Ladies and gentlemen, welcome, and thank you for joining today's web conference, FY'19 Third Quarter Earnings Call for Richardson Electronics. [Operator Instructions] With that, I'll turn the call over to Ed Richardson, CEO. Please go ahead.

Good morning and welcome to Richardson Electronics conference call for the third quarter of fiscal year 2019. Joining me today are Robert Ben, Chief Financial Officer; Wendy Diddell, Chief Operating Officer and Acting Manager for Richardson Healthcare; Greg Peloquin, General Manager of our Power and Microwave Technologies Group, and Jens Ruppert, General Manager of Canvys. As a reminder, this call is being recorded and will be available for audio playback. I would also like to remind you that we will be making forward-looking statements and they are based on current expectations and involve risks and uncertainties. Therefore, our actual results could be materially different. Please refer to our press release and SEC filings for an explanation of our risk factors. Sales declined in the third quarter of fiscal year 2019 versus the third quarter of FY'18. This was due to slower demand in the semiconductor wafer fab equipment market, which we've been discussing throughout the year. Q3 and Q4 of FY'18 were huge quarters for the semi-fab industry. We were able to offset some of the decline with continued growth in both the Power and Microwave Group and in Healthcare which are our two key growth initiatives. We were also pleased that sales of our core industrial power tube business did well during the quarter and are showing year-over-year growth. Canvys had a small sales decline quarter-over-quarter, but is up slightly year-to-date and continues to deliver more in operating income than the prior year. Overall, our sales are still above prior year by 5.7% on a year-to-date basis. Gross margin was below prior year’s third quarter. This was due primarily to product mix in both PMT and Healthcare. Scrap and inventory related charges within our healthcare group also contributed the decline. We made changes in the quarter including additional headcount…

Thank you, Ed and good morning. I will review our financial results for our third quarter and first nine months of fiscal year 2019 followed by a review of our cash position Net sales for the third quarter of fiscal year 2019 were $39.0 million compared to the prior year's third quarter of $41.6 million, which was a decrease of $2.6 million or 6.3%. Net sales decreased $2.1 million for PMT and $0.6 million for Canvys. Net sales for Richardson Healthcare increased by $0.1 million. Gross margin for the quarter was 31.5% of net sales compared to 33.8% of net sales in last year's third quarter. This was primarily due to a less favorable product mix, higher costs related to CT tube production and overabsorption in LaFox manufacturing in last year's third quarter that did not repeat. Exiting the third quarter of fiscal 2019, both the CT tube manufacturing area and LaFox manufacturing were fully absorbed, and we anticipate this trend to continue assuming no significant change in demand or production. Operating expenses were $13.1 million for both the third quarter of fiscal 2019 and the third quarter of fiscal 2018. During the quarter, the company incurred $0.1 million of severance expense related to actions taken to reduce costs and $0.2 million in higher legal expenses as compared to prior year. Total legal expenses in the quarter were nearly $0.4 million. These expenses were offset by lower incentive compensation expense. It is anticipated that the reduction and headcount in the first nine months of fiscal 2019 will result in at least $1.6 million in annualized savings, and cost of sales and operating expenses combined. The company reported an operating loss of $0.8 million for the third quarter of fiscal 2019 compared to an operating income of $1.0 million in the…

Thank you, Bob and good morning, everyone. In our third quarter of fiscal year 2018 PMT sales were $29.7 million versus $31.9 million in Q3, FY'18. Our gross margins in the quarter were 31.6% versus 33.4% in Q3 of last year. Q3 results were greatly affected by the downturn in the semi-fab market. However, this market decline was partially offset by growth in our base tube business and excellent growth in our new technology partners supporting the RF and power market. This growth is based on a demand creation model, strong booking trends, numerous design wins and our unique global business model. Our strategy has allowed PMT to grow 6.3% overall so far this year. We have grown the main parts of our business through FY'19 and with a book-to-build 1.17 in Q3; we will weather the storm of the semi-fab market decline. We're taking advantage of our long-term customer relationships. While our customer count continues to grow with our ever expanding product range. Favorable market conditions in the industrial, RF wireless infrastructure and microwave markets are leading the growth. As the market conditions change, we responded quickly through internal initiatives. These include a reduction in force relating to our semi-fab manufactured products in Q2 and Q3 FY'19. In addition to the reallocation, two other programs designed to improve efficiencies and help offset the slowdown. These actions allow us to generate more opportunities in growing markets and using our existing global infrastructure and resources. Our revenue growth with our new technologies is being supported by key partners such as Qorvo, MACOM, Anokiwave, USCi and Fuji. Our core legacy business continues to be greatly supported by the key two manufacturers in the industry such as CPI, Thales, NJRC and Photonis as well as Vishay which is bringing us associated sales revenues…

Thank you, Greg and good morning, everyone. And as Ed mentioned in his opening remarks, barriers entering the C2 replacement market are more challenging than we initially thought. Over the past several years, Canon improved the quality of its tube, extending life to three years or more. While hospitals and third party service providers continue to demand third party replacement tubes to help lower maintenance cost, they expect tubes to last longer than ever. We've been selling ALTA750 since June 2018 and our longest installed tubes are nearing one year clinical use. Sales performances are meeting expectations. We are confident we will be able to meet the demand for the healthcare industry. In the interim, sales of the ALTA750 are stronger than anticipated. Our P3 program is a good option for the customers who want to avoid the risk of early tube light failure. P3 agreements are recurring revenue contract where Richardson agrees to provide replacement parts and in most cases replacement tube in exchange for fixed monthly fee over a three year period. Interest in our P3 program continues to be very strong. P3 contracts are attracted to our customers because they allow them to quickly see the economic value of the Richardson offering as compared to the OEM, and it allows them to budget operating expenses. P3 contracts also help overcome any potential resistance to purchasing an alterative to the OEM CP2. If the tube fails during the contract period, the replacement is on us not the customer. We are also offering P3 through installation provided by service companies we have trained. Installation can cover the life of the P3 contract or can be a shorter term depending on the need of our customers. Its option allows our customers to move away from the OEM and to choose…

Thanks Wendy and good morning everyone. Canvys includes engineering, manufacturing, sale of custom displays to original equipment manufactures in industrial and medical markets. Delivered strong performance with sales of $7 million during the third quarter of fiscal 2019. The decrease of 8.3% over the same period last year. On a year-to-date basis, sales are still nearly 3% above the same period of fiscal year 2018. The revenue decrease in the quarter was related to some one-time projects in fiscal 2018 that didn't repeat this fiscal year. Cost margin decrease as a percentage of sales to 32.8% from 32.9% the same period last year. This year-over-year gross margin decrease was related to an unfavorable product mix. Our backlog increased quarter-over-quarter to a very healthy level and we are cautiously optimistic about continued strong customer demand throughout North America and Europe. Our backlog is over 12 to 24 months and is impacted by customer call of orders and can vary quarter-to-quarter based on customer sales, regulatory issues and other factors. During the quarter, we received several new orders from both existing and new medical OEM customers. Applications include displayed used during refractive surgery and eye surgery used to improve the refractive state of the eye and decrease or eliminate the dependency of glasses or contact lenses. Corneal cross-linking and minimally invasive procedure that combines the use of UVA light and special eye drops to add stiffness to the cornea which has been weakened by disease or refractive surgery. Macular diagnostic where our products are used during standard eye examinations, surgical navigation, a system that enables surgeons precisely track the location of surgical instrument throughout the procedure, patient monitoring where our monitors are installed in the intensive care unit or a remote location such as the central nerve station, DICOM-compliant monochrome displays for…

Thanks Jens. It remains clear our strategic objectives continue to drive revenue growth and help offset the cyclical nature of the semiconductor wafer fab equipment industry. Our industrial power tube business, PMT and Canvys are performing well. As we overcome the barriers to entry in the healthcare market, we anticipate sales and margin to improve on a potential basis. We will continue to monitor our performance and make changes if necessary to return the company to profitability. We have an excellent team in place to make that happen. At this point, we'll be happy to answer a few questions.

[Operator Instructions] We do have a few questions in the queue. Moving to our first question, Caller your line has been unmuted.

It's Howard Brous. Wendy, how are you? Tough quarter but let's talk about what goes on forward. In your press release that I pulled, the majority of Toshiba CT systems sold in the quarter included ALTA750 tube at a premium price. Can you discuss what you mean by premium price?

Hi, Howard. Good morning. We didn't know that. So, the system that we sell don't have a set price. We buy in with different clause[ph], obviously, whatever they're available at the market, but on average we're able to increase the sales price for system when we include the ALTA750 tube by about 25%. So, it's a nice charge, and then as I mentioned in my presentation, we then get the OEM tube which we can certify and sell as a pre-owned. So, overall it's a big pick up for us in terms of margin percentage.

All right. I understand. What do you need to do in terms of ALTA750 G to establish greater penetration in the market and what is it going to cost you over the next year?

Okay. So for the G, you're asking specifically about the G, that is in development as we mentioned and we expect to have the prototype sometime this summer, hopefully at June timeframe, and I guess the cost for that is going to be a little bit less than what it was for the D because there are some similarities, but we would estimate $2 million.

$ 2 million, yes.

$1.5 million to $2 million, and then the critical thing in terms of gaining market penetration whether it's the D or the G is really the tube life and being able to prove out through the clinical trials, and then once we have the installation that our tube lasts as long as the OEMs does.

So if we've got a D and G, is there another letter that comes after that for greater penetration of the market?

There are other variations. Right now, the D and the G are the largest number of tubes that are used in the market. There's also an E and an F, and they're just minor modifications to the D and we may address that later, but right now we need G, and we should tell you just so that you're clear with the clinical trials, we won't be to market with a tube as far as production is concerned probably over a year or a year and a half.

Right. You talked about $400,000 as your legal bill last quarter. What was that consisting of besides the litigation or was that all the litigation?

That was just litigation.

Based on my discussion with my counsel about litigation, we're assuming that you’ll win it , but what is the ongoing cost over the next period of time quarter by quarter until you see a resolution?

Well, right now the case has been submitted to the judge, and he's going over all the information that both sides have submitted. His docket is rather full and the experience is that a rule on something like this takes about five months. And so right now it's just dormant. There isn't any additional legal cost and he has -- he can either rule to dismiss the case at that time, and if he does it, and then depending upon if he doesn't dismiss it what his ruling is, how we go forward and we'll certainly have to recalculate what the estimated costs will be from there.

All right, fair enough. Wendy, you mentioned positive booking trends. Can you be a little bit more specific?

Well, in healthcare, the booking trends are impacted mostly by equipment sales, and so we had several systems that did not book in Q3 that will book in Q4. I think our book-to-bill was 1.17 for healthcare.

All right. You mentioned that sales were meeting your expectations, and yet at the same time things were slower than anticipated. I'm not sure I understood the commentary.

Are you referring to my comment where I said that the tube is meeting field expectations, we're talking about the performance of the tube and it is performing; and on the sale side, of course we're disappointed like you and everyone else that we haven't sold more to date.

One question that I started asking on conference calls. This certainly has nothing to do with the CT tubes, but have you considered Ed expanding the board of directors for a woman and/or a minority?

Not at the moment, but if you look at our management, we have quite a number of very talented women in management and we would certainly consider someone on the Board and if that was a woman for sure.

Okay, Just I would nominate Wendy.

Thank you, Howard.

You're welcome. That's all I have. Good luck for the next quarter. Thank you.

Now moving to our next question. Caller your line is unmuted.

Yes. Mark Zinski, 21st Century Equities. Good morning, everyone. Greg, I just wanted to sort of home in a little bit on the demand for PMT. Are you saying the headwinds are mostly due to the semiconductor fab market or are there some sort of general sort of your opinion they slow down as well?

No. the headwinds with the semi-fab market is really headwinds in terms of quarter-over-quarter comparison. We had this specific to the fourth quarter. That was the largest quarter of the semiconductor fab shipments and even though with the bookings and everything that's going on with our core businesses, we've been able to not only exceed that downturn, but we've actually grown the business year-to-date 6.3%. But again, the headwinds are two main things, comparing our financials quarter-over-quarter in terms of margin and sales as the downturn in semi-fab market. And then also, some of the lead times continue to expand on the semiconductor or the PMG wireless side.

Okay and then -- I know you just kind of talked extensively about the replacement tube business, I just wanted to clarify right now you're -- are you selling one model into the market?

That’s sort of correct. We have the ALTA750D which we are selling to the market and we also have what we call, certified pre owned, the CPO tube which will be Toshiba as well as GE and Thales. Then we also have a third category where we harvest tubes from equipment and that has given us access to Siemens tube, but as far as tubes that are produced here, it's in LaFox factory, you're correct. There's just one today. And then I should also mention -- [Multiple Speakers]

-- And then there are more in the pipeline? Is that waiting for clinical approval?

No. We are not at clinical approval yet on the G. We should have our first prototype for it in the next 60 or 90 days, and then we will enter clinical trials, and as Ed mentioned that will be another 12 months or so or 18 before we release that to the market.

Okay, great, thanks. And then Bob, Greg had mentioned a build up in inventory to address some of the increase in lead times. Should we expect any material difference in your operating cash flow in the next quarter or two because of the inventory build?

Hi, Mark. Yes. I would expect a slight increase for that. I mean while we are using cash for our growth initiatives specifically for inventory. There are other parts of the business that do generate cash. So I would say overall I'd expect a slight increase for those.

Okay and then just to confirm you did reactivate the share repurchase plan and there's about 9 million on that plan. Is that credit?

That's correct, right.

Now moving to our next question. Caller your line has been unmuted good.

Good morning. [Craig Weaver] from Victor Capital. Just a follow up towards Greg and PMT. What --it sounds like the semi business is bottomed yet you did a reduction in force. So I'm just trying to understand I guess you feel it's not coming back to the old levels or a little more color there?

Yes. The reduction in force was not in people generating revenue, it was on the manufacturing side of the products that we manufacture for the semiconductor wafer fab and what we did is we looked at the forecast that we're getting from each of our customers and looked at what was needed to support them with that with lead times. But also to get the under absorption issue other way with the downturn that happened fast that was the biggest issue. It happened faster than we expected, and visibility we had and we didn't get the cost out in time to deal with the under absorption issues.

I guess maybe I -because they don't have clarity on it but I guess how roughly how big is this? Was the semi and kind of what's it shrunk to. And I guess you don't think it's going back to what it was?

It's coming out of the FY'18 the total business was right around $20 million and right now it's running about a $1 million a month. So it's been about an $8 million decline. And all of that product is manufactured here in LaFox so majority of our manufacturing workforce is dedicated to that product line and we cut back accordingly -- according to concern.

Okay and I guess just so $8 million there. How big has the microwave business become? Obviously, you mentioned it's growing to help offset some of that decline, but maybe a little color there.

Yes. It's nowhere near as large as the semi -fab business. But in the microwave products that we manufactured, we move some of that manufacturing from our factory in France which we closed a couple of years ago to our facility here. And we had difficulty getting yields up but fortunately our team's done a great job. And right now we're in full production. Our yields are well over 90%. That business is $3 million or $4 million something like that.

Per year?

Yes.

But you said that it's growing I guess with 5G and some of these other millimeter-wave opportunities.

Yes. That's different than the products we manufacture. Those are more in the PMG side of PMT. Greg can address that for you.

Yes. It's really 5G is by far the largest growth for this fiscal year. We'll ship and we're halfway through the fourth quarter. So we'll ship close to $23 million into that market. Last year, our fiscal year 2018 we shipped about $12 million. So that business is almost doubled in terms of shipments and the products and the specific IT applications worldwide. It's a real growth for us and it looks the same going forward.

PMG is inside of PMT the way you report it?

Yes. PMT is the SBU or the division, within that division there's two business units one is EDG which a majority that is the legacy business of tubes but also the manufactured products here in LaFox and the other business unit is PMG which is the new technologies servicing the new technologies such as 5G et cetera. So it's --those are two business units.

So that's more than offset the growth --the PMG growth is more than offset the semi decline.

Right. It has been top of the last two quarters it will be tough but both year-over-year growth is not only that we make that up but we increase the sales of the group 6.3%.

Okay. So if semi is bottom right at sequentially we're talking here. You said the book-to-bill is above one right. And PMG is continuing to grow. We should expect their group to grow sequentially.

Yes. In FY'20.

We did receive one more question in the queue. Caller your line is unmuted.

Hi, this is Eric. Greg is your toughest compare regarding the semiconductors that this quarter or was it the just finished quarter?

It will be this quarter, full quarter.

Okay. So we are in the toughest compare right now.

Yes. This is the -- a year ago Eric we did almost $7 million in semi-fab in the fourth quarter and you can see and I just mentioned that we are running about $1 million a month. So you can do the math.

Yes.

But hopefully all that's going to pick up. So we are --

Okay. And then it gets significantly easier in Q1, Q2 & Q3 of course.

Right. It really started to tail off in Q2. Q1 was still a halfway decent quarter because we were carrying on our backlog. And we have it easier compared from year-over-year.

Okay. So, Greg, you mentioned that even with this the toughest compare you're still 1.17 book-to-bill right?

Yes. 1.17 in the quarter.

Okay. That's not PMG, that's the whole PMT.

That's all of PMG, EDG actually had a positive book-to-bill, and PMG had a very, very strong book-to-bill in Q2 and Q3.

Okay, all right. Wendy, I want to address this D and G issue. It seems like the G issue had come up in recent conversations, but I've heard it and talked about it in some investor presentations. And we've heard it in a call but when you first set out to make these tubes, we didn't hear anything about customers' reticence to buy a D because there was no G. And as an investor is kind of distressing to hear that, well, we thought that the D would be a smashing success six months ago, but now we don't think it's going to be quite the success that it was because there's this reticence that Toshiba is going to raise the price in the G. I'm just wondering why that wasn't --that information or that sentiment wasn't unearthed prior to you manufacturing the D? What happened there such that was --I'm just kind of wondering how that happens?

Well, I think that the market is very dynamic, Eric. It's changing all the time. As you know, we're pretty well familiar with what Verax who is the manufacturer what their production is and this year for example we think that the 750G has grown to where 40% almost 40% to 50% of their production now as the G versus the D. And that's and going into new equipment while we've been developing the tube. If you remember, we've been developing E over 4.5 years. So the market has been changing all during that period of time. So we're learning as we go along. I think we mentioned to you one large healthcare organization that we were working with. They have 40 systems, Toshiba systems on contract with Toshiba and in their case 12 of those use the G and 28 use the D. We just we know Mayo Clinic really well for example and they have 24 Toshiba systems in use and in their case where I'm sure they have better financing. They bought more and newer equipment and 50% of their Toshiba equipment is the G. So we're learning as we go along in that again it's a dynamic market. It's changing every day but the new production is more heavily geared towards the G which is a smaller tube. It weighs 175 pounds versus 225 for the D. And use the smaller parts but it's exactly the same concept as far as the tube is concerned and we're optimistic within a year to 18 months we will be in the market with that tube as well.

I understand all that but they had those --they probably had that same mix a year and a half ago when you started or two years ago or three years ago or whatever it was, wasn't there any of these customers that said, hey, wait a second, it's great that you have the D but in order to be buying volume from Richardson, we need to have a G as well. I'm just -- I'm just wondering why that wasn't on earth earlier than when they are now frankly.

No. It's very basic. I mean the new production, the new CT scanners that are being built are using the G, first of all, and when the scanners are sold they are on warranty for three years with the factory. So that business is not available to us at all. And then as they come off of warranty now more and more the G because that's what's being produced. So it's a learning experience. The market is a dynamic market. Five years ago when we started it was probably 70% -80% D. And that's changing to last two to three years. So you can do the math when you see the number of tubes that are being produced that are going to be out there for a replacement two to three years from now.

So what you're saying is when a couple years ago when you set out to sell this a D or develop this D, the G was a lot less significant in the market than it is now. Is that sort of what you're saying?

That is correct.

Okay. Wendy, I think you said there's been more engineering or you implied in your script that there has been more engineering resources thrown at development of the G. Is that correct?

That's correct.

Okay. Is it a material amount or is it --and is that going to change the timeframe? Is there any way that you could sort of increase the clinical trials or is that out of your hands?

First, we got to get to the prototype and what we're doing is as we really put that C to D and to G into production and we're getting more comfortable with that we can take some of those engineering resources and we can have them focus more on the G. So that's kind of where the engineering resources are coming from. So from our perspective they will expedite the development of the G now that we've got D under control and in a normal manufacturing process.

So it's not that the company is hiring more engineers, it's just that you're shifting engineers from the D to the G correct?

That is correct. We've also put incentive programs in place to encourage our engineering team to work over time six, seven days a week and see if we can accelerate the process. So we are taking every action we can then move that along but still in all designing a CT tube is quite a challenge.

Let me ask you this is. Is there any way to speed up what seems like a pretty standard year-long process for the clinical trials?

Well, first of all, we run them on scanners here for extended periods of time. What we do is we put tubes out in multiple data sites to try to get them in the actual use in various environments. That we do. We did that with a B but still in all we're really not comfortable until we have about 12 months of clinical experience in actual application where they're turned off and on and used all day long.

Got you. And what would have been the sort of the field feedback from the D thus far? Is it performing as expected?

Yes. I mean we're working all the time to every little thing that we see to improve areas and we know that Verax does that too. For example, Wendy mentioned we are well aware that the lifetime of the Verax tube has been increased. It gone from probably two years when we started into this program, two year life to where it's close to three now. So that's typical. Manufactures are working on this product all the time trying to improve them.

Well, I'm asking about the performance of your tube. Is there been --is that been as expected?

Yes. I think we're right on line where we thought we would be but that still every time we go into production we're looking for ways to improve it. Our challenge is always going to be tried to have a better life than the OEM.

Okay, got you, thanks. Last thing, Jens, so is it safe to say you have just passed your toughest compared from last year?

Hi, Eric. This is Jens. Hey, I'm not sure I understood your question you said that I passed what the revenue over the year or --

Well, if I'm looking at my data correctly you grew over 50%. Is that correct in the quarter last year? Third quarter last year?

Yes. That might be correct. So the full year growth I have is about 30%.

Right now I'm just trying to figure --I'm just trying to figure out whether or not we're past the toughest comparable quarter from last year which it looks to me --

Yes. We did. Sorry now I hear and understood, yes. That last year we had a very good quarter in revenue wise by about $7.6 million in Q3 and this year with $ 7 million quite a bit behind but the next quarter will be much better in comparison to last year's fourth quarter.

Okay. Got you. So that the Canvys has strong two quarters in a row here but there's a decent chance that that trend may be over?

Yes. Absolutely. And again, don't forget I mean last year we grew 30% year-over-year. So this year on the year-to-date base, we are still about 3% above last year's performance for the first three quarters. So we are progressing on a very, very good year we had last year. So and I'm expecting this improvement to continue, yes.

Okay. That's all for me. Thank you.

The one thing that you should, the Jens credit for is although his revenue was down slightly in the quarter his operating income contribution was higher than it was in the same quarter last year. Good job, Jens.

And move into our next question. Caller your line is unmuted.

Hi, this is George Melas from MKH Management. Thanks for taking my question. I think the question has already been asked. But I want to ask it again on working capital and inventory. Working on the inventory side I think you grew inventory by $8 million last year. So far this year it's by 3.5, I'm just trying to understand the trend and why -- I understand that you were fairly -- the working capital intensive company but why is the trends so strong there?

Hi, George. This Bob Ben. Regarding inventory and working capital in general, it's really just part of our business in particularly in the EDG area, we have to stock inventory since it's a MRO type business. We have to have the inventory available when the customer calls. And the other businesses as I noted previously, both the PMG business and the healthcare business our growth strategies and as you can imagine we need to stock inventory there in healthcare. So that we have components inventory so we can build the CT tubes, as well as the equipment business which we have to have the equipment on hand in order to sell it. We can't just order it and sell it right away in most cases. So that gives you kind of I hope an idea why we need to stock the inventory. In terms of the trends, yes, last year in fiscal 2018 inventory did grow substantially from fiscal 2017. Of course, sales were up last year affecting fiscal 2018 year-over-year almost 20%. So I think that certainly drove a lot of that. This year as you know, sales haven't been up as much. They're still up at a 9 month basis 5.7%, and so we continue to see increases. But as you noted, it's less and going forward I think we're at this moment expecting something similar as to where we're at. We certainly expect more --some growth in Canvys and PMG next year. And so inventory I think will continue to go up, but not to the level is probably in fiscal 2018, if that's helpful.

Okay. Maybe just a little bit more color just on numbers. Working capital use has been $8 million this year year-to-date. Do you expect that to increase sort of -- you expect working capital use almost every quarter or at some point it levels out?

Yes, well, again I think with sales growth and on the year-to-date basis, we've grown pipeline 7% and certainly I expect our fourth quarter by the way is typically one of our best of the year. So I'm hopeful and optimistic there. But along with sales growth, we typically see growth in inventory and working capital. So, yes, I do expect it to go up going forward. And again our growth initiatives in healthcare and PMG drive some of that too and those businesses we expect an upward trajectory on whether it's in the fourth quarter or next year.

Okay. We had one question on chat if there are no other questions from the group verbally. And that question has to deal with we reinstalled the share buyback in the last quarter. Originally, we had 75 million shares approved by the Board on buyback and we bought back 65.5 or 6 million and the board decided to reinitiate the buyback on the remaining 9.5 million. And the question was why we haven't been buying stock in the quarter. And as you know we just finished our board meeting yesterday and we had a rather heated executive session with the entire board and the discussion was on the use of cash similar to what George was just asking about. So there are two issues. First of all, currently we have about $25.1 million of cash in the US which is available to us for cash flow. The balance of the $49.4 million is in foreign entities all over the world. And we've done fairly well moving that cash back but now it's in most places in $1 million in this country and $2 million in that country which takes more time and sometimes there are even larger barriers. So and from one year to this quarter, we went from $60.1 million in cash down to $49.4 million. The board is very concerned with the fact that we have $25.1 million in the US. As we told you, the barriers to entry in the CT market are telling us it's going to take longer, and we need to design additional tubes for CT applications and unfortunately the development cost in our CT tube is $5 million a tube. So their charter is save your cash and use it for running the business and investing in healthcare. And for that reason we haven't been buying stock back. Any other questions?

There are no more questions in the queue. And with that I'll turn the call back over to you, Ed.

Okay. Well thank you again for joining us and for your ongoing interest in Richardson Electronics. You're welcome to call us, if you have additional questions. We look forward to discussing our fiscal 2019 fourth quarter in July. Thanks Kyle.

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