# Richardson Electronics, LTD.: Form 10-Q for the period ended Mar 2, 2024

- Company: [Richardson Electronics, LTD.](/companies/rell.md) (CIK 355948)
- Form: 10-Q
- Filed: 2024-04-11
- Accepted by EDGAR: Apr 11, 2024, 14:09 ET
- Period: 2024-03-02
- Accession: 0000950170-24-043629
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/355948/000095017024043629/rell-20240302.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/355948/000095017024043629/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-02.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-12-03 to 2024-03-02 | $52.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-05-28 to 2024-03-02 | $149.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-12-03 to 2024-03-02 | $36.9m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-05-28 to 2024-03-02 | $103.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-12-03 to 2024-03-02 | $15.4m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-05-28 to 2024-03-02 | $45.2m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-12-03 to 2024-03-02 | $14.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-05-28 to 2024-03-02 | $44.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-12-03 to 2024-03-02 | $1.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-05-28 to 2024-03-02 | $462.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-12-03 to 2024-03-02 | $229.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-05-28 to 2024-03-02 | $116.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-12-03 to 2024-03-02 | $750.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-05-28 to 2024-03-02 | $180.0k | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2023-12-03 to 2024-03-02 | 12,445,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-05-28 to 2024-03-02 | 12,480,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-12-03 to 2024-03-02 | −$2.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 9 months, 2023-05-28 to 2024-03-02 | −$716.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-12-03 to 2024-03-02 | $401.0k | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 9 months, 2023-05-28 to 2024-03-02 | $3.1m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2023-12-03 to 2024-03-02 | $844.0k | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 9 months, 2023-05-28 to 2024-03-02 | $2.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-03-02 | $18.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-02 | $163.4m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-02 | $193.6m | us-gaap:Assets |
| Current liabilities | at 2024-03-02 | $32.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-02 | $35.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-02 | $158.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,235 characters.

### 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; economic, labor and political conditions; global business disruption caused by the Russian invasion of Ukraine and related sanctions; currency exchange fluctuations; and the ability of the Company to manage its growth and the risk factors set forth in our Annual Report on Form 10-K filed with the SEC on July 31, 2023. 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 or any outside third party, 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 securities analyst or outside third party, 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 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**
- **Results of Operations –** an analysis and comparison of our consolidated results of operations for the three and nine-month periods ended March 2, 2024 and February 25, 2023, as reflected in our unaudited consolidated statements of comprehensive income.
- **Liquidity, Financial Position and Capital Resources –** a discussion of our primary sources and uses of cash for the nine-month periods ended March 2, 2024 and February 25, 2023, and a discussion of changes in our financial position.

### Business Overview

Richardson Electronics, Ltd. (the "Company", "we", "our") is a leading global manufacturer of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high-value replacement parts, tubes and service training for diagnostic imaging equipment; and customized display solutions. Nearly 55% of our products are manufactured at our facilities located in LaFox, Illinois, Marlborough, Massachusetts and Donaueschingen, Germany, or by one of our manufacturing partners throughout the world. All our partners manufacture to our strict specifications and per our supplier code of conduct. 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.

Some of the Company's products are manufactured in China and are imported into the United States. The Office of the United States Trade Representative ("USTR") instituted additional 10% to 25% tariffs on the importation of a number of products into the United States from China effective July 6, 2018, with additional products added August 23, 2018 and September 24, 2018. These additional tariffs are a response to what the USTR considers to be certain unfair trade practices by China. A number of the Company's products manufactured in China are now subject to these additional duties of 25% when imported into the United States.

Management continues to work with suppliers and customers to mitigate the impact of the tariffs in our markets. However, if the Company is unable to successfully pass through the additional cost of these tariffs, or if the higher prices reduce demand for the Company's products, it will have a negative effect on the Company's sales and gross margins.

The Company reports its financial performance based on the operating and reportable segments defined as follows:

Power and Microwave Technologies ("PMT") combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies. As a designer, manufacturer, technology partner and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities on a global basis. 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 5G, 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.

Green Energy Solutions ("GES") combines our key technology partners and engineered solutions capabilities to design and manufacture innovative products for the fast-growing energy storage market and power management applications. As a designer, manufacturer, technology partner and authorized distributor, GES’s strategy is to provide specialized technical expertise and engineered solutions using our core design engineering and manufacturing capabilities on a global basis. 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. GES’s focus is on products for numerous green energy applications such as wind, solar, hydrogen and Electric Vehicles, and other power management applications that support green solutions such as synthetic diamond manufacturing.

Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets. Our engineers design, manufacture, source and support a full spectrum of solutions to match the needs of our customers. We offer long-term availability and proven custom display solutions that include touch screens, protective panels, custom enclosures, All-In-One computers, specialized cabinet finishes and application specific software packages and certification services. Our volume commitments are lower than the large display manufacturers, making us the ideal choice for companies with very specific design requirements. We partner with both private label manufacturing companies and leading branded hardware vendors to offer the highest quality display and touch solutions and customized computing platforms.

Healthcare manufactures, repairs, refurbishes and distributes high value replacement parts and equipment for the healthcare market including hospitals, medical centers, asset management companies, independent service organizations and multi-vendor service providers. Products include diagnostic imaging replacement parts for CT and MRI systems; replacement CT and MRI tubes; CT service training; MRI coils, cold heads and RF amplifiers; hydrogen thyratrons, klystrons, magnetrons; flat panel detector upgrades; pre-owned CT systems; and additional replacement solutions 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 while lowering the cost of healthcare delivery.

Refer to Note 9, *Segment Reporting*, to our unaudited consolidated financial statements for additional information on the operating and reportable segments.

We currently operate within the following major geographic regions: North America, Asia/Pacific, Europe and Latin America.

### RESULTS OF OPERATIONS

### Financial Summary – Three Months Ended March 2, 2024

- The third quarter of fiscal 2024 and fiscal 2023 both contained 13 weeks.
- Net sales during the third quarter of fiscal 2024 were $52.4 million, a decrease of 25.6%, compared to net sales of $70.4 million during the third quarter of fiscal 2023.
- Gross margin decreased to 29.5% during the third quarter of fiscal 2024 compared to 31.8% during the third quarter of fiscal 2023.
- Selling, general and administrative expenses were $14.4 million or 27.6% of net sales during the third quarter of fiscal 2024 compared to $14.8 million or 21.0% of net sales during the third quarter of fiscal 2023.
- Operating income during the third quarter of fiscal 2024 was $1.0 million compared to operating income of $7.6 million during the third quarter of fiscal 2023.
- Net income during the third quarter of fiscal 2024 was $0.8 million compared to net income of $6.3 million during the third quarter of fiscal 2023.

### Financial Summary – Nine Months Ended March 2, 2024

- The first nine months of fiscal 2024 contained 40 weeks and the first nine months of fiscal 2023 contained 39 weeks.
- Net sales during the first nine months of fiscal 2024 were $149.1 million, a decrease of 26.9%, compared to net sales of $203.8 million during the first nine months of fiscal 2023.
- Gross margin decreased to 30.3% during the first nine months of fiscal 2024 compared to 33.0% during the first nine months of fiscal 2023.
- Selling, general and administrative expenses were $44.7 million or 30.0% of net sales during the first nine months of fiscal 2024 compared to $43.7 million or 21.4% of net sales during the first nine months of fiscal 2023.
- Operating income during the first nine months of fiscal 2024 was $0.5 million compared to operating income of $23.6 million during the first nine months of fiscal 2023.
- Net income during the first nine months of fiscal 2024 was $0.2 million compared to net income of $18.2 million during the first nine months of fiscal 2023.

### Net Sales and Gross Profit Analysis

Net sales by segment and percent change during the third quarter and first nine months of fiscal 2024 and fiscal 2023 were as follows (*in thousands):*

| Net Sales | Three Months Ended March 2, 2024 | February 25, 2023 | FY24 vs. FY23 % Change |
| --- | ---: | ---: | ---: |
| PMT | $31,163 | $46,822 | -33.4% |
| GES | 11,531 | 11,471 | 0.5% |
| Canvys | 6,590 | 9,685 | -32.0% |
| Healthcare | 3,091 | 2,386 | 29.5% |
| Total | $52,375 | $70,364 | -25.6% |

|  | Nine Months Ended March 2, 2024 | February 25, 2023 | FY24 vs. FY23 % Change |
| --- | ---: | ---: | ---: |
| PMT | $98,199 | $132,761 | -26.0% |
| GES | 18,534 | 32,275 | -42.6% |
| Canvys | 23,770 | 30,177 | -21.2% |
| Healthcare | 8,583 | 8,613 | -0.3% |
| Total | $149,086 | $203,826 | -26.9% |

19

During the third quarter of fiscal 2024, consolidated net sales decreased 25.6% compared to the third quarter of fiscal 2023. Sales for PMT decreased 33.4 %, sales for GES increased 0.5%, sales for Canvys decreased 32.0% and sales for Healthcare increased 29.5%. The decrease in PMT was mainly due to a cyclical downturn in the semi-wafer fabrication industry. The increase in GES was mainly due to increased shipments of battery modules for wind turbine products. The decrease in Canvys was primarily due to customer pushouts in the North American market. The increase in Healthcare was primarily due to increases in parts and CT tube sales, partially offset by a decrease in equipment sales.

During the first nine months of fiscal 2024, consolidated net sales decreased 26.9% compared to the first nine months of fiscal 2023. Sales for PMT decreased 26.0%, sales for GES decreased 42.6%, sales for Canvys decreased 21.2% and sales for Healthcare decreased 0.3%. The decrease in sales for PMT was mainly due to a cyclical downturn in the semi-wafer fabrication industry. The decrease in sales for GES reflected the project-based nature of this segment and was mainly due to lower shipments of battery modules for wind turbine products in the first half of the year and the completion of the EV locomotive prototype build in fiscal 2023. The decrease in sales for Canvys was primarily due to lower sales in the North American market. The decrease in sales for Healthcare was primarily due to decreases in equipment sales, partially offset by an increase in CT tube sales.

Gross profit by segment and percent of net sales for the third quarter and first nine months of fiscal 2024 and fiscal 2023 were as follows (*in thousands):*

| Gross Profit | Three Months Ended March 2, 2024 | % of Net Sales | February 25, 2023 | % of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| PMT | $8,815 | 28.3% | $15,404 | 32.9% |
| GES | 3,070 | 26.6% | 2,948 | 25.7% |
| Canvys | 2,265 | 34.4% | 3,103 | 32.0% |
| Healthcare | 1,286 | 41.6% | 950 | 39.8% |
| Total | $15,436 | 29.5% | $22,405 | 31.8% |

|  | Nine Months Ended March 2, 2024 | % of Net Sales | February 25, 2023 | % of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| PMT | $29,231 | 29.8% | $44,950 | 33.9% |
| GES | 5,411 | 29.2% | 10,132 | 31.4% |
| Canvys | 8,070 | 34.0% | 9,364 | 31.0% |
| Healthcare | 2,530 | 29.5% | 2,837 | 32.9% |
| Total | $45,242 | 30.3% | $67,283 | 33.0% |

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

Consolidated gross profit decreased to $15.4 million during the third quarter of fiscal 2024 compared to $22.4 million during the third quarter of fiscal 2023. Consolidated gross margin as a percentage of net sales decreased to 29.5% during the third quarter of fiscal 2024 when compared to 31.8% during the third quarter of fiscal 2023. This decrease was mainly due to the unfavorable product mix and manufacturing under absorption in PMT with a partial offset from the favorable product mix in GES, Canvys and Healthcare.

Consolidated gross profit decreased to $45.2 million during the first nine months of fiscal 2024 compared to $67.3 million during the first nine months of fiscal 2023. Consolidated gross margin as a percentage of net sales decreased to 30.3% during the first nine months of fiscal 2024 compared to 33.0% during the first nine months of fiscal 2023. This decrease was primarily due to unfavorable product mix and manufacturing under absorption in PMT, unfavorable product mix in GES, manufacturing under absorption and higher scrap in Healthcare with a partial offset from the favorable product mix in Canvys.

### Power and Microwave Technologies

PMT net sales decreased 33.4% to $31.2 million during the third quarter of fiscal 2024 from $46.8 million during the third quarter of fiscal 2023. The decrease was mainly due to lower sales of semi-wafer fabrication products which mainly reflected the cyclical slowdown in that market. Gross margin as a percentage of net sales decreased to 28.3% during the third quarter of fiscal 2024 as compared to 32.9% during the third quarter of fiscal 2023 due to unfavorable product mix and manufacturing under absorption.

PMT net sales decreased 26.0% to $98.2 million during the first nine months of fiscal 2024 from $132.8 million during the first nine months of fiscal 2023. The decrease was due to lower sales of semi-wafer fabrication products reflecting the cyclical slowdown in that market. Gross margin as a percentage of net sales decreased to 29.8% during the first nine months of fiscal 2024 as compared to 33.9% during the first nine months of fiscal 2023 due to unfavorable product mix and manufacturing under absorption.

### Green Energy Solutions

GES net sales increased 0.5% to $11.5 million during the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023. The increase reflected the project-based nature of this segment and was mainly due to increased shipments of battery modules for wind turbine products. Gross margin as a percentage of net sales increased to 26.6% during the third quarter of fiscal 2024 as compared to 25.7% during the third quarter of fiscal 2023 due to product mix.

GES net sales decreased 42.6% to $18.5 million during the first nine months of fiscal 2024 from $32.3 million during the first nine months of fiscal 2023. The decrease reflected the project-based nature of this segment and was mainly due to lower shipments of battery modules for wind turbine products in Q1 and Q2 and completion of our EV locomotive prototype build in fiscal 2023. Gross margin was 29.2% during the first nine months of fiscal 2024 as compared to 31.4% during the first nine months of fiscal 2023 due to product mix.

### Canvys

Canvys net sales decreased 32.0% to $6.6 million during the third quarter of fiscal 2024 from $9.7 million during the third quarter of fiscal 2023, due to customer pushouts in the North American market. Gross margin as a percentage of net sales increased to 34.4% during the third quarter of fiscal 2024 from 32.0% during the third quarter of fiscal 2023 primarily due to improved product mix.

Canvys net sales decreased 21.2% to $23.8 million during the first nine months of fiscal 2024 from $30.2 million during the first nine months of fiscal 2023, due to lower sales in the North American market. Gross margin as a percentage of net sales increased to 34.0% during the first nine months of fiscal 2024 from 31.0% during the first nine months of fiscal 2023 primarily due to improved product mix and lower freight costs.

### Healthcare

Healthcare net sales increased 29.5% to $3.1 million during the third quarter of fiscal 2024 from $2.4 million during the third quarter of fiscal 2023 primarily due to increases in parts and CT tube sales, partially offset by a decrease in equipment sales. Gross margin as a percentage of net sales increased to 41.6% during the third quarter of fiscal 2024 as compared to 39.8% during the third quarter of fiscal 2023 primarily due to product mix.

Healthcare net sales decreased 0.3% during the first nine months of fiscal 2024 from $8.6 million during the first nine months of fiscal 2023 primarily due to a decrease in equipment sales, partially offset by an increase in CT tube sales. Gross margin as a percentage of net sales decreased to 29.5% during the first nine months of fiscal 2024 as compared to 32.9% during the first nine months of fiscal 2023 primarily due to manufacturing under absorption and higher scrap expense.

### Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) decreased slightly to $14.4 million for the third quarter of fiscal 2024 when compared to $14.8 million for the year ago quarter. The decrease from the third quarter of fiscal 2023 reflected lower incentives due to financial performance partially offset by higher R&D expenses. Expressed as a percentage of net sales, SG&A for the third quarter of fiscal 2024 increased to 27.6% compared to 21.0% for the third quarter of fiscal 2023.

SG&A increased $1.0 million or 2.3% to $44.7 million for the first nine months of fiscal 2024 when compared to the prior year. The increase from the first nine months of fiscal 2023 mainly reflected higher salaries and R&D expenses, partially offset by lower incentive expense. Expressed as a percentage of net sales, SG&A for the first nine months of fiscal 2024 increased to 30.0% compared to 21.4% for the first nine months of fiscal 2023.

### Other Income/Expense

Other expense was less $0.1 million during the third quarter of fiscal 2024, compared to other income of $0.4 million for the third quarter of fiscal 2023. Other expense during the third quarter of fiscal 2024 included interest income and foreign exchange losses. 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.

Other expense was $0.2 million during the first nine months of fiscal 2024, compared to other expense of $0.1 million for the first nine months of fiscal 2023. Other expense during the first nine months of fiscal 2024 included interest income and foreign exchange losses. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities.

### Income Tax Provision

We recorded an income tax provision of $0.2 million and $1.7 million for the third quarter of fiscal 2024 and the third quarter of fiscal 2023, respectively. The effective income tax rate during the third quarter of fiscal 2024 was 23.4% as compared to 20.7% during the third quarter of fiscal 2023. The difference in rate during the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023 reflects changes in our geographical distribution of income, which is primarily driven by a decrease in U.S. earnings for fiscal 2024 and the state income tax provision as well as the U.S. research and development credits. The 23.4% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income and the utilization of the U.S. research and development credit.

We recorded an income tax provision of $0.1 million and $5.3 million for the first nine months of fiscal 2024 and the first nine months of fiscal 2023, respectively. The effective income tax rate during the first nine months of fiscal 2024 was a tax provision of 39.2% as compared to a tax provision of 22.5% during the first nine months of fiscal 2023. The difference in rate during the first nine months of fiscal 2024 as compared to the first nine months of fiscal 2023 reflects changes in our geographical distribution of income, which is primarily driven by a decrease in U.S. earnings for fiscal 2024, and the state income tax provision, as well as the U.S. research and development credits. The 39.2% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income, which is primarily driven by a decrease in U.S. earnings for fiscal 2024, state income tax provision and the U.S. research and development credit.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal 2019 are closed for examination under the statute of limitation for U.S. federal, U.S. state and local or non-U.S. tax jurisdictions. Our primary foreign tax jurisdictions are Germany and the Netherlands. We have tax years open in Germany beginning in fiscal 2019 and the Netherlands beginning in fiscal 2021.

The Company did not have any uncertain tax positions as of March 2, 2024 and May 27, 2023. We record penalties and interest related to uncertain tax positions in the income tax expense line item within the consolidated statements of comprehensive loss when applicable.

### Net Income and Per Share Data

Net income during the third quarter of fiscal 2024 was $0.8 million, or $0.05 per diluted common share and $0.05 per Class B diluted common share as compared to net income of $6.3 million during the third quarter of fiscal 2023 or $0.44 per diluted common share and $0.40 per Class B diluted common share.

Net income during the first nine months of fiscal 2024 was $0.2 million, or $0.01 per diluted common share and $0.01 per Class B diluted common share as compared to net income of $18.2 million during the first nine months of fiscal 2023 or $1.27 per diluted common share and $1.15 per Class B diluted common share.

### LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

Our operations and cash needs have been primarily financed through cash on hand.

Cash and cash equivalents were $18.9 million at March 2, 2024. Cash and cash equivalents by geographic area at March 2, 2024 consisted of $5.7 million in North America, $5.9 million in Europe, $1.0 million in Latin America and $6.3 million in Asia/Pacific. We repatriated $0.3 million to the United States in the second quarter of fiscal 2024 from our entity in Mexico. Although the Tax Cuts and Jobs Act generally eliminated federal income tax on future cash repatriation to the United States, cash repatriation may be subject to state and local taxes, withholding or similar taxes. See Note 8, *Income Taxes*, of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for the fiscal year ended May 27, 2023, filed with the SEC on July 31, 2023, for further information.

Cash and cash equivalents were $25.0 million on May 27, 2023. Cash and cash equivalents by geographic area on May 27, 2023 consisted of $8.1 million in North America, $8.6 million in Europe, $1.5 million in Latin America and $6.8 million in Asia/Pacific. No funds were repatriated to the United States in fiscal 2023 from our foreign entities.

Our short-term and long-term liquidity requirements primarily arise from: (i) working capital requirements, (ii) capital expenditure needs and (iii) cash dividend payments (if and when declared by our Board of Directors). Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

Based on past performance and current expectations, we believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs through the next twelve months. Additionally, while our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for growth in our markets, we believe our existing sources of liquidity as well as our ability to generate operating cash flows will satisfy our future obligations and cash requirements.

On March 20, 2023, the Company established a senior, secured revolving credit facility agreement with a three-year term in an aggregate principal amount not to exceed $30 million, including a swingline loan and a letter of credit sub-facility (collectively, the "Revolving Credit Facility") with PNC Bank. The Revolving Credit Facility is guaranteed by the Company's domestic subsidiaries. Proceeds of the borrowings under the Revolving Credit Facility are expected to be used for working capital and general corporate purposes of the Company and its subsidiaries. The Company utilized $3.7 million of the credit line to address short-term cash requirements and repaid that $3.7 million during the third quarter of fiscal 2024. As of the end of the third quarter for fiscal 2024 and the date of this report, no amounts were outstanding under the Revolving Credit Facility.

### Cash Flows from Operating Activities

Cash flows from operating activities are primarily a result of our net income adjusted for non-cash items and changes in our operating assets and liabilities.

Operating activities used $0.7 million of cash during the first nine months of fiscal 2024. We had a net income of $0.2 million during the first nine months of fiscal 2024, which included non-cash stock-based compensation expense of $1.0 million associated with the issuance of stock option and restricted stock awards, inventory reserve provisions of $0.5 million and depreciation and amortization expense of $3.2 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities used $5.7 million in cash during the first nine months of fiscal 2024, net of foreign currency exchange gains and losses included an increase in inventory of $2.2 million, a decrease in accounts payable of $5.2 million and an increase in prepayments of $0.1 million. Partially offsetting the cash utilization was a decrease in receivables of $1.0 million and an increase in accrued liabilities of $0.6 million. The decrease in accounts receivable was primarily due to the lower level of sales across our operating segments in the current quarter. Most of the inventory increase supported the products for electron tubes and Healthcare. The changes in accounts payable and accrued liabilities were timing related.

Operating activities used $11.4 million of cash during the first nine months of fiscal 2023. We had a net income of $18.2 million during the first nine months of fiscal 2023, which included non-cash stock-based compensation expense of $0.7 million associated with the issuance of stock option and restricted stock awards, inventory reserve provisions of $0.3 million and depreciation and amortization expense of $2.7 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities used $33.4 million in cash during the first nine months of fiscal 2023, net of foreign currency exchange gains and losses, included an increase in accounts receivable of $12.7 million, an increase in inventory of $21.8 million and an increase in prepaid expenses of $0.6 million. Partially offsetting the cash utilization for accounts receivable, inventory and prepaid expenses was an increase in accounts payable and accrued liabilities of $1.3 million. The increase in accounts receivable was primarily due to increased sales. The majority of the inventory increase supported the product growth in LaFox manufacturing, Green Energy Solutions and Canvys, in addition to increases in the inventory for electron tubes. The increase in accounts payable was related to the inventory increase and the increase in accrued liabilities was timing related.

### Cash Flows from Investing Activities

Cash used in investing activities of $3.1 million during the first nine months of fiscal 2024 was due to capital expenditures. Capital expenditures were primarily related to our IT system and the LaFox manufacturing and facilities renovation. LaFox manufacturing primarily supports the Electron Device Group ("EDG") and Green Energy Solutions ("GES").

Cash provided by investing activities of $0.2 million during the first nine months of fiscal 2023 was mainly due to the proceeds from investment maturities as well as proceeds from the sale of assets partially offset by capital expenditures. Capital expenditures were primarily related to our IT system, as well as our LaFox manufacturing business and facilities, which also supports both EDG and Green Energy Solutions. The Company did not have any investment purchases in the first nine months of fiscal 2023.

### Cash Flows from Financing Activities

Cash flows used in financing activities consist primarily of cash dividends and cash flows provided by financing activities consist primarily of the proceeds from the issuance of stock. All future dividend payments are at the discretion of the Board of Directors. Dividend payments depend on earnings, capital requirements, operating conditions and such other factors that the Board may deem relevant.

Cash used in financing activities of $2.3 million during the first nine months of fiscal 2024 primarily resulted from $2.5 million of dividend payments to stockholders partially offset by $0.3 million of proceeds from the issuance of stock.

Cash provided by financing activities of $0.9 million during the first nine months of fiscal 2023 primarily resulted from the $3.4 million proceeds from the issuance of stock less the $2.5 million of dividend payments to stockholders.

## Market risk

As filed, 866 characters.

### 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 of our operations, assets and liabilities 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 is set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended May 27, 2023, filed with the SEC on July 31, 2023.

## Controls and procedures

As filed, 1,607 characters.

(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 March 2, 2024.

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 third quarter of fiscal 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 187 characters.

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended May 27, 2023, filed with the SEC on July 31, 2023.

Filed Apr 11, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-043629. Last ingested by Listed: Nov 2, 2026, 11:55 ET. No prices; not investment advice.