SIGNIFICANT ACCOUNTING POLICIES AND DISCLOSURES (Policies)

12 Months Ended

Jun. 02, 2018

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management continuously evaluates its critical accounting policies and estimates, including the allowance for doubtful accounts, revenue recognition, inventory obsolescence, goodwill and other intangible assets, loss contingencies and income taxes. Management bases the estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, however, actual results could differ from those estimates.

Fair Values of Financial Instruments

Fair Values of Financial Instruments: The fair values of financial instruments are determined based on quoted market prices and market interest rates as of the end of the reporting period. Our financial instruments include investments, accounts receivable, accounts payable and accrued liabilities. The fair values of these financial instruments approximate carrying values at June 2, 2018 and May 27, 2017. 

Cash and Cash Equivalents

Cash and Cash Equivalents: We consider short-term, highly liquid investments that are readily convertible to known amounts of cash, and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates, and that have a maturity of three months or less, when purchased, to be cash equivalents. The carrying amounts reported in the balance sheet for cash and cash equivalents approximate the fair market value of these assets. 

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts: Our allowance for doubtful accounts includes estimated losses that result from uncollectible receivables. The estimates are influenced by the following: continuing credit evaluation of customers’ financial conditions; aging of receivables, individually and in the aggregate; a large number of customers which are widely dispersed across geographic areas; and collectability and delinquency history by geographic area. Significant changes in one or more of these considerations may require adjustments affecting net income and net carrying value of accounts receivable. The allowance for doubtful accounts was approximately $0.3 million as of June 2, 2018 and $0.4 million as of May 27, 2017. 

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 loss 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. 

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. 

Foreign Currency Translation

Foreign Currency Translation: The functional currency is the local currency at all foreign locations, with the exception of Hong Kong, which the functional currency is the US dollar. Balance sheet items for our foreign entities, included in our consolidated balance sheets, are translated into U.S. dollars at end-of-period spot rates. Gains and losses resulting from translation of foreign subsidiary financial statements are credited or charged directly to accumulated other comprehensive income/(loss), a component of stockholders’ equity. Revenues and expenses are translated at the current rate on the date of the transaction. Gains and losses resulting from foreign currency transactions are included in income. Foreign exchange losses reflected in our consolidated statements of comprehensive income (loss) were a loss of $0.2 million during fiscal 2018, a loss of $0.6 million during fiscal 2017 and a loss of $0.2 million during fiscal 2016. 

Shipping and Handling Fees and Costs

Shipping and Handling Fees and Costs: Shipping and handling costs billed to customers are reported as revenue and the related costs are reported as a component of cost of sales. 

Inventories, net

Inventories, net: Our consolidated inventories are stated at the lower of cost and net realizable value, generally using a weighted-average cost method. Our net inventories include approximately $42.6 million of finished goods, $5.7 million of raw materials and $2.4 million of work-in-progress as of June 2, 2018 as compared to approximately $36.0 million of finished goods, $5.3 million of raw materials and $1.4 million of work-in-progress as of May 27, 2017. The inventory reserve as of June 2, 2018 was $4.0 million compared to $3.5 million as of May 27, 2017.

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.

We recorded provisions to our inventory reserves of $0.8 million, $0.5 million and $0.7 million during fiscal 2018, 2017 and 2016, respectively, which were included in cost of sales. The provisions were primarily for obsolete and slow moving parts. The parts were written down to estimated realizable value. 

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.

Investments

Investments: As of June 2, 2018, we had no investments. As of May 27, 2017, we have invested in time deposits and certificates of deposit (“CD”) in the amount of $8.2 million. Of this, $6.4 million mature in less than twelve months and $1.8 million mature in greater than twelve months.

We liquidated our investments in equity securities in fiscal 2018. Proceeds from the liquidation were $0.9 million with gross realized gains of $0.2 million for fiscal 2018. Prior to the liquidation of our investment in equity securities, our investments in equity securities were classified as available-for-sale and were carried at their fair value based on quoted market prices. Our investments, which were included in non-current assets, had a carrying amount of $0.6 million at May 27, 2017. Proceeds from the sale of securities were $0.3 million during fiscal 2017 and $0.3 million during fiscal 2016. Prior to liquidation of the equity securities, 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 less than $0.1 million during fiscal 2017 and 2016. Net unrealized holding gain (loss) during fiscal 2017 and 2016 were less than $0.1 million and have been included in accumulated comprehensive loss during its respective fiscal year. 

Discontinued Operations

Discontinued Operations: On September 12, 2017, the Company received an income tax refund from the State of Illinois of approximately $2.0 million, which included interest earned. The refund was a result of the conclusion of the Illinois amended return related to the sale of the RF, Wireless and Power Division (“RFPD”) in 2011. A net benefit of $1.5 million, which included $0.5 million of professional fee costs incurred to pursue the refund, was recognized in the second quarter of fiscal 2018 in discontinued operations.

During fiscal 2017, the Company disposed of, by sale, the PACS Display business in the Healthcare segment. Based on our assessment of the criteria that must be met to qualify a disposal transaction as a discontinued operation set forth in Accounting Standards Update 2014-08, the disposal of the PACS Display business does not qualify as a discontinued operation.

Goodwill and Other Intangible Assets

Goodwill and Intangible Assets: We test goodwill for impairment annually and whenever events or circumstances indicate 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.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04 (“ASU 2017-04”), Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates step 2 from the goodwill impairment test. As amended, the goodwill impairment test will consist of one-step comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity may still perform the optional qualitative assessment for a reporting unit to determine if it is more likely than not that goodwill is impaired. ASU 2017-04 will be effective for fiscal years and interim periods beginning after December 15, 2019. ASU 2017-04 is required to be applied prospectively and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company elected to early adopt ASU 2017-04 for our fiscal 2018 annual impairment test.

During the fourth quarter of each fiscal year, our goodwill balances are reviewed for impairment using the first day of our fourth quarter as the measurement date. If after reviewing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we test for impairment through the application of a fair value based test. We estimate the fair value of each of our reporting units based on projected future operating results, market approach and discounted cash flows.

After reviewing the totality of events or circumstances as provided in FASB ASC 350-20-35, we determined that it was more likely than not that the fair value for the IMES reporting unit was less than its carrying value. Accordingly, the quantitative goodwill impairment test as described in FASB ASC 350-20-35 was performed. We performed the quantitative impairment test using the income method, which is based on a discounted future cash flow approach that uses the significant assumptions of projected revenue, projected operational profit, terminal growth rates and the cost of capital. Refer to Note 7 “Goodwill and Intangible Assets” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

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 over their useful lives either on a straight-line basis or over their projected future cash flows and are tested for impairment when events or changes in circumstances occur that indicate possible impairment. Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements and technology acquired in connection with the acquisition. 

Property, Plant and Equipment

Property, Plant and Equipment: Property, plant and equipment are stated at cost, net of accumulated depreciation. Improvements and replacements are capitalized while expenditures for maintenance and repairs are charged to expense as incurred. Provisions for depreciation are computed using the straight-line method over the estimated useful life of the asset. Depreciation expense was approximately $2.6 million, $2.4 million and $2.0 million during fiscal 2018, 2017 and 2016, respectively. Property, plant and equipment consist of the following (in thousands):  

	June 2,  2018			May 27,  2017
Land and improvements	$	1,301		$	1,301
Buildings and improvements		21,673			19,885
Computer, communications equipment and software		9,652			8,551
Construction in progress		1,582			2,063
Machinery and other equipment		12,004			10,387
	$	46,212		$	42,187
Accumulated depreciation		(27,980	)		(26,374	)
Property, plant, and equipment, net	$	18,232		$	15,813

Construction in progress at June 2, 2018 includes $0.7 million related to our Healthcare growth initiatives. All projects are expected to be completed before the end of fiscal 2019.

Supplemental disclosure information of the estimated useful life of the assets:

Land improvements	10 years
Buildings and improvements	10 - 30 years
Computer and communications equipment	3 - 10 years
Machinery and other equipment	3 - 20 years

We review all property, plant and equipment for impairment when events or changes in circumstances occur which indicate a possible impairment may exist. We have concluded that our property, plant and equipment as of June 2, 2018 were not impaired. 

Accrued Liabilities

Accrued Liabilities: Accrued liabilities consist of the following (in thousands):

	June 2, 2018		May 27, 2017
Compensation and payroll taxes	$	3,449	$	3,250
Accrued severance(1)		454		706
Professional fees		527		535
Deferred revenue		2,395		1,460
Other accrued expenses		3,518		2,360
Accrued Liabilities	$	10,343	$	8,311

⁽¹⁾ In the second quarter of fiscal 2017, the Company executed a reduction in headcount to streamline operations and reduce costs and recorded $1.3 million of expense included in selling, general and administrative expenses for employee termination costs payable to terminated employees with employment and/or separation agreements with the Company. The changes in the severance accrual for fiscal 2018 included provisions and payments of $0.1 million and $0.3 million, respectively. The changes in the severance accrual for fiscal 2017 included provisions and payments of $1.3 million and $1.2 million, respectively.

Warranties

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.

Changes in the warranty reserve during fiscal 2018 and 2017 were as follows (in thousands):

	Warranty Reserve
Balance at May 30, 2016	$	210
Accruals for products sold		89
Utilization		(78	)
Recovery		(115	)
Balance at May 27, 2017	$	106
Accruals for products sold		65
Utilization		(22	)
Balance at June 2, 2018	$	149

Other Non-Current Liabilities

Other Non-Current Liabilities: Other non-current liabilities of $0.9 million at June 2, 2018 and $0.7 million at May 27, 2017, primarily represent employee-benefits obligations in various non-US locations. 

Share-Based Compensation

Share-Based Compensation: We measure and recognize share-based compensation cost at fair value for all share-based payments, including stock options. We estimate fair value using the Black-Scholes option-pricing model, which requires assumptions such as expected volatility, risk-free interest rate, expected life and dividends. Compensation cost is recognized using a graded-vesting schedule over the applicable vesting period. Share-based compensation expense totaled approximately $0.5 million during fiscal 2018, $0.4 million during fiscal 2017 and $0.5 million during fiscal 2016.

Stock options granted generally vest over a period of five years and have contractual terms to exercise of 10 years. A summary of stock option activity is as follows (in thousands, except option prices and years):

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Options Outstanding at May 30, 2015		1,137		$	10.35
Granted		122			5.88
Exercised		(28	)		5.18
Forfeited		(105	)		10.98
Cancelled		(107	)		9.97
Options Outstanding at May 28, 2016		1,019		$	9.93
Granted		190			6.90
Exercised		(5	)		5.61
Forfeited		(43	)		8.39
Cancelled		(88	)		11.17
Options Outstanding at May 27, 2017		1,073		$	9.38
Granted		200			6.08
Exercised		(16	)		5.85
Forfeited		(11	)		8.05
Cancelled		(51	)		9.36
Options Outstanding at June 2, 2018		1,195		$	8.89		5.8	$	2,033
Options Vested at June 2, 2018		746		$	9.87		4.5	$	876

There were 16,000 stock options exercised during fiscal 2018, with cash received of $0.1 million. The total intrinsic value of options exercised totaled less than $0.1 million during fiscal 2018, fiscal 2017 and fiscal 2016. The weighted average fair value of stock option grants was $0.85 during fiscal 2018, $1.14 during fiscal 2017 and $1.21 during fiscal 2016. As of June 2, 2018, total unrecognized compensation costs related to unvested stock options was approximately $0.6 million, which is expected to be recognized over the remaining weighted average period of approximately three to four years. The total grant date fair value of stock options vested during fiscal 2018 was $0.4 million.

The fair value of stock options is estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Fiscal Year Ended
	June 2,  2018			May 27,  2017			May 28,  2016
Expected volatility		21.92	%		25.41	%		32.21	%
Risk-free interest rate		2.22	%		1.46	%		1.78	%
Expected lives (years)		6.31			6.50			6.50
Annual cash dividend	$	0.24		$	0.24		$	0.24

The expected volatility assumptions are based on historical experience commensurate with the expected term. The risk-free interest rate is based on the yield of a treasury note with a remaining term equal to the expected life of the stock option.

The expected stock option life assumption is based on the Securities and Exchange Commission’s (“SEC”) guidance in Staff Accounting Bulletin (“SAB”) No. 107 (“SAB No. 107”). For stock options granted during fiscal 2018, fiscal 2017 and fiscal 2016, we believe that our historical stock option experience does not provide a reasonable basis upon which to estimate expected term. We utilized the Safe Harbor option, or Simplified Method, to determine the expected term of these options in accordance with SAB No. 107 for options granted. We intend to continue to utilize the Simplified Method for future grants in accordance with SAB No. 110 until such time that we believe that our historical stock option experience will provide a reasonable basis to estimate an expected term.

The following table summarizes information about stock options outstanding at June 2, 2018 (in thousands, except option prices and years):

	Outstanding								Vested
Exercise Price Range	Shares		Weighted Average Exercise Price		Weighted Average Life		Aggregate Intrinsic Value		Shares		Weighted Average Exercise Price		Weighted Average Life		Aggregate Intrinsic Value
$5.03 to $6.47		383	$	5.76		6.4	$	1,508		190	$	5.63		4.0	$	772
$6.90 to $10.85		385	$	8.48		7.3	$	525		159	$	9.31		6.4	$	104
$11.14 to $13.76		427	$	12.05		4.1	$	—		397	$	12.12		4.0	$	—
Total		1,195	$	8.89		5.8	$	2,033		746	$	9.87		4.5	$	876

As of June 2, 2018, a summary of restricted stock award transactions was as follows (in thousands):

	Unvested Restricted Shares
Unvested at May 27, 2017		—
Granted		78
Unvested at June 2, 2018		78

Compensation effects arising from issuing stock awards have been charged against income and recorded as additional paid-in-capital in the consolidated statements of stockholders’ equity during fiscal years 2018, 2017 and 2016.

The Employees’ 2011 Long-Term Incentive Compensation Plan authorizes the issuance of up to 1,500,000 shares as incentive stock options, non-qualified stock options or stock awards. Under this plan, 524,000 shares are reserved for future issuance. The Plan authorizes the granting of stock options at the fair market value at the date of grant. Generally, these options become exercisable over five years and expire up to 10 years from the date of grant. 

Earnings per Share

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 consolidated statements of comprehensive income (loss) are based on the following (in thousands, except per share amounts):

	For the Fiscal Year Ended
	June 2, 2018						May 27, 2017						May 28, 2016
	Basic			Diluted			Basic			Diluted			Basic			Diluted
Numerator for Basic and Diluted EPS:
Income (loss) from continuing operations	$	2,326		$	2,326		$	(6,928	)	$	(6,928	)	$	(6,766	)	$	(6,766	)
Less dividends:
Common stock		2,586			2,586			2,567			2,567			2,615			2,615
Class B common stock		462			462			464			464			464			464
Undistributed losses	$	(722	)	$	(722	)	$	(9,959	)	$	(9,959	)	$	(9,845	)	$	(9,845	)
Common stock undistributed losses	$	(613	)	$	(613	)	$	(8,440	)	$	(8,440	)	$	(8,367	)	$	(8,367	)
Class B common stock undistributed losses		(109	)		(109	)		(1,519	)		(1,519	)		(1,478	)		(1,478	)
Total undistributed losses	$	(722	)	$	(722	)	$	(9,959	)	$	(9,959	)	$	(9,845	)	$	(9,845	)
Income from discontinued operations	$	1,496		$	1,496		$	—		$	—		$	—		$	—
Less dividends:
Common stock		2,586			2,586			2,567			2,567			2,615			2,615
Class B common stock		462			462			464			464			464			464
Undistributed losses	$	(1,552	)	$	(1,552	)	$	(3,031	)	$	(3,031	)	$	(3,079	)	$	(3,079	)
Common stock undistributed losses	$	(1,317	)	$	(1,318	)	$	(2,567	)	$	(2,567	)	$	(2,615	)	$	(2,615	)
Class B common stock undistributed losses		(235	)		(234	)		(464	)		(464	)		(464	)		(464	)
Total undistributed losses	$	(1,552	)	$	(1,552	)	$	(3,031	)	$	(3,031	)	$	(3,079	)	$	(3,079	)
Net income (loss)	$	3,822		$	3,822		$	(6,928	)	$	(6,928	)	$	(6,766	)	$	(6,766	)
Less dividends:
Common stock		2,586			2,586			2,567			2,567			2,615			2,615
Class B common stock		462			462			464			464			464			464
Undistributed income (losses)	$	774		$	774		$	(9,959	)	$	(9,959	)	$	(9,845	)	$	(9,845	)
Common stock undistributed income (losses)	$	657		$	657		$	(8,440	)	$	(8,440	)	$	(8,367	)	$	(8,367	)
Class B common stock undistributed income (losses)		117			117			(1,519	)		(1,519	)		(1,478	)		(1,478	)
Total undistributed income (losses)	$	774		$	774		$	(9,959	)	$	(9,959	)	$	(9,845	)	$	(9,845	)
Denominator for Basic and Diluted EPS:
Common stock weighted average shares		10,765			10,765			10,705			10,705			10,908			10,908
Class B common stock weighted average shares, and shares under if-converted method for diluted EPS		2,137			2,137			2,140			2,140			2,141			2,141
Effect of dilutive securities
Dilutive stock options					59						—						—
Denominator for diluted EPS adjusted for weighted average shares and assumed conversions					12,961						12,845						13,049
Income (loss) from continuing operations per share:
Common stock	$	0.18		$	0.18		$	(0.55	)	$	(0.55	)	$	(0.53	)	$	(0.53	)
Class B common stock	$	0.16		$	0.16		$	(0.49	)	$	(0.49	)	$	(0.47	)	$	(0.47	)
Income from discontinued operations per share:
Common stock	$	0.12		$	0.12		$	—		$	—		$	—		$	—
Class B common stock	$	0.11		$	0.11		$	—		$	—		$	—		$	—
Net income (loss) per share:
Common stock	$	0.30		$	0.30		$	(0.55	)	$	(0.55	)	$	(0.53	)	$	(0.53	)
Class B common stock	$	0.27		$	0.27		$	(0.49	)	$	(0.49	)	$	(0.47	)	$	(0.47	)

Note: Common stock options that were anti-dilutive and not included in diluted earnings per common share for fiscal 2017 and fiscal 2016 were 848 and 890 respectively.  

New Accounting Pronouncements

New Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers, which amends guidance for revenue recognition. ASU 2014-09 is principles based guidance that can be applied to all contracts with customers, enhancing comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The core principle of the guidance is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The guidance details the steps entities should apply to achieve the core principle. In August 2015, the FASB issued an amendment to defer the effective date for all entities by one year. For public entities, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016. Companies have the option of using either a full or modified retrospective approach in applying this standard. During fiscal 2016 and 2017, the FASB issued four additional updates which further clarify the guidance provided in ASU 2014-09. We have undertaken a detailed analysis of our various contracts with customers and revenue streams, including engaging a third party to assist management in evaluating the impact of this new standard on our consolidated financial statements and related disclosures. The Company’s management has elected to adopt the amendments in ASU 2014-09 on a modified retrospective basis; whereas any cumulative effect of adopting this guidance will be recognized as an adjustment to its opening balance of retained earnings. Prior periods will not be retrospectively adjusted. The Company does not expect the implementation of ASU 2014-09 and the related amendments to have a material impact on the timing, amount or characterization of revenue recognized by the Company. For most of our revenue, we will continue to recognize revenue when title to the goods transfers to the customer, as this is generally when control transfers to the customer. While we expect the impact of these new standards will be immaterial to our financial statements, upon adoption, we will include the expanded disclosures required by the new standards.

Pursuant to the Company’s adoption of the standard it anticipates expanding its disclosures in the consolidated financial statements for revenue recognition, assets and liabilities relating to contracts with customers, the nature of the Company’s performance obligations and the manner by which the Company determines and allocates transaction prices and variable consideration to its performance obligations and the significant judgments inherent in its revenue recognition policies.

In July 2015, the FASB issued ASU No. 2015-11 (“ASU 2015-11”), Simplifying the Measurement of Inventory. ASU 2015-11 requires inventory within the scope of the ASU (e.g., first-in, first-out (“FIFO”) or average cost) to be measured using the lower of cost and net realizable value. Inventory excluded from the scope of the ASU (i.e., last-in, first-out (“LIFO”) or the retail inventory method) will continue to be measured at the lower of cost or market. The ASU also amends some of the other guidance in Topic 330, “Inventory,” to more clearly articulate the requirements for the measurement and disclosure of inventory. However, those amendments are not intended to result in any changes to current practice. ASU 2015-11 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2015-11 in fiscal 2018 and there was no material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02 (“ASU 2016-02”), Leases. ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the potential impact of the adoption of ASU 2016-02 on the Company’s consolidated financial statements. Upon adoption, the Company expects that the amounts recognized for the ROU asset and lease liability in the balance sheets may be material.

In March 2016, the FASB issued ASU No. 2016-09 (“ASU 2016-09”), Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, a new accounting standard update intended to simplify several aspects of the accounting for share-based payment transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Specifically, the ASU 2016-09 requires that excess tax benefits and tax deficiencies (the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes) be recognized as income tax expense or benefit in the consolidated statements of comprehensive income (loss), introducing a new element of volatility to the provision for income taxes. This update is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company adopted ASU 2016-09 on May 28, 2017. Effective with the adoption of the ASU all share-based awards continue to be accounted for as equity awards, excess tax benefits recognized on stock-based compensation expense are reflected in the consolidated statements of comprehensive income (loss) as a component of the provision for income taxes on a prospective basis, excess tax benefits recognized on stock-based compensation expense are classified as an operating activity in the consolidated statements of cash flows on a prospective basis and the Company has elected to continue to estimate expected forfeitures over the course of a vesting period.  The adoption of ASU 2016-09 had no impact on the retained earnings, other components of equity or net assets as of the beginning of the period of adoption.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. For public business entities, ASU 2016-13 is effective for annual and interim reporting periods beginning after December 15, 2019, and the guidance is to be applied using the modified-retrospective approach. Earlier adoption is permitted for annual and interim reporting periods beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15 (“ASU 2016-15”), Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance permits entities to reclassify tax effects stranded in Accumulated Other Comprehensive Income as a result of tax reform to retained earnings. This new guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted in annual and interim periods and can be applied retrospectively or in the period of adoption. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

In May 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, regarding the accounting implications of the recently issued Tax Cuts and Jobs Act (the “Act”). This standard is effective immediately. The update clarifies that in a company’s financial statements that include the reporting period in which the Act was enacted, the company must first reflect the income tax effects of the Act in which the accounting under GAAP is complete. These amounts would not be provisional amounts. The company would also report provisional amounts for those specific income tax effects for which the accounting under GAAP is incomplete but a reasonable estimate can be determined. The Company has recorded a provisional amount which it believes is a reasonable estimate of the effects of the Act on the Company’s financial statements as of June 2, 2018. Technical corrections or other forthcoming guidance could change how the Company interprets provisions of the Act, which may impact its effective tax rate and could affect its deferred tax assets, tax positions and/or its tax liabilities.