10q10k10q10k.net

What changed in RICHARDSON ELECTRONICS, LTD.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of RICHARDSON ELECTRONICS, LTD.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+177 added−214 removedSource: 10-K (2024-08-05) vs 10-K (2023-07-31)

Top changes in RICHARDSON ELECTRONICS, LTD.'s 2024 10-K

177 paragraphs added · 214 removed · 152 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

30 edited+6 added−13 removed23 unchanged
Biggest changeSee Note 10, Segment and Geographic Information , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information. 7 Human Capital Resources Recruitment & Staffing The future success of our Company depends on our ability to attract, hire, motivate, retain and further develop top talent, including highly skilled technical, management and sales personnel.
Biggest changeHuman Capital Resources Recruitment & Staffing The future success of our Company depends on our ability to attract, hire, motivate, retain and further develop top talent, including highly skilled technical, management and sales personnel. The skills, experience and industry knowledge of our employees significantly benefit our operations and performance.
Although some of these agreements allow PMT to return inventory periodically, others do not, in which case PMT may have obsolete inventory that they cannot return to the supplier. PMT’s suppliers provide warranty coverage for the products and allow return of defective products, including those returned to PMT by its customers.
Although some of these agreements allow PMT to return inventory periodically, others do not, in which case PMT may have obsolete inventory that they cannot return to the supplier. PMT’s suppliers provide warranty coverage for the products and allow the return of defective products, including those returned to PMT by its customers.
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 Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets.
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.
We establish credit limits for each customer and routinely review delinquent and aging accounts. Distribution We maintain over 100,000 part numbers in our product inventory database and we estimate that more than 90% of orders received by 6:00 p.m. local time are shipped complete the same day for stock product.
We establish credit limits for each customer and routinely review delinquent and aging accounts. 6 Distribution We maintain over 100,000 part numbers in our product inventory database and we estimate that more than 90% of orders received by 6:00 p.m. local time are shipped complete the same day for in-stock product.
For information regarding the warranty reserves, see Note 3, Significant Accounting Policies and Disclosures , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. In addition to third party products, we sell proprietary products principally under certain trade names we own including Amperex ®, Cetron ® and National® .
For information regarding the warranty reserves, see Note 3, Significant Accounting Policies and Disclosures , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. 5 In addition to third party products, we sell proprietary products principally under certain trade names we own including Amperex ®, Cetron ® and National® .
We are also subject to various domestic and international export, trade and anti-corruption laws, such as include the Arms Export Control Act, the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”), anti-money laundering laws and regulations and the trade and trade sanctions laws and regulations administered by the Office of the United States Trade Representative and the United States Department of the Treasury’s Office of Foreign Assets Control.
We are also subject to various domestic and international export, trade and anti-corruption laws, such as the Arms Export Control Act, the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”), anti-money laundering laws and regulations and the trade and trade sanctions laws and regulations administered by the Office of the United States Trade Representative and the United States Department of the Treasury’s Office of Foreign Assets Control.
Selected financial data attributable to each segment and geographic region for fiscal 2023, fiscal 2022 and fiscal 2021 is set forth in Note 10, Segment and Geographic Information , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
Selected financial data attributable to each segment and geographic region for fiscal 2024, fiscal 2023 and fiscal 2022 is set forth in Note 10, Segment and Geographic Information , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
PMT’s inventory levels reflect our commitment to maintain an inventory of a broad range of products for customers who are buying products for replacement of components used in critical equipment and designing in new technologies. PMT also sells a number of products representing trailing edge technology.
PMT’s inventory levels reflect our commitment to maintaining an inventory of a broad range of products for customers who are buying products for replacement of components used in critical equipment and designing in new technologies. PMT also sells a number of products representing trailing edge technology.
Information on stock availability, pricing in local currency, cross-reference information, customers and market analyses are obtainable throughout the entire distribution network. The content of our websites is not deemed to be incorporated by reference in this report filed with the Securities and Exchange Commission. International Sales During fiscal 2023, we made approximately 58% of our sales outside the United States.
Information on stock availability, pricing in local currency, cross-reference information, customers and market analyses are obtainable throughout the entire distribution network. The content of our websites is not deemed to be incorporated by reference in this report filed with the Securities and Exchange Commission. International Sales During fiscal 2024, we made approximately 60% of our sales outside the United States.
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.
Products include diagnostic imaging replacement parts for CT and MRI systems; replacement CT and MRI tubes; CT service training; MRI 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.
The Company offers employees a competitive compensation program, designed to recognize and reward both individual and company performance, which includes a base pay, variable compensation programs, and health, well being and retirement programs to meet the needs of our employees. Diversity, Equity, Inclusion & Belonging We are an international company with offices and personnel located around the world.
The Company offers employees a competitive compensation program, designed to recognize and reward both individual and company performance through base pay, variable compensation programs, and health, well-being and retirement programs to meet the needs of our employees. 7 Diversity, Equity, Inclusion & Belonging ("DEI&B") We are an international company with offices and personnel located around the world.
We continue to pursue new international sales to further expand our geographic reach. Major Customers Sales to one customer in our PMT segment totaling $31.2 million accounted for 12 percent of the Company’s consolidated net sales in fiscal 2023. No one customer accounted for more than 10 percent of the Company’s consolidated net sales for fiscal 2022 and fiscal 2021.
We continue to pursue new international sales to further expand our geographic reach. Major Customers No one customer accounted for more than 10 percent of the Company’s consolidated net sales for fiscal 2024. Sales to one customer in our PMT segment totaled $31.2 million, which accounted for 12 percent of the Company’s consolidated net sales in fiscal 2023.
We seek to embrace and encourage our employees’ differences in age, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique.
We seek to embrace and encourage our employees’ differences in age, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique. Management has identified DEI&B as a priority for our Company.
Expenditures relating to such regulations are made in the ordinary course of our business and do not represent material expenditures and we further do not currently expect that compliance with such laws will require us to make material additional expenditures, however, there is no assurance that existing or future laws and regulations applicable to our operations, products, and services will not have a material adverse effect on our business. 4 Among others, we are subject to a variety of data protection laws that change frequently and have requirements that vary from jurisdiction to jurisdiction.
Expenditures relating to such regulations are made in the ordinary course of our business and do not represent material expenditures and we further do not currently expect that compliance with such laws will require us to make material additional expenditures, however, there is no assurance that existing or future laws and regulations applicable to our operations, products, and services will not have a material adverse effect on our business.
To date, DEI&B initiatives have focused on the following: • Expanded the Board of Directors to include a female director • Increased DEI&B awareness throughout the Company through education and involvement • Added socially responsible funds to our 401K Plan • Providing regular training, communication, activities, and surveys regarding DEI&B matters to our employees Website Access to SEC Reports We maintain an Internet website at www.rell.com.
To date, DEI&B initiatives have focused on the following: • The election of a female to serve on the Board of Directors • Increasing DEI&B awareness on a Company-wide basis through education and involvement • Inclusion of socially responsible funds in our 401K Plan • Providing regular training, communication, activities, and surveys regarding DEI&B matters to our employees Website Access to SEC Reports We maintain an Internet website at www.rell.com .
Of these, 329 full-time and 15 part-time were in the United States and 122 full-time and 19 part-time were located internationally. All of our employees are non-union.
Of these, 284 full-time and 15 part-time employees were located in the United States and 123 full-time and 20 part-time employees were located internationally. All our employees are non-union.
Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of remedial or corrective action requirements, and the imposition of injunctions to prohibit certain activities or force future compliance.
Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of remedial or corrective action requirements, and the imposition of injunctions to prohibit certain activities or force future compliance. 4 Certain of the Company’s products are manufactured in China and are imported into the United States.
Our fiscal year 2023 began on May 29, 2022 and ended on May 27, 2023, our fiscal year 2022 began on May 30, 2021 and ended on May 28, 2022 and our fiscal year 2021 began on May 31, 2020 and ended on May 29, 2021.
Our fiscal year 2024 began on May 28, 2023 and ended on June 1, 2024, our fiscal year 2023 began on May 29, 2022 and ended on May 27, 2023 and our fiscal year 2022 began on May 30, 2021 and ended on May 28, 2022.
Nearly 60% of our products are manufactured in LaFox, Illinois, Marlborough, Massachusetts or 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.
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. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets.
We are subject to significant compliance obligations under privacy laws such as the General Data Protection Regulation in the European Union and an expanding list of comprehensive state privacy and/or cybersecurity laws in the United States.
Among others, we are subject to a variety of data protection laws that change frequently and have requirements that vary from jurisdiction to jurisdiction. We are subject to significant compliance obligations under privacy laws such as the General Data Protection Regulation in the European Union and an expanding list of comprehensive state privacy and/or cybersecurity laws in the United States.
The four operating and reportable segments for fiscal 2023, fiscal 2022 and fiscal 2021 are defined as follows: Power and Microwave Technologies Power and Microwave Technologies combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies.
Business Segments The Company reports it financial performance 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, 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.
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.
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.
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.
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 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.
Among the suppliers 5 PMT supports are Amperex, CDE, CPI, Draloric, Eimac, General Electric, Hitachi, Jennings, L3, MACOM, National, NJRC, Ohmite, Qorvo, Thales, Toshiba and Vishay.
PMT represents leading manufacturers of electron tubes and RF, Microwave and power components used in semiconductor manufacturing equipment, RF and wireless and industrial power applications. Among the suppliers PMT supports are Amperex, CDE, CPI, Draloric, Eimac, General Electric, Hitachi, Jennings, L3, MACOM, National, NJRC, Ohmite, Qorvo, Thales, Toshiba and Vishay.
Management has identified Diversity, Equity, Inclusion, and Belonging (“DEI&B”) as a priority for our Company. Significant positive change requires careful planning, leadership, resources, and coordination. The Company established a DEI&B committee to plan and implement changes to achieve our goal of being a more diverse and inclusive organization.
Significant positive change requires careful planning, leadership, resources, and coordination. The Company established a DEI&B committee to plan and implement changes to achieve our goal of being a more diverse and inclusive organization. The DEI&B committee has been charged with making recommendations about how we, as a company, can promote and act upon the Company’s initiatives in this area.
These materials are generally readily available, but some components may require long lead times for production, and some materials are subject to shortages or price fluctuations based on supply and demand.
These materials are generally readily available, but some components may require long lead times for production, and some materials are subject to shortages or price fluctuations based on supply and demand. 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.
We believe supplier relationships, combined with our engineering design and manufacturing capabilities and private label partnerships, allow us to maintain a well-balanced and technologically advanced offering of customer specific display solutions. 6 Healthcare 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.
We believe supplier relationships, combined with our engineering design and manufacturing capabilities and private label partnerships, allow us to maintain a well-balanced and technologically advanced offering of customer specific display solutions.
The skills, experience and industry knowledge of our employees significantly benefit our operations and performance. Competition for such personnel is intense and the salary, benefits and other costs to employ the right personnel may impact our results and performance. As of May 27, 2023, we employed 485 individuals, which included 451 full-time individuals and 34 part-time individuals.
Competition for such personnel is intense and the salary, benefits and other costs to employ the right personnel may impact our results and performance. As of June 1, 2024, we employed 442 individuals, 407 of whom were employed on a full-time basis and 35 of whom were employed on a part-time basis.
Unless otherwise noted, all references to a particular year in this document shall mean the fiscal year for such period.
Unless otherwise noted, all references to a particular year in this document shall mean the fiscal year for such period. Government Regulations We are subject to a variety of federal, state, local and foreign laws and regulatory requirements relating to our operations.
Removed
COVID-19 Update While the immediate impacts of the COVID-19 pandemic have been assessed, the long-term effects of the disruption, including supply chain disruption, and resulting impact on the global economy and capital markets remain unpredictable, and depend on future developments, such as the possible resurgence of the virus, variant strains of the virus, vaccine availability and effectiveness, and future government actions in response to the crisis.
Added
Our importation of products into the United States from China is subject to tariffs instituted and imposed from time to time by The Office of the United States Trade Representative. Management works with suppliers and customers in an effort to mitigate the impact of such tariffs on customer markets.
Removed
The residual impact of the COVID-19 pandemic and its effects on supply chains and general economic conditions continues to evolve.
Added
Our sales and gross margins on certain products could be negatively impacted if we are unable to successfully pass through the additional cost of applicable tariffs, or if higher prices reduce demand for the Company's products.
Removed
The COVID-19 pandemic and its residual negative impact on general economic conditions has had and continues to have a negative effect on our business, results of operations, cash flows, gross margins as a percentage of net sales (particularly within our Canvys segment).
Added
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.
Removed
While the Company did not experience sales declines during fiscal year 2023 as a direct result of the pandemic, the residual economic impact from the pandemic continued to negatively impact our gross margins as a percentage of net sales in our Canvys segment.
Added
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.
Removed
It is likely that the pandemic will continue to affect our business for an indeterminable period of time due to the impact on the global economy, including with respect to transportation networks and supply chains, the availability of raw materials, production efforts and customer demand for our products.
Added
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.
Removed
We have experienced and continue to experience component delays which negatively impact our product development schedule. Management continues to monitor the impact of global economic factors on its financial condition, liquidity, operations, suppliers, industry and workforce. Our ability to predict and respond to future changes resulting from the Covid pandemic is uncertain.
Added
No one customer accounted for more than 10 percent of the Company’s consolidated net sales for fiscal 2022. See Note 10, Segment and Geographic Information , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.
Removed
Even after the Covid pandemic fully subsides, there may be continued long-term effects on our business practices and customers in economies in which we operate that could severely disrupt our operations and could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Removed
As we cannot predict the duration, scope or severity of the Covid pandemic, the negative financial impact to our results cannot be reasonably estimated and could be material. Government Regulations We are subject to a variety of federal, state, local and foreign laws and regulatory requirements relating to our operations.
Removed
Business Segments The Company began reporting the results for its new Green Energy Solutions ("GES") segment in the first quarter of fiscal 2023 due to its focus on power applications that support the green energy market. The GES segment has been carved out of our existing Power and Microwave Technologies (“PMT”) segment.
Removed
Accordingly, the Company is reporting its financial performance based on four operating and reportable segments for fiscal 2023. The results for fiscal 2022 and fiscal 2021 presented herein were adjusted to reflect the presentation of the new GES segment separately from the PMT segment.
Removed
PMT also offers its customers technical services for both microwave and industrial equipment. PMT represents leading manufacturers of electron tubes and RF, Microwave and power components used in semiconductor manufacturing equipment, RF and wireless and industrial power applications.
Removed
Green Energy Solutions Green Energy Solutions 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.
Removed
The DEI&B committee has been charged with making recommendations about how we, as a company, can promote and act upon the Company’s initiatives in this area.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

37 edited+4 added−8 removed80 unchanged
Biggest changeFurther, disruptions to the supply chain could adversely impact our business” and “Major disruptions to our logistics capability or to the operations of our key vendors or customers could have a material adverse impact on our operations.” Prolonged periods of inflation could increase costs, have an adverse effect on general economic conditions and impact consumer spending, which could impact our profitability and have a material adverse effect on our business and results of operations.
Biggest changeProlonged periods of inflation could increase costs, have an adverse effect on general economic conditions and impact consumer spending, which could impact our profitability and have a material adverse effect on our business and results of operations. Rising levels of inflation continue to impact the markets in which we operate.
Our business could be adversely affected as a result of a significant quality or performance issues in the components sold by us if we are required to pay for the damages. Although we have product liability insurance, such insurance is limited in coverage and amount.
Our business could be adversely affected as a result of significant quality or performance issues in the components sold by us if we are required to pay for the damages. Although we have product liability insurance, such insurance is limited in coverage and amount.
Further, challenges within global logistics networks, including shortages of shipping containers, international port congestion, and trucking shortages and freight capacity constraints have resulted in delays in receiving key manufacturing components and increased order backlogs and transportation costs. Such logistical disruption may cause us to incur higher costs and may also result in longer lead times for our customers.
Further, challenges within global logistics networks, including shortages of shipping containers, international port congestion, trucking shortages and freight capacity constraints have resulted in delays in receiving key manufacturing components and increased order backlogs and transportation costs. Such logistical disruption may cause us to incur higher costs and may also result in longer lead times for our customers.
Fines of up to 20 million euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, may be imposed for violations of certain of the GDPR’s requirements. 14 In addition, several other jurisdictions in the U.S. and around the world have enacted privacy laws or regulations similar to GDPR.
Fines of up to 20 million euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, may be imposed for violations of certain of the GDPR’s requirements. In addition, several other jurisdictions in the U.S. and around the world have enacted privacy laws or regulations similar to GDPR.
If we are deemed to be subject to the Investment Company Act, compliance with required additional regulatory burdens would increase our operating expenses. 16 Evolving expectations around corporate responsibility practices, specifically related to environmental, social and governance (“ESG”) matters, may expose us to reputational and other risks.
If we are deemed to be subject to the Investment Company Act, compliance with required additional regulatory burdens would increase our operating expenses. Evolving expectations around corporate responsibility practices, specifically related to environmental, social and governance (“ESG”) matters, may expose us to reputational and other risks.
If this is the case, an impairment charge to earnings would be necessary. 13 Our indebtedness and restrictive covenants under our credit facility could limit our operational and financial flexibility. We may incur indebtedness in the future under our credit facility with PNC Bank NA.
If this is the case, an impairment charge to earnings would be necessary. Our indebtedness and restrictive covenants under our credit facility could limit our operational and financial flexibility. We may incur indebtedness in the future under our credit facility with PNC Bank NA.
There can be no assurance, however, that the Company will be able to prevent or remediate all future cybersecurity incidents or that the cost associated with responding to any such incident or impact 10 of such incident will not be significant or material.
There can be no assurance, however, that the Company will be able to prevent or remediate all future cybersecurity incidents or that the cost associated with responding to any such incident or impact of such incident will not be significant or material.
A major interruption or disruption in service at any of our distribution centers, or a disruption at the operations of any of our significant vendors or customers, for any reason, including reasons beyond our control (such as natural disasters, pandemics or other health crises (such as COVID-19), work stoppages, power loss, cyber attacks, incidents of terrorism or other significant disruptions of services from our third party providers) could cause cancellations or delays in a significant number of shipments to customers and, as a result, could have a severe impact on our business, operations and financial performance.
A major interruption or disruption in service at any of our distribution centers, or a disruption at the operations of any of our significant vendors or customers, for any reason, including reasons beyond our control (such as natural disasters, pandemics or other health crises, work stoppages, power loss, cyber attacks, incidents of terrorism or other significant disruptions of services from our third party providers) could cause cancellations or delays in a significant number of shipments to customers and, as a result, could have a severe impact on our business, operations and financial performance.
Our revenues and gross profit margins depend significantly on global economic conditions, the demand for our products and services and the financial condition of our customers. Economic weakness and uncertainty have in the past, and may in the future, result in decreased revenues and gross profit margins.
Our revenues and gross profit margins depend significantly on global economic conditions, the demand for our products and services and the financial condition of our customers. Economic weakness and uncertainty have resulted in the past, and may result in the future, in decreased revenues and gross profit margins.
As threats related to cyber attacks develop and grow, we may also find it necessary to make further investments to protect our data and infrastructure, which may impact our profitability.
As threats related to cyber attacks develop and 10 grow, we may also find it necessary to make further investments to protect our data and infrastructure, which may impact our profitability.
We have historically incurred significant charges for inventory obsolescence and may incur similar charges in the future. We maintain significant inventories in an effort to ensure that customers have a reliable source of supply. Our products generally support industrial machinery powered by tube technology. As technology evolves and companies replace this capital equipment, the market for our products potentially declines.
We have historically incurred significant charges for inventory obsolescence and may incur similar charges in the future. We maintain significant inventories in an effort to ensure that customers have a reliable source of supply. Our products generally support industrial machinery powered by tube technology. As technology evolves and companies replace their capital equipment, the market for our products potentially declines.
In some cases, depending on the nature of the claim, we may be able to seek indemnification from our suppliers for our self and our customers against such claims, but there is no assurance that we will be successful in obtaining such indemnification or that we are fully protected against such claims.
In some cases, depending on the nature of the claim, we may be able to seek indemnification from our suppliers for ourselves and our customers against such claims, but there is no assurance that we will be successful in obtaining such indemnification or that we are fully protected against such claims.
Richardson, our Chairman, Chief Executive Officer and President, beneficially owned approximately 98% of the outstanding shares of our Class B common stock, representing approximately 62% of the voting power of the outstanding common stock. This share ownership permits Mr.
Richardson, our Chairman, Chief Executive Officer and President, beneficially owned approximately 98% of the outstanding shares of our Class B common stock, representing approximately 61% of the voting power of the outstanding common stock. This share ownership permits Mr.
Our information technology systems may be subject to cyber attacks, security breaches, computer hacking, as well as other damage, disruptions or shutdowns. Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise sensitive personal, proprietary or confidential information, create system disruptions or cause shutdowns.
Our information technology systems are subject to the threat of cyber attacks, security breaches, computer hacking, as well as other damage, disruptions or shutdowns. Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise sensitive personal, proprietary or confidential information, create system disruptions or cause shutdowns.
Our failure to maintain and enhance our competitive position could have a material adverse effect on our business. 9 We are dependent on a limited number of vendors to supply us with essential products. Disruptions to the supply chain could adversely impact our business. The products we supply are currently produced by a relatively small number of manufacturers.
Our failure to maintain and enhance our competitive position could have a material adverse effect on our business. 9 We are dependent on a limited number of vendors to supply us with essential products. The products we supply are currently produced by a relatively small number of manufacturers.
To the extent that our supply chain, costs, sales or profitability are negatively affected by the tariffs or other trade actions, our business, financial condition and results of operations may be materially adversely affected. 15 Ownership Risks A single stockholder controls a majority of the Company's voting stock. As of July 25, 2023, Edward J.
To the extent that our supply chain, costs, sales or profitability are negatively affected by the tariffs or other trade actions, our business, financial condition and results of operations may be materially adversely affected. Ownership Risks A single stockholder controls a majority of the Company's voting stock. As of July 26, 2024, Edward J.
To the extent that our significant suppliers are unwilling or unable to continue to do business with us, extend lead times, limit supplies due to capacity constraints or other factors, there could be a material adverse effect on our business.
To the extent that our significant suppliers are unwilling or unable to continue to do business with us, extend lead times, limit supplies due to capacity constraints or other factors, there could be a material adverse effect on our business. Disruptions to our supply chain could adversely impact our business.
Many factors may cause the market price for our common stock to change, including: (i) our operating results as compared to investors’ expectations in any period, (ii) market perceptions concerning our future earnings prospects, (iii) adverse changes in general market conditions or economic trends and (iv) changes or events in our industry or the world, such as market reactions to public health issues (including the COVID-19 pandemic), natural disasters, changes in global, national, or regional economies, inflation, governmental policies, political unrest, military action and armed conflicts (such as the 2022 Russian invasion of Ukraine), terrorist activities, political and social turmoil, civil unrest and other crises.
Many factors may cause the market price for our common stock to change, including: (i) our operating results as compared to investors’ expectations in any period, (ii) market perceptions concerning our future earnings prospects, (iii) adverse changes in general market conditions or economic trends and (iv) changes or events in our industry or the world, such as market reactions to public health issues, natural disasters, changes in global, national, or regional economies, inflation, governmental policies, political unrest, military action and armed conflicts (such as the Russia-Ukraine and Israel-Hamas wars), terrorist activities, political and social turmoil, civil unrest and other crises.
In addition, customer difficulties in the future could result from economic declines, the Covid pandemic, the cyclical nature of their respective businesses, such as in the oil and gas industry, or otherwise and, in turn, result in decreases in product demand, increases in bad debt write-offs, decreases in timely collection of accounts receivable and adjustments to our allowance for credit losses, resulting in material reductions to our revenues and net earnings. 12 Major disruptions to our logistics capability or to the operations of our key vendors or customers could have a material adverse impact on our operations.
In addition, customer difficulties in the future could result from economic uncertainty or the deterioration of conditions in markets in which we operate, the cyclical nature of their respective businesses, such as in the oil and gas industry, or otherwise and, in turn, result in decreases in product demand, increases in bad debt write-offs, decreases in timely collection of accounts receivable and adjustments to our allowance for credit losses, resulting in material reductions to our revenues and net earnings. 12 Major disruptions to our logistics capability or to the operations of our key vendors or customers could have a material adverse impact on our operations.
One of our suppliers represented 11% of our total cost of sales during fiscal year 2023. Our success depends, in large part, on maintaining current vendor relationships and developing new relationships.
During fiscal 2024 two of our suppliers each represented 11% of our total cost of sales. Our success depends, in large part, on maintaining current vendor relationships and developing new relationships.
The U.S. government has made statements and taken certain actions that have led to, and may in the future lead to, further changes to U.S. and international trade policies, including recently imposed tariffs affecting certain products exported by a number of U.S. trading partners, including China.
The U.S. government has made statements and taken certain actions that have led to, and may in the future lead to, further changes to U.S. and international trade policies, including recently imposed tariffs affecting certain products exported by a number of U.S. trading partners, including China. There were no changes or additional tariffs that affected our fiscal 2024 operations.
Our failure, or our suppliers’ failure, to meet the demand for raw materials and components could adversely affect our business and results of operations. Further disruptions to the supply chain because of the COVID-19 pandemic and its continuing residual impact, or other world or domestic events could materially adversely impact our operations and business.
Our failure, or our suppliers’ failure, to meet the demand for raw materials and components could adversely affect our business and results of operations. Further disruptions to the supply chain because of other global or domestic events could materially adversely impact our operations and business.
These risks include the costs and difficulties of managing foreign entities, limitations on the repatriation and investment of funds, cultural differences that affect customer preferences and business practices, unstable political or economic conditions, geopolitical risks and demand or supply reactions from events that could include political crises and conflict (such as the Russian invasion of Ukraine), war, a major terrorist attack, natural disasters, actual or threatened public health emergencies (such as COVID-19, including virus variants and resurgences and responses to those developments such as continued or new government-imposed lockdowns and travel restrictions), trade protection measures and import or export licensing requirements, monetary policy, inflation, economic growth, recession, commodity prices, currency volatility, currency controls, and changes in tax laws.
These risks include the costs and difficulties of managing foreign entities, limitations on the repatriation and investment of funds, cultural differences that affect customer preferences and business practices, unstable political or economic conditions, geopolitical risks and demand or supply reactions from events that could include political crises and conflict (such as Russia-Ukraine and Israel-Hamas wars), war, a major terrorist attack, natural disasters, actual or threatened public health emergencies, trade protection measures and import or export licensing requirements, monetary policy, inflation, economic growth, recession, commodity prices, currency volatility, currency controls, and changes in tax laws.
Changes in our relationships with suppliers, shortages in availability of materials, production delays, regulatory restrictions, public health crises, or other supply chain disruptions, whether due to our suppliers or customers, could have a material adverse effect on our operations and results. Increases in the costs of supplies could result in manufacturing interruptions, delays, inefficiencies or our inability to market products.
Material disruptions to our supply chains, including changes in our relationships with suppliers, shortages in availability of materials, production delays, regulatory restrictions, public health crises, or other supply chain disruptions, whether due to our suppliers or customers, could have a material adverse effect on our operations and results.
These disruptions have been further exacerbated by other events and conditions, including the conflict between Russia and Ukraine, which have adversely affected our ability to receive goods on a timely basis and increased our material costs. Short-term or sustained increases in market demand may exceed our suppliers’ production capacity or otherwise strain our supply chain.
Supply chain disruptions may be exacerbated by other events and conditions, including the Russia-Ukraine and Israel-Hamas wars, which could continue to adversely affect our ability to receive goods on a timely basis and increase our material costs. Short-term or sustained increases in market demand may exceed our suppliers’ production capacity or otherwise strain our supply chain.
It is possible that further tariffs may be imposed on imports of our products, including by other countries, or that our business will be impacted by changing trade relations among countries.
These tariff modifications are not expected to materially impact our Company. 15 It is possible that further tariffs may be imposed on imports of our products, including by other countries, or that our business will be impacted by changing trade relations among countries.
In addition, we may be required to pay damage awards or settlements, become subject to injunctions or other equitable remedies, or determine to abandon certain lines of business, that may cause a material adverse effect on our results of operations, financial position and cash flows.
In addition, we may be required to pay damage awards or settlements, become subject to injunctions or other equitable remedies, or determine to abandon certain lines of business, that may cause a material adverse effect on our results of operations, financial position and cash flows. 14 We may incur substantial operational costs or be required to change our business practices to comply with data privacy and data protection laws and regulations around the world.
Our operations could be adversely affected by global or regional economic conditions if markets decline in the future, whether related to the Covid pandemic, the Russian invasion of Ukraine, higher inflation or interest rates, recession, natural disasters, impacts of and issues related to climate change, business disruptions, our ability to adequately staff operations or otherwise.
Our operations could be adversely affected by uncertain conditions in global or regional economies, including conflict (such as Russia-Ukraine and Israel-Hamas wars), higher inflation or interest rates, recession, natural disasters, impacts of and issues related to climate change, business disruptions, our ability to adequately staff operations or otherwise and may in the future result in the decline of conditions in markets in which we operate.
The EU’s General Data Protection Regulation (“GDPR”) includes operational requirements for companies that receive or process personal data of residents of the European Union, including more robust documentation requirements for data protection compliance programs.
We are subject to many privacy and data protection laws and regulations in various jurisdictions, which continue to evolve rapidly. The EU’s General Data Protection Regulation (“GDPR”) includes operational requirements for companies that receive or process personal data of residents of the European Union, including more robust documentation requirements for data protection compliance programs.
The Company also regularly evaluates its protections against cybersecurity incidents, including in response to specific threats and as part of the Company's information security program.
The Company maintains various information technology protections designed to detect and reduce the likelihood of cybersecurity incidents, although there can be no assurance that our protections will be successful. The Company also regularly evaluates its protections against cybersecurity incidents, including in response to specific threats and as part of the Company's information security program.
If we are deemed to be an investment company, we will be required to meet burdensome compliance requirements and restrictions on our activities. We have had significant cash and investments.
Any such actions could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. 16 If we are deemed to be an investment company, we will be required to meet burdensome compliance requirements and restrictions on our activities. We have had significant cash and investments.
Our business and results of operations are subject to a broad range of uncertainties arising out of world and domestic events. Global and regional economic uncertainty continues to exist, including uncertainty relating to the Covid pandemic and the Russian invasion of Ukraine.
Our business and results of operations are subject to a broad range of uncertainties arising out of world and domestic events.
Further, challenges in the supply chain and disruptions in our logistics capability could further negatively impact our gross profit margins. See “We are dependent on a limited number of vendors to supply us with essential products.
See We are dependent on a limited number of vendors to supply us with essential products, Disruptions to the supply chain could adversely impact our business and Major disruptions to our logistics capability or to the operations of our key vendors or customers could have a material adverse impact on our operations.
In addition, we may be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission or NASDAQ. Any such actions could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
In addition, we may be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission or NASDAQ.
Inflation has risen on a global basis and the United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase, it can also push up the costs of labor and other expenses. There is no assurance that our revenues will increase at the same rate to maintain the same level of profitability.
If the inflation rate continues to increase, it can also push up the costs of labor and other expenses. If our revenues do not increase at the rate of inflation, we may not be able to maintain the same level of profitability.
In addition, our profit margins would decrease if prices of purchased raw materials, component parts or finished goods increase and we are unable to pass on those increases to our customers. As various locations have seen recovery from COVID-19, there have been increases in demand, which have, in turn, created significant disruption to the global supply chain.
Increases in the costs of supplies could result in manufacturing interruptions, delays, inefficiencies or our inability to market products. In addition, our profit margins would decrease if the prices of purchased raw materials, component parts or finished goods increase and we are unable to pass on those increases to our customers.
Negative or uncertain financial and macroeconomic conditions may have a significant adverse impact on our sales, profitability and results of operations. Financial Risks There is a possible risk of identifiable intangible asset impairment, which could reduce the value of our assets and reduce our net income in the year in which the write-off occurs.
Our sales and gross margins on certain products could be negatively impacted if we are unable to successfully pass through the additional cost of applicable tariffs, or if higher prices reduce demand for the Company's products. 13 Financial Risks There is a possible risk of identifiable intangible asset impairment, which could reduce the value of our assets and reduce our net income in the year in which the write-off occurs.
Removed
Further, as a result of COVID-19 and its effects, we experienced some residual COVID-19 related component delays impacting new product development schedules. The global markets have generally suffered, and are continuing to suffer, from material disruptions to certain supply chains.
Added
Further, challenges in the supply chain and disruptions in our logistics capability could further negatively impact our gross profit margins.
Removed
We have experienced cybersecurity incidents in the past, but none of these incidents, individually or in the aggregate, has had a material adverse effect on our business, reputation, operations or products. The Company implemented various information technology protections designed to detect and reduce cybersecurity incidents, although there can be no assurance that our protections will be successful.
Added
Negative or uncertain financial and macroeconomic conditions may have a significant adverse impact on our sales, profitability and results of operations. Certain of our products are subject to tariffs. Certain of the Company’s products are manufactured in China and are imported into the United States.
Removed
We may incur substantial operational costs or be required to change our business practices to comply with data privacy and data protection laws and regulations around the world. We are subject to many privacy and data protection laws and regulations in various jurisdictions, which continue to evolve rapidly.
Added
Our importation of products into the United States from China is subject to tariffs instituted and imposed from time to time by The Office of the United States Trade Representative. Management works with suppliers and customers to mitigate the impact of such tariffs on customer markets.
Removed
For example, during 2018, the U.S. and China each imposed new tariffs, and announced further proposed tariffs, on various products imported from China and the U.S., respectively. Between July 2018 and September 2018, the Office of the United States Trade Representative imposed tariffs of 10% and 25% on three product lists totaling approximately $250 billion in Chinese imports.
Added
In May 2024, the U.S. government announced proposed tariff modifications for certain products from China. Proposed tariffs of 25%, 50% and 100% on certain products from China are expected to become effective on August 1, 2024, January 1, 2025, and January 1, 2026.
Removed
In May 2019, there was an announcement of the United States government’s imposition of a 25% tariff on a range of products exported from China to the U.S. on or after May 10, 2019. These lists include some of our products.
Removed
Subsequently, in January 2020, the U.S. and China signed a “phase one” trade deal, accompanied by a U.S. decision to cancel a plan to increase tariffs on an additional list of Chinese products and to reduce the tariffs imposed on May 13, 2019 from 15% to 7.5% effective February 14, 2020.
Removed
Currently, the majority of tariff exclusions granted have expired and many of the additional tariffs on Chinese origin goods remain, as do concerns over the stability of bilateral trade relations, particularly given the limited scope of the phase one agreement.
Removed
ITEM 1B. Unresolve d Staff Comments None. 17

Item 2. Properties

Properties — owned and leased real estate

0 edited+0 added−1 removed3 unchanged
Removed
ITEM 3. Legal Proceedings None. 18 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−2 removed0 unchanged
Biggest changeTotal return indices reflect reinvestment of dividends at the closing stock prices at the date of the dividend declaration. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Richardson Electronics, Ltd., the NASDAQ Composite Index and the NASDAQ Electronic Components Index $250 $200 $150 $100 $50 $0 5/30/15 5/28/16 5/27/17 6/2/18 6/1/19 5/30/20 Richardson Electronics, Ltd.
Biggest changeCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Richardson Electronics, Ltd., the NASDAQ Composite Index and the NASDAQ Electronic Components Index $250 $200 $150 $100 $50 $0 5/30/15 5/28/16 5/27/17 6/2/18 6/1/19 5/30/20 Richardson Electronics, Ltd. NASDAQ Composite NASDAQ Electronic Components *$100 invested on 5/30/15 in stock or 5/31/15 in index, including reinvestment of dividends. Indexes calculated on month-end basis.
As of July 25, 2023, there were approximately 419 stockholders of record for the common stock and approximately 13 stockholders of record for the Class B common stock. Effective June 26, 2023, the Company joined the 2023 Russell 3000® Index.
As of July 26, 2024, there were approximately 406 stockholders of record for the common stock and approximately 13 stockholders of record for the Class B common stock. The Company joined the Russell 3000® Index in 2023.
ITEM 5. Market for the Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities Unregistered Sales of Equity Securities None. Share Repurchases There were no share repurchases in fiscal 2023. Dividends Our quarterly dividend was $0.06 per common share and $0.054 per Class B common share.
ITEM 5. Market for the Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities Unregistered Sales of Equity Securities There were no sales of unregistered equity securities in fiscal 2024. Share Repurchases There were no share repurchases in fiscal 2024.
Common Stock Information Our common stock is traded on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol (“RELL”). There is no established public trading market for our Class B common stock.
Dividend payments will depend on earnings, capital requirements, operating conditions and such other factors that the Board may deem relevant. Common Stock Information Our common stock is traded on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol (“RELL”). There is no established public trading market for our Class B common stock.
The Russell Microcap Technology Index is a published industry index comprised of over 150 companies. Next year's performance graph will exclude the NASDAQ Electronic Components Index. The graph assumes $100 invested on the last day of our fiscal year 2018, in our common stock, the NASDAQ Composite Index, NASDAQ Electronic Components Index and the Russell Microcap Technology Index.
The Russell Microcap Technology Index is a published industry index comprised of over 150 companies. The performance of our common stock is compared with the performance of the NASDAQ Composite Index and the Russell Microcap Technology Index for the fiscal years 2020 to 2024.
Membership in the U.S. all-cap Russell 3000® Index remains in place for one year and includes the Company in the large-cap Russell 1000® Index and the small-cap Russell 2000® Index. 19 Performance Graph The following graph compares the performance of our common stock for the periods indicated with the performance of the NASDAQ Composite Index, NASDAQ Electronic Components Index and the Russell Microcap Technology Index.
Membership in the U.S. all-cap Russell 3000® Index includes the Company in the large-cap Russell 1000® Index and the small-cap Russell 2000® Index. 20 Performance Graph As discussed in the Form 10-K for fiscal 2023, the NASDAQ Electronic Components Index is not available for fiscal 2024 and has been replaced by the Russell Microcap Technology Index.
Annual dividend payments were approximately $3.3 million for fiscal 2023 and $3.2 million for fiscal 2022. 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.
Dividends Our quarterly dividend was $0.06 per common share and $0.054 per Class B common share during fiscal 2024. Annual dividend payments were approximately $3.4 million for fiscal 2024 and $3.3 million for fiscal 2023. All future payments of dividends are at the discretion of the Board of Directors.
Removed
The NASDAQ Electronic Components Index will not be available for fiscal 2024 and accordingly is being replaced by the Russell Microcap Technology Index. This year's performance graph includes both the NASDAQ Electronic Components Index and the Russell Microcap Technology Index to facilitate the transition to the replacement index.
Added
The following graph assumes $100 invested on the last day of our fiscal year 2019, in our common stock, the NASDAQ Composite Index and the Russell Microcap Technology Index. Total return indices reflect reinvestment of dividends at the closing stock prices at the date of the dividend declaration.
Removed
NASDAQ Composite NASDAQ Electronic Components *$100 invested on 5/30/15 in stock or 5/31/15 in index, including reinvestment of dividends. Indexes calculated on month-end basis. ITEM 6. R eserved 20

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

74 edited+14 added−38 removed33 unchanged
Biggest changeFY21 % Change North America $ 112,214 $ 98,527 $ 73,625 13.9 % 33.8 % Asia/Pacific 59,557 49,235 40,839 21.0 % 20.6 % Europe 62,017 64,435 52,549 (3.8 %) 22.6 % Latin America 28,924 12,439 9,651 132.5 % 28.9 % Other (1) (54 ) (16 ) 273 (237.5 %) (105.9 %) Total $ 262,658 $ 224,620 $ 176,937 16.9 % 26.9 % Gross profit by geographic area and percent of geographic net sales for fiscal 2023, fiscal 2022 and fiscal 2021 were as follows ( in thousands ): FY 2023 FY 2022 FY 2021 Gross Profit (Loss) Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales North America $ 43,580 38.8 % $ 36,548 37.1 % $ 28,639 38.9 % Asia/Pacific 18,775 31.5 % 15,728 31.9 % 13,520 33.1 % Europe 18,760 30.2 % 19,215 29.8 % 16,958 32.3 % Latin America 7,735 26.7 % 4,340 34.9 % 3,405 35.3 % Other (1) (5,161 ) (4,131 ) (3,697 ) Total $ 83,689 31.9 % $ 71,700 31.9 % $ 58,825 33.2 % (1) Other primarily includes net sales not allocated to a specific geographical region, unabsorbed value-add costs and other unallocated expenses. 25 We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition.
Biggest changeFY22 % Change North America $ 77,269 $ 112,214 $ 98,527 (31.1 %) 13.9 % Asia/Pacific 45,264 59,557 49,235 (24.0 %) 21.0 % Europe 61,476 62,017 64,435 (0.9 %) (3.8 %) Latin America 10,908 28,924 12,439 (62.3 %) 132.5 % Other (1) 1,543 (54 ) (16 ) 2,957.4 % (237.5 %) Total $ 196,460 $ 262,658 $ 224,620 (25.2 %) 16.9 % (1) Primarily includes net sales not allocated to a specific geographical region, unabsorbed value-add costs and other unallocated expenses. 26 Gross profit by geographic area and percent of geographic net sales for fiscal 2024, fiscal 2023 and fiscal 2022 were as follows ( in thousands ): FY 2024 FY 2023 FY 2022 Gross Profit (Loss) Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales North America $ 29,306 37.9 % $ 43,580 38.8 % $ 36,548 37.1 % Asia/Pacific 13,682 30.2 % 18,775 31.5 % 15,728 31.9 % Europe 18,516 30.1 % 18,760 30.2 % 19,215 29.8 % Latin America 3,983 36.5 % 7,735 26.7 % 4,340 34.9 % Other (1) (5,521 ) (5,161 ) (4,131 ) Total $ 59,966 30.5 % $ 83,689 31.9 % $ 71,700 31.9 % (1) Primarily includes net sales not allocated to a specific geographical region, unabsorbed value-add costs and other unallocated expenses.
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 sub-facility 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.
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.
Significant changes in one or more of these considerations may require adjustments affecting net income and net carrying value of accounts receivable. 30 Revenue Recognition Our customers are generally not resellers, but rather businesses that incorporate our products into their processes from which they generate an economic benefit.
Significant changes in one or more of these considerations may require adjustments affecting net income and net carrying value of accounts receivable. Revenue Recognition Our customers are generally not resellers, but rather businesses that incorporate our products into their processes from which they generate an economic benefit.
The goods we provide to our customers are distinct in that our customers benefit from the goods we sell them through use in their own processes. Distribution typically includes products purchased from our suppliers, stocked in our warehouses and then sold to our customers.
The goods we provide to our customers are distinct in that our customers benefit from the goods we sell them through use in their own processes. 31 Distribution typically includes products purchased from our suppliers, stocked in our warehouses and then sold to our customers.
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.
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 estimates and significant developments.
The difference between the effective income tax rates as compared to the U.S. federal statutory rate of 21.0% during fiscal 2023, fiscal 2022 and fiscal 2021 was primarily driven by the impact of valuation allowance changes related to the realizability of our U.S. state and federal net deferred tax assets and changes in our geographical distribution of income (loss).
The difference between the effective income tax rates as compared to the U.S. federal statutory rate of 21.0% during fiscal 2024, fiscal 2023 and fiscal 2022 was primarily driven by the impact of valuation allowance changes related to the realizability of our U.S. state and federal net deferred tax assets and changes in our geographical distribution of income (loss).
Our assumptions, judgments and estimates are based on historical experience and various other factors deemed relevant. Actual results could be materially different from those estimates under different assumptions or conditions. We evaluate our assumptions, judgments and estimates on a regular basis. We also discuss our critical policies and estimates with the Audit Committee of the Board of Directors.
Our assumptions, judgments and estimates are based on historical experience and various other factors deemed relevant. Actual results could be materially different from those estimates under different assumptions or conditions. We evaluate our assumptions, judgments and estimates on a regular basis. We also discuss our critical accounting estimates with the Audit Committee of the Board of Directors.
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.
Products include diagnostic imaging replacement parts for CT and MRI systems; replacement CT and MRI tubes; CT service training; MRI 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.
This section is organized as follows: • Business Overview • Results of Operations - an analysis and comparison of our consolidated results of operations for the fiscal years ended May 27, 2023, May 28, 2022 and May 29, 2021, as reflected in our Consolidated Statements of Comprehensive Income. • Liquidity, Financial Position and Capital Resources - a discussion of our primary sources and uses of cash for the fiscal years ended May 27, 2023, May 28, 2022 and May 29, 2021, and a discussion of changes in our financial position.
This section is organized as follows: • Business Overview • Results of Operations - an analysis and comparison of our consolidated results of operations for the fiscal years ended June 1, 2024, May 27, 2023 and May 28, 2022, as reflected in our Consolidated Statements of Comprehensive Income. • Liquidity, Financial Position and Capital Resources - a discussion of our primary sources and uses of cash for the fiscal years ended June 1, 2024, May 27, 2023 and May 28, 2022, and a discussion of changes in our financial position.
Business Overview Richardson Electronics, Ltd. 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.
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.
The remaining valuation allowance relates to state NOLs ($0.2 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.3 million).
The valuation allowance relates to state NOLs ($1.1 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.0 million).
We believe the assumptions, judgments and estimates involved for the following have the greatest potential impact on our Consolidated Financial Statements: • Allowance for Doubtful Accounts • Revenue Recognition • Inventories, net • Intangible and Long-Lived Assets • Loss Contingences • Income Taxes Allowance for Doubtful Accounts Our allowance for doubtful accounts includes estimated losses that result from uncollectible receivables.
We believe the assumptions, judgments and estimates involved for the following have the greatest potential impact on our Consolidated Financial Statements: • Allowance for Credit Losses • Revenue Recognition • Inventories, net • Intangible and Long-Lived Assets • Income Taxes Allowance for Credit Losses Our allowance for credit losses includes estimated losses that result from uncollectible receivables.
Income taxes paid, including foreign estimated tax payments, were $4.8 million, $1.5 million and $0.1 million, during fiscal 2023, fiscal 2022 and fiscal 2021, respectively. In the normal course of business, we are subject to examination by taxing authorities throughout the world.
Income taxes paid, net of refunds, including foreign estimated tax payments, were less than $0.1 million, $4.8 million and $1.5 million, during fiscal 2024, fiscal 2023 and fiscal 2022, respectively. In the normal course of business, we are subject to examination by taxing authorities throughout the world.
Net Sales and Gross Profit Analysis Net sales by segment and percent change for fiscal 2023, fiscal 2022 and fiscal 2021 were as follows ( in thousands ): Net Sales FY 2023 FY 2022 FY 2021 FY23 vs. FY22 % Change FY22 vs.
Net Sales and Gross Profit Analysis Net sales by segment and percent change for fiscal 2024, fiscal 2023 and fiscal 2022 were as follows ( in thousands ): Net Sales FY 2024 FY 2023 FY 2022 FY24 vs. FY23 % Change FY23 vs.
Gross margin as a percentage of net sales increased to 32.0% during fiscal 2022 as compared to 29.0% during fiscal 2021, primarily due to product mix. 24 Canvys Net sales for Canvys increased 11.8% to $39.3 million during fiscal 2023, from $35.2 million during fiscal 2022. Sales increased primarily due to strong sales in the North American market.
Net sales for Canvys increased 11.8% to $39.3 million during fiscal 2023, from $35.2 million during fiscal 2022. Sales increased primarily due to strong sales in the North American market. Gross margin as a percentage of net sales decreased to 31.5% during fiscal 2023 as compared to 32.0% during fiscal 2022 mainly due to product mix.
Net sales by geographic area and percent change for fiscal 2023, fiscal 2022 and fiscal 2021 were as follows ( in thousands ): Net Sales FY 2023 FY 2022 FY 2021 FY23 vs. FY22 % Change FY22 vs.
Net sales by geographic area and percent change for fiscal 2024, fiscal 2023 and fiscal 2022 were as follows ( in thousands ): Net Sales FY 2024 FY 2023 FY 2022 FY24 vs. FY23 % Change FY23 vs.
As of May 27, 2023, a valuation allowance of $1.4 million was recorded, representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance as of May 28, 2022 was $3.5 million.
As of June 1, 2024, a valuation allowance of $2.1 million was recorded, representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance as of May 27, 2023 was $1.4 million.
Gross margin during fiscal 2023 included expense related to inventory provisions of $0.3 million for PMT, $0.1 million for Canvys and $0.1 million for Healthcare. Consolidated gross profit was $71.7 million during fiscal 2022, compared to $58.8 million during fiscal 2021.
Gross margin during fiscal 2024 included expense related to inventory provisions of $0.4 million for PMT, $0.1 million for Canvys and $0.1 million for Healthcare. Consolidated gross profit was $83.7 million during fiscal 2023, compared to $71.7 million during fiscal 2022.
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 further information. Cash, cash equivalents and investments were $40.5 million at May 28, 2022.
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 further information. Cash and cash equivalents were $25.0 million at May 27, 2023.
Cash used in financing activities of $0.4 million during fiscal 2022 resulted primarily from the $3.2 million used to pay dividends to shareholders, partially offset by proceeds from the issuance of common stock from stock option exercises. All future payments of dividends are at the discretion of the Board of Directors.
Cash provided by financing activities of $0.4 million during fiscal 2023 resulted primarily from the $3.8 million of proceeds from the issuance of common stock from stock option exercises and the $3.3 million used to pay dividends to shareholders. All future payments of dividends are at the discretion of the Board of Directors.
As of the date of this report, no amounts were outstanding under the Revolving Credit Facility. 28 Cash Flows from Operating Activities Cash flow from operating activities primarily resulted from our net income adjusted for non-cash items and changes in our operating assets and liabilities. Operating activities utilized $8.2 million of cash during fiscal 2023.
As of the end of fiscal 2024 and the date of this report, no amounts were outstanding under the Revolving Credit Facility. Cash Flows from Operating Activities Cash flow from operating activities primarily resulted from our net income adjusted for non-cash items and changes in our operating assets and liabilities. Operating activities provided $6.5 million of cash during fiscal 2024.
Purchasing of future investments may vary from period to period due to interest and foreign currency exchange rates. 29 Cash Flows from Financing Activities The cash flow from financing activities primarily consists of cash dividends paid.
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 cash dividends paid.
We conduct annual reviews for idle and underutilized equipment and review business plans for possible impairment. If adverse events do occur, our impairment review is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of our assets and liabilities.
If adverse events do occur, our impairment review is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of our assets and liabilities.
We had net income of $17.9 million during fiscal 2022, which included non-cash stock-based compensation expense of $0.7 million associated with the issuance of stock option awards and restricted stock awards, $0.5 million of inventory provisions, and depreciation and amortization expense of $3.4 million associated with our property and equipment as well as amortization of our intangible assets.
We had net income of $0.1 million during fiscal 2024, which included non-cash stock-based compensation expense of $1.3 million associated with the issuance of stock option awards and restricted stock awards, $0.6 million of inventory provisions and depreciation and amortization expense of $4.3 million associated with our property and equipment as well as amortization of our intangible assets, and a $1.0 million increase in deferred income taxes.
Gross margin during fiscal 2022 included expense related to inventory provisions for PMT of $0.4 million and $0.1 million for Healthcare. Power and Microwave Technologies Net sales for PMT increased 5.7% to $164.3 million during fiscal 2023 from $155.4 million during fiscal 2022.
Gross margin during fiscal 2023 included expense related to inventory provisions of $0.3 million for PMT, $0.1 million for Canvys and $0.1 million for Healthcare. Power and Microwave Technologies Net sales for PMT decreased 21.7% to $128.7 million during fiscal 2024 from $164.3 million during fiscal 2023.
Capital expenditures were primarily related to our LaFox manufacturing business and facility renovation, IT systems and the Healthcare business. Cash used by investing activities of $8.1 million during fiscal 2022 was mainly attributed to the $5.0 million purchase of a Certificate of Deposit (CD) and $3.1 million in capital expenditures.
Cash used by investing activities of $2.2 million during fiscal 2023 was mainly attributed to $7.4 million in capital expenditures with a $5.0 million offset for the maturities of a Certificate of Deposit (CD). Capital expenditures were primarily related to our LaFox manufacturing business and facility renovation, IT systems and the Healthcare business.
Nearly 60% of our products are manufactured in LaFox, Illinois, Marlborough, Massachusetts or 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.
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. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets.
The increase in Healthcare was primarily due to strong part sales and increase in demand for the ALTA750 TM tubes. 23 Gross profit by segment and percent of segment net sales for fiscal 2023, fiscal 2022 and fiscal 2021 were as follows ( in thousands ): Gross Profit FY 2023 FY 2022 FY 2021 PMT $ 54,089 32.9 % $ 50,810 32.7 % $ 43,546 33.8 % GES 13,719 28.8 % 7,231 32.0 % 2,405 29.0 % Canvys 12,375 31.5 % 11,252 32.0 % 10,274 35.0 % Healthcare 3,506 30.7 % 2,407 21.2 % 2,600 25.1 % Total $ 83,689 31.9 % $ 71,700 31.9 % $ 58,825 33.2 % 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.
The increase in Healthcare was primarily due to an increase in equipment sales. 24 Gross profit by segment and percent of segment net sales for fiscal 2024, fiscal 2023 and fiscal 2022 were as follows ( in thousands ): Gross Profit FY 2024 FY 2023 FY 2022 PMT $ 38,717 30.1 % $ 54,089 32.9 % $ 50,810 32.7 % GES 6,607 28.4 % 13,719 28.8 % 7,231 32.0 % Canvys 10,973 33.8 % 12,375 31.5 % 11,252 32.0 % Healthcare 3,669 30.4 % 3,506 30.7 % 2,407 21.2 % Total $ 59,966 30.5 % $ 83,689 31.9 % $ 71,700 31.9 % 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.
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.
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.
We currently have operations in the following major geographic regions: North America, Asia/Pacific, Europe and Latin America. 22 Results of Operations Overview - Fiscal Year Ended May 27, 2023 • Fiscal 2023 and fiscal 2022 both contained 52 weeks. • Net sales during fiscal 2023 were $262.7 million, up 16.9%, compared to net sales of $224.6 million during fiscal 2022. • Gross margin was 31.9% of net sales during fiscal 2023, compared to 31.9% of net sales during fiscal 2022. • Selling, general and administrative expenses were $58.7 million, or 22.4% of net sales, during fiscal 2023, compared to $55.7 million, or 24.8% of net sales, during fiscal 2022. • Operating income during fiscal 2023 was $25.0 million, compared to an operating income of $16.0 million during fiscal 2022. • Other income during fiscal 2023 was less than $0.1 million, compared to other expense of $0.2 million during fiscal 2022. • Net income during fiscal 2023 was $22.3 million, compared to a net income of $17.9 million during fiscal 2022.
We currently operate within the following major geographic regions: North America, Asia/Pacific, Europe and Latin America. 23 Results of Operations Overview - Fiscal Year Ended June 1, 2024 • Fiscal 2024 contained 53 weeks and fiscal 2023 contained 52 weeks. • Net sales during fiscal 2024 were $196.5 million, down 25.2%, compared to net sales of $262.7 million during fiscal 2023. • Gross margin was 30.5% of net sales during fiscal 2024, compared to 31.9% of net sales during fiscal 2023. • Selling, general and administrative expenses were $59.5 million, or 30.3% of net sales, during fiscal 2024, compared to $58.7 million, or 22.4% of net sales, during fiscal 2023. • Operating income during fiscal 2024 was $0.3 million, compared to an operating income of $25.0 million during fiscal 2023. • Other expense during fiscal 2024 was $0.2 million, compared to other income of less than $0.1 million during fiscal 2023. • Net income during fiscal 2024 was $0.1 million, compared to a net income of $22.3 million during fiscal 2023.
Consolidated gross profit was $83.7 million during fiscal 2023, compared to $71.7 million during fiscal 2022.
Consolidated gross profit was $60.0 million during fiscal 2024, compared to $83.7 million during fiscal 2023.
SG&A as a percentage of sales decreased to 22.4% during fiscal 2023 as compared to 24.8% during fiscal 2022. Selling, general and administrative expenses decreased during fiscal 2022 to $55.7 million from $55.9 million during fiscal 2021.
SG&A as a percentage of sales increased to 30.3% during fiscal 2024 as compared to 22.4% during fiscal 2023. Selling, general and administrative expenses increased during fiscal 2023 to $58.7 million from $55.7 million during fiscal 2022.
PMT also offers its customers technical services for both microwave and industrial equipment. Green Energy Solutions 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.
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.
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.
Some of the Company's products are manufactured in China and imported into the United States. The Office of the United States Trade Representative ("USTR") instituted tariffs on the importation of a number of products into the United States from China. These tariffs are a response to what the USTR considers to be certain unfair trade practices by China.
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.
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.
Fiscal 2023 had $0.3 million of investment income compared to $0.1 million of investment income for fiscal 2022. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. The foreign exchange loss reported for fiscal 2023 totaled $0.3 million, unchanged from fiscal 2022.
Other Income/Expense Other expense was $0.2 million during fiscal 2024, compared to other income of less than $0.1 million during fiscal 2023. Fiscal 2024 had $0.3 million of investment income the same as fiscal 2023. 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. Income Tax Provision Our income tax provision (benefit) during fiscal 2023, fiscal 2022 and fiscal 2021 was $2.7 million, ($2.2 million) and $0.7 million, respectively. The effective income tax rates during fiscal 2023, fiscal 2022 and fiscal 2021 were 10.8%, (13.7%) and 28.3%, respectively.
The foreign exchange loss reported for fiscal 2024 totaled $0.4 million compared to $0.3 million for fiscal 2023. We currently do not utilize derivative instruments to manage our exposure to foreign currency. Income Tax Provision Our income tax provision (benefit) during fiscal 2024, fiscal 2023 and fiscal 2022 was $0.1 million, $2.7 million and ($2.2 million), respectively.
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.
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.
The majority of the inventory increase was to support our Electron tube, PMG, Green Energy Solutions, LaFox manufacturing and Healthcare businesses. The decrease in accounts payable and accrued liabilities was due to revenue recognition and timing. Operating activities provided $1.9 million of cash during fiscal 2022.
The majority of the inventory increase was to support our Electron tube, PMG, Green Energy Solutions, LaFox manufacturing and Healthcare businesses. The decrease in accounts payable and accrued liabilities was due to revenue recognition and timing. 29 Cash Flows from Investing Activities The cash flow from investing activities consisted primarily of purchases and maturities of investments and capital expenditures.
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.
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.
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.
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 fiscal 2024.
Net deferred tax assets related to foreign NOL carryforwards was $0.2 million as of May 27, 2023 compared to $0.4 million as of May 28, 2022, with various or indefinite expiration dates. We released the valuation allowance and have utilized $1.8 million of domestic net deferred tax asset related to foreign tax credit carryforwards as of May 27, 2023.
Net deferred tax assets related to foreign NOL carryforwards was $0.1 million as of June 1, 2024, and $0.2 million as of May 27, 2023 with various or indefinite expiration dates.
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 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.
Selling, General and Administrative Expenses Selling, general and administrative expenses (“SG&A”) increased during fiscal 2023 to $58.7 million from $55.7 million during fiscal 2022. This increase in SG&A expense from fiscal 2022 was mainly due to higher employee compensation and travel expenses, partially offset by lower legal fees and a lower bad debt expense.
Selling, General and Administrative Expenses Selling, general and administrative expenses (“SG&A”) increased 1.4% during fiscal 2024 to $59.5 million from $58.7 million during fiscal 2023. This increase in SG&A from fiscal 2023 was mainly due to higher R&D expenses, partially offset by lower incentives due to financial performance.
Cash provided by financing activities of $0.4 million during fiscal 2023 resulted primarily from the $3.8 million of proceeds from the issuance of common stock from stock option exercises and the $3.3 million used to pay dividends to shareholders.
Cash used in financing activities of $2.9 million during fiscal 2024 resulted primarily from the $3.4 million used to pay dividends to shareholders with a $0.6 million offset for the proceeds from stock option exercises.
The weight of this positive evidence is sufficient to outweigh other negative evidence in evaluating our need for a valuation allowance in the U.S. federal jurisdiction. As a result of the positive evidence outweighing the negative evidence for the year ended May 28, 2022, we released the full valuation allowance on the U.S. federal and state deferred tax items.
The weight of this positive evidence is sufficient to outweigh other negative evidence in evaluating our need for a valuation allowance in the U.S. federal jurisdiction.
The slight increase in sales was primarily due to an increase in equipment sales, partially offset by decreases in part sales and CT tube sales. Gross margin as a percentage of net sales increased to 30.7% during fiscal 2023, compared to 21.2% during fiscal 2022. The increase was primarily due to improved manufacturing absorption and decreased component scrap expenses.
Gross margin as a percentage of net sales increased to 30.7% during fiscal 2023, compared to 21.2% during fiscal 2022. The increase was primarily due to improved manufacturing absorption and decreased component scrap expenses. Sales by Geographic Area Our sales are aggregated by the following geographic regions: North America; Asia/Pacific; Europe; Latin America; and Other.
Sales for PMT increased by 5.7%, GES sales increased by 110.5%. Canvys sales increased by 11.8% and Healthcare sales increased by 0.5%. The increase in PMT was mainly due to strong growth in the semi-wafer fabrication industry and the RF and microwave products for various applications.
Sales for PMT decreased by 21.7%, GES sales decreased by 51.2%, Canvys sales decreased by 17.5% and Healthcare sales increased by 5.7%. The decrease in PMT was mainly due to lower sales of semi-wafer fabrication products and RF and microwave products.
FY21 % Change PMT $ 164,299 $ 155,445 $ 128,980 5.7 % 20.5 % GES 47,596 22,611 8,300 110.5 % 172.4 % Canvys 39,331 35,187 29,319 11.8 % 20.0 % Healthcare 11,432 11,377 10,338 0.5 % 10.1 % Total $ 262,658 $ 224,620 $ 176,937 16.9 % 26.9 % During fiscal 2023, consolidated net sales increased by 16.9% compared to fiscal 2022.
FY22 % Change PMT $ 128,697 $ 164,299 $ 155,445 (21.7 %) 5.7 % GES 23,233 47,596 22,611 (51.2 %) 110.5 % Canvys 32,444 39,331 35,187 (17.5 %) 11.8 % Healthcare 12,086 11,432 11,377 5.7 % 0.5 % Total $ 196,460 $ 262,658 $ 224,620 (25.2 %) 16.9 % During fiscal 2024, consolidated net sales decreased by 25.2% compared to fiscal 2023.
Consolidated gross margin as a percentage of net sales decreased to 31.9% during fiscal 2022, from 33.2% during fiscal 2021, primarily due to unfavorable product mix for PMT, favorable product mix for GES, higher freight costs and foreign exchange effects for Canvys and increased component scrap expenses for Healthcare.
Consolidated gross margin as a percentage of net sales was 30.5% for fiscal 2024, compared to the 31.9% during fiscal 2023, primarily due to unfavorable product mix and manufacturing under absorption for PMT, unfavorable product mix for GES, favorable product mix and lower freight costs for Canvys and increased manufacturing under absorption for Healthcare.
Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers’ markets.
A number of the Company's products manufactured in China are subject to duties of 25% when imported into the United States. Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers’ markets.
Gross margin as a percentage of net sales decreased to 31.5% during fiscal 2023 as compared to 32.0% during fiscal 2022 mainly due to product mix. Net sales for Canvys increased 20.0% to $35.2 million during fiscal 2022, from $29.3 million during fiscal 2021. Sales increased primarily due to strong sales in the European and North American markets.
Gross margin as a percentage of net sales decreased to 28.8% during fiscal 2023 as compared to 32.0% during fiscal 2022, primarily due to product mix. 25 Canvys Net sales for Canvys decreased 17.5% to $32.4 million during fiscal 2024, from $39.3 million during fiscal 2023.
Intangible assets are initially recorded at their fair market values determined by quoted market prices in active markets, if available, or recognized valuation models. We review property and equipment, definite-lived intangible assets and other long-lived assets for impairment whenever adverse events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable.
We review property and equipment, definite-lived intangible assets and other long-lived assets for impairment whenever adverse events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. We conduct annual reviews for idle and underutilized equipment and review business plans for possible impairment.
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.
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. 22 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.
We record penalties and interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income. Accrued interest and penalties were included within the related tax liability line in the Consolidated Balance Sheets. We have not recorded a liability for interest and penalties as of May 27, 2023 or May 28, 2022.
The Company recorded a $0.1 million uncertain tax position as of June 1, 2024 as compared to not recording an uncertain tax position as of May 27, 2023. We record interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income.
The deferred tax liability related to undistributed earnings of our foreign subsidiaries was less than $0.1 million in both fiscal 2023 and fiscal 2022. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to support a more likely than not assertion that its deferred tax assets will be realized.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to support a more likely than not assertion that its deferred tax assets will be realized. A significant component of objective evidence evaluated was the cumulative income or loss incurred in each jurisdiction over the three-year period ended June 1, 2024.
The increase in GES was primarily due to growth in related product sales to the wind turbine industry, as well as EV battery modules. The increase in Canvys was primarily due to strong sales in the North American market. The increase in Healthcare was primarily due to an increase in equipment sales.
The increase in PMT was mainly due to strong growth in the semi-wafer fabrication industry and the RF and microwave products for various applications. The increase in GES was primarily due to growth in related product sales to the wind turbine industry, as well as EV battery modules.
In addition, the Company recognized both foreign tax and research and development tax credits in fiscal 2023.
In addition, the Company recognized both foreign tax and research and development ("R&D") tax credits in fiscal 2024. During the fourth quarter of fiscal 2024, the Company recorded R&D tax credits of $0.5 million.
Net sales for Healthcare increased 10.1% to $11.4 million during fiscal 2022, from $10.3 million during fiscal 2021. The increase in sales was primarily due to strong parts sales and an increase in demand for the ALTA 750D TM tubes. Gross margin as a percentage of net sales decreased to 21.2% during fiscal 2022, compared to 25.1% during fiscal 2021.
Healthcare Net sales for Healthcare increased 5.7% to $12.1 million during fiscal 2024, from $11.4 during fiscal 2023. The increase in sales was primarily due to higher part and CT tube sales. Gross margin as a percentage of net sales decreased slightly to 30.4% during fiscal 2024, compared to 30.7% during fiscal 2023.
Generally, years prior to fiscal 2017 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 were under examination for fiscal 2015 through fiscal 2018 in Germany. The audit was settled in the fourth quarter of fiscal 2022.
Years prior to fiscal 2015 are closed for examination under the statute of limitation for U.S. federal and U.S. state. In the Netherlands, years prior to fiscal 2019 are closed for examination. We are under examination in Germany for fiscal years 2019 to 2022. We have no current open audits in the U.S.
The increase was mainly due to growth in related product sales to the wind turbine industry, as well as EV battery modules. Gross margin as a percentage of net sales decreased to 28.8% during fiscal 2023 as compared to 32.0% during fiscal 2022, primarily due to product mix.
Net sales for GES increased 110.5% to $47.6 million during fiscal 2023 from $22.6 million during fiscal 2022. The increase was mainly due to growth in related product sales to the wind turbine industry, as well as EV battery modules.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (“GAAP”) and pursuant to the rules and regulations of the SEC, we make assumptions, judgments and estimates that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities.
Contractual Obligations Contractual obligations are presented in the table below as of June 1, 2024 ( in thousands ): Less than 1 year 1 - 3 years 4 - 5 years More than 5 years Less Interest Total Lease obligations (1) $ 1,294 $ 1,505 $ 142 $ — $ (181 ) $ 2,760 (1) Lease obligations are related to certain warehouse and office facilities under non-cancelable operating leases as well as financing leases. 30 Critical Accounting Estimates The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (“GAAP”) and pursuant to the rules and regulations of the SEC, we make assumptions, judgments and estimates that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities.
Changes in our operating assets and liabilities resulted in a use of cash of $16.5 million during fiscal 2022, primarily due to the increase in inventories of $20.6 million, an increase in accounts receivable of $6.2 million and an increase in prepaid expenses of $0.2 million.
Changes in our operating assets and liabilities provided cash of $1.2 million during fiscal 2024, mainly due to a decrease in receivables of $5.3 million, a decrease in accounts payable and accrued liabilities of $4.7 million and a decrease in prepaid expenses of $0.3 million.
The increase in GES was primarily due to components for power management applications and niche products for wind turbines. The increase in Canvys was primarily due to strong sales in the European and North American markets.
The increase in Canvys was primarily due to strong sales in the North American market.
We have historically determined that undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. The deferred tax liability on the outside basis difference is now primarily withholding tax on future dividend distributions.
The deferred tax liability on the outside basis difference is now primarily withholding tax on future dividend distributions. The deferred tax liability related to undistributed earnings of our foreign subsidiaries was less than $0.1 million in both fiscal 2024 and fiscal 2023.
During fiscal 2022, consolidated net sales increased by 26.9% compared to fiscal 2021. Sales for PMT increased by 20.5%, GES sales increased by 172.4%, Canvys sales increased by 20.0% and Healthcare sales increased by 10.1%.
The increase in Healthcare was primarily due to higher part and CT tube sales. During fiscal 2023, consolidated net sales increased by 16.9% compared to fiscal 2022. Sales for PMT increased by 5.7%, GES sales increased by 110.5%, Canvys sales increased by 11.8% and Healthcare sales increased by 0.5%.
If future demand changes in an industry or market conditions differ from management’s estimates, additional provisions may be necessary. 31 Intangible and Long-Lived Assets Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements and technology acquired in connection with the acquisitions.
If future demand changes in an industry or market conditions differ from management’s estimates, additional provisions may be necessary. Intangible and Long-Lived Assets Our intangible assets reflect their fair value. Intangible assets are initially recorded at their fair market values determined by quoted market prices in active markets, if available, or recognized valuation models.
However, when considering the non-recurrence of the $1.6 million legal settlement in fiscal 2021, the SG&A expense for fiscal 2022 was $1.4 million or 2.6% higher than fiscal 2021. This increase in SG&A expense from fiscal 2021 was mainly due to higher employee compensation expenses including incentive expense, partially offset by lower legal fees.
This increase in SG&A expense from fiscal 2022 was mainly due to higher employee compensation and travel expenses, partially offset by lower legal fees and a lower bad debt expense. SG&A as a percentage of sales decreased to 22.4% during fiscal 2023 as compared to 24.8% during fiscal 2022.
As of May 27, 2023 and May 28, 2022 we have utilized all net deferred tax assets related to federal net operating loss (“NOL”) carryforwards. Net deferred tax assets related to domestic state NOL carryforwards at May 27, 2023 amounted to approximately $2.1 million, compared to $2.4 million at May 28, 2022.
These credits represent the expected U.S. federal credits to be claimed for fiscal 2024. 27 Net deferred tax assets related to domestic state NOL carryforwards at June 1, 2024 amounted to approximately $1.8 million, compared to $2.1 million at May 27, 2023.
Cash, cash equivalents and investments by geographic area at May 28, 2022 consisted of $25.7 million in North America, $6.0 million in Europe, $1.5 million in Latin America and $7.3 million in Asia/Pacific. We repatriated a total of $1.5 million to the United States in fiscal 2022 from our foreign entities.
Cash and cash equivalents were $24.3 million at June 1, 2024. Cash and cash equivalents by geographic area at June 1, 2024 consisted of $7.1 million in North America, $7.3 million in Europe, $1.1 million in Latin America and $8.8 million in Asia/Pacific.
We also had strong growth in various Electron Device (EDG) product lines. Gross margin as a percentage of net sales decreased to 32.7% during fiscal 2022 as compared to 33.8% during fiscal 2021, primarily due to product mix. Green Energy Solutions Net sales for GES increased 110.5% to $47.6 million during fiscal 2023 from $22.6 million during fiscal 2022.
Gross margin as a percentage of net sales decreased to 30.1% during fiscal 2024 as compared to 32.9% during fiscal 2023, primarily due to unfavorable product mix and manufacturing under absorption. Net sales for PMT increased 5.7% to $164.3 million during fiscal 2023 from $155.4 million during fiscal 2022.
This analysis requires management judgment with respect to changes in technology, the continued success of product lines and future volume, revenue and expense growth rates. 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.
This analysis requires management judgment with respect to changes in technology, the continued success of product lines and future volume, revenue and expense growth rates. 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.
Liquidity, Financial Position and Capital Resources Our operations and cash needs have been primarily financed through income from operations and cash on hand. Cash and cash equivalents were $25.0 million at May 27, 2023.
Accrued interest was included within the related tax liability line in the Consolidated Balance Sheets. We have recorded a liability of less than $0.1 million for interest as of June 1, 2024. 28 Liquidity, Financial Position and Capital Resources Our operations and cash needs have been primarily financed through income from operations and cash on hand.
Gross margin as a percentage of net sales decreased to 32.0% during fiscal 2022 as compared to 35.0% during fiscal 2021 mainly due to increasing freight costs resulting from the COVID-19 pandemic and foreign currency effects. Healthcare Net sales for Healthcare increased 0.5% to $11.4 million during fiscal 2023, essentially unchanged from fiscal 2022.
Sales decreased primarily due to lower sales in the North American market resulting from high interest rates negatively impacting our medical OEM customers. Gross margin as a percentage of net sales increased to 33.8% during fiscal 2024 as compared to 31.5% during fiscal 2023 due to product mix and lower freight costs.
Removed
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.
Added
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.
Removed
The Company began reporting the results for its new Green Energy Solutions ("GES") segment in the first quarter of fiscal 2023 due to its focus on power applications that support the green energy market. The GES segment has been carved out of our existing Power and Microwave Technologies (“PMT”) segment.
Added
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.
Removed
Accordingly, the Company is reporting its financial performance based on four operating and reportable segments.
Added
The decrease in GES was due to the project-based nature of the wind turbine business and lower shipments to EV locomotive customers including a large shipment of battery modules made in fiscal 2023 that did not recur in fiscal 2024. The decrease in Canvys was primarily due to lower sales in the North American market.

… 46 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed4 unchanged
Biggest changeWe do manage foreign exchange exposures by using currency clauses in certain sales contracts and we also have local debt to offset asset exposures. We have not used any derivative instruments nor entered into any forward contracts in fiscal 2023, fiscal 2022 or fiscal 2021.
Biggest changeWe have not used any derivative instruments nor entered into any forward contracts in fiscal 2024, fiscal 2023 or fiscal 2022.
Had the U.S. dollar changed unfavorably 10% against various foreign currencies, foreign denominated net sales would have been lower by an estimated $12.2 million during fiscal 2023, an estimated $12.1 million during fiscal 2022 and an estimated $10.0 million during fiscal 2021.
Had the U.S. dollar changed unfavorably 10% against various foreign currencies, foreign denominated net sales would have been lower by an estimated $10.8 million during fiscal 2024, an estimated $12.2 million during fiscal 2023 and an estimated $12.1 million during fiscal 2022.
Total assets would have declined by an estimated $4.3 million as of the fiscal year ended May 27, 2023 and an estimated $4.2 million as of the fiscal year ended May 28, 2022, while the total liabilities would have decreased by an estimated $1.1 million as of the fiscal year ended May 27, 2023 and an estimated $1.0 million as of the fiscal year ended May 28, 2022.
Total assets would have declined by an estimated $4.6 million as of the fiscal year ended June 1, 2024 and an estimated $4.3 million as of the fiscal year ended May 27, 2023, while the total liabilities would have decreased by an estimated $1.2 million as of the fiscal year ended June 1, 2024 and an estimated $1.1 million as of the fiscal year ended May 27, 2023.
Our foreign denominated assets and liabilities are cash and cash equivalents, accounts receivable, inventory, accounts payable and intercompany receivables and payables, as we conduct business in countries of the European Union, Asia/Pacific and, to a lesser extent, Canada and Latin America.
Our foreign denominated assets and liabilities are cash and cash equivalents, accounts receivable, inventory, accounts payable and intercompany receivables and payables, as we conduct business in countries of the European Union, Asia/Pacific and, to a lesser extent, Canada and Latin America. We do manage foreign exchange exposures by using currency clauses in certain sales contracts.

Other RELL 10-K year-over-year comparisons