ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and related notes.
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. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes appearing elsewhere in this filing. This section is organized as follows:
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Business Overview
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Results of Operations - an analysis and comparison of our consolidated results of operations for the fiscal years ended May 30, 2026, May 31, 2025 and June 1, 2024, as reflected in our Consolidated Statements of Comprehensive Income.
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Liquidity, Financial Position and Capital Resources - a discussion of our primary sources and uses of cash for the fiscal years ended May 30, 2026, May 31, 2025 and June 1, 2024, and a discussion of changes in our financial position.
Business Overview
Richardson Electronics, Ltd. (the "Company," "we," "our") is a leading global manufacturer of engineered solutions, green energy products, power grid and microwave tubes, and related consumables; power conversion and RF and microwave components including green energy solutions; tubes for diagnostic imaging equipment; and customized display solutions. More than 55% 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. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure.
Some of the Company's products are manufactured in foreign countries and imported into the United States. Accordingly, the Company’s operations are subject to tariffs and other trade protection measures. The current U.S. administration has instituted certain changes, and may make additional changes, in trade policies that include the negotiation or termination of trade agreements, higher tariffs on imports into the U.S., and other measures affecting trade between the U.S. and other countries from which the Company imports. Due in part to these measures, some countries are changing their trade policies relating to goods imported from the U.S. These global trade disruptions and geopolitical tensions, together with any related downturns in the global economy, could dampen customer demand,increase market volatility, and impact currency exchange rates, all which could materially and adversely affect the Company’s financial performance.
The extent to which of these changes in trade policies may impact our business will depend on various factors, including (i) when trade measures are implemented, (ii) the ultimate amount, scope, nature, and duration of tariffs and other trade measures, and (iii) the extent to which the Company can mitigate impacts and pass on any increased costs associated with these changes. In addition, the impact of trade disruptions on general economic conditions and demand for electronic components is difficult to predict.
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Our results for fiscal 2026 were not materially impacted by the changes in trade policies implemented by the U.S. However, 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. Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers’ markets. However, if the Company is unable to successfully pass through the additional cost of these tariffs, or if the higher prices reduce demand for the Company's products, it will have a negative effect on the Company's sales and gross margins.
The Company reports its financial performance based on the operating and reportable segments defined as follows:
Power and Microwave Technologies ("PMT") combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies. As a designer, manufacturer, technology partner and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair - all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in 5G, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment. After the sale of certain assets to DirectMed, the Company continues to repair certain CT tubes and sells them exclusively to DirectMed pursuant to a supply agreement.
Green Energy Solutions ("GES") combines our key technology partners and engineered solutions capabilities to design and manufacture innovative products for the fast-growing energy storage market and power management applications. As a designer, manufacturer, technology partner and authorized distributor, GES’s strategy is to provide specialized technical expertise and engineered solutions using our core design engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair - all through our existing global infrastructure. GES’s focus is on products for numerous green energy applications such as wind, solar, hydrogen and Electric Vehicles, and other power management applications that support green solutions such as synthetic diamond manufacturing.
Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets. Our engineers design, manufacture, source and support a full spectrum of solutions to match the needs of our customers. We offer long-term availability and proven custom display solutions that include touch screens, protective panels, custom enclosures, All-In-One computers, specialized cabinet finishes, application specific software packages and certification services. Our volume commitments are lower than the large display manufacturers, making us the ideal choice for companies with very specific design requirements. We partner with both private label manufacturing companies and leading branded hardware vendors to offer the highest quality display and touch solutions and customized computing platforms.
We currently operate within the following major geographic regions: North America, Asia/Pacific, Europe and Latin America.
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Results of Operations
Overview - Fiscal Year Ended May 30, 2026
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Fiscal 2026 and fiscal 2025 each contained 52 weeks.
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Net sales during fiscal 2026 were $228.6 million, up 9.4%, compared to net sales of $208.9 million during fiscal 2025.
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Gross margin was 31.2% of net sales during fiscal 2026, compared to 31.0% of net sales during fiscal 2025.
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Selling, general and administrative expenses were $65.7 million, or 28.8% of net sales, during fiscal 2026, compared to $62.2 million, or 29.8% of net sales, during fiscal 2025.
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Operating income during fiscal 2026 was $6.5 million, compared to an operating loss of $2.5 million during fiscal 2025.
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Other income during fiscal 2026 was $1.0 million, compared to other income of $0.9 million during fiscal 2025.
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Net income during fiscal 2026 was $6.4 million, compared to a net loss of $1.1 million during fiscal 2025.
Net Sales and Gross Profit Analysis
Net sales by segment and percentage change for fiscal 2026, fiscal 2025 and fiscal 2024 were as follows (in thousands):
During fiscal 2026, consolidated net sales increased by 9.4% compared to fiscal 2025. Sales for PMT increased by 9.1%, GES sales increased by 7.3%, and Canvys sales increased by 12.4%. The increase in PMT was due to strong growth in RF and Wireless Components and Semiconductor Wafer Fab market. The increase in GES was due to an increase in new customers, new power management products, and increased market share for current products. The increase in Canvys was primarily due to higher sales in the North American markets.
During fiscal 2025, consolidated net sales increased by 6.3% compared to fiscal 2024. Sales for PMT increased by 4.4%, GES sales increased by 23.6%, and Canvys sales increased by 2.2%. The increase in PMT was mainly due to increased sales of engineered solutions for the semi-wafer fabrication products and increases in RF and Wireless Components. The increase in GES was mainly due to increased market share, new products and new customer development for power management products focused on numerous green energy applications. The increase in Canvys was attributable to higher sales in the North American markets.
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Gross profit by segment and percentage of segment net sales for fiscal 2026, fiscal 2025 and fiscal 2024 were as follows (in thousands):
Gross profit reflects the distribution and manufacturing product margin less manufacturing variances, inventory obsolescence charges, customer returns, scrap and cycle count adjustments, engineering costs and other provisions.
Consolidated gross profit was $71.3 million during fiscal 2026, compared to $64.8 million during fiscal 2025. Consolidated gross margin as a percentage of net sales was 31.2% for fiscal 2026, compared to the 31.0% during fiscal 2025, primarily due to a favorable product mix for PMT, and unfavorable product mix for GES and Canvys.
Consolidated gross profit was $64.8 million during fiscal 2025, compared to $60.0 million during fiscal 2024. Consolidated gross margin as a percentage of net sales was 31.0% for fiscal 2025, compared to the 30.5% during fiscal 2024, primarily due to favorable product mix partially offset by manufacturing under absorption for PMT, favorable product mix of increased Engineered Solution products for GES, and unfavorable product mix and higher freight costs for Canvys. Gross margin during fiscal 2025 included expense related to inventory provisions of $0.5 million for PMT and $0.1 million for Canvys.
Power and Microwave Technologies
Net sales for PMT increased 9.1% to $160.5 million during fiscal 2026 from $147.1 million during fiscal 2025. The increase was due to strong growth in RF and Wireless Components and Semiconductor Wafer Fab market. Gross margin as a percentage of net sales increased to 31.2% during fiscal 2026 as compared to 30.5% during fiscal 2025, due to favorable product mix.
Net sales for PMT increased 4.4% to $147.1 million during fiscal 2025 from $140.8 million during fiscal 2024. The increase was due primarily to increased sales of engineered solutions for the semiconductor wafer fabrication market and increases in RF and Wireless components. Gross margin as a percentage of net sales increased to 30.5% during fiscal 2025 as compared to 30.1% during fiscal 2024, primarily due to favorable product mix partially offset by manufacturing under absorption.
Green Energy Solutions
Net sales for GES increased 7.3% to $30.8 million during fiscal 2026 from $28.7 million during fiscal 2025. The increase in GES was due to increase in new customers, new power management products, and increased market share for current products. Gross margin as a percentage of net sales decreased to 30.3% during fiscal 2026 as compared to 31.4% during fiscal 2025, primarily due to unfavorable product mix.
Net sales for GES increased 23.6% to $28.7 million during fiscal 2025 from $23.2 million during fiscal 2024. The increase in GES was mainly due to increased market share, new products and new customer development for power management products focused on numerous green energy applications. Gross margin as a percentage of net sales increased to 31.4% during fiscal 2025 as compared to 28.4% during fiscal 2024, primarily due to favorable product mix of increased Engineered Solution products.
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Canvys
Net sales for Canvys increased 12.4% to $37.3 million during fiscal 2026, from $33.1 million during fiscal 2025 primarily due to higher sales in the North American markets. Gross margin as a percentage of net sales decreased to 32.0% during fiscal 2026 as compared to 32.9% during fiscal 2025 due to unfavorable product mix.
Net sales for Canvys increased 2.2% to $33.1 million during fiscal 2025, from $32.4 million during fiscal 2024 due to higher sales in the North American markets. Gross margin as a percentage of net sales decreased to 32.9% during fiscal 2025 as compared to 33.8% during fiscal 2024 due to product mix and higher freight costs.
Sales by Geographic Area
We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition. Terms are generally 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.
Our sales are aggregated by the following geographic regions: North America; Asia/Pacific; Europe; Latin America; and Other. The net sales by geographic area and percentage change for fiscal 2026, fiscal 2025 and fiscal 2024 were as follows (in thousands):
(1)
Primarily includes net sales not allocated to a specific geographical region.
Gross Profit by Geographic Area
Gross profit by geographic area and percentage of geographic net sales for fiscal 2026, fiscal 2025 and fiscal 2024 were as follows (in thousands):
(1)
Primarily includes net sales not allocated to a specific geographical region, unabsorbed value-add costs and other unallocated expenses.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses (“SG&A”) increased 5.7% during fiscal 2026 to $65.7 million from $62.2 million during fiscal 2025. This increase in SG&A from fiscal 2025 mainly reflected higher salaries and incentives due to sales growth, as well as severance expense, partially offset by lower travel and legal expenses. SG&A as a percentage of sales decreased to 28.8% during fiscal 2026 as compared to 29.8% during fiscal 2025.
Selling, general and administrative expenses (“SG&A”) increased 4.4% during fiscal 2025 to $62.2 million from $59.5 million during fiscal 2024. This increase in SG&A from fiscal 2024 mainly reflected higher incentives due to sales growth, partially offset by lower Research and Development ("R&D") expenses. SG&A as a percentage of sales decreased to 29.8% during fiscal 2025 as compared to 30.3% during fiscal 2024.
Loss on Disposal of Healthcare Assets and Related Charges
A substantial portion of Healthcare assets were sold to DirectMed on January 24, 2025 that resulted in a total loss of $5.1 million for fiscal 2025. The loss on assets sold to DirectMed totaled $3.2 million and the Company recorded an impairment charge of $1.9 million for inventories, net and property, plant and equipment, net. In future periods, Healthcare financial results are no longer a standalone segment, they have been consolidated into the PMT segment.
During fiscal 2026, the Company entered into an arrangement to sell certain Healthcare assets retained by the Company following the Healthcare asset sale in January 2025, resulting in a gain on disposal of $0.8 million.
The cumulative loss recorded in fiscal 2025 and fiscal 2026 for the disposal of Healthcare assets and related charges totaled $4.2 million. Refer to Note 10, Disposal of Healthcare Assets and Related Charges, in Part II, Item 8 for more details.
Other Income/Expense
Other income was $1.0 million during fiscal 2026, compared to other income of $0.9 million during fiscal 2025. Fiscal 2026 had $0.5 million of investment income compared to $0.4 million in fiscal 2025. 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 2026 totaled $0.5 million compared to a gain of $0.5 million for fiscal 2025. We currently do not utilize derivative instruments to manage our exposure to foreign currency. Other income for fiscal 2026 also included a non-recurring gain of $0.9 million.
Income Tax Provision (Benefit)
Our income tax provision (benefit) during fiscal 2026, fiscal 2025 and fiscal 2024 was $1.1 million, ($0.4) million and $0.1 million, respectively. The effective income tax rates during fiscal 2026, fiscal 2025 and fiscal 2024 were 14.6%, 25.4%, and 61.4%, respectively. The difference between the effective income tax rates as compared to the U.S. federal statutory rate of 21.0% during fiscal 2026, fiscal 2025 and fiscal 2024 reflects changes in the geographical distribution of income (loss) and the impact of valuation allowance changes related to the realizability of our U.S. state net operating loss deferred tax assets.
As of May 30, 2026, net deferred tax assets related to domestic state net operating loss ("NOL") carryforwards amounted to approximately $1.8 million and $1.9 million as of May 31, 2025. Net deferred tax assets related to foreign NOL carryforwards were $0.3 million as of May 30, 2026 and $0.1 million as of May 31, 2025 with various or indefinite expiration dates. During the fourth quarter of fiscal 2026, we decreased the valuation allowance on the state net operating losses by $0.5 million resulting in a total valuation allowance against state net operating losses of $1.2 million.
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 liabilities on the outside basis difference is now primarily withholding tax on future dividend distributions. There was no deferred tax liability related to undistributed earnings of our foreign subsidiaries in fiscal 2026 and fiscal 2025.
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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 May 30, 2026. We considered other positive evidence in determining the need for a valuation allowance in the U.S. including the subpart F and GILTI inclusions of our foreign earnings, the changes in our business performance in recent years and the utilization of federal NOLs. 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 30, 2026, no additional valuation allowance on the U.S. federal deferred tax items was recorded. As of May 30, 2026, we recorded a $0.5 million valuation allowance decrease on state NOLs as there was more positive evidence supporting the Company’s ability to utilize the state NOLs, including higher book income in fiscal 2026 and fiscal 2027 projections.
As of May 30, 2026, a valuation allowance of $2.8 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 31, 2025 was $2.8 million. The valuation allowance relates to state NOLs ($1.2 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.6 million). The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.
In the normal course of business, we are subject to examination by taxing authorities throughout the world. Years prior to fiscal 2016 are closed for examination under the statute of limitation for U.S. federal and U.S. state. In The Netherlands, years prior to fiscal 2021 are closed for examination. We are under examination in Germany for fiscal years 2019 to 2022. The Company is under audit in Illinois for fiscal 2022 and fiscal 2023. We have no other current open audits in the U.S.
The Company recorded $0.4 million related to uncertain tax positions as of May 30, 2026 as compared to $0.3 million as of May 31, 2025 and $0.1 million as of June 1, 2024. We record interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in operating expenses. We have recorded a liability of less than $0.1 million for interest as of May 30, 2026, May 31, 2025 and June 1, 2024.
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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 $31.8 million at May 30, 2026. Cash and cash equivalents by geographic area at May 30, 2026 consisted of $11.7 million in North America, $11.4 million in Europe, $1.0 million in Latin America and $7.7 million in Asia/Pacific. Although the Tax Cuts and Jobs Act generally eliminated federal income tax on future cash repatriation to the United States, cash repatriation may be subject to state and local taxes, withholding or similar taxes. See Note 8, Income Taxes, from 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 $35.9 million at May 31, 2025. Cash and cash equivalents by geographic area at May 31, 2025 consisted of $19.5 million in North America, $7.7 million in Europe, $0.9 million in Latin America and $7.8 million in Asia/Pacific. The January 24, 2025 sale of certain Healthcare assets to DirectMed generated $8.0 million of cash. No cash was repatriated to the United States in fiscal 2025.
Based on past performance and current expectations, we believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs through the next twelve months. Additionally, while our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for growth in our markets, we believe our existing sources of liquidity as well as our ability to generate operating cash flows will satisfy our future obligations and cash requirements.
On October 7, 2025, the Company executed a three-year extension to the Credit Agreement through the Second Amendment to the Credit Agreement with a maximum borrowing limit of $20 million. The terms of the new agreement are similar to the previous Credit Agreement. See Note 6, Revolving Credit Facility, included in the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10K for further information. The Revolving Credit Facility is guaranteed by the Company's domestic subsidiaries. Proceeds of the borrowings under the Revolving Credit Facility, if any, are expected to be used for working capital and general corporate purposes of the Company and its subsidiaries. There were no drawings or repayments under the Revolving Credit Facility as of May 30, 2026 and through the report release date. No amounts were outstanding under the Revolving Credit Facility as of May 30, 2026, and through the report release date.
Cash Flows from Operating Activities
Cash flow from operating activities primarily resulted from our net income (loss) adjusted for non-cash items and changes in our operating assets and liabilities.
Operating activities provided $0.8 million of cash during fiscal 2026. We had $6.4 million net income, a $0.8 million gain on the disposal of Healthcare assets and related charges and a $1.1 million decrease in deferred income tax assets during fiscal 2026. Other cash provided during fiscal 2026 included non-cash share-based compensation expense of $1.6 million associated with the issuance of stock option awards and restricted stock awards, $0.5 million of inventory provisions and $3.8 million from depreciation and amortization expense associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities used cash of $11.2 million during fiscal 2026, mainly due to an increase in receivables of $8.9 million, a decrease in inventories of $0.7 million, an increase of $2.3 million in prepaid expenses, and a $0.7 million net decrease in accounts payable and accrued liabilities. Increase in receivables due to increase in sales.
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Operating activities provided $10.6 million of cash during fiscal 2025. We had $1.1 million net loss, a $5.1 million loss on the disposal of Healthcare assets, a $1.0 million unrealized foreign exchange gain and a $3.3 million increase in deferred income tax assets during fiscal 2025. Other cash provided during fiscal 2025 included non-cash share-based compensation expense of $1.5 million associated with the issuance of stock option awards and restricted stock awards, $0.6 million of inventory provisions and $4.0 million from depreciation and amortization expense associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities provided cash of $4.8 million during fiscal 2025, mainly due to a decrease in receivables of $0.1 million, a decrease in inventories of $0.2 million and a $4.3 million net increase in accounts payable and accrued liabilities The increase in accounts payable and accrued liabilities was due to higher year-end accruals and timing.
Cash Flows from Investing Activities
Cash flow from investing activities consisted primarily of proceeds from the disposal of Healthcare assets and capital expenditures.
Cash used by investing activities of $3.1 million during fiscal 2026 was due to $4.4 million in capital expenditures partially offset by $1.3 million proceeds from the sale of Healthcare assets and related charges. Capital expenditures were primarily related to our IT system and LaFox manufacturing and facilities. LaFox manufacturing primarily supports the PMT and GES segments.
Cash provided by investing activities of $4.0 million during fiscal 2025 was due to $6.8 million from the proceeds from the sale of Healthcare assets and related charges partially offset by $2.8 million of capital expenditures. The capital expenditures were primarily related to our LaFox manufacturing business and facility improvements as well as IT systems.
Our purchases and proceeds from investments consisted 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
Cash flow from financing activities primarily consisted of cash dividends paid.
Cash used in financing activities of $2.5 million during fiscal 2026 resulted primarily from the $3.4 million used to pay dividends to stockholders with a $0.9 million offset for the proceeds from stock option exercises.
Cash used in financing activities of $3.2 million during fiscal 2025 resulted primarily from the $3.4 million used to pay dividends to stockholders with a $0.3 million offset for the proceeds from stock option exercises.
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.
Contractual Obligations
Contractual obligations are presented in the table below as of May 30, 2026 (in thousands):
Less than 1 year 1 - 3years Less Interest Total
(1)
Lease obligations are related to certain warehouse and office facilities and vehicles under non-cancelable operating leases.
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Critical Accounting Estimates
The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (“US 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. 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.
We believe the assumptions, judgments and estimates involved for the following have the greatest potential impact on our consolidated financial statements:
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Inventories, net
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Income Taxes
Inventories, net
Our consolidated inventories are stated at the lower of cost and net realizable value, generally using a weighted-average cost method. Our net inventories include finished goods, raw materials and work-in-progress.
We do not anticipate any material risks or uncertainties related to possible future inventory write-downs. Provisions for obsolete or slow-moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets and assumptions about future demand and market conditions. If future demand changes in an industry or market conditions differ from management’s estimates, additional provisions may be necessary.
Income Taxes
We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and determine the need for a valuation allowance based on a number of factors, including both positive and negative evidence. These factors include historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. In circumstances where we, or any of our affiliates, have incurred three years of cumulative losses which constitute significant negative evidence, positive evidence of equal or greater significance is needed to overcome the negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards.
New Accounting Pronouncements
A summary of the New Accounting Pronouncements is provided in Note 3, Significant Accounting Policies and Disclosures, of thenotes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
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ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Risk Management and Market Sensitive Financial Instruments
We are exposed to many different market risks with the various industries we serve. The primary financial risk we are exposed to is foreign currency exchange, as certain operations, assets and liabilities of ours are denominated in foreign currencies. We manage these risks through normal operating and financing activities.
Foreign Currency Exposure
Even though we consider foreign currency exchange rates at the time an order is taken, our financial statements, denominated in a non-U.S. functional currency, are subject to foreign exchange rate fluctuations.
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 manage foreign exchange exposures by using currency clauses in certain sales contracts. We have not used any derivative instruments nor entered any forward contracts in fiscal 2026, fiscal 2025 or fiscal 2024.
Had the U.S. dollar changed unfavorably 10% against various foreign currencies, foreign denominated net sales would have been lower by an estimated $13.0 million during fiscal 2026, an estimated $11.3 million during fiscal 2025, and an estimated $10.8 million during fiscal 2024. Total assets would have declined by an estimated $5.2 million as of the fiscal year ended May 30, 2026, and an estimated $5.4 million as of the fiscal year ended May 31, 2025, while the total liabilities would have decreased by an estimated $0.9 million as of the fiscal year ended May 30, 2026 and an estimated $1.4 million as of the fiscal year ended May 31, 2025.
The interpretation and analysis of these disclosures should not be considered in isolation since such variances in exchange rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect our operations. Additional disclosure regarding various market risks is set forth in Part I, Item 1A, Risk Factors, of our Annual Report on this Form 10-K.
ITEM 8. Financial Statements and Supplementary Data
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Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Richardson Electronics, Ltd.
LaFox, Illinois
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Richardson Electronics, Ltd. (the “Company”) as of May 30, 2026 and May 31, 2025, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three fiscal years in the period ended May 30, 2026, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 30, 2026 and May 31, 2025, and the results of its operations and its cash flows for each of the three fiscal years in the period ended May 30, 2026, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of May 30, 2026, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated August 3, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Estimation of Obsolete or Slow-moving Inventory Reserve - Power and Microwave Technologies ("PMT") Reportable Segment
As described in Note 3 to the consolidated financial statements, the consolidated inventory balance as of
May 30, 2026, was $103.0 million, net of $6.3 million in reserves. Provisions for obsolete or slow-moving inventories are based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets and assumptions about future demand and market conditions. A number of products in the PMT reportable segment represent trailing edge technology the Company often buys products ahead of supplier price increases and extended lead times which can create higher levels of inventory. As technologies evolve and customers replace their equipment, PMT inventory on hand may become obsolete.
We have identified the Company's estimation of obsolete or slow-moving inventory reserve for the PMT reportable segment as a critical audit matter due to the significant judgments required by management in estimating any obsolete or slow-moving inventory reserve needed for certain inventory items. The Company’s estimation of its obsolete or slow-moving inventory reserve, performed on an item-by-item basis, requires inputs from operations personnel and assessing current market conditions and future industry trends, which can be difficult to predict given evolving technologies and the declining market for certain products. Auditing this matter involved especially challenging auditor judgment due to the nature and extent of audit effort needed to evaluate the reasonableness of management’s estimate of future demands.
The primary procedures we performed to address this critical audit matter included:
•
Testing the design, implementation, and operating effectiveness of controls over the development of the Company’s estimation of the obsolete or slow-moving inventory reserve.
•
Assessing the reasonableness of management's estimate of future demand by selecting a sample and (i) inquiring of operations personnel as to their assessment of the viability of aged and slow-moving inventory, (ii) evaluating historical customer ordering trends and current uses, and (iii) when applicable evaluating stock rotation privileges.
•
Evaluating the reasonableness of management’s estimates by comparing the prior period inventory on hand for certain products to current period sales, write-offs, and inventory consumption.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2015.
Chicago, Illinois
August 3, 2026
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Richardson Electronics, Ltd.
Consolidated Balance Sheets
(in thousands, except per share amounts)
Assets
Current assets:
Prepaid expenses and other assets 4,770 3,070
Non-current assets:
Right of use lease assets, net 1,389 2,276
Deferred income tax assets, net 8,346 8,744
Other non-current assets 263 228
Liabilities and Stockholders’ Equity
Current liabilities:
Non-current liabilities:
Deferred income tax liabilities 177 81
Lease liabilities non-current 602 1,105
Other non-current liabilities 1,168 1,204
Total non-current liabilities 1,947 2,390
Commitments and contingencies (Note 3)
Stockholders’ Equity
Accumulated other comprehensive income 3,736 2,154
Total liabilities and stockholders’ equity $ 202,017 $ 195,835
Refer to accompanying Notes to Consolidated Financial Statements.
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Richardson Electronics, Ltd.
Consolidated Statements of Comprehensive Income
(in thousands, except per share amounts)
Fiscal Year Ended
Loss on disposal of property, plant and equipment 13 16 70
(Gain) loss on disposal of healthcare assets and related charges (847 ) 5,074 —
Other (income) expense:
Income tax provision (benefit) 1,095 (388 ) 96
Foreign currency translation gain, net of tax 1,582 1,390 149
Net income (loss) per share:
Class B common stock - Basic 0.40 (0.07 ) 0.00
Class B common stock - Diluted 0.40 (0.07 ) 0.00
Weighted average number of shares:
Refer to accompanying Notes to Consolidated Financial Statements.
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Richardson Electronics, Ltd.
Consolidated Statements of Cash Flows
(in thousands)
Fiscal Year Ended
Operating activities:
Adjustments to reconcile net income to cash provided by operating activities:
Unrealized foreign currency gain (24 ) (1,002 ) (304 )
Loss on disposal of property, plant and equipment 10 16 70
(Gain) loss on disposal of healthcare assets and related charges (847 ) 5,074 —
Change in assets and liabilities:
Prepaid expenses and other assets (2,265 ) (180 ) 250
Investing activities:
Proceeds from the sale of property, plant and equipment — 7 —
Proceeds from disposal of healthcare assets 1,300 6,827 —
Net cash (used in) provided by investing activities (3,083 ) 4,023 (4,041 )
Financing activities:
Proceeds from issuance of common stock 993 320 591
Proceeds from revolving credit facility — 1,000 3,744
Repayment of revolving credit facility — (1,000 ) (3,744 )
Net cash used in financing activities (2,544 ) (3,246 ) (2,905 )
Effect of exchange rate changes on cash and cash equivalents 743 309 (296 )
(Decrease) increase in cash and cash equivalents (4,122 ) 11,638 (718 )
Supplemental Disclosure of Cash Flow Information:
Cash paid during the fiscal year:
Income taxes, net of refunds $ 1,738 $ 1,821 $ -
Non-cash activities:
Accruals for construction in progress 312 - 267
Right of use assets obtained in exchange for lease liabilities 303 730 1,518
Refer to accompanying Notes to Consolidated Financial Statements.
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Richardson Electronics, Ltd.
Consolidated Statements of Stockholders’ Equity
(in thousands, except per share amounts)
Comprehensive income
Net income — — — — 61 — 61
Foreign currency translation, net of tax — — — — — 149 149
Share-based compensation:
Restricted stock — — — 685 — — 685
Stock options — — — 641 — — 641
Common stock:
Restricted stock issuance 37 — 2 (121 ) — — (119 )
Class B converted to common 3 (3 ) — — — — —
Dividends paid to:
Class B ($0.22 per share) — — — — (443 ) — (443 )
Comprehensive income
Foreign currency translation, net of tax — — — — 161 1,390 1,551
Share-based compensation:
Restricted stock — — — 958 — — 958
Stock options — — — 587 — — 587
Common stock:
Restricted stock issuance 60 — 3 (162 ) — — (159 )
Dividends paid to:
Class B ($0.22 per share) — — — — (443 ) — (443 )
Comprehensive income
Foreign currency translation, net of tax — — — — — 1,582 1,582
Share-based compensation:
Restricted stock — — — 879 — — 879
Stock options — — — 742 — — 742
Common stock:
Restricted stock issuance 71 — 3 (102 ) — — (99 )
Class B converted to common 13 (13 ) 1 — — — 1
Dividends paid to:
Class B ($0.22 per share) — — — — (442 ) — (442 )
Refer to accompanying Notes to Consolidated Financial Statements.
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Richardson Electronics, Ltd.
Notes to Consolidated Financial Statements
1.
DESCRIPTION OF THE COMPANY
Richardson Electronics, Ltd. (the "Company," "we," "our") is a global manufacturer of engineered solutions, green energy products, power grid and microwave tubes, and related consumables; power conversion and RF and microwave components including green energy solutions; tubes for diagnostic imaging equipment; and customized display solutions. We have manufacturing at our facilities located in LaFox, Illinois, Marlborough, Massachusetts, and Donaueschingen, Germany.
We serve customers in alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company products and services include design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair. Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing and visual technology solutions. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, medical and communication applications.
On January 24, 2025, the Company sold a substantial portion of the assets of its Healthcare business to DirectMed Imaging, LLC (“DirectMed”), a Delaware limited liability company, and entered into an exclusive 10-year global supply agreement in which Richardson will supply DirectMed with repaired Siemens CT X-ray tubes.
We currently operate within the following major geographic regions: North America, Asia/Pacific, Europe and Latin America.
2.
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP") for all fiscal years presented. The consolidated financial statements include our wholly owned subsidiaries. All intercompany transactions and account balances have been eliminated in consolidation.
Our fiscal year 2026 began on June 1, 2025 and ended on May 30, 2026, our fiscal year 2025 began on June 2, 2024 and ended on May 31, 2025, and our fiscal year 2024 began on May 28, 2023 and ended on June 1, 2024. Unless otherwise noted, all references to a particular year in this document shall mean the fiscal year for such period.
3.
SIGNIFICANT ACCOUNTING POLICIES AND DISCLOSURES
Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management continuously evaluates its estimates which includes the allowance for credit losses, revenue recognition, inventory obsolescence, loss contingencies and income taxes. Management bases the estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, however, actual results could differ from those estimates.
Cash and Cash Equivalents: We consider short-term, highly liquid investments that are readily convertible to known amounts of cash, and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates, and that have a maturity of three months or less, when purchased, to be cash equivalents. The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents approximate the fair market value of these assets.
Accounts Receivable and Allowance for Credit Losses: Trade accounts receivable represent amounts billed to customers and not yet collected. Trade accounts receivable is recorded at the invoiced amount, which approximates net recoverable value, and generally do not bear interest. The Company's accounts receivable, net
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balance was $33.2 million, $24.1 million, and $24.8 million as of May 30, 2026, May 31, 2025, and June 1, 2024, respectively. Our allowance for credit losses includes estimated losses that result from uncollectible receivables. The estimates are influenced by the following: continuing credit evaluation of customers’ financial conditions; aging of receivables, individually and in the aggregate; a large number of customers which are widely dispersed across geographic areas; and collectability and delinquency history by geographic area. Significant changes in one or more of these considerations may require adjustments affecting net (loss) income and net carrying value of accounts receivable. The allowance for credit losses was $0.4 million as of May 30, 2026, and $0.3 million as of May 31, 2025.
Inventories, net: Our consolidated inventories are stated at the lower of cost and net realizable value, generally using a weighted-average cost method. Our net inventories include $86.5 million of finished goods, $11.8 million of raw materials and $4.7 million of work-in-progress as of May 30, 2026 as compared to $86.4 million of finished goods, $11.5 million of raw materials and $4.9 million of work-in-progress as of May 31, 2025.
Provisions for obsolete or slow-moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, exiting certain markets and assumptions about future demand and market conditions. If future demand changes in the industry or market conditions differ from management’s estimates, additional provisions may be necessary. The inventory reserve as of May 30, 2026 was $6.3 million compared to $7.6 million as of May 31, 2025.
We recorded provisions to our inventory reserves of $0.5 million, $0.6 million and $0.6 million during fiscal 2026, fiscal 2025 and fiscal 2024, respectively, which were included in cost of sales. The provisions were primarily for obsolete and slow-moving parts. The parts were written down to estimated realizable value.
Property, Plant and Equipment: Property, plant and equipment are stated at cost, net of accumulated depreciation. Improvements and replacements are capitalized while expenditures for maintenance and repairs are charged to expense as incurred. Provisions for depreciation are computed using the straight-line method over the estimated useful life of the asset. Depreciation is classified as a selling, general and administrative ("SG&A"') expense in the Consolidated Statements of Comprehensive Income. The depreciation expense was $3.7 million, $3.8 million, and $4.0 million during fiscal 2026, fiscal 2025 and fiscal 2024, respectively.
Property, plant and equipment consist of the following (in thousands):
Computer, communications equipment and software 10,906 8,895
Property, plant, and equipment, net $ 19,003 $ 18,355
Construction in progress on May 30, 2026, included $0.4 million for IT systems, $0.7 million for manufacturing facilities and $0.9 million for other facilities.
Supplemental disclosure information of the estimated useful life of the assets:
Land improvements 10 years
Buildings and improvements 10 - 30 years
Computer, communications equipment and software 3 - 10 years
Machinery and other equipment 3 - 20 years
Intangible Assets: Intangible assets are initially recorded at their market values determined by quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized over their useful lives and are tested for impairment when events or changes in circumstances occur that indicate possible impairment.
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Intangible assets subject to amortization were as follows (in thousands):
Gross Amounts:
Customer Relationships $ 911 $ 911
Accumulated Amortization:
Customer Relationships $ 691 $ 652
Total Accumulated Amortization $ 776 $ 716
Intangible Assets, Net $ 285 $ 345
The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table (in thousands):
Fiscal Year AmortizationExpense
Thereafter 32
Total amortization expense $ 285
The amortization expense associated with the intangible assets, which is classified as SG&A on the Consolidated Statements of Comprehensive Income, totaled $0.1 million during fiscal 2026, $0.2 million during fiscal 2025, and $0.3 million during fiscal 2024, respectively.
Right of Use Lease Assets: We determine if an arrangement is a lease at inception in accordance with Accounting Standards Codification ("ASC") Topic 842, Leases. The lease term begins on the commencement date, which is the date we take possession of the leases, and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The lease term is used to determine lease classification as an operating or finance lease and is used to calculate straight-line expense for operating leases.
Right of use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make payments arising from the lease. As a practical expedient, lease agreements with lease and non-lease components are accounted for as a single lease component for all asset classes, which are comprised of real estate leases. ROU assets and lease liabilities are recognized at the commencement date based upon the present value of lease payments over the lease term. ROU assets also include prepaid lease payments and exclude lease incentives received. We estimate contingent lease incentives when it is probable that we are entitled to the incentive at lease commencement. Since our leases do not typically provide an implicit rate, we use our incremental borrowing rate based upon the information available at commencement date of each lease. The determination of the incremental borrowing rate requires judgment. We determine the incremental borrowing rate using our secure borrowing rate. We elected the short-term lease recognition exemption for all leases that qualify. Therefore, leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets; instead, lease payments are recognized as lease expenses on a straight-line basis over the lease term. See Note 7, Lease Obligations, for additional details.
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Operating lease assets and liabilities are recognized for leases with lease terms greater than 12 months based on the present value of the future lease payments over the lease at the commencement date. Operating lease expense is recognized on a straight-line basis over the lease term.
Long-lived assets: We review property, plant 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.
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. 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. We conduct annual reviews of idle and underutilized equipment and review business plans for possible impairment. Impairment occurs when the carrying value of the assets exceeds the future undiscounted cash flows expected to be earned by the use of the asset or asset group. When impairment is indicated, the estimated future cash flows are then discounted to determine the estimated fair value of the asset or asset group, and an impairment charge is recorded when the carrying value exceeds the estimated fair value. Following the guidance of ASC 350, Intangibles - Goodwill and Other and ASC 360, Property, Plant and Equipment, our analysis supports the values of property, plant and equipment and intangible assets exceed the carrying value. Except for the $0.5 million impairment associated with the Healthcare disposal in fiscal 2025 as discussed in Note 10, Disposal of Healthcare Assets and Related Charges, no impairment was recognized for fiscal 2026, fiscal 2025 and fiscal 2024.
Additionally, we also evaluate the remaining useful life of each reporting period to determine whether events and circumstances warrant a revision to the remaining period of depreciation or amortization. If the estimate of a long-lived asset’s remaining useful life is changed, the remaining carrying amount of the asset is amortized prospectively over that revised remaining useful life.
Accrued Liabilities:Accrued liabilities consist of the following (in thousands):
Compensation and payroll taxes $ 5,952 $ 4,303
Income Taxes: We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and determine the need for a valuation allowance based on a number of factors, including both positive and negative evidence. These factors include historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. We record a reserve for uncertain tax positions whenever appropriate. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize interest and penalties related to income tax matters in income tax expense line item within the Consolidated Statements of Comprehensive Income. In circumstances where we, or any of our affiliates, have incurred three years of cumulative losses which constitute significant negative evidence, positive evidence of equal or greater significance is needed to overcome the negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards.
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Warranties: We offer assurance-type warranties for the limited number of specific products we manufacture.
We estimate the cost to perform under the warranty obligation and recognize this estimated cost at the time of the related product sale. We record expenses related to our warranty obligations as cost of sales in our Consolidated Statements of Comprehensive Income. Each quarter, we assess the actual warranty costs incurred on a product-by-product basis and compare the warranty costs to our estimated warranty obligation. With respect to new products, estimates are based generally on knowledge of the products and warranty experience.
Warranty reserves are established for costs that are expected to be incurred after the sale and delivery of products under warranty. Warranty reserves are included in accrued liabilities on our Consolidated Balance Sheets. The warranty reserves are determined based on known product failures, historical experience and other available evidence.
Changes in the warranty reserve during fiscal 2026, fiscal 2025, and fiscal 2024 were as follows (in thousands):
WarrantyReserve
Accruals for products sold 2
Utilization (42 )
Accruals for products sold 202
Utilization (53 )
Accruals for products sold (42 )
Utilization (51 )
Other Non-Current Liabilities: Other non-current liabilities of $1.2 million at May 30, 2026 and $1.2 million at May 31, 2025, primarily represent employee-benefits obligations in various non-U.S. locations.
Common and Class B Common Stock: At the Annual Meeting held on October 7, 2025, stockholders approved the Second Amended and Restated Certificate of Incorporation which increased the aggregate number of shares authorized for issuance to twenty-five million shares (25,000,000) consisting of twenty-two million (22,000,000) shares of common stock, three million shares (3,000,000) of Class B common stock and no shares of preferred stock. The Class B common stock has 10 votes per share and has transferability restrictions; however, Class B common stock may be converted into common stock on a share-for-share basis at any time. With respect to dividends and distributions, shares of common stock and Class B common stock rank equally and have the same rights, except that Class B common stock cash dividends are limited to 90% of the amount of common stock cash dividends.
Revenue Recognition: We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition. Terms are generally 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.
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 are also distinct in that each item sold to the customer is clearly identified on both the purchase order and resulting invoice. Each product we sell benefits the customer independently of the other products. Each item on each purchase order from the customer can be used by the customer unrelated to any other products we provide to the customer. We derive revenue from the sale of products. Generally, the performance obligation under contracts are satisfied when there is a transfer of control of the products to our customer, which is primarily upon shipment or, in certain instances, upon the delivery of the products to the named customer location.
We also generate revenue from repair, installation or training activities. The services we provide are relatively
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short in duration and are typically completed in one or two weeks. Therefore, at each reporting date, the amount of unbilled work is insignificant. The services revenue has consistently accounted for less than 5% of the Company’s total revenues.
We record discounts taken based on historical experience. The policy varies by business unit. The Company allows returns with prior written authorization. We estimate returns based on historical experience. The Company maintains a reserve for returns based on historical trends that cover all contracts and revenue streamsusing the expected value method because we have a large number of contracts with similar characteristics, which is considered variable consideration. The reserve for returns creates a refund liability on our balance sheet as a contra trade accounts receivable as well as an asset in inventory. We value the inventory at cost due to there being minimal or no costs to the Company as we generally require the customer to pay freight and we typically do not have costs associated with activities such as relabeling or repackaging. The reserve is considered immaterial at each balance sheet date. Returns for defective product are typically covered by our suppliers’ warranty, thus, returns for defective product are not factored into our reserve.
Principal versus agent guidance was considered for products that are provided by our suppliers versus manufactured by the Company. The Company acts as the principal as we are responsible for satisfying the performance obligation. We have primary responsibility for fulfilling the contract, we have inventory risk prior to delivery to our customer, we establish prices, our consideration is not in the form of a commission and we bear the credit risk. The Company recognizes revenue in the gross amount of consideration.
Contracts with customers
A revenue contract exists once a customer purchase order is received, reviewed and accepted. Each accepted purchase order identifies a distinct good or service as a performance obligation. The goods include standard products purchased from a supplier and stocked on our shelves, customized products purchased from a supplier, products that are customized or have value added to them in house prior to shipping to the customer and manufactured products. Prior to accepting a customer purchase order, we review the credit worthiness of the customer. Purchase orders are deemed to meet the collectability criterion once the customer’s credit is approved. The Company may receive advance payments or deposits from our customers before revenue is recognized resulting in contract liabilities. Contract liabilities are included in accrued liabilities in the Consolidated Balance Sheets.
On occasion, the Company enters bill-and-hold arrangements. Each bill-and-hold arrangement is reviewed and revenue is recognized only when the control has transferred to our customer and certain criteria have been met: (i) the reason for the bill-and-hold arrangement is substantive; (ii) the product is segregated from the Company’s other inventory items held for sale; (iii) the product is ready for shipment to the customer; and (iv) the Company does not have the ability to use the product or direct it to another customer. The bill and hold revenue recognized was $2.6 million for fiscal 2026, $4.0 million for fiscal 2025, and $2.1 million for fiscal 2024.
Contract Liabilities: Contract liabilities and revenue recognized were as follows for the fiscal years ended May 30, 2026, May 31, 2025 and June 1, 2024 (in thousands):
Customer Concentration: No single customer represented more than 10 percent of our total accounts receivable balance as of May 30, 2026 and May 31, 2025. Sales to one customer in our PMT segment totaling $31.5 million accounted for 14 percent of the Company's consolidated net sales in fiscal 2026. No single customer represented more than 10 percent of the consolidated net sales in fiscal 2025 and fiscal 2024.
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Supplier Concentration: Two of our suppliers each represented more than 10 percent of our total cost of sales in fiscal 2026, and fiscal 2025. The amount owed to both suppliers for fiscal 2026 totaled $1.4 million as of May 30, 2026. The amount owed to both suppliers for fiscal 2025 totaled $3.7 million as of May 31, 2025.
Shipping and Handling Fees and Costs: Shipping and handling costs billed to customers are reported as revenue and the related costs are reported as a component of cost of sales.
Share-Based Compensation: We measure and recognize share-based compensation cost at fair value for all share-based payments, including stock options and restricted stock awards. We estimate fair value of stock options using the Black-Scholes option-pricing model, which requires assumptions such as expected volatility, risk-free interest rate, expected life and dividends. Restricted stock compensation expense is based on the Company’s stock price at the date of the grant and is amortized over the vesting period.
We account for the forfeitures of share-based compensation in the period in which they occur. Compensation cost is recognized using a graded vesting schedule over the applicable vesting period. Share-based compensation expense totaled $1.6 million during fiscal 2026, $1.5 million during fiscal 2025, and $1.3 million during fiscal 2024. The tax benefit for share-based compensation expense totaled $0.4 million during fiscal 2026, $0.4 million during fiscal 2025, and $0.3 million during fiscal 2024.
Foreign Currency Translation: The functional currency is the local currency at all foreign locations, with the exception of Hong Kong, where the functional currency is the U.S. dollar. Balance sheet items for our foreign entities, included in our Consolidated Balance Sheets, are translated into U.S. dollars at end-of-period spot rates. Gains and losses resulting from translation of foreign subsidiary financial statements are credited or charged directly to accumulated other comprehensive income, a component of stockholders’ equity. Revenues and expenses are translated at the current rate on the date of the transaction. Gains and losses resulting from foreign currency transactions are included in income. Foreign exchange gain (loss) reflected in our Consolidated Statements of Comprehensive Income was a $0.5 million loss during fiscal 2026, $0.5 million gain during fiscal 2025, and a $0.4 million loss during fiscal 2024.
Contingencies: We accrue a liability for loss contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. If we determine that there is at least a reasonable possibility that a loss may have been incurred, we will include a disclosure describing the contingency.
The Company does not allow for the recognition of a gain contingency within its consolidated financial statements prior to the settlement of the underlying events or contingencies associated with the gain contingency. As a result, the consideration related to a gain contingency is recorded in the consolidated financial statements during the period in which all underlying events or contingencies are resolved and the gain is realized.
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New Accounting Pronouncements - Adopted
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2023-09, Improvements to Income Tax Disclosures, which addresses investor requests for more transparency around income tax information. ASU 2023-09 requires additional information within the disclosures related to income tax rate reconciliations and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company has adopted ASU 2023-09 prospectively for the Annual Report on Form 10-K for the year ended May 30, 2026. The adoption had no material impact on the Company’s financial condition, results of operations, or cash flows. Refer to Note 8, Income Taxes for additional details.
New Accounting Pronouncements - Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires an entity to disclose on an annual and interim basis, disaggregated information about specific income statement expense categories. The guidance should be applied prospectively with the option to apply the standard retrospectively. This ASU is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (“ASU 2025-11”) which is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with U.S. GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2025-11 may have on the Company’s consolidated financial statements and disclosures.
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4.
SHARE-BASED COMPENSATION
Stock options granted generally vest over a period of five years and have contractual terms to exercise of 10 years. A summary of stock option activity is as follows (in thousands, except option prices and years):
(1)
Includes only those options that were in-the-money as of May 30, 2026. Stock options for which the exercise price exceeded the market price have been omitted. Fluctuations in the intrinsic value of both outstanding and exercisable options may result from changes in underlying stock price and timing and volume of option grants, exercises and forfeitures.
There were 141,763 stock options exercised during fiscal 2026, with cash received of $1.0 million. The total intrinsic value of options exercised was $0.9 million during fiscal 2026, $0.3 million during fiscal 2025, and $0.3 million during fiscal 2024. The weighted average fair value of stock option grants was $3.94 during fiscal 2026, $4.95 during fiscal 2025, and $6.33 during fiscal 2024. As of May 30, 2026, total unrecognized compensation costs related to unvested stock options and restricted stock awards was $2.6 million, which is expected to be recognized over the remaining weighted average period of approximately two to four years. The total grant date fair value of stock options vested during fiscal 2026 was $0.6 million.
The fair value of stock options is estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:
Fiscal Year Ended
The expected volatility assumptions are based on historical experience commensurate with the expected term. The risk-free interest rate is based on the yield of a treasury note with a remaining term equal to the expected life of the stock option. The expected term of stock options is estimated from the vesting period of the award and represents the weighted average period that our stock options are expected to be outstanding.
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As of May 30, 2026, a summary of restricted stock award transactions was as follows (in thousands):
UnvestedRestrictedShares
Vested (78 )
Vested (76 )
Compensation effects arising from issuing stock awards have been charged against income and recorded as additional paid-in-capital in the Consolidated Statements of Stockholders’ Equity during fiscal 2026, fiscal 2025 and fiscal 2024.
The Amended and Restated 2011 Long-Term Incentive Compensation Plan (the "Plan") authorized the issuance of up to 3,500,000 shares as incentive stock options, non-qualified stock options or stock awards. On October 7, 2025, the Company held an annual meeting of its stockholders (the “Annual Meeting”). At the Annual Meeting, the Company’s stockholders approved an amendment and restatement of the Plan to increase the number of shares authorized for issuance thereunder by 2,000,000 shares, for a total of 5,500,000 shares. Under this plan, 2,085,914 shares are reserved for future issuance. The Plan authorizes the granting of stock options at the fair market value at the date of grant. Generally, these options become exercisable over five years and expire up to 10 years from the date of grant. Restricted stock awards vest on the anniversary of the grant date in three equal installments.
5.
EARNINGS PER SHARE ("EPS")
Our Class B common stock is considered a participating security requiring the use of the two-class method for the computation of basic and diluted earnings per share. The two-class computation method for each period reflects the cash dividends paid per share for each class of stock, plus the amount of allocated undistributed earnings per share computed using the participation percentage which reflects the dividend rights of each class of stock. Basic and diluted earnings per share were computed using the two-class method. The shares of Class B common stock are considered to be participating convertible securities since the shares of Class B common stock are convertible on a share-for-share basis into shares of common stock and may participate in dividends with common stock according to a predetermined formula which is 90% of the amount of common stock cash dividends.
The allocation of undistributed earnings (loss) between common stock and Class B common stock is based on the relationship of the weighted shares outstanding for the respective stock class (common or Class B) to the total of the weighted shares outstanding for common stock and 90% of the weighted shares outstanding for Class B common stock. The adjustment to the number of outstanding Class B common stock shares reflects the limitation of Class B common stock dividends to 90% of common stock dividends.
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The EPS presented in our Consolidated Statements of Comprehensive Income are based on the following (in thousands, except per share amounts):
For the Fiscal Year Ended
Basic Diluted Basic Diluted Basic Diluted
Numerator for Basic and Diluted EPS:
Less dividends:
Denominator for Basic and Diluted EPS:
Effect of dilutive securities
Dilutive stock options and awards 198 — 250
Net income (loss) per share:
Note: There were no common stock options that were anti-dilutive for fiscal 2026. There were 232 common stock options and awards that were anti-dilutive and not included in the diluted earnings per share for fiscal 2025. There were nocommon stock options that were anti-dilutive for fiscal 2024.
6.
REVOLVING CREDIT FACILITY
On October 7, 2025, the Company executed a three-year extension to the Credit Agreement through the Second Amendment to the Credit Agreement with a maximum borrowing limit of $20 million. The Revolving Credit Facility is guaranteed by the Company's domestic subsidiaries. The Revolving Credit Facility will mature on October 7, 2028. The terms of the new agreement are similar to the previous Credit Agreement. Proceeds of borrowings may be used for working capital and general corporate purposes. There were no drawings or repayments under the Revolving Credit Facility during fiscal 2026. There wasno amount outstanding under the Revolving Credit Facility as of May 30, 2026.
The Credit Agreement provides that the Company must maintain compliance with a maximum consolidated leverage ratio covenant and a minimum consolidated fixed charge coverage ratio, each as determined in accordance with the Credit Agreement. The Credit Agreement also contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, and transactions with affiliates, as well as customary events of default for financings of this type. The Company was in compliance with financial covenants under the Credit Agreement as of May 30, 2026.
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Borrowings under the Revolving Credit Facility will bear interest at a rate per annum selected by the Company from the following options: (a) Term secured overnight financing rate ("SOFR") for the applicable Interest Period, plus the SOFR Adjustment for the applicable Interest Period, plus 1.25%; (b) Base Rate plus 0.25% or (c) Daily Simple risk free rate ("RFR") for Euros, plus the RFR Adjustment, plus 1.25%. Letters of credit issued under the letter of credit sub-facility will have a letter of credit fee equal to 1.25% per annum. The fee for the unused portion of the credit line is 0.10%. There were no letters of credit outstanding as of May 30, 2026.
7.
LEASE OBLIGATIONS
The Company leases real and personal property in the normal course of business under various operating leases. The Company uses operating leases for facility space and automobiles. Most of the leased facility space is for sales and general office use. Automobile leases are used throughout the Company. Several leases include renewal clauses which vary in length and may not include specific rent renewal amounts. The Company will revise the value of the right of use assets and associated lease liabilities upon a remeasurement event.
The gross amounts of assets and liabilities related to operating leases on May 30, 2026 and May 31, 2025 were as follows (in thousands):
Right of use lease assets $ 1,389 $ 2,276
Lease liabilities current $ 787 $ 1,171
Lease liabilities non-current $ 602 $ 1,105
The components of lease costs for fiscal 2026, fiscal 2025 and fiscal 2024 were as follows (in thousands):
Fiscal Year Ended
Future maturities of operating lease liabilities for the next five fiscal years are as follows (in thousands):
Fiscal Year Operating Leases
Total lease payments 1,459
Lease inputted interest 70
Net minimum lease payments $ 1,389
The weighted average remaining lease terms and interest rates of leases held by the Company as of May 30, 2026 and May 31, 2025 were as follows:
The cash activities associated with our leases for fiscal 2026, fiscal 2025 and fiscal 2024 were as follows (in thousands):
Fiscal Year Ended
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8.
INCOME TAXES
Income (loss) before income taxes included the following components (in thousands):
Fiscal Year Ended
Income (loss) before income taxes $ 7,478 $ (1,531 ) $ 157
The provision (benefit) for income taxes for fiscal 2026, fiscal 2025 and fiscal 2024 consisted of the following (in thousands):
Fiscal Year Ended
Current:
Deferred:
Income tax provision (benefit) $ 1,095 $ (388 ) $ 96
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The fiscal 2026 provision for income taxes results in effective rates that differ from the statutory rates. The following is a reconciliation of the income tax expense computed at the statutory federal income tax rate to the total tax expense computed at the effective tax rate (in thousands, except percentages):
Fiscal Year Ended
Amount Percentage
US federal statutory tax rate $ 1,573 21.0 %
State and local income taxes, net of federal benefit (174 ) -2.3 %
Foreign tax effects:
Israel - return to provision adjustment (116 ) -1.5 %
Israel - other 22 0.3 %
Effect of cross-border tax laws:
Global intangible low-taxed income (GILTI) 576 7.7 %
Subpart F income 185 2.5 %
Section 78 gross-up on foreign exclusions 214 2.9 %
Section 250 deductions on GILTI (368 ) -4.9 %
Foreign tax credit (409 ) -5.5 %
Tax credits:
Research and development tax credits (329 ) -4.4 %
Non-taxable or non-deductible items:
Restricted stock (165 ) -2.2 %
Non-deductible U.S.compensation 109 1.5 %
Changes in unrecognized tax benefits 58 0.8 %
Other adjustments (98 ) -1.6 %
Total income tax provision and effective tax rate $ 1,095 14.6 %
As previously disclosed for fiscal 2025 and fiscal 2024, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
Fiscal Year Ended
Federal statutory rate 21.0 % 21.0 %
Effect of:
State income taxes, net of federal tax benefit 16.8 (90.1 )
Foreign income inclusion (3.2 ) 149.0
Foreign taxes at other rates (10.8 ) 189.0
Permanent tax differences (3.0 ) (93.0 )
Change in valuation allowance for deferred tax assets (40.3 ) 548.6
Foreign return to provision adjustments 13.5 179.9
Restricted stock 3.3 (33.6 )
Research and development credit 28.9 (302.1 )
U.S. return to provision adjustments 18.1 (648.6 )
Effective tax rate 25.4 % 61.4 %
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Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Our deferred tax assets and liabilities reflect operations as of May 30, 2026 and May 31, 2025. Significant components were as follows (in thousands):
Fiscal Year Ended
Deferred tax assets:
Net operating loss carryforwards - foreign and domestic $ 2,127 $ 1,969
Capitalized research and development 2,659 3,643
Valuation allowance - foreign and domestic (2,769 ) (2,804 )
Net deferred tax assets after valuation allowance 10,213 10,651
Deferred tax liabilities:
Accelerated depreciation (1,133 ) (1,120 )
Deferred income tax assets, net $ 8,169 $ 8,663
During fiscal 2026, the Company recorded R&D credits of $0.3 million. These credits represent the expected U.S. federal credits to be claimed for fiscal 2026.
As of May 30, 2026, net deferred tax assets related to domestic state NOL carryforwards at May 31, 2025 amounted to approximately $1.8 million, compared to $1.9 million at May 31, 2025. Net deferred tax assets related to foreign NOL carryforwards was $0.3 million as of May 30, 2026, and $0.1 million as of May 31, 2025 with various or indefinite expiration dates. During the fourth quarter of fiscal 2026 we decreased the valuation allowance on the state net operating losses by $0.5 million resulting in a total valuation allowance against state net operating losses of $1.2 million.
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 related to undistributed earnings of our foreign subsidiaries was $0 in fiscal 2026 and $0 million in fiscal 2025.
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 May 30, 2026. We considered other positive evidence in determining the need for a valuation allowance in the U.S. including the subpart F and GILTI inclusions of our foreign earnings, the changes in our business performance in recent years, and the utilization of federal NOLs. 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 30, 2026, no additional valuation allowance on the U.S. federal deferred tax items was recorded. As of May 30, 2026, we recorded a $0.5 million valuation allowance decrease on state NOLs as there was more positive evidence supporting the Company’s ability to utilize the state NOLs, including higher book income in fiscal 2026 and fiscal 2027 projections.
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As of May 30, 2026, a valuation allowance of $2.8 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 30, 2025 was $2.8 million. The valuation allowance relates to state NOLs ($1.2 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.6 million). The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.
Cash paid for income taxes (net of refunds) for fiscal 2026 consisted of the following (in thousands):
Fiscal Year Ended
Federal $ —
State:
Other states 45
Total state 45
Foreign:
United Kingdom 136
Other foreign 267
Income tax paid $ 1,738
Income taxes paid (net of refunds) were $1.8 million during fiscal 2025 and $0 during fiscal 2024.
In the normal course of business, we are subject to examination by taxing authorities throughout the world. Years prior to fiscal 2016 are closed for examination under the statute of limitation for U.S. federal, and U.S. state. In Netherlands, years prior to fiscal 2021 are closed for examination. We are under examination in Germany for fiscal years 2019 to 2022. The Company is under audit in Illinois for fiscal 2022 and fiscal 2023. We have no other current open audits in the U.S.
The Company recorded a $0.4 million uncertain tax positions as of May 30, 2026 as compared to $0.3 million as of May 31, 2025 and $0.1 million as of June 1, 2024. We record interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income (Loss). The Company recognizes interest accrued related to unrecognized tax benefits and penalties in operating expenses. We have recorded a liability of less than $0.1 million for interest as of May 30, 2026, May 31, 2025 and June 1, 2024.
The following table summarizes the activity related to the unrecognized tax benefits (in thousands):
Fiscal Year Ended
Unrecognized tax benefits, beginning of period $ 335 $ 93 $ —
Tax positions taken during the year 36 242 242
Unrecognized tax benefits, end of period $ 371 $ 335 $ 93
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9.
EMPLOYEE BENFITS
The employee profit-sharing plan is a defined contribution profit-sharing plan. The profit-sharing plan has a 401(k) provision whereby we match 50% of employee contributions up to 6.0% of pay for fiscal 2026, fiscal 2025 and fiscal 2024. Charges to expense for matching contributions to this plan were $1.0 million, $0.9 million, and $0.9 million, during fiscal 2026, fiscal 2025 and fiscal 2024, respectively.
10.
DISPOSAL OF HEALTHCARE ASSETS AND RELATED CHARGES
On January 24, 2025, the Company entered into an Asset Purchase Agreement with DirectMed. Pursuant to the terms and subject to the conditions of the Purchase Agreement, DirectMed purchased assets of the Company used in the operation of its International Medical Equipment and Service ("IMES") business as well as ALTA tube and related inventory (the “IMES Sale”). The IMES Sale transaction closed simultaneously with the execution of the Asset Purchase Agreement on January 24, 2025.
Under the terms of the Asset Purchase Agreement, the Company sold a substantial portion of the assets comprising its Healthcare reportable segment to DirectMed for an initial consideration of $8.2 million and entered into an exclusive 10-year global supply agreement in which Richardson will supply DirectMed with repaired Siemens CT X-ray tubes ("Siemens CT Supply Agreement"). Additionally, the Company will continue manufacturing a limited quantity of ALTA CT X-ray tubes exclusively for DirectMed under a supply agreement ("ALTA CT Supply Agreement").
Consideration received of $8.0 million from DirectMed was allocated between the asset sale and the ALTA CT Supply Agreement based on their respective fair values (measured using Level 3 inputs) as follows: $6.8 million allocated to the asset sale and $1.2 million allocated to the ALTA CT Supply Agreement. The consideration related to the ALTA CT Supply Agreement has been initially recorded as deferred revenue within accrued liabilities in the Consolidated Balance Sheets and will be recognized into income as ALTA tubes are sold. Deferred revenue as of May 30, 2026 and May 31, 2025 was less than $0.1 million, and $0.8 million, respectively.
In conjunction with the IMES Sale, other non-cash charges were incurred relating to the write-down of CT tube component inventory not transferred to the buyer and not expected to be used by the Company of $1.4 million, and an impairment of specific property, plant and equipment of $0.5 million that will be used to satisfy the ALTA CT Supply Agreement, which are included in the total loss recorded for the fiscal year ended May 31, 2025.
During fiscal 2026, the Company entered into an arrangement to sell certain Healthcare assets retained by the Company following the IMES sale in January 2025, resulting in a gain on disposal of $0.8 million.
A summary of the $4.2 million cumulative loss, recorded in fiscal 2026 and fiscal 2025, on the disposal of healthcare assets and related charges is shown in the following table (in thousands):
Assets sold:
Accounts receivable 1,004
Inventories, net 7,123
Property, plant and equipment, net 264
Intangible assets, net 1,117
Transaction related costs 448
Loss on disposal of healthcare assets (3,129 )
Other charges:
Loss on write-down of healthcare related inventory not disposed of 1,420
Total loss recorded in fiscal 2025 (5,074 )
Gain on sale of assets recorded in fiscal 2026 847
Cumulative loss $ (4,227 )
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11.
SEGMENT AND GEOGRAPHIC INFORMATION
During the fiscal year ended May 31, 2025 and prior, we had four reportable segments: Power and Microwave Technologies ("PMT"), Green Energy Solutions ("GES"), Canvys, and Healthcare. Beginning June 1, 2025, we realigned our operating segment structure and now have three segments: PMT, GES and Canvys, as the Company reevaluated its operating segments to better align with how the Company's CODM makes operating decisions, assesses business performance, allocates resources and evaluates performance. The key factor in this evaluation was the sale of the majority of assets in the Healthcare segment to DirectMed and continued sale of CT tubes pursuant to an exclusive supply agreement, as described in Note 10, Disposal of Healthcare Assets and Related Charges. Accordingly, the Company decided to integrate PMT and Healthcare into one segment, thereby resulting in three reporting segments. The segment results for prior periods were recast to reflect the new segment reporting structure.
The Company reports its financial performance to its CODM based on the three operating and reportable segments defined as follows:
PMT includes the power grid and microwave tube business and RF, Wireless and Power technologies. PMT provides design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair. PMT also offers its customers technical services for both microwave and industrial equipment and continued sale of CT tubes pursuant to an exclusive supply agreement.
GES designs and manufactures products for the energy storage market and power management applications. We provide design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair.
Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets. Display solutions include touch screens, protective panels, custom enclosures, All-In-One computers, specialized cabinet finishes and application specific software packages and certification services.
The CODM is Edward J. Richardson (Chairman, Chief Executive Officer and President). The CODM utilizes segment gross profit compared to both the current forecast and the prior year to analyze and assess financial performance by segment. The CODM’s assessment of each segment’s financial performance is utilized to deliberate and execute decisions to allocate resources to manage the growth and profitability of the individual segments and the entire Company. Inventories, net is the only segment asset metric analyzed and reviewed by the CODM.
Operating results by segment are summarized in the following tables (in thousands):
PMT GES Canvys Total
Selling, general and administrative expenses 65,717
Loss on disposal of property, plant and equipment 13
Gain on disposal of healthcare assets and related charges (847 )
Operating income 6,464
Interest income 544
Foreign exchange loss (452 )
Income before income taxes $ 7,478
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PMT GES Canvys Total
Selling, general and administrative expenses 62,173
Loss on disposal of property, plant and equipment 16
Loss on disposal of healthcare assets and related charges 5,074
Operating loss (2,463 )
Interest income 392
Foreign exchange gain 496
Other, net 44
Loss before income taxes $ (1,531 )
Fiscal Year Ended June 1, 2024
PMT GES Canvys Total
Selling, general and administrative expenses 59,548
Loss on disposal of property, plant and equipment 70
Operating income 348
Interest income 284
Foreign exchange loss (436 )
Other, net (39 )
Income before income taxes $ 157
The segment assets, which consist of inventories, net are summarized in the following table (in thousands):
PMT GES Canvys Total Segment Assets
The reconciliations of segment assets to the Consolidated Balance Sheets are summarized in the following table (in thousands):
Prepaid expenses and other assets 4,770 3,070
Right of use lease assets, net 1,389 2,276
Other non-current assets 263 228
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Geographic net sales information is primarily grouped by customer destination into five areas: North America; Asia/Pacific; Europe; Latin America; and Other.
Net sales and gross profit by geographic region are summarized in the following table (in thousands):
Fiscal Year Ended
Net Sales
Gross Profit
(1)
The United States represented approximately 40%, 44% and 40% of total net sales in FY26, FY25 and FY24, respectively. No other country generated a material amount.
(2)
China represented approximately 12% of total net sales in FY26. No other country generated a material amount.
(3)
Germany represented approximately 11% of total net sales in FY24. No other country generated a material amount.
(4)
No country generated a material amount.
(5)
Includes primarily net sales not allocated to a specific geographical region, unabsorbed value-add cost andother unallocated expenses.
Net assets by geographic region are summarized in the following table (in thousands):
Fiscal Year Ended
Net Assets
(1)
The United States represented approximately 52% and 58% of total net assets in FY26 and FY25, respectively. No other country generated a material amount.
(2)
No country generated a material amount.
(3)
The Netherlands represented approximately 28% and 22% of total net assets in FY26 and FY25, respectively. No other country generated a material amount.
The Company had long-lived assets of $20.7 million as of May 30, 2026 and $20.5 million as of May 31, 2025. The long-lived assets which include property, plant and equipment-net, intangible assets-net and right of use lease assets, were primarily in the U.S. There were $1.6 million of long-lived assets that belong to our foreign affiliates as of May 30, 2026 and $2.1 million as of May 31, 2025.
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12.
RISKS AND UNCERTAINTIES