Good day, ladies and gentlemen and welcome to the First Quarter 2014 Conference Call. All participants are in listen-only mode. Later, we will conduct a question-and-answer session (Operator Instructions). I would now like to turn the conference over to your host for today, Mr. Ed Richardson, Chief Executive Officer of Richardson Electronics. Please proceed.

Good morning and welcome to our first quarter 2014 conference call. Joining me today are Kathy Dvorak, Chief Financial Officer, and Wendy Diddell, Executive Vice President, Corporate Development and General Manager of Canvys. As a reminder, this call is being recorded and will be available for audio playback on our website. During the call, we may make forward-looking statements, and based on certain risk factors, our actual results could differ materially. Please refer to our press release and SEC filings for an explanation of our risk factors. First quarter revenues were $34.3 million, down slightly from our prior year first quarter. While we're not happy with these results, overall we did see some encouraging changes in the first quarter of our fiscal year which makes us optimistic that FY 2014 will be a better year for Richardson Electronics. Global economic conditions and the impact of healthcare reform continue to give us challenges in realizing significant sales growth. We're seeing economic improvements in Europe as well as China and parts of Southeast Asia. We're also seeing growth in several key markets including textile, wood and plastic manufacturing, the marine radar market, and CO2 laser cutting in the industrial and automotive markets. During the first quarter, we closed one small acquisition which gives us more resources and experience to grow our power capacitor sales. Today we have a very small share of the power capacitor market, which is estimated to exceed $200 million in revenue annually. One of the more exciting trends is the recent increase in demand for our microwave generator solutions. I will discuss these opportunities in greater detail when I review EDG's performance. We also continue to evaluate potential acquisitions in the diagnostic imaging replacement parts market. We remain convinced that the demand for high quality replacement parts will increase as healthcare reform makes it more critical than ever for hospitals to focus on reducing costs in the face of the declining diagnostic reimbursements. While it's taking us a bit longer than we had hoped to enter the replacement parts market, we firmly believe we can play a significant role in this market in the future. Now let me turn the call over to Kathy to present the details of our first quarter financial performance.

Thank you, Ed, and thank you for taking the time to join us this morning. While sales in our first quarter remained sluggish, we believe we are finally beginning to see signs of stabilization in demand. Gross margin of 29.8% was down slightly from the prior year. Operating expenses were flat at $10.1 million for the first quarter of both fiscal 2013 and 2014. Operating income for Q1 was slightly above breakeven. We are actively working on our cost structure and pursuing every opportunity to further reduce cost. Our challenge of course is to achieve the balance between removing cost from areas of the business that are struggling, while investing in niche areas of growth and maintaining adequate organizational capacity, so as not to jeopardize our long-term growth potential. Interest income for the quarter was $265,000 and FX was $106,000 loss. FX volatility continues to challenge us as we transact business globally in 17 different foreign currencies. Contributing significantly to the quarter was the receipt of $2.1 million in proceeds related to our participation in a class action lawsuit settlement. Income from continuing operations before tax was $2.4 million. Our tax provision from continuing operations for the quarter was $448,000 or an 18% effective tax rate. For the total year, our cash tax requirements will remain low while our effective tax rate will be around 29% excluding any discrete events. So, income from continuing operations for the first quarter was $2 million or $0.14 per share. Cash and investments at quarter end were $137 million, reflecting the fact that we have been actively repurchasing shares. During the quarter, we used $6.7 million of cash for share repurchases. Our share count is now just about 14 million. Also, cash from operating activities was a use of cash primarily related to an increase in working capital of $4.3 million, which is cash flow net of any effects from foreign currency exchange and acquired businesses. We are expecting modest top line growth in the second quarter, so we believe sales will be in the range of $35 million to $37 million. In light of the current market dynamics, we are cautiously investing in niche areas of our business and focusing our efforts on building a cost-effective, highly flexible IT platform that will provide a solid foundation for the future. Our long-term growth objectives remain in the forefront of our planning. In the meantime, we will continue to identify opportunities to grow sales, cut costs and create shareholder value. Now, I'd like to turn the call over to Wendy to discuss the operating performance of Canvys.

Thank you, Kathy. Canvys finished the quarter with sales of $8.8 million, which was flat with the most recent quarter but 12.4% below FY 2013 first quarter. In terms of gross margin, Canvys finished the quarter at 26.6%, up from 24.6% compared to the most recent quarter, and flat to FY 2013 first quarter. Our European OEM segment had a nice start to the year beating last quarter and prior year's first quarter sales on significantly improved margins. The North American OEM segment was down compared to the first quarter of last year. This was anticipated given significant purchases in Q1 of last year from a non-repeating customer, although revenues were slightly less than planned due to several customer push-outs and delayed component shipments. In both OEM segments, we continue to see good opportunities for new programs. Approximately 15% to 20% of our revenue in the first quarter came from new customers in both medical and industrial applications. We see increased interest in our custom solutions as medical and industrial machines more frequently use touchscreen displays versus buttons and knobs to control systems. Given Canvys competence in the 21.5 inch, 24 inch and 27 inch screen sizes, we help customers transition from older technology, manage end-of-life components, and take advantage of new touch technology. We are also launching two new products, a 4K monitor and a 42-inch monitor with projected capacitive touch or PCAP for operating room environment. The 4K monitor enables medical OEMs to split the screen which eliminates the need for two separate monitors. We believe however that customer delays could make it more challenging to book some new orders in the current fiscal year. A significant percentage of our existing as well as new business opportunities are tied to medical OEMs who are experiencing a decline of…

Thanks Wendy. EDG sales in the first quarter were $25.5 million at 30.8% margin. This was nearly flat with the first quarter of FY 2013. In general, there were no significant economic changes over last year's first quarter, although China and parts of Southeast Asia are starting to come back strong and the European economy seems to be improving. Demand for industrial products in the textile, wood and plastic industry is strengthening, and there continues to be high demand for CO2 laser tubes and consumables. Our sales of laser consumables, such as lenses, nozzles, mirrors and bellows that are replaced on a regular basis, continue to increase nicely and are becoming a more significant part of our revenue. We began this initiative over two years ago and have been pleased with the growth as well as the positive impact this program has on our sales of laser tubes to end-users and the independent service company. In the last several months, we've seen a significant number of new opportunities for both RF and microwave generators across various market segments, including applications for mining, industrial heating, cooking, drying, plasma and many others. Many of these new opportunities are in Asia. To support this growth, we're excited to announce the formation of our new product engineering and development team here in LaFox. This team will be led by Ted Staub who is formerly Engineering Manager at Microwave Cavity Labs, MCL, in Bolingbrook. MCL was recently acquired by CPI. CPI is ultimately moving a majority of engineering and manufacturing to its facilities in California and Canada which gives us the opportunity to hire some of the best microwave engineers in the industry. The new product development team will focus on high voltage power supplies used as part of microwave generators and other high-power amplifiers.…

(Operator Instructions) Your first question comes from the line of Mark Zinski of 21st Century Equity. Please proceed.

Ed, I was wondering if you could possibly give some color on the semiconductor wafer fabrication vertical. There has been some talk that that appears to – or there is some very positive forecast out there basically for 2014 suggesting there could be a very good rebound in that vertical. Have you seen any evidence of that or do you have any thoughts on that?

We've seen some recovery. It certainly bottomed out and started to increase. We are seeing more opportunities to quote on new parts and subsystems from some of the major manufacturers in that space. So I would say it looks encouraging right now.

Okay, great. And then on the CO2 laser front, could you give any color on like year-over-year growth or what percentage of the EDG business that is?

Right now we're seeing about a 15% increase annually. We'd like to see a higher number but that's where it is on tubes. On the consumable parts, the business has actually more than doubled in the past year, so we're really encouraged there.

Okay. And do you feel like you've got the geographical flexibility to meet demand there?

Oh, absolutely. We have the global infrastructure in place, we've added either service capability in the major geographies or else we've written contracts with independent service companies, so that we can not only sell tubes but we can offer to install tubes in user's equipment where they don't have that capability on a global basis.

Okay, great. And then lastly, in terms of the acquisition strategy for diagnostics imaging, I'm wondering if you're meeting with sellers out there, how is the healthcare reform overhang impacting their decision to sell? Are they more reluctant to sell, do they want to see this kind of play out, or do they see health reform as kind of a negative so they are more inclined to sell, or any input there will be great?

There are a number of companies, private equity companies, in that space and also some of the major OEMs that are doing acquisitions of independent service companies and parts houses. So, they sort of generated a market on their own, and quite frankly, some of the delay from our side is I'm not willing to pay the kinds of multiples we are seeing paid for these companies, but there is a fair amount of activity.

Any shift in those multiples or not so much?

No, they are pretty much the same, but we are seeing one times revenue on a regular basis, which is something I'm not used to pay.

Right, but you are still contemplating a potentially big deal if it were to be favorable?

We are.

Okay. Great, that's it for me. Thank you.

We have no more questions at this time.

Okay, [Daphney], thank you very much. Thank you again for joining us and for your ongoing support of Richardson Electronics. We look forward to discussing our fiscal 2014 second quarter results with you in January, and we wish you all the best in the coming months and a very safe and happy holiday season. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect, and everyone, have a great day.