North America  $17,792   $14,699 
Asia/Pacific   6,132    6,505 
Europe   11,358    11,049 
Latin America   1,607    2,321 
Other (1)   182    125 
Total  $37,071   $34,699 
Gross Profit          
North America  $6,199   $5,183 
Asia/Pacific   1,956    2,119 
Europe   3,341    3,719 
Latin America   625    878 
Other (1)   (859)   (1,241)
Total  $11,262   $10,658 


(1)Other includes primarily net sales not allocated to a specific geographical region, unabsorbed value-add costs, and other unallocated expenses.

We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition. Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe, and Latin America. Estimates of credit losses are recorded in the financial statements based on monthly reviews of outstanding accounts.

XML 46 R4.htm IDEA: XBRL DOCUMENT v3.3.0.814
Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Aug. 29, 2015
Aug. 30, 2014
Net sales $ 37,071 $ 34,699
Cost of sales 25,809 24,041
Gross profit 11,262 10,658
Selling, general, and administrative expenses 12,267 11,182
(Gain) loss on disposal of assets (1) 9
Operating loss (1,004) (533)
Other (income) expense:    
Investment/interest income (191) (256)
Foreign exchange (gain) loss 182 (57)
Other, net 36 (2)
Total other income 27 (315)
Loss before income taxes (1,031) (218)
Income tax provision (benefit) 368 (135)
Net loss (1,399) (83)
Foreign currency translation loss, net of tax (503) (968)
Fair value adjustments on investments gain (loss) (60) 25
Comprehensive loss $ (1,962) $ (1,026)
Weighted average number of shares:    
Common shares - Diluted 13,627 14,004
Common Stock [Member]    
Other (income) expense:    
Loss per Common share - Basic: $ (.10) $ (0.01)
Loss per Common share - Diluted: $ (0.10) $ (0.01)
Weighted average number of shares:    
Common shares - Basic 11,486 11,822
Common shares - Diluted 11,486 11,822
Dividends per common share $ .060 $ 0.060
Common Class B [Member]    
Other (income) expense:    
Loss per Common share - Basic: (0.10) (0.01)
Loss per Common share - Diluted: $ (0.10) $ (0.01)
Weighted average number of shares:    
Common shares - Basic 2,141 2,182
Common shares - Diluted 2,141 2,182
Dividends per common share $ 0.054 $ 0.054
XML 47 R12.htm IDEA: XBRL DOCUMENT v3.3.0.814
GOODWILL AND INTANGIBLE ASSETS
3 Months Ended
Aug. 29, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS

5. GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying value of goodwill are as follows (in thousands):

   Goodwill
    
Balance at May 30, 2015  $—   
Premium Paid for IMES Acquisition   3,746 
Balance at August 29, 2015  $3,746 

 

Goodwill is initially recorded based on the premium paid for acquisitions and is subsequently tested for impairment, using the first day of our fourth quarter as the measurement date. We test goodwill for impairment annually and whenever events or circumstances indicates an impairment may have occurred, such as a significant adverse change in the business climate, loss of key personnel or a decision to sell or dispose of a reporting unit. The goodwill balance in its entirety relates to our Healthcare segment.

Intangible assets are initially recorded at their fair market values determined on quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized on a straight-line basis over their useful lives.

Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements, and technology acquired in connection with our acquisitions. Intangible assets subject to amortization as well as amortization expense are as follows (in thousands):

   Intangible Assets Subject  to
Amortization as of
   August 29, 2015  May 30, 2015
Gross Amounts:          
Trade Name  $729   $29 
Customer Relationship   5,450    948 
Non-compete Agreements   247    47 
Technology   400    —   
Total Gross Amounts  $6,826   $1,024 
Accumulated Amortization:          
Trade Name  $29   $29 
Customer Relationship   245    221 
Non-compete Agreements   24    31 
Technology   —      —   
Total Accumulated Amortization  $298   $281 
           
Net Intangibles  $6,528   $743 

  The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table (in thousands):

   Amortization
Expense
Fiscal Year      
 Remaining 2016   $567 
 2017    595 
 2018    593 
 2019    360 
 2020    350 
 Thereafter    4,063 
 Total amortization expense   $6,528 

XML 48 R11.htm IDEA: XBRL DOCUMENT v3.3.0.814
ACQUISITIONS
3 Months Ended
Aug. 29, 2015
Business Combinations [Abstract]  
ACQUISITIONS

4. ACQUISITION

On June 15, 2015, Richardson Electronics, Ltd (“the Company”), acquired certain assets of International Medical Equipment and Services, Inc. (“IMES”), for a purchase price of $12.2 million.

IMES, based in South Carolina, provides reliable, cost-saving solutions worldwide for major brands of CT and MRI equipment. This acquisition positions Richardson Healthcare to provide cost effective diagnostic imaging replacement parts and training to hospitals, diagnostic imaging centers, medical institutions, and independent service organizations. IMES offers an extensive selection of replacement parts, as well as an interactive training center, on-site test bays and experienced technicians who provide 24/7 customer support. Replacement parts are readily available and triple tested to provide peace of mind when uptime is critical. IMES core operations will remain in South Carolina. Richardson Healthcare plans to expand IMES’ replacement parts and training offerings geographically to leverage the Company’s global infrastructure.

The consideration paid by the Company to IMES at closing was $12.2 million in cash. The following table summarizes the preliminary fair values of the assets acquired at the date of the closing of the acquisition (in thousands):

Accounts receivable  $743 
Inventories   1,690 
Property, plant and equipment   230 
Goodwill   3,746 
Other intangibles   5,800 
Net assets acquired  $12,209 

Intangible assets include trade names with an estimated life of 3 years for $0.7 million, customer relationships with an estimated life of 20 years for $4.5 million, technology with an estimated life of 10 years for $0.4 million, and non-compete agreements with an estimated life of 5 years for $0.2 million.

The approximate fair values of the assets acquired related to the IMES acquisition are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of the assets acquired. Such changes could result in material variances between the Company’s future financial fair values recorded and expenses associated with these items.

In connection with the Agreement, the Company also entered into an Employment, Non-Disclosure, and Non-Compete Agreement (“Employment Agreement”) with Lee A. McIntyre III as the Company’s Executive Vice President, IMES. During the term of his employment, Mr. McIntyre will earn an annual base salary of $300,000. In addition to his base salary, he will be entitled to an annual bonus equal to 20% of the EBITDA of IMES provided that the EBITDA of the business is at least $2.0 million inclusive of the bonus payment. The annual bonus payment will terminate after five years.

XML 49 R23.htm IDEA: XBRL DOCUMENT v3.3.0.814
ACQUISITIONS (Tables)
3 Months Ended
Aug. 29, 2015
Business Combinations [Abstract]  
Fair value of assets acquired

The consideration paid by the Company to IMES at closing was $12.2 million in cash. The following table summarizes the preliminary fair values of the assets acquired at the date of the closing of the acquisition (in thousands):

Accounts receivable  $743 
Inventories   1,690 
Property, plant and equipment   230 
Goodwill   3,746 
Other intangibles   5,800 
Net assets acquired  $12,209 
XML 50 R19.htm IDEA: XBRL DOCUMENT v3.3.0.814
LITIGATION
3 Months Ended
Aug. 29, 2015
Commitments and Contingencies Disclosure [Abstract]  
LITIGATION

12.  LITIGATION

We are involved in several pending judicial proceedings concerning matters arising in the ordinary course of business. While the outcome of litigation is subject to uncertainties, based on information available at the time the financial statements were issued, we determined disclosure of contingencies relating to any of our pending judicial proceedings was not necessary because there is less than a reasonable possibility that a material loss will be incurred.

XML 51 R15.htm IDEA: XBRL DOCUMENT v3.3.0.814
LEASE OBLIGATIONS, OTHER COMMITMENTS, AND CONTINGENCIES
3 Months Ended
Aug. 29, 2015
Commitments and Contingencies Disclosure [Abstract]  
LEASE OBLIGATIONS, OTHER COMMITMENTS, AND CONTINGENCIES

8.  LEASE OBLIGATIONS, OTHER COMMITMENTS, AND CONTINGENCIES

We lease certain warehouse and office facilities and office equipment under non-cancelable operating leases. Rent expense during the first three months of fiscal 2016 was $0.5 million and $0.4 million during the first three months of fiscal 2015. Our future lease commitments for minimum rentals, including common area maintenance charges and property taxes during the next five years are as follows (in thousands):

Fiscal Year  Payments
Remaining 2016   $1,040 
2017    643 
2018    341 
2019    273 
2020    224 
Thereafter    264 

XML 52 R13.htm IDEA: XBRL DOCUMENT v3.3.0.814
INVESTMENTS
3 Months Ended
Aug. 29, 2015
Investments, Debt and Equity Securities [Abstract]  
INVESTMENTS

6.  INVESTMENTS

As of August 29, 2015, we had approximately $16.3 million invested in time deposits and certificates of deposit (“CD”). Of these, $6.3 million mature in less than twelve months and $10 million mature in more than twelve months. The fair value of these investments is equal to the face value of each time deposit and CD.

As of May 30, 2015, we had approximately $34.7 million invested in time deposits and CD’s. Of this, $23.7 million mature in less than twelve months and $10.9 million mature in more than twelve months. The fair value of these investments is equal to the face value of each time deposit and CD.

We also have investments in equity securities, all of which are classified as available-for-sale and are carried at their fair value based on quoted market prices. Our investments, which are included in non-current assets, had a carrying amount of $0.5 million at August 29, 2015, and $0.6 million at May 30, 2015. Proceeds from the sale of securities were $0.1 million during the first quarter of fiscal 2016 and less than $0.1 million during the first quarter of fiscal 2015. We reinvested proceeds from the sale of securities, and the cost of the equity securities sold was based on a specific identification method. Gross realized gains and losses on those sales were $0.1 million during the first quarter of fiscal 2016 and less than $0.1 million during the first quarter of fiscal 2015. Net unrealized holding gains of less than $0.1 million during the first quarter of fiscal 2016 and fiscal 2015, have been included in accumulated other comprehensive loss.

XML 53 R14.htm IDEA: XBRL DOCUMENT v3.3.0.814
WARRANTIES
3 Months Ended
Aug. 29, 2015
Guarantees [Abstract]  
WARRANTIES

7.  WARRANTIES

We offer warranties for the limited number of specific products we manufacture. We also provide extended warranties for some products we sell that lengthen the period of coverage specified in the manufacturer’s original warranty. Our warranty terms generally range from one to three years.

We estimate the cost to perform under the warranty obligation and recognize this estimated cost at the time of the related product sale. We record expense related to our warranty obligations as cost of sales in our consolidated statements of comprehensive income (loss). Each quarter, we assess actual warranty costs incurred on a product-by-product basis and compare the warranty costs to our estimated warranty obligation. With respect to new products, estimates are based generally on knowledge of the products, the extended warranty period, and warranty experience.

Warranty reserves are established for costs that are expected to be incurred after the sale and delivery of products under warranty. Warranty reserves are included in accrued liabilities on our consolidated balance sheets. The warranty reserves are determined based on known product failures, historical experience, and other available evidence. Warranty reserves were approximately $0.2 million as of August 29, 2015, and as of May 30, 2015.

XML 54 R16.htm IDEA: XBRL DOCUMENT v3.3.0.814
INCOME TAXES
3 Months Ended
Aug. 29, 2015
Income Tax Disclosure [Abstract]  
INCOME TAXES

9. INCOME TAXES

The effective income tax rate during the first three months of fiscal 2016 was a tax provision of (35.7%), as compared to a tax provision of 61.8% during the first three months of fiscal 2015. The difference in rate during the first three months of fiscal 2016, as compared to the first three months of fiscal 2015, reflects the impact of changes in our geographical distribution of income (loss), the recording of additional valuation allowance against all of our U.S. state and federal net deferred tax assets, and our positions with respect to ASC 740-30, Income Taxes - Other Considerations or Special Areas (“ASC 740-30”). The (35.7%) effective income tax rate differs from the federal statutory rate of 34.0% as a result of our geographical distribution of income (loss), the increase in uncertain tax positions as a result of an income tax audit in Germany, and the recording of a valuation allowance against all of our U.S. state and federal net deferred tax assets.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal 2011 are closed for examination under the statute of limitation for U.S. federal, U.S. state and local, or non-U.S. tax jurisdictions. We are also currently under examination in Germany (fiscal 2009 through 2011) and Thailand (fiscal 2008 through 2011). Our primary foreign tax jurisdictions are Germany and the Netherlands. We have tax years open in Germany beginning in fiscal 2008 and the Netherlands beginning in fiscal 2010.

We have historically determined that certain undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. Accordingly, we have provided a deferred tax liability totaling $5.0 million as of August 29, 2015, on foreign earnings of $37.6 million. In addition, as of August 29, 2015, approximately $20.9 million of cumulative positive earnings of some of our foreign subsidiaries are still considered permanently reinvested pursuant to ASC 740-30. Due to various tax attributes that are continuously changing, it is not practicable to determine what, if any, tax liability might exist if such earnings were to be repatriated.

As of August 29, 2015, our worldwide liability for uncertain tax positions related to continuing operations is $0.2 million, excluding interest and penalties, as compared to no liabilities for uncertain tax positions as of May 30, 2015. We record penalties and interest relating to uncertain tax positions in the income tax expense line item within the unaudited consolidated statements of income and comprehensive income. It is not expected that there will be a change in the unrecognized tax benefits within the next 12 months.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant component of objective evidence evaluated was the cumulative income or loss incurred in each jurisdiction over the three-year period ended August 29, 2015. Such objective evidence limits the ability to consider other subjective evidence such as future income projections. We considered other positive evidence in determining the need for a valuation allowance in the U.S. including the repatriation of foreign earnings which we do not consider permanently reinvested in certain of our foreign subsidiaries. The weight of this positive evidence is not sufficient to outweigh other negative evidence in evaluating our need for a valuation allowance in the U.S. jurisdiction.

On the basis of this evaluation, as of August 29, 2015, a valuation allowance of $5.5 million has been established to record only the portion of the deferred tax asset that will more likely than not be realized. The valuation allowance relates to deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred as well as valuation allowance for all domestic federal and state net deferred tax assets considering the cumulative losses for the U.S. jurisdiction. Our valuation allowance increased $0.3 million for additional domestic federal and state net deferred tax assets generated during the first quarter of fiscal 2016 due to additional losses in the U.S. jurisdiction. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

XML 55 R34.htm IDEA: XBRL DOCUMENT v3.3.0.814
GOODWILL AND INTANGIBLE ASSETS (Details 1)
$ in Thousands
Aug. 29, 2015
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
Remaining 2016 $ 567
2017 595
2018 593
2019 360
2020 350
Thereafter 4,063
Total amortization expense $ 6,528
XML 56 R21.htm IDEA: XBRL DOCUMENT v3.3.0.814
RELATED PARTY TRANSACTION
3 Months Ended
Aug. 29, 2015
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTION

14.  Related Party Transaction

On June 15, 2015, the Company entered into a lease agreement for the IMES facility with LDL, LLC. The Executive Vice President of IMES, Lee A. McIntyre III, has an ownership interest in LDL, LLC.  The lease agreement provides for monthly payments over five years with total future minimum lease payments of $0.7 million.  Rental expense related to this lease amounted to less than $0.1 million for the three months ended August 29, 2015.  The Company shall be entitled to extend the term of the lease for a period of an additional five years by notifying the landlord in writing of its intention to do so within six months of the expiration of the initial term.

XML 57 R26.htm IDEA: XBRL DOCUMENT v3.3.0.814
CALCULATION OF EARNINGS PER SHARE (Tables)
3 Months Ended
Aug. 29, 2015
Earnings Per Share [Abstract]  
Calculation of earnings per share

The earnings per share (“EPS”) presented in our unaudited consolidated statements of comprehensive income (loss) are based on the following amounts (in thousands, except per share amounts):

   For the Three Months Ended
   August 29, 2015  August 30, 2014
   Basic  Diluted  Basic  Diluted
Numerator for Basic and Diluted EPS:            
Net loss  $(1,399)  $(1,399)  $(83)  $(83)
Less dividends:                    
Common stock   690    690    710    710 
Class B common stock   116    116    118    118 
Undistributed losses  $(2,205)  $(2,205)  $(911)  $(911)
Common stock undistributed losses  $(1,888)  $(1,888)  $(781)  $(781)
Class B common stock undistributed losses   (317)   (317)   (130)   (130)
Total undistributed losses  $(2,205)  $(2,205)  $(911)  $(911)
Denominator for basic and diluted EPS:                    
Common stock weighted average shares   11,486    11,486    11,822    11,822 
Class B common stock weighted average shares, and shares under if-converted method for diluted EPS   2,141    2,141    2,182    2,182 
Effect of dilutive securities                    
Dilutive stock options        —           —   
Denominator for diluted EPS adjusted for weighted average shares and assumed conversions        13,627         14,004 
Net loss per share:                    
Common stock  $(0.10)  $(0.10)  $(0.01)  $(0.01)
Class B common stock  $(0.10)  $(0.10)  $(0.01)  $(0.01)
XML 58 R41.htm IDEA: XBRL DOCUMENT v3.3.0.814
CALCULATION OF EARNINGS PER SHARE (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended
Aug. 29, 2015
Aug. 30, 2014
Numerator for Basic and Diluted Earnings Per Share [Abstract]    
Net loss $ (1,399) $ (83)
Less dividends:    
Common ($0.06 per share) 690 710
Class B ($0.054 per share) 116 118
Undistributed losses, basic (2,205) (911)
Undistributed losses, diluted $ (2,205) $ (911)
Denominator for Basic and Diluted Earnings Per Share [Abstract]    
Weighted Average Number of Shares Outstanding, Diluted 13,627 14,004
Common Stock [Member]    
Less dividends:    
Undistributed losses, basic $ (1,888) $ (781)
Undistributed losses, diluted $ (1,888) $ (781)
Denominator for Basic and Diluted Earnings Per Share [Abstract]    
Weighted Average Number of Shares Outstanding, Basic 11,486 11,822
Weighted Average Number of Shares Outstanding, Diluted 11,486 11,822
Earnings Per Share, Basic and Diluted [Abstract]    
Earnings Per Share, Basic $ (.10) $ (0.01)
Earnings Per Share, Diluted $ (0.10) $ (0.01)
Common Class B [Member]    
Less dividends:    
Undistributed losses, basic $ (317) $ (130)
Undistributed losses, diluted $ (317) $ (130)
Denominator for Basic and Diluted Earnings Per Share [Abstract]    
Weighted Average Number of Shares Outstanding, Basic 2,141 2,182
Weighted Average Number of Shares Outstanding, Diluted 2,141 2,182
Earnings Per Share, Basic and Diluted [Abstract]    
Earnings Per Share, Basic $ (0.10) $ (0.01)
Earnings Per Share, Diluted $ (0.10) $ (0.01)
XML 59 R5.htm IDEA: XBRL DOCUMENT v3.3.0.814
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Aug. 29, 2015
Aug. 30, 2014
Operating activities:    
Net loss $ (1,399) $ (83)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:    
Depreciation and amortization 485 366
Gain on sale of investments (11) $ (3)
Gain on disposal of assets (1)
Share-based compensation expense 90 $ 120
Deferred income taxes 1 (79)
Change in assets and liabilities, net of effect of acquired business:    
Accounts receivable (2,525) (372)
Income tax receivable 548 2,308
Inventories, net (593) (2,110)
Prepaid expenses and other assets (581) 135
Accounts payable (1,521) 101
Accrued liabilities (804) $ (662)
Non-current deferred income tax liabilities 228
Long term liablities - accrued pension (465)  
Other 35 $ (49)
Net cash used in operating activities (6,513) $ (328)
Investing activities:    
Cash consideration paid for acquired business (12,209)
Capital expenditures (984) $ (834)
Proceeds from maturity of investments $ 18,350 30,482
Purchases of investments (32,362)
Proceeds from sales of available-for-sale securities $ 100 37
Purchases of available-for-sale securities (100) (37)
Other 60 (28)
Net cash provided by (used in) investing activities 5,217 (2,742)
Financing activities:    
Repurchase of common stock $ (3,308) (488)
Proceeds from issuance of common stock 158
Cash dividends paid $ (806) (828)
Other (4) 1
Net cash used in financing activities (4,118) (1,157)
Effect of exchange rate changes on cash and cash equivalents (695) (441)
Decrease in cash and cash equivalents (6,109) (4,668)
Cash and cash equivalents at beginning of period 74,535 102,752
Cash and cash equivalents at end of period $ 68,426 $ 98,084
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
3 Months Ended
Aug. 29, 2015
Accounting Policies [Abstract]  
CRITICAL ACCOUNTING POLICIES AND ESTIMATES

3.  CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Inventories: Our consolidated inventories are stated at the lower of cost or market, generally using a weighted-average cost method. Our inventories include approximately $35.8 million of finished goods and $5.4 million of raw materials and work-in-progress as of August 29, 2015, as compared to approximately $33.7 million of finished goods and $5.1 million of raw materials and work-in-progress as of May 30, 2015.

At this time, we do not anticipate any material risks or uncertainties related to possible future inventory write-downs. Provisions for obsolete or slow moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets, and assumptions about future demand and market conditions. If future demand, changes in the industry, or market conditions differ from management's estimates, additional provisions may be necessary. The inventory reserve as of August 29, 2015, was $3.1 million compared to $3.0 million as of May 30, 2015.

Revenue Recognition: Our product sales are recognized as revenue upon shipment, when title passes to the customer, when delivery has occurred or services have been rendered, and when collectability is reasonably assured. We also record estimated discounts and returns based on our historical experience. Our products are often manufactured to meet the specific design needs of our customers’ applications. Our engineers work closely with customers to ensure that our products will meet their needs. Our customers are under no obligation to compensate us for designing the products we sell.

Loss Contingencies: We accrue a liability for loss contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible losses can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. If we determine that there is at least a reasonable possibility that a loss may have been incurred, we will include a disclosure describing the contingency.

Intangible Assets: Intangible assets are initially recorded at their fair market values determined on quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized on a straight-line basis over their useful lives.

Income Taxes: We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and determine the need for a valuation allowance based on a number of factors, including both positive and negative evidence. These factors include historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences, and the implementation of tax planning strategies. In circumstances where we, or any of our affiliates, have incurred three years of cumulative losses which constitute significant negative evidence, positive evidence of equal or greater significance is needed to overcome the negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards.

XML 61 R27.htm IDEA: XBRL DOCUMENT v3.3.0.814
SEGMENT REPORTING (Tables)
3 Months Ended
Aug. 29, 2015
Segment Reporting [Abstract]  
Schedule of operating results by segment

Operating results by segment are summarized in the following table (in thousands):

   Three Months Ended
   August 29, 2015  August 30, 2014
PMT      
Net Sales  $27,195   $27,438 
Gross Profit   8,138    8,686 
Canvys          
Net Sales  $6,681   $5,968 
Gross Profit   1,709    1,656 
Healthcare          
Net Sales  $3,195   $1,293 
Gross Profit   1,415    316 
Schedule of net sales and gross profit by Geographic Region

Net sales and gross profit by geographic region are summarized in the following table (in thousands):

   Three Months Ended
   August 29, 2015  August 30, 2014
Net Sales      
North America  $17,792   $14,699 
Asia/Pacific   6,132    6,505 
Europe   11,358    11,049 
Latin America   1,607    2,321 
Other (1)   182    125 
Total  $37,071   $34,699 
Gross Profit          
North America  $6,199   $5,183 
Asia/Pacific   1,956    2,119 
Europe   3,341    3,719 
Latin America   625    878 
Other (1)   (859)   (1,241)
Total  $11,262   $10,658 
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LEASE OBLIGATIONS, OTHER COMMITMENTS, AND CONTINGENCIES (Details)
$ in Thousands
Aug. 29, 2015
USD ($)
Future Lease Obligations [Abstract]  
Remaining 2016 $ 1,040
2017 643
2018 341
2019 273
2020 224
Thereafter $ 264
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FAIR VALUE MEASUREMENTS
3 Months Ended
Aug. 29, 2015
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

13.  FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists; therefore requiring an entity to develop its own assumptions.

As of August 29, 2015, we held investments that are required to be measured at fair value on a recurring basis. Our investments consist of time deposits and CDs, where face value is equal to fair value, and equity securities of publicly traded companies for which market prices are readily available.

Investments measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of August 29, 2015, and May 30, 2015, were as follows (in thousands):

   Level 1
August 29, 2015     
Time deposits/CDs  $16,315 
Equity securities   538 
Total  $16,853 
May 30, 2015     
Time deposits/CDs  $34,665 
Equity securities   576 
Total  $35,241