What changed in this filing

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Item 1. Business

2022-08-01 compared with 2021-08-02 · 63 added, 32 removed, 93 unchanged (51% of the section changed)

Richardson Electronics, Ltd.

is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables;

is a leading global manufacturer of engineered solutions, power grid and microwave tubes, and related consumables;

power conversion and RF and microwave components;

high value flat panel detector solutions, replacement parts, tubes and service training for diagnostic imaging equipment;

high-value replacement parts, tubes, and service training for diagnostic imaging equipment;

and customized display solutions.

More than 60% of our products are manufactured in LaFox, Illinois, Marlborough, Massachusetts, or Donaueschingen, Germany, or by one of our manufacturing partners throughout the world.

All our partners manufacture to our strict specifications and per our supplier code of conduct.

We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets.

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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 fiscal year 2021 began on May 31, 2020 and ended on May 29, 2021, our fiscal year 2020 began on June 2, 2019 and ended on May 30, 2020 and our fiscal year 2019 began on June 3, 2018 and ended on June 1, 2019.

Our fiscal year 2022 began on May 30, 2021 and ended on May 28, 2022, our fiscal year 2021 began on May 31, 2020 and ended on May 29, 2021 and our fiscal year 2020 began on June 2, 2019 and ended on May 30, 2020.

Unless otherwise noted, all references to a particular year in this document shall mean our fiscal year.

Company Response to COVID-19

In March 2020, the World Health Organization classified the outbreak of COVID-19 as a pandemic.

Thereafter, most U.S.

states imposed “shelter in place” directives on their populations to stem the spread of COVID-19 and similar restrictive measures were taken by governments across the world.

The shelter in place directives generally required the closure of businesses that did not provide essential functions.

The Company was considered a critical supplier of products to healthcare and critical infrastructure businesses.

Further, several of our largest customers mandated that we continue to supply parts so as not to disrupt the supply chain and their ability to serve critical industries.

As such, the Company qualified as an “Essential Business” and the Company continued our manufacturing and distribution operations throughout 2021.

Our top priority was ensuring the health and safety of our employees and, accordingly, we undertook measures such as limiting the number of people in any one of our facilities by requiring only employees who could not perform their work remotely to physically work in a Company US-based facility.

The Company advised all other employees that could perform their job functions remotely to do so.

As such, the Company’s operations remained operational.

The impact of the COVID-19 outbreak and its effects continue to evolve.

As such, the full magnitude that the pandemic, and the steps taken to prevent and/or mitigate its spread, will have on the Company’s financial condition, liquidity and future results of operations is uncertain.

The extent of the impact of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the duration and spread of the pandemic, the extent, speed and effectiveness of worldwide containment and vaccination efforts and the impact of these and other factors on our employees, customers and suppliers.

Our ability to meet customer demands for products may be impaired or, similarly, our customers may experience adverse business consequences due to COVID-19 and its effects.

COVID-19 Update

The impact of the COVID-19 pandemic and its effects continue to evolve.

As such, the full magnitude that the pandemic, and the steps taken to prevent, mitigate and/or respond to its spread, will have on the Company’s financial condition, liquidity and future results of operations is uncertain.

The extent of the impact of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the duration and spread of the pandemic, the extent, speed and effectiveness of continued worldwide containment efforts, and other actions taken by governments, businesses and individuals in response to abatement and resurgence of the disease.

Our ability to meet customer demands for products may be impaired or, similarly, our customers may experience adverse business consequences due to the continued impact of COVID-19 and its effects.

Reduced demand for products or impaired ability to meet customer demand (including disruptions at our transportation service providers or vendors) could have a material adverse effect on our business, operations and financial performance.

There was a decline in PMT sales during the first three months of fiscal 2021, a decline in Healthcare sales during the first six months of fiscal 2021 and a decline in Canvys sales during the first nine months of fiscal 2021.

The majority of these declines

in sales were related to the COVID-19 global pandemic.

While we had some COVID-19 related component delays impacting new product development schedules, we did not experience a major interruption in our supply chain.

There were sales declines during fiscal year 2021, the majority of which were related to the COVID-19 global pandemic.

While the Company did not experience sales declines during fiscal year 2022 as a result of the pandemic, the impacts from the pandemic negatively impacted our gross margins as a percentage of net sales in our Canvys and Healthcare segments.

As a result of COVID-19 and its effects, we experienced some COVID-19 related component delays impacting new product development schedules.

The global markets have generally suffered, and are continuing to suffer, from material disruptions in the supply chain.

Management continues to monitor the global situation on its financial condition, liquidity, operations, suppliers, industry and workforce.

Given the ever-evolving nature of the pandemic and the continued global responses to curb its spread, the Company is not presently able to fully estimate the effects of COVID-19 on its results of operations, financial condition or liquidity for fiscal year 2022 .

Given the ever-evolving nature of the pandemic and the continued global responses to the ongoing impact of the pandemic as well the cycle of recurrences and the after-effects, the Company is not presently able to fully estimate the effects of COVID-19 on its results of operations, financial condition or liquidity going forward.

Company Response to CARES Act

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The CARES Act included provisions relating to refundable payroll tax credits, deferral of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified, improvement property.

As of May 29, 2021, the Company deferred $0.9 million of employer-side social security tax payments.

As of May 28, 2022, the Company deferred $0.4 million of employer-side social security tax payments, which will be made by December 31, 2022.

The Company has estimated and recorded the overall effects of the CARES Act and does not anticipate a material change.

Government Regulations

We are subject to a variety of federal, state, local and foreign laws and regulatory requirements relating to our operations.

These laws and regulations, which differ among jurisdictions, include, among others, those related to financial and other disclosures, accounting standards, privacy and data protection, cybersecurity, intellectual property, corporate governance, tax, trade, antitrust,

employment, import/export, anti-corruption, and environmental regulatory compliance.

Expenditures relating to such regulations are made in the ordinary course of our business and do not represent material expenditures and we further do not currently expect that compliance with such laws will require us to make material additional expenditures, however, there is no assurance that existing or future laws and regulations applicable to our operations, products, and services will not have a material adverse effect on our business .

Among others, we are subject to a variety of data protection laws that change frequently and have requirements that vary from jurisdiction to jurisdiction.

We are subject to significant compliance obligations under privacy laws such as the General Data Protection Regulation in the European Union and an expanding list of comprehensive state privacy and/or cybersecurity laws in the United States.

Failure to comply with these laws and regulations subjects us to potential regulatory enforcement activity, fines, private litigation including class actions, reputational impacts, and other costs.

Our efforts to comply with privacy and data security laws and regulations complicate our operations and add to our costs.

We are also subject to various domestic and international export, trade and anti-corruption laws, such as include the Arms Export Control Act, the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”), anti-money laundering laws and regulations and the trade and trade sanctions laws and regulations administered by the Office of the United States Trade Representative and the United States Department of the Treasury’s Office of Foreign Assets Control.

Violations of these laws and regulations may result in severe criminal or civil sanctions and penalties.

Our operations also are subject to numerous laws and regulations governing health and safety aspects of our operations, or otherwise relating to environmental protection.

Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of remedial or corrective action requirements, and the imposition of injunctions to prohibit certain activities or force future compliance.

For more information on risks related to the laws and regulations to which we are subject, see the relevant discussions throughout "Item 1A, Risk Factors" of this Annual Report on Form 10-K.

We currently have operations in the following major geographic regions:

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Selected financial data attributable to each segment and geographic region for fiscal 2022, fiscal 2021 and fiscal 2020 is set forth in Note 9, Segment and Geographic Information , of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

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

Power and Microwave Technologies Group

Power and Microwave Technologies Group (“PMT”) combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies.

We have three operating and reportable segments.

Starting with our first quarter earnings release in October for fiscal 2023, we will introduce our new Green Energy Solutions (“GES”) segment.

This segment is carved out of our existing PMT segment as we continue to focus on power management applications that support the green energy market globally.

Accordingly, in the first quarter of fiscal 2023, we will begin reporting on four segments.

The three operating and reportable segments for fiscal 2022, fiscal 2021 and fiscal 2020 are defined as follows:

Power and Microwave Technologies

Power and Microwave Technologies (“PMT”) combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies.

As a designer, manufacturer, technology partner and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities on a global basis.

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PMT also sells a number of products representing trailing edge technology.

While the market for these trailing edge technology products is declining, PMT is increasing its market share.

While the market for these trailing edge technology products is declining,

PMT is increasing its market share.

PMT often buys products it knows it can sell ahead of any supplier price increases and extended lead times.

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and additional replacement solutions currently under development for the diagnostic imaging service market.

Through a combination of newly developed products and partnerships, service offerings and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.

Through a combination of newly developed products and partnerships, service offerings and training programs, we believe we can help our customers improve efficiency while lowering the cost of healthcare delivery.

Sales and Product Management

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We establish credit limits for each customer and routinely review delinquent and aging accounts.

We maintain approximately 110,700 part numbers in our product inventory database and we estimate that more than 90% of orders received by 6:00 p.m.

We maintain over 100,000 part numbers in our product inventory database and we estimate that more than 90% of orders received by 6:00 p.m.

local time are shipped complete the same day for stock product.

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Information on stock availability, pricing in local currency, cross-reference information, customers and market analyses are obtainable throughout the entire distribution network.

The content of our websites are not deemed to be incorporated by reference in this report filed with the Securities and Exchange Commission.

International Sales

During fiscal 2021, we made approximately 59% of our sales outside the U.S.

During fiscal 2022, we made approximately 57% of our sales outside the United States.

We continue to pursue new international sales to further expand our geographic reach.

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Human Capital Management

Recruitment & Staffing

The future success of our Company depends on our ability to attract, hire, motivate, retain and further develop top talent, including highly skilled technical, management and sales personnel.

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The Company offers employees a competitive compensation program, designed to recognize and reward both individual and company performance, which includes a base pay, variable compensation programs, and health, wellbeing and retirement programs to meet the needs of our employees.

The health, safety and wellness of our employees is a priority that was a particular focus in 2021 in light of COVID-19, including having many of our employees work from home whenever possible while implementing additional safety measures for employees continuing critical on-site work.

The health, safety and wellness of our employees is a priority.

In light of COVID-19, many of our employees work from home whenever possible and additional safety measures were implemented for employees continuing critical on-site work.

Diversity, Equity, Inclusion & Belonging

We are an international company with offices and personnel located around the world.

We understand, respect, and value the similarities as well as the differences of our employees.

Our human capital is a critical asset that enables us to serve and support our global customer base.

Our effectiveness in maximizing the talents of people of different backgrounds, experiences, and perspectives is key to our continued global success.

Fostering, cultivating, and preserving a culture of diversity, equity, inclusion, and belonging is a key priority for the Company.

We seek to embrace and encourage our employees’ differences in age, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique.

Management has identified Diversity, Equity, Inclusion, and Belonging (“DEI&B”) as a priority for our Company.

Significant positive change requires careful planning, leadership, resources, and coordination.

The Company established a DEI&B committee to plan and implement changes to achieve our goal of being a more diverse and inclusive organization.

The DEI&B committee has been charged with making recommendations about how we, as a company, can promote and act upon the Company’s initiatives in this area.

The committee will identify priorities based on employee input and incorporate these into the Company’s strategic plans, work to establish accountability and methods of measuring our progress, and provide appropriate communications about our plans and achievements to our stakeholders.

To date, DEI&B initiatives have focused on the following:

Expanded the Board of Directors to include a female director

Increased DEI&B awareness throughout the Company by education and involvement

Added socially responsible funds to our 401K Plan

Providing regular training, communication, activities, and surveys regarding DEI&B matters to our employees

Website Access to SEC Reports

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business