UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~February 25, 2017~~March 3, 2018

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from To

Commission File Number: 0-12906

RICHARDSON ELECTRONICS, LTD.

(Exact name of registrant as specified in its charter)

Delaware	36-2096643
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

40W267 Keslinger Road, P.O. Box 393 LaFox, Illinois 60147-0393
(Address of principal executive offices)

Registrant’s telephone number, including area code: (630) 208-2200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of April ~~4, 2017,~~10, 2018, there were outstanding ~~10,708,332~~10,796,094 shares of Common Stock, $0.05 par value and ~~2,140,631~~2,136,919 shares of Class B Common Stock, $0.05 par value, which are convertible into Common Stock of the registrant on a share for share basis.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Richardson Electronics, Ltd.

Consolidated Balance Sheets

(in thousands, except per share amounts)

February 25,
2017 May 28,
2016
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 51,386 $ 60,454
Accounts receivable, less allowance of $375 and $364 21,240 24,928
Inventories, net 42,860 45,422
Prepaid expenses and other assets 2,647 1,758
Deferred income taxes — 1,078
Income tax receivable 22 17
Investments - current 6,399 2,268
Total current assets 124,554 135,925
Non-current assets:
Property, plant and equipment, net 15,208 12,986
Goodwill 6,332 6,332
Intangible assets, net 3,528 3,818
Non-current deferred income taxes 1,305 1,270
Investments - non-current 2,395 7,799
Total non-current assets 28,768 32,205
Total assets $ 153,322 $ 168,130
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 12,328 $ 14,896
Accrued liabilities 8,736 9,135
Total current liabilities 21,064 24,031
Non-current liabilities:
Non-current deferred income tax liabilities 275 1,457
Other non-current liabilities 696 967
Total non-current liabilities 971 2,424
Total liabilities 22,035 26,455
Stockholders’ equity
Common stock, $0.05 par value; issued and outstanding 10,708 shares at February 25, 2017, and 10,703 shares at May 28, 2016 535 535
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,141 shares at February 25, 2017, and at May 28, 2016 107 107
Preferred stock, $1.00 par value, no shares issued — —
Additional paid-in-capital 59,353 58,969
Common stock in treasury, at cost, no shares at February 25, 2017, and at May 28, 2016 — —
Retained earnings 70,216 79,292
Accumulated other comprehensive income 1,076 2,772
Total stockholders’ equity 131,287 141,675
Total liabilities and stockholders’ equity $ 153,322 $ 168,130


	Unaudited		Audited
	March 3, 2018		May 27, 2017
Assets
Current assets:
Cash and cash equivalents	$	59,882	$	55,327
Accounts receivable, less allowance of $362 and $398, respectively		21,893		20,782
Inventories, net		49,129		42,749
Prepaid expenses and other assets		3,746		3,070
Investments - current		199		6,429
Total current assets		134,849		128,357
Non-current assets:
Property, plant and equipment, net		17,991		15,813
Goodwill		6,332		6,332
Intangible assets, net		3,125		3,441
Non-current deferred income taxes		1,061		1,102
Investments - non-current		—		2,419
Total non-current assets		28,509		29,107
Total assets	$	163,358	$	157,464
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	15,846	$	15,933
Accrued liabilities		9,867		8,311
Total current liabilities		25,713		24,244
Non-current liabilities:
Non-current deferred income tax liabilities		236		158
Other non-current liabilities		947		735
Total non-current liabilities		1,183		893
Total liabilities		26,896		25,137
Stockholders’ equity
Common stock, $0.05 par value; issued and outstanding 10,796 shares at March 3, 2018 and 10,712 shares at May 27, 2017		540		535
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,137 shares at March 3, 2018 and May 27, 2017		107		107
Preferred stock, $1.00 par value, no shares issued		—		—
Additional paid-in-capital		59,900		59,436
Common stock in treasury, at cost, no shares at March 3, 2018 and May 27, 2017		—		—
Retained earnings		69,132		69,333
Accumulated other comprehensive income		6,783		2,916
Total stockholders’ equity		136,462		132,327
Total liabilities and stockholders’ equity	$	163,358	$	157,464

Richardson Electronics, Ltd.

Unaudited Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)

(in thousands, except per share amounts)

Three Months Ended Nine Months Ended
February 25,
2017 February 27,
2016 February 25,
2017 February 27,
2016
Statements of Comprehensive Loss
Net sales $ 32,313 $ 31,291 $ 99,513 $ 102,448
Cost of sales 21,621 21,541 67,617 71,001
Gross profit 10,692 9,750 31,896 31,447
Selling, general, and administrative expenses 12,002 12,471 37,697 37,938
Gain on disposal of assets — — — (244 )
Operating loss (1,310 ) (2,721 ) (5,801 ) (6,247 )
Other (income) expense:
Investment/interest income (67 ) (131 ) (129 ) (433 )
Foreign exchange loss 214 265 311 108
Other, net (16 ) (40 ) — (53 )
Total other (income) expense 131 94 182 (378 )
Loss before income taxes (1,441 ) (2,815 ) (5,983 ) (5,869 )
Income tax provision (benefit) (10 ) 111 820 742
Net loss (1,431 ) (2,926 ) (6,803 ) (6,611 )
Foreign currency translation gain (loss), net of tax 508 240 (1,736 ) (1,912 )
Fair value adjustments on investments gain (loss) 27 (47 ) 40 (79 )
Comprehensive loss $ (896 ) $ (2,733 ) $ (8,499 ) $ (8,602 )
Loss per share:
Common shares - Basic $ (0.11 ) $ (0.23 ) $ (0.54 ) $ (0.51 )
Class B common shares - Basic $ (0.10 ) $ (0.21 ) $ (0.48 ) $ (0.46 )
Common shares - Diluted $ (0.11 ) $ (0.23 ) $ (0.54 ) $ (0.51 )
Class B common shares - Diluted $ (0.10 ) $ (0.21 ) $ (0.48 ) $ (0.46 )
Weighted average number of shares:
Common shares - Basic 10,706 10,701 10,704 10,976
Class B common shares - Basic 2,141 2,141 2,141 2,141
Common shares - Diluted 10,706 10,701 10,704 10,976
Class B common shares - Diluted 2,141 2,141 2,141 2,141
Dividends per common share $ 0.060 $ 0.060 $ 0.180 $ 0.180
Dividends per Class B common share $ 0.054 $ 0.054 $ 0.162 $ 0.162

	Three Months Ended						Nine Months Ended
	March 3, 2018			February 25, 2017			March 3, 2018			February 25, 2017
Statements of Comprehensive Income (Loss)
Net sales	$	41,645		$	32,313		$	117,722		$	99,513
Cost of sales		27,578			21,621			78,133			67,617
Gross profit		14,067			10,692			39,589			31,896
Selling, general and administrative expenses		13,097			12,002			38,023			37,697
Loss (gain) on disposal of assets		3			—			(188	)		—
Operating income (loss)		967			(1,310	)		1,754			(5,801	)
Other (income) expense:
Investment/interest income		(208	)		(67	)		(378	)		(129	)
Foreign exchange loss		159			214			475			311
Other, net		1			(16	)		(14	)		—
Total other (income) expense		(48	)		131			83			182
Income (loss) from continuing operations before income taxes		1,015			(1,441	)		1,671			(5,983	)
Income tax provision (benefit)		488			(10	)		1,084			820
Income (loss) from continuing operations		527			(1,431	)		587			(6,803	)
Income from discontinued operations		—			—			1,496			—
Net income (loss)		527			(1,431	)		2,083			(6,803	)
Foreign currency translation gain (loss), net of tax		1,646			508			3,997			(1,736	)
Fair value adjustments on investments (loss) gain		(164	)		27			(130	)		40
Comprehensive income (loss)	$	2,009		$	(896	)	$	5,950		$	(8,499	)
Net income (loss) per Common share - Basic:
Income (loss) from continuing operations	$	0.04		$	(0.11	)	$	0.05		$	(0.54	)
Income from discontinued operations		—			—			0.12			—
Total net income (loss) per Common share - Basic	$	0.04		$	(0.11	)	$	0.17		$	(0.54	)
Net income (loss) per Class B common share - Basic:
Income (loss) from continuing operations	$	0.04		$	(0.10	)	$	0.04		$	(0.48	)
Income from discontinued operations		—			—			0.11			—
Total net income (loss) per Class B common share - Basic	$	0.04		$	(0.10	)	$	0.15		$	(0.48	)
Net income (loss) per Common share - Diluted:
Income (loss) from continuing operations	$	0.04		$	(0.11	)	$	0.05		$	(0.54	)
Income from discontinued operations		—			—			0.12			—
Total net income (loss) per Common share – Diluted	$	0.04		$	(0.11	)	$	0.17		$	(0.54	)
Net income (loss) per Class B common share - Diluted:
Income (loss) from continuing operations	$	0.04		$	(0.10	)	$	0.04		$	(0.48	)
Income from discontinued operations		—			—			0.11			—
Total net income (loss) per Class B common share – Diluted	$	0.04		$	(0.10	)	$	0.15		$	(0.48	)
Weighted average number of shares:
Common shares – Basic		10,792			10,706			10,753			10,704
Class B common shares – Basic		2,137			2,141			2,137			2,141
Common shares – Diluted		10,872			10,706			10,793			10,704
Class B common shares – Diluted		2,137			2,141			2,137			2,141
Dividends per common share	$	0.060		$	0.060		$	0.180		$	0.180
Dividends per Class B common share	$	0.054		$	0.054		$	0.162		$	0.162

Richardson Electronics, Ltd.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended Nine Months Ended
February 25,
2017 February 27,
2016 February 25,
2017 February 27,
2016
Operating activities:
Net loss $ (1,431 ) $ (2,926 ) $ (6,803 ) $ (6,611 )
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 703 583 2,020 1,865
(Gain) loss on sale of investments (8 ) 21 (2 ) 2
Gain on disposal of assets — — — (244 )
Share-based compensation expense 75 119 354 434
Deferred income taxes 121 (82 ) (188 ) 173
Change in assets and liabilities, net of effect of acquired business:
Accounts receivable (717 ) 282 3,217 311
Income tax receivable — 187 (5 ) 851
Inventories 306 (2,164 ) 1,898 (5,636 )
Prepaid expenses and other assets 80 1 (961 ) (443 )
Accounts payable 849 (986 ) (2,372 ) (2,976 )
Accrued liabilities (1,118 ) (871 ) (256 ) (2,071 )
Long-term liabilities-accrued pension — — — (465 )
Other (125 ) 125 (107 ) 256
Net cash used in operating activities (1,265 ) (5,711 ) (3,205 ) (14,554 )
Investing activities:
Cash consideration paid for acquired business — — — (12,209 )
Capital expenditures (764 ) (1,267 ) (4,063 ) (3,043 )
Proceeds from sale of assets — — — 402
Proceeds from maturity of investments — — 3,582 25,584
Purchases of investments — — (2,136 ) (2,151 )
Proceeds from sales of available-for-sale securities 78 106 225 250
Purchases of available-for-sale securities (78 ) (106 ) (225 ) (250 )
Other (3 ) (49 ) (9 ) (17 )
Net cash (used in) provided by investing activities (767 ) (1,316 ) (2,626 ) 8,566
Financing activities:
Repurchase of common stock — — — (5,015 )
Proceeds from issuance of common stock 30 21 30 142
Cash dividends paid (758 ) (758 ) (2,273 ) (2,321 )
Other — — — (4 )
Net cash used in financing activities (728 ) (737 ) (2,243 ) (7,198 )
Effect of exchange rate changes on cash and cash equivalents 35 106 (994 ) (1,144 )
Decrease in cash and cash equivalents (2,725 ) (7,658 ) (9,068 ) (14,330 )
Cash and cash equivalents at beginning of period 54,111 67,863 60,454 74,535
Cash and cash equivalents at end of period $ 51,386 $ 60,205 $ 51,386 $ 60,205

	Three Months Ended						Nine Months Ended
	March 3, 2018			February 25, 2017			March 3, 2018			February 25, 2017
Operating activities:
Net income (loss)	$	527		$	(1,431	)	$	2,083		$	(6,803	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization		752			703			2,219			2,020
Inventory provisions		183			189			470			298
Gain on sale of investments		(159	)		(8	)		(183	)		(2	)
Loss (gain) on disposal of assets		3			—			(188	)		—
Share-based compensation expense		116			75			425			354
Deferred income taxes		124			121			186			(188	)
Change in assets and liabilities:
Accounts receivable		(551	)		(717	)		(239	)		3,217
Income tax receivable		—			—			—			(5	)
Inventories		(598	)		117			(5,232	)		1,600
Prepaid expenses and other assets		43			80			(572	)		(961	)
Accounts payable		552			849			(446	)		(2,372	)
Accrued liabilities		1,116			(1,118	)		1,325			(256	)
Other		(137	)		(125	)		(140	)		(107	)
Net cash provided by (used in) operating activities		1,971			(1,265	)		(292	)		(3,205	)
Investing activities:
Capital expenditures		(1,461	)		(764	)		(4,196	)		(4,063	)
Proceeds from sale of assets		—			—			276			—
Proceeds from maturity of investments		3,943			—			12,120			3,582
Purchases of investments		—			—			(3,943	)		(2,136	)
Proceeds from sales of available-for-sale securities		648			78			913			225
Purchases of available-for-sale securities		—			(78	)		(265	)		(225	)
Other		(2	)		(3	)		(7	)		(9	)
Net cash provided by (used in) investing activities		3,128			(767	)		4,898			(2,626	)
Financing activities:
Proceeds from issuance of common stock		44			30			44			30
Cash dividends paid		(763	)		(758	)		(2,284	)		(2,273	)
Net cash used in financing activities		(719	)		(728	)		(2,240	)		(2,243	)
Effect of exchange rate changes on cash and cash equivalents		1,049			35			2,189			(994	)
Increase (decrease) in cash and cash equivalents		5,429			(2,725	)		4,555			(9,068	)
Cash and cash equivalents at beginning of period		54,453			54,111			55,327			60,454
Cash and cash equivalents at end of period	$	59,882		$	51,386		$	59,882		$	51,386

Richardson Electronics, Ltd.

Unaudited Consolidated Statement of Stockholders’ Equity

(in ~~thousands)~~thousands, except per share amounts)

Common Class B
Common Par
Value Additional
Paid In
Capital Common
Stock in
Treasury Retained
Earnings Accumulated
Other
Comprehensive
Income Total
Balance May 28, 2016: 10,703 2,141 $ 642 $ 58,969 $ — $ 79,292 $ 2,772 $ 141,675
Comprehensive loss
Net loss — — — — — (6,803 ) — (6,803 )
Foreign currency translation — — — — — — (1,736 ) (1,736 )
Fair value adjustments on investments — — — — — — 40 40
Share-based compensation:
Stock options — — — 354 — — — 354
Common stock:
Options Exercised 5 — — 30 — — — 30
Dividends paid to:
Common ($0.18 per share) — — — — — (1,925 ) — (1,925 )
Class B ($0.162 per share) — — — — — (348 ) — (348 )
Balance February 25, 2017: 10,708 2,141 $ 642 $ 59,353 $ — $ 70,216 $ 1,076 $ 131,287

	Common		Class B Common		Par Value		Additional Paid In Capital		Common Stock in Treasury		Retained Earnings			Accumulated Other Comprehensive Income			Total
Balance May 27, 2017:		10,712		2,137	$	642	$	59,436	$	—	$	69,333		$	2,916		$	132,327
Comprehensive income
Net income		—		—		—		—		—		2,083			—			2,083
Foreign currency translation		—		—		—		—		—		—			3,997			3,997
Fair value adjustments on investments		—		—		—		—		—		—			(130	)		(130	)
Share-based compensation:
Restricted stock		78		—		—		57		—		—			—			57
Stock options		—		—		—		368		—		—			—			368
Common stock:
Options exercised		6		—		5		39		—		—			—			44
Dividends paid to:
Common ($0.18 per share)		—		—		—		—		—		(1,938	)		—			(1,938	)
Class B ($0.162 per share)		—		—		—		—		—		(346	)		—			(346	)
Balance March 3, 2018:		10,796		2,137	$	647	$	59,900	$	—	$	69,132		$	6,783		$	136,462

RICHARDSON ELECTRONICS, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE COMPANY

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

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

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

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

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

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

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

2. BASIS OF PRESENTATION

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

Our fiscal quarter ends on the Saturday nearest the end of the quarter-ending month. The third quarter of fiscal 2018 and fiscal 2017 both contained 13 weeks. The first nine months of fiscal 2018 and fiscal 2017 contained 40 and ~~2016 each contained~~ 39 ~~weeks.~~weeks, respectively.

In the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results of interim periods have been made. All inter-company transactions and balances have been eliminated. The unaudited consolidated financial statements presented herein include the accounts of our wholly owned subsidiaries. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of our operations for the three and nine months ended ~~February 25, 2017,~~March 3, 2018, are not necessarily indicative of the results that may be expected for the fiscal year ending ~~May 27, 2017.~~June 2, 2018.

The financial information contained in this report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May ~~28, 2016,~~27, 2017, that we filed on July ~~29, 2016.~~31, 2017.

3. CRITICAL ACCOUNTING POLICIES AND ESTIMATES

~~Inventories:~~Inventories, net: Our consolidated inventories are stated at the lower of cost ~~or market,~~and net realizable value, generally using a weighted-average cost method. Our net inventories include approximately ~~$36.9~~$40.9 million of finished goods, ~~$4.9~~$5.7 million of raw materials and ~~$1.1~~$2.5 million of work-in-progress as of ~~February 25, 2017,~~March 3, 2018, as compared to approximately ~~$40.0~~$36.0 million of finished goods, ~~$4.4~~$5.3 million of raw materials and ~~$1.0~~$1.4 million of work-in-progress as of May ~~28, 2016.~~27, 2017.

At this time, we do not anticipate any material risks or uncertainties related to possible future inventory write-downs. Provisions for obsolete or slow moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain markets and assumptions about future demand and market conditions. If future demand changes in the industry, or market conditions differ from management’s estimates, additional provisions may be necessary. ~~The inventory reserve was $3.4~~Inventory reserves were approximately $3.7 million as of ~~February 25, 2017,~~March 3, 2018 and $3.5 million as of May ~~28, 2016.~~ 27, 2017.

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

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers, which amends guidance for revenue recognition. ASU 2014-09 is principles based guidance that can be applied to all contracts with customers, enhancing comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The core principle of the guidance is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The guidance details the steps entities should apply to achieve the core principle. In August 2015, the FASB issued an amendment to defer the effective date for all entities by one year. For public entities, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016. Companies have the option of using either a full or modified retrospective approach in applying this standard. During fiscal 2016 and 2017, the FASB issued four additional updates which further clarify the guidance provided in ASU 2014-09.

We are evaluating the impact of the new standard on our financial statements using a three-phase approach (assessment, conversion and implementation). We continue to work through our assessment phase and further evaluation is needed in order to determine whether or not the new revenue recognition standard will have a material impact on our financial statements and related disclosures upon adoption. We have undertaken a detailed analysis of our various contracts with customers and revenue streams. The Company has engaged a third party to assist in evaluating the impact of this new standard on its consolidated financial statements and related disclosures. We will complete the conversion and implementation phases by the end of fiscal year 2018 in conjunction with future interpretative guidance.

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

Goodwill and Intangible Assets: We test goodwill for impairment annually and whenever events or circumstances indicate an impairment may have occurred, such as a significant adverse change in the business climate, loss of key personnel or a decision to sell or dispose of a reporting unit.

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

Intangible assets are initially recorded at their fair market values determined on quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized over their useful lives either on a straight-line basis or over their projected future cash flows and are tested for impairment when events or changes in circumstances occur that indicate possible impairment.

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.

In ~~November 2015,~~March 2016, the FASB issued ASU ~~2015-17, “Balance Sheet Classification~~No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”, a new accounting standard update intended to simplify several aspects of ~~Deferred Taxes.” ASU 2015-17 eliminates~~ the ~~prior US GAAP guidance in Topic 740, Income Taxes, that required an entity to separate deferred~~accounting for share-based payment transactions including: income tax consequences, classification of awards as either equity or liabilities and ~~assets~~classification on the statement of cash flows. Specifically, the update requires that excess tax benefits and tax deficiencies (the difference between ~~current~~the deduction for tax purposes and ~~noncurrent amounts~~the compensation cost recognized for financial reporting purposes) be recognized as income tax expense or benefit in the consolidated statements of comprehensive income (loss), introducing a ~~classified balance sheet. The amendments in ASU 2015-17 require that all deferred tax liabilities and assets~~new element of volatility to the ~~same tax jurisdiction or a tax filing group, as well as any related valuation allowance, be offset and presented as a single noncurrent amount in a classified balance sheet. ASU 2015-17~~provision for income taxes. This update is effective for ~~annual periods~~fiscal years beginning after December 15, ~~2016,~~2016. Early adoption is permitted. The Company adopted the ASU on May 28, 2017. Effective with the adoption of the ASU all share-based awards continue to be accounted for as equity awards, excess tax benefits recognized on stock-based compensation expense are reflected in the consolidated statements of comprehensive income (loss) as a component of the provision for income taxes on a prospective basis, excess tax benefits recognized on stock-based compensation expense are classified as an operating activity in the consolidated statements of cash flows on a prospective basis and ~~interim periods within those annual periods. In order to simplify presentation of deferred tax balances,~~ the Company ~~adopted this standard prospectively in~~has elected to continue to estimate expected forfeitures over the ~~first quarter~~course of ~~fiscal year 2017, ending August 27, 2016. Periods prior to August 27, 2016 were not retrospectively adjusted.~~a vesting period. The adoption of the ASU had no impact on the retained earnings, other components of equity or net assets as of the beginning of the period of adoption.

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

	February 25, 2017		May 28, 2016		March 3, 2018		May 27, 2017
Compensation and payroll taxes	$	2,543	$	3,404	$	3,328	$	3,250
Accrued severance (1)		1,010		650		410		706
Professional fees		578		775		642		535
Deferred revenue		1,437		1,879		2,051		1,460
Other accrued expenses		3,168		2,427		3,436		2,360
Accrued Liabilities	$	8,736	$	9,135	$	9,867	$	8,311

(1) In the ~~three months ended November 26, 2016,~~second quarter of fiscal year 2017, the Company executed a reduction in headcount to streamline operations and reduce ~~costs. For the three months ended November 26, 2016, the Company~~costs and recorded $1.3 million of expense included in selling, general and administrative expenses for employee termination costs payable to terminated employees with employment and/or separation agreements with the Company. The changes in the severance accrual for the ~~three~~first nine months ~~ended February 25, 2017~~of fiscal year 2018 included payments of ~~$0.4~~$0.3 million. ~~The changes in the severance accrual for the nine months ended February 25, 2017 included provisions and payments of $1.3 million and $0.9 million, respectively.~~

4. ~~ACQUISITION~~

On June 15, 2015, Richardson Electronics, Ltd (“the Company”), acquired certain assets of International Medical Equipment and Services, Inc. (“IMES”), for a purchase price of $12.2 million. This includes the purchase of inventory, receivables, fixed assets, and certain other assets of the Company. The Company did not acquire any liabilities of IMES. The total consideration paid excludes transaction costs.

IMES, based in South Carolina, provides reliable, cost-saving solutions worldwide for major brands of CT and MRI equipment. This acquisition positions Richardson Healthcare to provide cost effective diagnostic imaging replacement parts and training to hospitals, diagnostic imaging centers, medical institutions, and independent service organizations. IMES offers an extensive selection of replacement parts, as well as an interactive training center, on-site test bays and experienced technicians who provide 24/7 customer support. Replacement parts are readily available and triple tested to provide peace of mind when uptime is critical. IMES core operations have remained in South Carolina. Richardson Healthcare plans to expand IMES’ replacement parts and training offerings geographically to leverage the Company’s global infrastructure. During the fourth quarter of fiscal 2016, IMES opened up their first foreign location in Amsterdam.

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

Accounts receivable $ 737
Inventories 1,420
Property, plant and equipment 230
Goodwill 6,332
Other intangibles 3,490
Net assets acquired $ 12,209
Intangible assets include trade names with an estimated life of 3 years for $0.6 million, customer relationships with an estimated life of 20 years for $2.5 million, non-compete agreements with an estimated life of 5 years for $0.2 million, and technology with an estimated life of 10 years for $0.2 million.
Goodwill recognized represents value the Company expects to be created by combining the operations of IMES with the Company’s operations, including the expansion into markets within existing business segments and geographic regions, access to new customers and potential cost savings and synergies.
~~Goodwill related to the acquisition is deductible for tax purposes.~~
In connection with the acquisition of IMES, the Company also entered into an Employment, Non-Disclosure, and Non-Compete Agreement (“Employment Agreement”) with Lee A. McIntyre III as the Company’s Executive Vice President, IMES. During the term of his employment, Mr. McIntyre will earn an annual base salary of $300,000. In addition to his base salary, he will be entitled to an annual bonus equal to 20% of the EBITDA of IMES provided that the EBITDA of the business is at least $2.0 million inclusive of the bonus payment. The annual bonus payment will terminate after five years. For fiscal year 2016, Mr. McIntyre did not receive a bonus as the minimum EBITDA needed was not achieved.
8
The financial results for the nine months ended February 27, 2016, includes the financial results for IMES from June 15, 2015, through February 27, 2016. The financial transactions for IMES from May 31, 2015, through June 14, 2015, were deemed immaterial for illustrating pro forma financial statements.

5. GOODWILL AND INTANGIBLE ASSETS

The carrying value of goodwill was $6.3 million as of ~~February 25, 2017,~~March 3, 2018 and May ~~28, 2016.~~27, 2017.

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

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

	Intangible Assets Subject to Amortization as of
	February 25, 2017		May 28, 2016		March 3, 2018		May 27, 2017
Gross Amounts:
Trade Name	$	659	$	659	$	659	$	659
Customer Relationship		3,390		3,434
Customer Relationships⁽¹⁾						3,417		3,397
Non-compete Agreements		177		177		177		177
Technology		230		230		230		230
Total Gross Amounts	$	4,456	$	4,500	$	4,483	$	4,463
Accumulated Amortization:
Trade Name	$	388	$	231	$	598	$	441
Customer Relationship		420		374
Customer Relationships						582		446
Non-compete Agreements		75		55		107		84
Technology		45		22		71		51
Total Accumulated Amortization	$	928	$	682	$	1,358	$	1,022

Net Intangible Assets	$	3,528	$	3,818
Net Intangibles					$	3,125	$	3,441

(1) Change from prior periods reflect impact of foreign currency translation.

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	Amortization Expense		Amortization Expense
Remaining 2017	$	90
2018		431
Remaining 2018			$	108
2019		244		245
2020		256		258
2021		245		246
2022				253
Thereafter		2,262		2,015
Total amortization expense	$	3,528	$	3,125

The weighted average number of years of amortization expense remaining is ~~15.7~~15.9 years.

6.5. INVESTMENTS

As of ~~February 25, 2017,~~March 3, 2018, we had approximately ~~$8.2~~$0.2 million invested in time deposits and certificates of deposit (“CD”)~~. Of these, $6.4 million~~ which mature in less ~~than twelve months and $1.8 million mature in more~~ than twelve months. The fair value of these investments is equal to the face value of each time deposit and CD.

As of May ~~28, 2016,~~27, 2017, we ~~have~~had invested in time deposits and certificates of deposit ~~(“CD”)~~ in the amount of ~~$9.5~~$8.2 million. Of this, ~~$2.3~~$6.4 million mature in less than twelve months and ~~$7.2~~$1.8 million mature in greater than twelve months. The fair value of these investments is the face value of each time deposit and CD.

We ~~also have~~liquidated our investments in equity securities ~~all~~in the third quarter of ~~which are~~fiscal 2018. Proceeds from the liquidation were $0.9 million with gross realized gains of $0.2 million for the nine months ended March 3, 2018. Prior to the liquidation of our investment in equity securities, our investments in equity securities were classified as available-for-sale and ~~are~~were carried at their fair value based on quoted market prices. Our investments, which ~~are~~were included in non-current assets, had a carrying amount of $0.6 million as of ~~February 25, 2017, and~~ May ~~28, 2016.~~27, 2017. Proceeds from the sale of securities were $0.1 million during the third quarter of fiscal ~~2017 and fiscal 2016. We~~2017. Prior to liquidating the equity securities, we reinvested proceeds from the sale of securities, and the cost of the equity securities sold was based on a specific identification method. Gross realized ~~losses~~gains on those sales were less than $0.1 million during the third quarter of fiscal ~~2017 and fiscal 2016.~~2017. Net unrealized holding gains of less than $0.1 million during the third quarter of fiscal 2017 ~~and fiscal 2016, have been~~were included in accumulated other comprehensive ~~income.~~income (loss).

7.6. WARRANTIES

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

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

Warranty reserves are established for costs that are expected to be incurred after the sale and delivery of products under warranty. Warranty reserves are included in accrued liabilities on our consolidated balance sheets. The warranty reserves are determined based on known product failures, historical experience and other available evidence. Warranty reserves were approximately ~~$0.2~~$0.1 million as of ~~February 25, 2017,~~March 3, 2018 and ~~as of~~ May ~~28, 2016.~~27, 2017.

8.7. LEASE OBLIGATIONS, OTHER COMMITMENTS AND CONTINGENCIES

We lease certain warehouse and office facilities and office equipment under non-cancelable operating leases. Rent expense was ~~$1.5~~$1.3 million ~~during both the first nine months of fiscal 2017 and~~ during the first nine months of fiscal ~~2016.~~2018 and $1.5 million during the first nine months of fiscal 2017. Our future lease commitments for minimum rentals, including common area maintenance charges and property taxes during the next five years are as follows (in thousands):

Fiscal Year	Payments		Payments
Remaining 2017	$	458
2018		1,533
Remaining 2018			$	454
2019		1,339		1,622
2020		1,164		1,143
2021		850		802
2022				144
Thereafter		487		97

9.8. INCOME TAXES

We recorded an income tax provision from continuing operations of ~~$0.8~~$1.1 million and ~~$0.7~~$0.8 million for the first nine months of fiscal ~~2017~~2018 and the first nine months of fiscal ~~2016,~~2017, respectively. ~~Overall, the Company has certain foreign jurisdictions that have operating profits while the U.S. continues to experience operating losses while maintaining a full valuation allowance.~~ The effective income tax rate from continuing operations during the first nine months of fiscal ~~2017~~2018 was a tax provision of ~~(13.7%)~~65.0%, as compared to a tax provision of ~~(12.7%~~(13.7%) during the first nine months of fiscal ~~2016.~~2017. The difference in rate during the first nine months of fiscal ~~2017,~~2018, as compared to the first nine months of fiscal ~~2016,~~2017, reflects the ~~impact of~~change in the overall loss realized through the third quarter in each respective period, changes in our geographical distribution of income (loss), the recording of provision to return true-ups of various foreign jurisdictions, the accrual of an uncertain tax position with respect to a German audit and our positions with respect to permanent reinvestment of foreign earnings under ASC 740-30, Income Taxes - Other Considerations or Special Areas (“ASC 740-30”). The ~~(13.7%)~~65.0% effective income tax rate differs from the federal statutory rate of ~~34.0%~~29.2% as a result of our geographical distribution of income (loss), ~~the recording of various provision to return true-ups in foreign jurisdictions, the closure of the French tax audit, and~~ the recording of a valuation allowance against the increase in our U.S. state and federal net deferred tax ~~assets.~~assets, recognition of an uncertain tax position and preliminary tax assessments with respect to the income tax audit in Germany.

~~During~~On December 22, 2017, the ~~first~~U.S. government enacted new tax legislation, Tax Cuts and Jobs Act (the “Act”). The primary provisions of the Act expected to impact the Company in fiscal 2018 are a reduction to the U.S. corporate income tax rate from 35% to 21% and a transition from a worldwide corporate tax system to a territorial tax system. The reduction in the corporate income tax rate requires the Company to remeasure its net deferred tax assets to the new corporate tax rate and the transition to a territorial tax system requires payment of a one-time tax on deemed repatriation of undistributed and previously untaxed non-U.S. earnings. Primarily as a result of those provisions of the Act, the Company recorded a deferred remeasurement impact of approximately $1.6 million, which was fully offset by the valuation allowance movement. Additionally, the estimated deemed earnings repatriation tax, net of available foreign tax credits brought back as part of the deemed repatriation, was $3.5 million. The Company does not anticipate any cash tax payments due to the foreign tax credit carryforwards available to fully offset the provisional deemed repatriation tax.

The 21% corporate income tax rate was effective January 1, 2018. Based on the Company’s June 2, 2018 fiscal year end, the U.S. statutory income tax rate for fiscal 2018 will be approximately 29.2%.

The tax impact recorded for the Act during the third quarter of fiscal ~~year 2017, we~~2018 was provisional as outlined below and may change. The Company completed a ~~distribution~~preliminary assessment of ~~cash~~earnings that could be repatriated based on reinvestment needs of non-U.S. operations and earnings available for repatriation. The estimated withholding tax that would be incurred from ~~our Chinese entity to our U.S. parent company which consisted~~the repatriation of ~~a return of capital for $10.0 million and a dividend of $1.3 million. The impact on our income taxes recorded during~~those earnings is included in the ~~first~~third quarter of fiscal ~~2017 was an increase~~2018 provisional income tax expense. The Company continues to ~~our foreign tax credits~~analyze the provisions of the Act addressing the net deferred tax asset remeasurement and its calculations, the deemed earnings repatriation, including the determination of ~~approximately $3.6 million,~~undistributed non-U.S. earnings, and evaluate potential Company actions, including repatriating additional non-U.S. earnings and actions that could affect the Company’s fiscal year ended 2018 U.S. taxable income. In addition, the Company continues to monitor potential legislative action and regulatory interpretations of the Act.

Based on the effective date of certain provisions, the Company will be subject to additional requirements of the Act beginning in fiscal 2019. Those provisions include a ~~decrease~~tax on global intangible low-taxed income (GILTI), a tax determined by base erosion tax benefits (BEAT) from certain payments between a U.S. corporation and foreign subsidiaries, a limitation of certain executive compensation, a deduction for foreign derived intangible income (FDII) and interest expense limitations. The Company has not completed its analysis of those provisions and the estimated impact. The Company also has not determined its accounting policy to treat the taxes due on GILTI as a period cost or include in the determination of deferred taxes.

In December 2017, the SEC issued Staff Accounting Bulletin No. 118 that allows for a measurement period up to one year after the enactment date of the Act to complete the accounting requirements. The Company will complete the adjustments related to the Act within the allowed period.

We have historically determined that undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. ~~federal net operating loss deferred~~Due to the deemed earnings repatriation tax, ~~asset of $4.8 million, and a decrease to our~~the outside basis difference for which the historic balance has primarily related has been reduced. The deferred tax liability ~~for earnings considered permanently reinvested~~on the outside basis difference is now primarily withholding tax. Accordingly, we have reduced the deferred tax liability from $5.7 million as of ~~$1.2 million. In connection with~~ the ~~cash repatriation, we recorded and paid approximately $0.1 million of withholding tax during~~ second quarter of fiscal ~~year 2017.~~2018 to $0.2 million as of the third quarter of fiscal 2018 on foreign earnings of $47.2 million.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal ~~2006~~2007 are closed for examination under the statute of limitation for U.S. federal, U.S. state and local or non-U.S. tax jurisdictions. We are currently under examination in ~~Germany (fiscal 2011 through 2014) and~~ Thailand (fiscal 2008 through 2011). We are also under examination in the state of Illinois ~~(fiscal 2011 through 2013).~~for fiscal years 2014 and 2015. Our primary foreign tax jurisdictions are Germany and the Netherlands. We have tax years open in Germany beginning in fiscal ~~2012~~2015 and the Netherlands beginning in fiscal ~~2010.~~2011.

~~We have historically determined that certain undistributed earnings~~On September 12, 2017, the Company received an income tax refund from the State of ~~our foreign subsidiaries,~~Illinois of approximately $2.0 million, which was inclusive of interest earned. The refund was a result of the conclusion of the Illinois amended return related to the ~~extent~~sale of ~~cash available, will be repatriated to~~ the ~~U.S. Accordingly, we have provided a deferred tax liability totaling $5.3~~RF, Wireless and Power Division in 2011. A net benefit of $1.5 million, ~~as of February 25, 2017, on foreign earnings of $38.0 million. In addition, as of February 25, 2017, approximately $6.2~~which includes $0.5 million of ~~cumulative positive earnings~~professional fee costs incurred to pursue the refund, was recognized in the second quarter of some of our foreign subsidiaries are still considered permanently reinvested pursuant to ASC 740-30. Due to various tax attributes that are continuously changing, it is not practicable to determine what, if any, tax liability might exist if such earnings were to be repatriated.fiscal 2018 in discontinued operations.

As of ~~February 25, 2017, we had no~~March 3, 2018, our worldwide liability ~~from continuing operations,~~ for uncertain tax positions ~~compared~~related to continuing operations was $0.1 million, ~~of liabilities for uncertain tax positions,~~ excluding interest and penalties, as compared to no liability as of ~~February~~May 27, ~~2016.~~2017. The ~~decrease in~~change to the uncertain tax positions ~~relates to~~for the ~~closure~~third quarter of fiscal 2018 was as a result of the ~~French tax~~preliminary German audit assessments and ~~a lapse~~the related exposure for the open years, which was reserved in the second quarter of ~~a statute of limitation.~~fiscal 2018. We record penalties and interest relating to uncertain tax positions in the income tax expense line item within the unaudited consolidated statements of ~~comprehensive loss.~~income (loss). It is not expected that there will be a change ~~in the~~to unrecognized tax ~~benefits~~provision within the next ~~twelve~~12 months.

The valuation allowance against the net deferred tax assets ~~that will more likely than not be realized was $5.9~~increased to $10.0 million as of ~~May 28, 2016. The~~March 3, 2018. Changes during the first nine months relating to the Act include the impact from the deferred remeasurement, deemed earnings repatriation tax and changes to the permanent reinvestment assertion outside basis difference as a result of the Act. Additional impacts to the valuation allowance ~~against the net deferred~~include an Illinois income tax ~~assets has increased to $8.6 million as of February 25, 2017 for~~rate increase and additional domestic federal and state net deferred tax assets generated during the ~~nine months~~first three quarters of fiscal year ~~2017~~2018 due to additional losses in the U.S. jurisdiction. The valuation allowance against the net deferred tax assets was $8.5 million as of May 27, 2017. A full valuation allowance on the U.S. and state deferred tax assets will be maintained until sufficient positive evidence related to sources of future taxable income exists to support a reversal of the valuation allowance. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

~~10.~~9. CALCULATION OF EARNINGS PER SHARE

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

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

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


	Three Months Ended												Three Months Ended
	February 25, 2017						February 27, 2016						March 3, 2018						February 25, 2017
	Basic			Diluted			Basic			Diluted			Basic			Diluted			Basic			Diluted
Numerator for Basic and Diluted EPS:
Net loss	$	(1,431	)	$	(1,431	)	$	(2,926	)	$	(2,926	)
Income (loss) from continuing operations													$	527		$	527		$	(1,431	)	$	(1,431	)
Less dividends:
Common stock														648			648			642			642
Class B common stock														115			115			116			116
Undistributed losses													$	(236	)	$	(236	)	$	(2,189	)	$	(2,189	)
Common stock undistributed losses													$	(200	)	$	(200	)	$	(1,855	)	$	(1,855	)
Class B common stock undistributed losses														(36	)		(36	)		(334	)		(334	)
Total undistributed losses													$	(236	)	$	(236	)	$	(2,189	)	$	(2,189	)
Income from discontinued operations													$	—		$	—		$	—		$	—
Less dividends:
Common stock														—			—			—			—
Class B common stock														—			—			—			—
Undistributed losses													$	—		$	—		$	—		$	—
Common stock undistributed losses													$	—		$	—		$	—		$	—
Class B common stock undistributed losses														—			—			—			—
Total undistributed losses													$	—		$	—		$	—		$	—
Net income (loss)													$	527		$	527		$	(1,431	)	$	(1,431	)
Less dividends:
Common stock		642			642			642			642			648			648			642			642
Class B common stock		116			116			116			116			115			115			116			116
Undistributed losses	$	(2,189	)	$	(2,189	)	$	(3,684	)	$	(3,684	)	$	(236	)	$	(236	)	$	(2,189	)	$	(2,189	)
Common stock undistributed losses	$	(1,855	)	$	(1,855	)	$	(3,122	)	$	(3,122	)	$	(200	)	$	(200	)	$	(1,855	)	$	(1,855	)
Class B common stock undistributed losses		(334	)		(334	)		(562	)		(562	)		(36	)		(36	)		(334	)		(334	)
Total undistributed losses	$	(2,189	)	$	(2,189	)	$	(3,684	)	$	(3,684	)	$	(236	)	$	(236	)	$	(2,189	)	$	(2,189	)
Denominator for basic and diluted EPS:
Common stock weighted average shares		10,706			10,706			10,701			10,701			10,792			10,792			10,706			10,706
Class B common stock weighted average shares, and shares under if-converted method for diluted EPS		2,141			2,141			2,141			2,141			2,137			2,137			2,141			2,141
Effect of dilutive securities
Dilutive stock options					—						—						80						—
Denominator for diluted EPS adjusted for weighted average shares and assumed conversions					12,847						12,842						13,009						12,847
Net loss per share:
Income (loss) from continuing operations per share:
Common stock	$	(0.11	)	$	(0.11	)	$	(0.23	)	$	(0.23	)	$	0.04		$	0.04		$	(0.11	)	$	(0.11	)
Class B common stock	$	(0.10	)	$	(0.10	)	$	(0.21	)	$	(0.21	)	$	0.04		$	0.04		$	(0.10	)	$	(0.10	)
Income from discontinued operations per share:
Common stock													$	—		$	—		$	—		$	—
Class B common stock													$	—		$	—		$	—		$	—
Net income (loss) per share:
Common stock													$	0.04		$	0.04		$	(0.11	)	$	(0.11	)
Class B common stock													$	0.04		$	0.04		$	(0.10	)	$	(0.10	)

Note: Common stock options that were anti-dilutive and not included in diluted earnings per common share for the third quarter of fiscal 2017 ~~and fiscal 2016 were 853 and 1,020, respectively.~~was 853.

Nine Months Ended
February 25, 2017 February 27, 2016
Basic Diluted Basic Diluted
Numerator for Basic and Diluted EPS:
Net loss $ (6,803 ) $ (6,803 ) $ (6,611 ) $ (6,611 )
Less dividends:
Common stock 1,925 1,925 1,973 1,973
Class B common stock 348 348 348 348
Undistributed losses $ (9,076 ) $ (9,076 ) $ (8,932 ) $ (8,932 )
Common stock undistributed losses $ (7,691 ) $ (7,691 ) $ (7,598 ) $ (7,598 )
Class B common stock undistributed losses (1,385 ) (1,385 ) (1,334 ) (1,334 )
Total undistributed losses $ (9,076 ) $ (9,076 ) $ (8,932 ) $ (8,932 )
Denominator for basic and diluted EPS:
Common stock weighted average shares 10,704 10,704 10,976 10,976
Class B common stock weighted average shares, and shares under if-converted method for diluted EPS 2,141 2,141 2,141 2,141
Effect of dilutive securities
Dilutive stock options — —
Denominator for diluted EPS adjusted for weighted average shares and assumed conversions 12,845 13,117
Net loss per share:
Common stock $ (0.54 ) $ (0.54 ) $ (0.51 ) $ (0.51 )
Class B common stock $ (0.48 ) $ (0.48 ) $ (0.46 ) $ (0.46 )

	Nine Months Ended
	March 3, 2018						February 25, 2017
	Basic			Diluted			Basic			Diluted
Numerator for Basic and Diluted EPS:
Income (loss) from continuing operations	$	587		$	587		$	(6,803	)	$	(6,803	)
Less dividends:
Common stock		1,938			1,938			1,925			1,925
Class B common stock		346			346			348			348
Undistributed losses	$	(1,697	)	$	(1,697	)	$	(9,076	)	$	(9,076	)
Common stock undistributed losses	$	(1,440	)	$	(1,440	)	$	(7,691	)	$	(7,691	)
Class B common stock undistributed losses		(257	)		(257	)		(1,385	)		(1,385	)
Total undistributed losses	$	(1,697	)	$	(1,697	)	$	(9,076	)	$	(9,076	)
Income from discontinued operations	$	1,496		$	1,496		$	—		$	—
Less dividends:
Common stock		1,938			1,938			—			—
Class B common stock		346			346			—			—
Undistributed losses	$	(788	)	$	(788	)	$	—		$	—
Common stock undistributed losses	$	(668	)	$	(668	)	$	—		$	—
Class B common stock undistributed losses		(120	)		(120	)		—			—
Total undistributed losses	$	(788	)	$	(788	)	$	—		$	—
Net income (loss)	$	2,083		$	2,083		$	(6,803	)	$	(6,803	)
Less dividends:
Common stock		1,938			1,938			1,925			1,925
Class B common stock		346			346			348			348
Undistributed losses	$	(201	)	$	(201	)	$	(9,076	)	$	(9,076	)
Common stock undistributed losses	$	(171	)	$	(171	)	$	(7,691	)	$	(7,691	)
Class B common stock undistributed losses		(30	)		(30	)		(1,385	)		(1,385	)
Total undistributed losses	$	(201	)	$	(201	)	$	(9,076	)	$	(9,076	)
Denominator for basic and diluted EPS:
Common stock weighted average shares		10,753			10,753			10,704			10,704
Class B common stock weighted average shares, and shares under if-converted method for diluted EPS		2,137			2,137			2,141			2,141
Effect of dilutive securities
Dilutive stock options					40						—
Denominator for diluted EPS adjusted for weighted average shares and assumed conversions					12,930						12,845
Income (loss) from continuing operations per share:
Common stock	$	0.05		$	0.05		$	(0.54	)	$	(0.54	)
Class B common stock	$	0.04		$	0.04		$	(0.48	)	$	(0.48	)
Income from discontinued operations per share:
Common stock	$	0.12		$	0.12		$	—		$	—
Class B common stock	$	0.11		$	0.11		$	—		$	—
Net income (loss) per share:
Common stock	$	0.17		$	0.17		$	(0.54	)	$	(0.54	)
Class B common stock	$	0.15		$	0.15		$	(0.48	)	$	(0.48	)

Note: Common stock options that were anti-dilutive and not included in diluted earnings per common share for the first nine months of fiscal 2017 ~~and fiscal 2016 were 853 and 800, respectively.~~was 853.

~~11.~~10. SEGMENT REPORTING

In accordance with ASC 280-10, Segment Reporting, we have identified three operating and reportable segments as follows:

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

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

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

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	February 25,		February 27,		February 25,		February 27,		March 3,		February 25,		March 3,		February 25,
	2017		2016		2017		2016		2018		2017		2018		2017
PMT
Net Sales	$	24,763	$	23,008	$	75,373	$	75,365	$	31,869	$	24,763	$	91,056	$	75,373
Gross Profit		8,075		7,140		23,803		22,793		10,656		8,075		30,492		23,803
Canvys
Net Sales	$	4,824	$	5,190	$	14,883	$	17,773	$	7,585	$	4,824	$	20,057	$	14,883
Gross Profit		1,331		1,204		4,222		4,439		2,571		1,331		6,245		4,222
Healthcare
Net Sales	$	2,726	$	3,093	$	9,257	$	9,310	$	2,191	$	2,726	$	6,609	$	9,257
Gross Profit		1,286		1,406		3,871		4,215		840		1,286		2,852		3,871

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

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

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	February 25,			February 27,			February 25,			February 27,			March 3,			February 25,			March 3,			February 25,
	2017			2016			2017			2016			2018			2017			2018			2017
Net Sales
North America	$	13,607		$	14,215		$	40,715		$	47,039		$	18,748		$	13,607		$	49,657		$	40,715
Asia/Pacific		5,916			6,081			20,192			18,045			6,635			5,916			21,102			20,192
Europe		10,950			9,659			32,418			32,782			14,197			10,950			40,312			32,418
Latin America		1,792			1,402			6,138			4,464			2,086			1,792			6,646			6,138
Other (1)		48			(66	)		50			118			(21	)		48			5			50
Total	$	32,313		$	31,291		$	99,513		$	102,448		$	41,645		$	32,313		$	117,722		$	99,513
Gross Profit
North America	$	5,258		$	5,163		$	15,090		$	16,500		$	6,955		$	5,258		$	18,747		$	15,090
Asia/Pacific		2,085			2,094			7,012			5,909			2,331			2,085			7,256			7,012
Europe		3,764			2,908			10,540			9,763			4,904			3,764			13,493			10,540
Latin America		643			555			2,337			1,729			820			643			2,638			2,337
Other (1)		(1,058	)		(970	)		(3,083	)		(2,454	)		(943	)		(1,058	)		(2,545	)		(3,083	)
Total	$	10,692		$	9,750		$	31,896		$	31,447		$	14,067		$	10,692		$	39,589		$	31,896

(1)

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

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

~~12.~~11. LITIGATION

~~We are involved in several pending judicial proceedings concerning matters arising~~On December 5, 2017, Steven H. Busch filed a Verified Stockholder Derivative Complaint against Edward J. Richardson, Paul Plante, Jacques Belin, James Benham, Kenneth Halverson, and the Company in the ~~ordinary course~~Delaware Court of ~~business. While~~Chancery, captioned Steven H. Busch v. Edward J. Richardson, et al., C.A. No. 2017-0868-AGB. The lawsuit alleges claims for breach of fiduciary duty by the ~~outcome~~Company’s directors and challenges the decision of ~~litigation~~a special committee of the Company’s Board to refuse Mr. Busch’s demand that the Company’s Board, among other things, rescind the Company’s May 2013 repurchase of stock from Mr. Richardson and May 2013 and October 2014 repurchases of Company stock from the Richardson Wildlife Foundation. The Company believes the lawsuit to be without merit and that a loss is ~~subject to uncertainties,~~not probable or estimable based on the information available at the time the financial statements were issued, we determined disclosure of contingencies relating to any of our pending judicial proceedings was not necessary because there is less than a reasonable possibility that a material loss will be incurred.

issued.

~~13.~~12. FAIR VALUE MEASUREMENTS

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

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

As of ~~February 25, 2017,~~March 3, 2018 and May ~~28, 2016,~~27, 2017, we held investments that are required to be measured at fair value on a recurring basis. Our investments currently consist of time deposits and CDs, where face value is equal to fair value, and as of May 27, 2017, equity securities of publicly traded companies for which market prices are readily available.

Investments measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of ~~February 25, 2017,~~March 3, 2018 and May ~~28, 2016,~~27, 2017, were as follows (in thousands):

	Level 1		Level 1
February 25, 2017
March 3, 2018
Time deposits/CDs	$	8,193	$	199
Equity securities		601		—
Total	$	8,794	$	199
May 28, 2016
May 27, 2017
Time deposits/CDs	$	9,517	$	8,226
Equity securities		550		622
Total	$	10,067	$	8,848

~~14.~~13. Related Party Transaction

On June 15, 2015, the Company entered into a lease agreement for the IMES facility with LDL, LLC. The Executive Vice President of IMES, Lee A. McIntyre III (former owner of IMES), has an ownership interest in LDL, LLC. The lease agreement provides for monthly payments over five years with total future minimum lease payments of ~~$0.5~~$0.3 million. Rental expense related to this lease amounted to $0.1 million for the nine months ended March 3, 2018 and for the nine months ended February 25, ~~2017, and February 27, 2016.~~2017. The Company shall be entitled to extend the term of the lease for a period of an additional five years by notifying the landlord in writing of its intention to do so within nine months of the expiration of the initial term.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. The terms “may,” “should,” “could,” “anticipate,” “believe,” “continues,” “estimate,” “expect,” “intend,” “objective,” “plan,” “potential,” “project” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A, of our Annual Report on Form 10-K filed on July ~~29, 2016.~~31, 2017. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events or otherwise.

In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts, or opinions, such reports are not our responsibility.

INTRODUCTION

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

	●	Business Overview – a brief synopsis of our Company for the periods ended March 3, 2018 and February 25, ~~2017, and February 27, 2016.~~2017.

	●	Results of Operations– an analysis and comparison of our consolidated results of operations for the three and nine month periods ended March 3, 2018 and February 25, 2017, ~~and February 27, 2016,~~ as reflected in our consolidated statements of comprehensive ~~loss.~~income (loss).

	●	Liquidity, Financial Position and Capital Resources – a discussion of our primary sources and uses of cash for the three and nine month periods ended March 3, 2018, and February 25, 2017, ~~and February 27, 2016,~~ and a discussion of changes in our financial position.

Business Overview

We have three operating and reportable segments which we define as follows:

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

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

RESULTS OF OPERATIONS

Financial Summary – Three Months Ended ~~February 25, 2017~~March 3, 2018


	●	Net sales for the third quarter of fiscal ~~2017~~2018 were ~~$32.3~~$41.6 million, an increase of ~~3.3%~~28.9%, compared to net sales of ~~$31.3~~$32.3 million during the third quarter of fiscal ~~2016.~~2017.

	●	Gross margin increased to 33.8% during the third quarter of fiscal 2018, compared to 33.1% during the third quarter of fiscal ~~2017, compared to 31.2% during the third quarter of fiscal 2016.~~2017.

	●	Selling, general and administrative expenses were $13.1 million, or 31.4% of net sales, for the third quarter of fiscal 2018, compared to $12.0 million, or 37.1% of net sales, for the third quarter of fiscal ~~2017, compared to $12.5 million, or 39.9% of net sales, for the third quarter of fiscal 2016.~~2017.

	●	Operating ~~loss~~income during the third quarter of fiscal ~~2017~~2018 was ~~$1.3~~$1.0 million, compared to an operating loss of ~~$2.7~~$1.3 million in the third quarter of fiscal ~~2016.~~2017.

	●	Net ~~loss~~income during the third quarter of fiscal ~~2017~~2018 was ~~$1.4~~$0.5 million, compared to net loss of ~~$2.9~~$1.4 million during the third quarter of fiscal ~~2016.~~2017.

Financial Summary – Nine Months Ended ~~February 25, 2017~~March 3, 2018

●

The first nine months of fiscal 2018 and 2017 contained 40 and 39 weeks, respectively.

	●	Net sales for the first nine months of fiscal ~~2017~~2018 were ~~$99.5~~$117.7 million, ~~a decrease~~an increase of ~~2.9%~~18.3%, compared to net sales of ~~$102.4~~$99.5 million during the first nine months of fiscal ~~2016.~~2017.

	●	Gross margin increased to 33.6% during the first nine months of fiscal 2018, compared to 32.1% during the first nine months of fiscal ~~2017, compared to 30.7% during the first nine months of fiscal 2016.~~2017.

	●	Selling, general and administrative expenses were $38.0 million, or 32.3% of net sales, for the first nine months of fiscal 2018, compared to $37.7 million, or 37.9% of net sales, for the first nine months of fiscal ~~2017, compared to $37.9 million, or 37.0% of net sales, for the first nine months of fiscal 2016.~~2017.

	●	Operating ~~loss~~income during the first nine months of fiscal ~~2017~~2018 was ~~$5.8~~$1.8 million, compared to an operating loss of ~~$6.2~~$5.8 million in the first nine months of fiscal ~~2016.~~ 2017.

	●	~~Net loss~~Income from continuing operations during the first nine months of fiscal ~~2017~~2018 was $0.6 million, compared to loss from continuing operations of $6.8 million in the first nine months of fiscal 2017.

	●	Income from discontinued operations during the first nine months of fiscal 2018 was $1.5 million. There was no income (loss) from discontinued operations during the first nine months of fiscal 2017.

	●	Net income during the first nine months of fiscal 2018 was $2.1 million, compared to net loss of ~~$6.6~~$6.8 million during the first nine months of fiscal ~~2016.~~
		2017.

Net Sales and Gross Profit Analysis

Net sales by segment and percent change for the third quarter and first nine months of fiscal ~~2017~~2018 and ~~2016~~2017 were as follows (in thousands):

Net Sales	Three Months Ended				FY17 vs. FY16			Three Months Ended				FY18 vs. FY17
	February 25, 2017		February 27, 2016		% Change			March 3, 2018		February 25, 2017		% Change
PMT	$	24,763	$	23,008		7.6	%	$	31,869	$	24,763		28.7	%
Canvys		4,824		5,190		-7.1	%		7,585		4,824		57.2	%
Healthcare		2,726		3,093		-11.9	%		2,191		2,726		-19.6	%
Total	$	32,313	$	31,291		3.3	%	$	41,645	$	32,313		28.9	%

	Nine Months Ended				FY17 vs. FY16			Nine Months Ended				FY18 vs. FY17
	February 25, 2017		February 27, 2016		% Change			March 3, 2018		February 25, 2017		% Change
PMT	$	75,373	$	75,365		0.0	%	$	91,056	$	75,373		20.8	%
Canvys		14,883		17,773		-16.3	%		20,057		14,883		34.8	%
Healthcare		9,257		9,310		-0.6	%		6,609		9,257		-28.6	%
Total	$	99,513	$	102,448		-2.9	%	$	117,722	$	99,513		18.3	%

During the third quarter of fiscal ~~2017~~2018 consolidated net sales increased ~~3.3%~~28.9% compared to the third quarter of fiscal ~~2016.~~2017. Sales for PMT increased ~~7.6%~~28.7%, sales for Canvys ~~decreased 7.1 %,~~increased 57.2% and sales for Healthcare decreased ~~11.9%~~19.6%. The increase in PMT was due to specialty products engineered and manufactured in LaFox which are sold to the semiconductor capital market and new technology partners in power conversion and RF and microwave components. The ~~decline in~~increase for Canvys was ~~primarily~~ due to ~~declines~~increased customer demand in ~~overall demand from key original equipment manufacturers.~~both our North American and European markets. The decrease in Richardson Healthcare was primarily due to ~~lower~~the sale of the PACS display business at the end of fiscal 2017, partially offset by higher sales of ~~displays~~equipment and ~~detectors~~certified and ~~availability of harvested~~refurbished CT ~~Tubes.~~tubes.

During the first nine months of fiscal ~~2017~~2018 consolidated net sales ~~decreased 2.9%~~increased 18.3% compared to the first nine months of fiscal ~~2016.~~2017. Sales for PMT ~~were flat,~~increased 20.8%, sales for Canvys ~~decreased 16.3%,~~increased 34.8% and sales for Healthcare decreased ~~by 0.6%~~28.6%. The ~~decline~~increase in PMT was due to specialty products engineered and manufactured in LaFox which are sold to the semiconductor capital market, new technology partners in power conversion and RF and microwave components, complemented by increased sales of power grid tubes. The increase for Canvys was ~~primarily~~ due to ~~declines~~increased customer demand in ~~overall demand from key original equipment manufacturers.~~both our North American and European markets. The decrease in Richardson Healthcare was primarily due to ~~lower Display and Detector sales,~~the sale of the PACS display business at the end of fiscal 2017, partially offset by higher sales of ~~IMES spare parts.~~equipment and certified and refurbished CT tubes.

Gross profit by segment and percent ~~change~~of net sales for the third quarter and first nine months of fiscal ~~2017~~2018 and ~~2016~~2017 were as follows (in thousands):

Gross Profit	Three Months Ended										Three Months Ended
	February 25, 2017		% of Net Sales			February 27, 2016		% of Net Sales			March 3, 2018		% of Net Sales			February 25, 2017		% of Net Sales
PMT	$	8,075		32.6	%	$	7,140		31.0	%	$	10,656		33.4	%	$	8,075		32.6	%
Canvys		1,331		27.6	%		1,204		23.2	%		2,571		33.9	%		1,331		27.6	%
Healthcare		1,286		47.2	%		1,406		45.5	%		840		38.3	%		1,286		47.2	%
Total	$	10,692		33.1	%	$	9,750		31.2	%	$	14,067		33.8	%	$	10,692		33.1	%

Nine Months Ended
February 25,
2017 % of Net
Sales February 27,
2016 % of Net
Sales
PMT $ 23,803 31.6 % $ 22,793 30.2 %
Canvys 4,222 28.4 % 4,439 25.0 %
Healthcare 3,871 41.8 % 4,215 45.3 %
Total $ 31,896 32.1 % $ 31,447 30.7 %

	Nine Months Ended
	March 3, 2018		% of Net Sales			February 25, 2017		% of Net Sales
PMT	$	30,492		33.5	%	$	23,803		31.6	%
Canvys		6,245		31.1	%		4,222		28.4	%
Healthcare		2,852		43.2	%		3,871		41.8	%
Total	$	39,589		33.6	%	$	31,896		32.1	%

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

Consolidated gross profit increased to $14.1 million during the third quarter of fiscal 2018, compared to $10.7 million during the third quarter of fiscal ~~2017, compared to $9.8 million during the third quarter of fiscal 2016.~~2017. Consolidated gross margin as a percentage of net sales increased to 33.8% during the third quarter of fiscal 2018, from 33.1% during the third quarter of fiscal 2017, ~~from 31.2% during the third quarter of fiscal 2016,~~ primarily due to favorable product mix ~~and scrap metal recoveries from our Brive, France production facility~~ for PMT and favorable product mix and lower ~~inventory reserve requirements~~costs on selected products for Canvys.

Consolidated gross profit increased to $39.6 million during the first nine months of fiscal 2018, compared to $31.9 million during the first nine months of fiscal ~~2017, compared to $31.4 million during the first nine months of fiscal 2016.~~2017. Consolidated gross margin as a percentage of net sales increased to 33.6% during the first nine months of fiscal 2018, from 32.1% during the first nine months of fiscal 2017, ~~from 30.7% during the first nine months of fiscal 2016,~~ primarily due to favorable product mix ~~and scrap metal recoveries from our Brive, France production facility~~ for PMT, ~~and~~ favorable product mix and lower costs on selected products for ~~Canvys.~~Canvys and the sale of the PACS display business, which generated lower margins in our Healthcare business.

Power and Microwave Technologies Group

PMT net sales increased 28.7% to $31.9 million during the third quarter of fiscal 2018, from $24.8 million during the third quarter of fiscal 2017. The increase was due to specialty products engineered and manufactured in LaFox which are sold to the semiconductor capital market and new technology partners in power conversion and RF and microwave components. Gross margin as a percentage of net sales increased ~~7.6%~~to 33.4% during the third quarter of fiscal 2018, as compared to 32.6% during the third quarter of fiscal 2017, ~~compared~~due to ~~$23.0~~favorable product mix.

PMT net sales increased 20.8% to $91.1 million induring the ~~third quarter~~first nine months of fiscal ~~2016.~~2018, from $75.4 million during the first nine months of fiscal 2017. The increase included sales of specialty products engineered and manufactured in LaFox which are sold primarily into the semiconductor capital equipment market, sales from new technology partners in power conversion and RF and microwave components, ~~products sold in laser applications, and specialty products manufactured in LaFox which are sold primarily into the semiconductor capital equipment market. The sales increase was partially offset~~complemented by ~~lower~~increased sales of ~~Electron devices sold into the aviation market.~~power grid tubes. Gross margin as a percentage of net sales increased to ~~32.6% during the third quarter of fiscal 2017, as compared to 31.0% during the third quarter of fiscal 2016, due to product mix and scrap metal recoveries from our Brive, France production facility.~~

~~PMT net sales were $75.4 million~~33.5% during the first nine months of fiscal 2017 and during the first nine months of fiscal 2016. Sales increased from new technology partners in power conversion and RF and microwave components, Electron devices sold into the aviation market and products sold in laser applications. The sales increase was offset by lower sales of Electron devices sold into the industrial power, laser, radar, medical, and marine industries as well as lower sales of specialty products manufactured in LaFox which were sold primarily into the semiconductor capital equipment market during the first two quarters. Gross margin as a percentage of net sales increased to 31.6% during the first nine months of fiscal 2017,2018, as compared to ~~30.2%~~31.6% during the nine months of fiscal ~~2016,~~2017, due to favorable product mix and ~~scrap metal recoveries~~favorable manufacturing results from our ~~Brive, France~~LaFox production facility.

Canvys

Canvys net sales ~~decreased 7.1%~~increased 57.2% to $7.6 million during the third quarter of fiscal 2018, from $4.8 million during the third quarter of fiscal 2017 ~~from $5.2 million during the third quarter of fiscal 2016 primarily~~ due to ~~a decrease in~~increased customer demand in both our North ~~America market.~~American and European markets. Gross margin as a percentage of net sales increased to 33.9% during the third quarter of fiscal 2018 as compared to 27.6% during the third quarter of fiscal 2017, ~~as compared to 23.2% during the third quarter of fiscal 2016,~~ due to favorable product mix and lower ~~inventory reserves.~~costs on selected products sold.

Canvys net sales ~~decreased 16.3%~~increased 34.8% to $20.1 million during the first nine months of fiscal 2018, from $14.9 million during the first nine months of fiscal 2017 ~~from $17.8 million during the first nine months of fiscal 2016 primarily~~ due to ~~a significant decrease in~~increased customer demand in both our North ~~America market.~~American and European markets. Gross margin as a percentage of net sales increased to 31.1% during the first nine months of fiscal 2018 as compared to 28.4% during the first nine months of fiscal 2017, ~~as compared to 25.0% during the first nine months of fiscal 2016,~~ due to favorable product mix and lower ~~inventory reserves.~~costs on selected products sold.

Healthcare

Healthcare net sales decreased ~~11.9%~~19.6% to $2.2 million during the third quarter of fiscal 2018, from $2.7 million during the third quarter of fiscal 2017 ~~from $3.1 million~~primarily due to the sale of the PACS display business at the end of fiscal 2017, partially offset by higher sales of equipment and certified and refurbished CT tubes. Gross margin as a percentage of net sales decreased to 38.3% during the third quarter of fiscal ~~2016~~2018 as compared to 47.2% during the third quarter of fiscal 2017 due to an unfavorable product mix that favored equipment sales.

Healthcare net sales decreased 28.6% to $6.6 million during the first nine months of fiscal 2018, from $9.3 million during the first nine months of fiscal 2017 primarily due to ~~decreases in~~ the ~~sales~~sale of ~~displays and detectors and CT Tubes~~the PACS display business at the end of fiscal 2017, partially offset by ~~an increase in~~higher sales of ~~IMES products.~~equipment and certified and refurbished CT tubes. Gross margin as a percentage of net sales increased to 47.2% during the third quarter of fiscal 2017 as compared to 45.5% during the third quarter of fiscal 2016 due to a product mix which favored more spare parts sales which typically carry higher margins.

~~Healthcare net sales were $9.3 million~~43.2% during the first nine months of fiscal ~~2017 and during the first nine months of fiscal 2016. An increase in the sales of IMES products was offset by lower Display and Detector sales. Gross margin~~2018 as ~~a percentage of net sales decreased~~compared to 41.8% during the first nine months of fiscal 2017 ~~as compared to 45.3% during the first nine months of fiscal 2016~~ due to the sale of the PACS display business, which generated lower margins, offset partially by an unfavorable product ~~mix.~~mix that favored equipment sales.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses ~~(“SG&A“) decreased~~increased to ~~$12.0~~$13.1 million during the third quarter of fiscal ~~2017~~2018 from ~~$12.5~~$12.0 million in the third quarter of fiscal ~~2016.~~2017. The ~~decrease~~increase was due to ~~lower salaries, benefits,~~higher compensation and ~~incentive compensation~~other expenses mostly related to the increase in net sales as well as higher research and development costs and other incremental expenses for Richardson Healthcare. Operating expenses as a ~~result~~percent of sales decreased to 31.4% in the ~~reduction in workforce that occurred during the second~~third quarter of fiscal ~~2017, and a reduction~~2018 from 37.1% in the third quarter of ~~IT expenses compared to~~ fiscal ~~2016.~~2017.

Selling, general and administrative expenses ~~(“SG&A“) decreased~~increased to $38.0 million during the first nine months of fiscal 2018 from $37.7 million during the first nine months of fiscal ~~2017 from $37.9 million during the first nine months of fiscal 2016.~~2017. The ~~decrease~~increase was due to ~~lower salaries~~higher compensation and ~~incentive compensation~~other expenses mostly related to the increase in net sales as well as higher research and ~~a reduction of IT~~development costs and other incremental expenses ~~compared~~ to ~~fiscal 2016, mostly~~support our growth strategies in Richardson Healthcare. The increase was partially offset by a charge of $1.3 million in the second quarter of fiscal 2017 for severance expense related to a reduction in ~~workforce during the second quarter of fiscal 2017.~~workforce.

Other Income/Expense

Other income/expense was less than $0.1 million ~~of expense for both~~during the third quarter of fiscal ~~2017 and~~2018, compared to expense of $0.1 million during the third quarter of fiscal ~~2016.~~2017. Other ~~income~~income/expense during the third quarter of fiscal 2018 included $0.2 million of foreign exchange losses and $0.2 million of investment/interest income. Other expense during the third quarter of fiscal 2017 included $0.2 million of foreign exchange losses and $0.1 million of investment/interest income. Other income/expense during the third quarter of fiscal 2016 included $0.3 million of foreign exchange losses partially offset by $0.1 million of investment/interest income, and $0.1 million of other income. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. We currently do not utilize derivative instruments to manage our exposure to foreign currency.

Other income/expense was ~~$0.2~~$0.1 million of expense during the first nine months of fiscal ~~2017,~~2018, compared to ~~income~~expense of ~~$0.4~~$0.2 million during the first nine months of fiscal ~~2016.~~2017. Other expense during the first nine months of fiscal 2018 included $0.5 million of foreign exchange losses partially offset by $0.4 million of investment/interest income. Other expense during the first nine months of fiscal 2017 included $0.3 million of foreign exchange losses and $0.1 million of investment/interest income. Other income during the first nine months of fiscal 2016 included $0.4 million of investment/interest income and $0.1 million of other income partially offset by $0.1 million of foreign exchange losses. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. We currently do not utilize derivative instruments to manage our exposure to foreign currency.

Income Tax Provision

On December 22, 2017, the U.S. government enacted new tax legislation, Tax Cuts and Jobs Act (the “Act”). The primary provisions of the Act expected to impact the Company in fiscal 2018 are a reduction to the U.S. corporate income tax rate from 35% to 21% and a transition from a worldwide corporate tax system to a territorial tax system. The reduction in the corporate income tax rate requires the Company to remeasure its net deferred tax assets to the new corporate tax rate and the transition to a territorial tax system requires payment of a one-time tax on deemed repatriation of undistributed and previously untaxed non-U.S. earnings. Primarily as a result of those provisions of the Act, the Company recorded a deferred remeasurement impact of approximately $1.6 million, which was fully offset by the valuation allowance movement. Additionally, the estimated deemed earnings repatriation tax, net of available foreign tax credits brought back as part of the deemed repatriation, was $3.5 million. The Company does not anticipate any cash tax payments due to the foreign tax credit carryforwards available to fully offset the provisional deemed repatriation tax.

The 21% corporate income tax rate was effective January 1, 2018. Based on the Company’s June 2, 2018 fiscal year end, the U.S. statutory income tax rate for fiscal 2018 will be approximately 29.2%.

The tax impact recorded for the Act during the third quarter of fiscal 2018 was provisional as outlined below and may change. The Company completed a preliminary assessment of earnings that could be repatriated based on reinvestment needs of non-U.S. operations and earnings available for repatriation. The estimated withholding tax that would be incurred from the repatriation of those earnings is included in the third quarter of fiscal 2018 provisional income tax expense. The Company continues to analyze the provisions of the Act addressing the net deferred tax asset remeasurement and its calculations, the deemed earnings repatriation, including the determination of undistributed non-U.S. earnings, and evaluate potential Company actions, including repatriating additional non-U.S. earnings and actions that could affect the Company’s fiscal year ended 2018 U.S. taxable income. In addition, the Company continues to monitor potential legislative action and regulatory interpretations of the Act.

Based on the effective date of certain provisions, the Company will be subject to additional requirements of the Act beginning in fiscal 2019. Those provisions include a tax on global intangible low-taxed income (GILTI), a tax determined by base erosion tax benefits (BEAT) from certain payments between a U.S. corporation and foreign subsidiaries, a limitation of certain executive compensation, a deduction for foreign derived intangible income (FDII) and interest expense limitations. The Company has not completed its analysis of those provisions and the estimated impact. The Company also has not determined its accounting policy to treat the taxes due on GILTI as a period cost or include in the determination of deferred taxes.

We have historically determined that undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. Due to the deemed earnings repatriation tax, the outside basis difference for which the historic balance has primarily related has been reduced. The deferred tax liability on the outside basis difference is now primarily withholding tax. Accordingly, we have reduced the deferred tax liability from $5.7 million as of the second quarter of fiscal 2018 to $0.2 million as of the third quarter of fiscal 2018 on foreign earnings of $47.2 million.

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

Recently Adopted Accounting Standards

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

Net ~~Loss~~Income (Loss) and Per Share Data

Net ~~loss~~income during the third quarter of fiscal ~~2017~~2018 was $0.5 million or $0.04 per diluted common share and $0.04 per Class B diluted common share, as compared to net loss of $1.4 million during the third quarter of fiscal 2017, or ($0.11) per diluted common share and ($0.10) per Class B diluted common share.

Net income, including income from discontinued operations of $1.5 million, during the first nine months of fiscal 2018 was $2.1 million, or $0.17 per diluted common share and $0.15 per Class B diluted common share, as compared to net loss of ~~$2.9~~$6.8 million ~~during the third quarter of fiscal 2016, or ($0.23) per diluted common share and ($0.21) per Class B diluted common share.~~

~~Net loss~~ during the first nine months of fiscal 2017, ~~was $6.8 million,~~ or ($0.54) per diluted common share and ($0.48) per Class B diluted common ~~share, as compared to net loss of $6.6 million during the first nine months of fiscal 2016, or ($0.51) per diluted common share and ($0.46) per Class B diluted common~~ share.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

Our ~~growth~~operations and cash needs have been primarily financed through income from operations and cash on hand.

Cash and cash equivalents were $59.9 million at ~~February 25, 2017, were $51.4 million.~~March 3, 2018. Investments included CDs and time deposits classified as short-term investments of $0.2 million. Cash and investments at March 3, 2018, consisted of $9.4 million in North America, $19.4 million in Europe, $1.1 million in Latin America, and $30.2 million in Asia/Pacific.

Cash and cash equivalents were $55.4 million at May 27, 2017. Investments included CD’s and time deposits, classified as short-term investments were $6.4 million and long-term investments were $2.4 million including equity securities of $0.6 million. Cash and investments at ~~February 25,~~May 27, 2017, consisted of ~~$15.6~~$16.3 million in North America, ~~$13.9~~$15.5 million in Europe, ~~$1.2~~$1.5 million in Latin America and ~~$29.5~~$30.9 million in Asia/Pacific. During the first quarter of fiscal 2017, we completed a cash repatriation of $11.3 million, which included a return of capital and dividend from our Chinese entity to our U.S. parent company.

~~Cash~~We believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and cash equivalents were $60.4 million at May 28, 2016. Investments included CDs and time deposits, classified as short-term investments were $2.3 million and long-term investments were $7.8 million including equity securities of $0.6 million. Cash and investments at May 28, 2016, consisted of $18.1 million in North America, $12.6 million in Europe, $0.7 million in Latin America, and $39.1 million in Asia/Pacific.working capital needs through the next twelve months.

Cash Flows from Operating Activities

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

Operating activities used $0.3 million of cash during the first nine months of fiscal 2018. We had net income of $2.1 million during the first nine months of fiscal 2018, which included non-cash stock-based compensation expense of $0.4 million associated with the issuance of stock option and restricted stock awards and depreciation and amortization expense of $2.2 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities during the first nine months of fiscal 2018, net of foreign currency exchange gains and losses, included an increase in inventories of $5.2 million, a decrease of $0.4 million in accounts payable and an increase in prepaid expenses and other assets of $0.6 million, partially offset by an increase in accrued liabilities of $1.3 million. The inventory increase was due to the ongoing growth of our RF and power technologies business, increase in raw material and work in process supporting the semiconductor capital equipment market and growth in supplying replacement systems and parts to the Healthcare market. The decrease in our accounts payable was due to timing of payments for some of our larger vendors for both inventory and services.

Operating activities used $3.2 million of cash during the first nine months of fiscal 2017. We had net loss of $6.8 million during the first nine months of fiscal 2017, which included non-cash stock-based compensation expense of $0.4 million associated with the issuance of stock option awards, deferred income tax credit adjustment of $0.2 million, and depreciation and amortization expense of $2.0 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities during the first nine months of fiscal 2017, net of foreign currency exchange gains and losses, included an increase of $1.0 million in prepaid expenses, a decrease of $2.4 million in accounts payable and a decrease in other accrued liabilities of $0.3 million, partially offset by decreases in receivables of $3.2 million and inventories of $1.9 million. The decrease in receivables of $3.2 million was primarily due to the collection of a large receivable during the first quarter of fiscal 2017 that was invoiced during the fourth quarter of fiscal 2016. The inventory decrease was due to decreases in selected electron tubes. The decrease in our accounts payable was due to timing of payments for some of our larger vendors and also the result of shorter payment terms for our Richardson Healthcare vendors.

Operating activities used $14.6 million of cash during the first nine months of fiscal 2016. We had net loss of $6.6 million during the first nine months of fiscal 2016, which included non-cash stock-based compensation expense of $0.4 million associated with the issuance of stock option awards and depreciation and amortization expense of $1.9 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities, net of effects of acquired businesses, was a use of cash of $10.2 million during the first nine months of fiscal 2016, due primarily to the increase in inventories of $5.6 million, the decrease in our accounts payable of $3.0 million, and the decrease in accrued liabilities of $2.1 million. The increase, or use of cash, for our inventory was primarily due to purchases related to our growth initiatives and several large orders that shipped during the fourth quarter. The decrease in accounts payable and accrued liabilities was due to larger purchases of fixed assets and inventory primarily related to our Healthcare growth initiative where shorter payment terms are required.

Cash Flows from Investing Activities

The cash flow from investing activities has consisted primarily of purchases and maturities of investments and capital expenditures.

Cash provided by investing activities of $4.9 million during the first nine months of fiscal 2018 included proceeds from the maturities of investments of $12.1 million, partially offset by $3.9 million from purchases of investments and $4.2 million in capital expenditures. Capital expenditures relates primarily to our Healthcare growth initiatives, a new roof for part of our warehouse and ~~any business acquisition activity.~~capital used for our IT system.

Cash used by investing activities of $2.6 million during the first nine months of fiscal 2017, included proceeds from the maturities of investments of $3.6 million, offset by $2.1 million from purchases of investments and $4.1 million in capital expenditures. Capital expenditures relates primarily to our Healthcare growth initiative and capital used for our new IT system.

Cash provided by investing activities of $8.6 million during the first nine months of fiscal 2016, included proceeds from the maturities of investments of $25.6 million and proceeds from the sale of our building in Spain of $0.4 million, offset by the acquisition of IMES of $12.2 million, purchases of investments of $2.1 million, and $3.0 million in capital expenditures. Capital expenditures of $1.6 million relates primarily to our Healthcare growth initiatives and capital used for our new IT system.

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

Cash Flows from Financing Activities

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

Cash used in financing activities of $2.2 million during the first nine months of fiscal 2018 resulted from cash used to pay dividends.

Cash used in financing activities of $2.2 million during the first nine months of fiscal 2017 resulted from cash used to pay dividends.

Cash used in financing activities of $7.2 million during the first nine months of fiscal 2016, resulted from $5.0 million of cash used to repurchase common stock under our share repurchase authorization and $2.3 million of cash used to pay dividends, offset by $0.1 million of proceeds from the issuance of common stock.

Dividend payments for the first nine months of fiscal ~~2017~~2018 were approximately $2.3 million. All future payments of dividends are at the discretion of the Board of Directors. Dividend payments will depend on earnings, capital requirements, operating conditions, and such other factors that the Board may deem relevant.

We believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs through the next twelve months.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management and Market Sensitive Financial Instruments

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

The interpretation and analysis of these disclosures should not be considered in isolation since such variances in exchange rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect our operations. Additional disclosure regarding various market risks are set forth in Part I, Item 1A, “Risk Factors“ of our Annual Report on Form 10-K for the year ended May ~~28, 2016,~~27, 2017, filed July ~~29, 2016.~~31, 2017.

ITEM 4.

CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~February 25, 2017.~~March 3, 2018.

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

(b)	Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the third quarter of fiscal ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

~~From time to time we or our subsidiaries are involved in legal actions that arise~~On December 5, 2017, Steven H. Busch filed a Verified Stockholder Derivative Complaint against Edward J. Richardson, Paul Plante, Jacques Belin, James Benham, Kenneth Halverson, and the Company in the ~~ordinary course~~Delaware Court of ~~our business. While~~Chancery, captioned Steven H. Busch v. Edward J. Richardson, et al., C.A. No. 2017-0868-AGB. The lawsuit alleges claims for breach of fiduciary duty by the ~~outcome~~Company’s directors and challenges the decision of ~~these matters cannot be predicted with certainty, we do not believe~~a special committee of the Company’s Board to refuse Mr. Busch’s demand that the ~~outcome~~Company’s Board, among other things, rescind the Company’s May 2013 repurchase of ~~any current claims will have~~stock from Mr. Richardson and May 2013 and October 2014 repurchases of Company stock from the Richardson Wildlife Foundation. The Company believes the lawsuit to be without merit and that a ~~material adverse effect~~loss is not probable or estimable based on ~~our consolidated~~the information available at the time the financial ~~position, results of operations, or cash flows.~~statements were issued.

ITEM 1A.

RISK FACTORS

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended May ~~28, 2016,~~27, 2017, filed July ~~29, 2016.~~31, 2017.

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

ITEM 5.	OTHER INFORMATION

Results of Operation and Financial Condition and Declaration of Dividend

On April ~~5, 2017,~~11, 2018, we issued a press release reporting results for our third quarter ended ~~February 25, 2017,~~March 3, 2018, and the declaration of a cash dividend. A copy of the press release is furnished as Exhibit 99.1 to this Form 10-Q and incorporated by reference herein.

ITEM 6.

EXHIBITS

See exhibit index which is incorporated by reference herein.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	RICHARDSON ELECTRONICS, LTD.

Date: April ~~6, 2017~~12, 2018	By:	/s/	Robert J. Ben
			Robert J. Ben Chief Financial Officer and Chief Accounting Officer (on behalf of the Registrant and as Principal Financial Officer)

Exhibit Index

		EXHIBITS

Exhibit Number		Description
3.1		Amended and Restated Certificate of Incorporation of the Company, incorporated by reference to Annex III of the Proxy Statement dated August ~~19, 2016.~~22, 2014.

3.2		Amended and Restated By-Laws of the Company ~~approved~~(incorporated by reference to Exhibit 3.1 to the Company’s ~~board of directors~~Current Report on ~~January 5, 2016.~~Form 8-K filed with the SEC on June 15, 2017).

31.1		Certification of Edward J. Richardson pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002 (filed pursuant to Part I)~~2002..

31.2		Certification of Robert J. Ben pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002 (filed pursuant to Part I)~~2002..

32		Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002 (filed pursuant to Part I)~~2002..

99.1		Press release, dated April ~~5, 2017~~11, 2018..

101		The following financial information from our Quarterly Report on Form 10-Q for the third quarter of fiscal ~~2017,~~2018, filed with the SEC on April ~~6, 2017,~~12, 2018, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, ~~as of February 25, 2017, and May 28, 2016,~~ (ii) the Unaudited Consolidated Statements of Comprehensive ~~Loss for the three months ended February 25, 2017, and February 27, 2016,~~Income (Loss), (iii) the Unaudited Consolidated Statements of Cash Flows, ~~for the three months ended February 25, 2017, and February 27, 2016,~~ (iv) the Unaudited Consolidated Statement of Stockholder’s Equity ~~as of February 25, 2017,~~ and (v) Notes to Unaudited Consolidated Financial Statements.


		Page

Part I.	Financial Information

Item 1.	Financial Statements	2
	Consolidated Balance Sheets	2
	Unaudited Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)	3
	Unaudited Consolidated Statements of Cash Flows	4
	Unaudited Consolidated Statement of Stockholders’ Equity	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1617
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2324
Item 4.	Controls and Procedures	2324

Part II.	Other Information

Item 1.	Legal Proceedings	2425
Item 1A.	Risk Factors	2425
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2425
Item 5.	Other Information	2425
Item 6.	Exhibits	2425
Signatures			2526
Exhibit Index		2627

Accounts receivable	$	737
Inventories		1,420
Property, plant and equipment		230
Goodwill		6,332
Other intangibles		3,490
Net assets acquired	$	12,209