SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 1, 1996
OR
[ ] 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 1-4415
PARK ELECTROCHEMICAL CORP.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 11-1734643
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Dakota Drive, Lake Success, N.Y. 11042
- ------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 354-4100
Not Applicable
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 11,256,230 as of October 11,
1996.
<PAGE> 2
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 1, 1996 (Unaudited) and
March 3, 1996 ...................................... 4
Consolidated Statements of Earnings
13 weeks and 26 weeks ended September 1, 1996 and
August 27, 1995 (Unaudited)......................... 5
Condensed Consolidated Statements of Cash Flows
26 weeks ended September 1, 1996 and
August 27, 1995 (Unaudited)......................... 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) ............................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ......................................... 8
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings ................................... 11
Item 4. Submission of Matters to a Vote of
Security Holders..................................... 11
Item 6. Exhibits and Reports on Form 8-K .................... 11
SIGNATURES ..................................................... 12
EXHIBIT INDEX.................................................... 13
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Company's Financial Statements begin on the next page.
-3-
<PAGE> 4
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
September 1, March 3,
1996 1996
------------ --------
<S> <C> <C>
ASSETS (Unaudited) *
Current assets:
Cash and cash equivalents $ 82,121 $ 75,970
Marketable securities 52,304 67,243
Accounts receivable, net 44,304 42,821
Inventories (Note 2) 25,969 27,712
Prepaid expenses and other current assets 4,506 4,026
-------- -------
Total current assets 209,204 217,772
Property, plant and equipment, net 79,758 76,439
Other assets 4,486 4,764
-------- --------
$293,448 $298,975
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,556 $ 35,924
Accrued liabilities 15,649 16,941
Income taxes payable 3,461 3,942
-------- --------
Total current liabilities 50,666 56,807
Long-term debt 100,000 100,000
Deferred income taxes 6,832 6,324
Deferred pension liability 1,417 1,417
Stockholders' equity:
Common stock 1,358 1,358
Other stockholders' equity 133,175 133,069
-------- --------
Total stockholders' equity 134,533 134,427
-------- --------
$293,448 $298,975
======== ========
<FN>
*The balance sheet at March 3, 1996 has been derived from the audited
financial statements at that date.
</TABLE>
-4-
<PAGE> 5
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited--in thousands, except per share data)
<CAPTION>
13 Weeks Ended 26 Weeks Ended
------------------------- ------------------------
September 1, August 27, September 1, August 27,
1996 1995 1996 1995
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales $81,974 $69,937 $157,380 $145,349
Cost of sales 67,120 54,728 130,694 112,423
-------- -------- --------- ---------
Gross profit 14,854 15,209 26,686 32,926
Selling, general and
administrative expenses 8,375 7,630 16,176 16,487
-------- -------- --------- ---------
Profit from operations 6,479 7,579 10,510 16,439
-------- -------- --------- ---------
Other income (expense):
Interest and other
income, net 1,675 551 3,528 1,119
Interest expense (1,370) - (2,725) -
-------- -------- --------- ---------
Total other income 305 551 803 1,119
-------- -------- -------- --------
Earnings before income taxes 6,784 8,130 11,313 17,558
Income tax provision 2,103 2,764 3,507 6,168
-------- -------- -------- --------
Net earnings $ 4,681 $ 5,366 $ 7,806 $11,390
======== ======== ======== ========
Earnings per share (Note 3):
Primary $ .40 $ .45 $ .67 $ .97
Fully diluted $ .40 $ .45 $ .67 $ .96
Weighted average number of
common and common equivalent
shares outstanding:
Primary 11,590 11,801 11,686 11,749
Fully diluted 13,960 11,829 11,686 11,814
Dividends per share $ .08 $ .06 $ .16 $ .12
</TABLE>
-5-
<PAGE> 6
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited--in thousands)
<CAPTION>
26 Weeks Ended
-------------------------
September 1, August 27,
1996 1995
------------ ----------
<S> <C> <C>
Net cash provided by operating activities $ 7,767 $10,276
-------- --------
Cash flows from investing activities:
Purchases of property, plant and
equipment, net (8,596) (13,844)
Purchases of marketable securities (44,756) (13,476)
Proceeds from sales of marketable
securities 59,638 5,393
-------- --------
Net cash provided by (used in) investing
activities 6,286 (21,927)
-------- --------
Cash flows from financing activities:
Dividends paid (1,846) (1,375)
Proceeds from exercise of stock options 225 347
Purchase of treasury stock (6,293) -
Other 1 (2)
-------- --------
Net cash used in financing activities (7,913) (1,030)
-------- --------
Increase (decrease) in cash and cash equivalents
before effect of exchange rate changes 6,140 (12,681)
Effect of exchange rate changes on cash
and cash equivalents 11 (76)
-------- --------
Increase (decrease) in cash and cash equivalents 6,151 (12,757)
Cash and cash equivalents, beginning of period 75,970 30,803
-------- --------
Cash and cash equivalents, end of period $82,121 $18,046
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ 6,450 $ 4,983
</TABLE>
-6-
<PAGE> 7
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of September 1, 1996, the
consolidated statements of earnings for the 13 weeks and 26 weeks ended
September 1, 1996 and August 27, 1995, and the condensed consolidated
statements of cash flows for the 26 week periods then ended have been
prepared by the Company, without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position at September 1, 1996, and the
results of operations and cash flows for all periods presented, have been
made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year
ended March 3, 1996.
<TABLE>
2. INVENTORIES
Inventories consist of the following:
<CAPTION> (In thousands)
September 1, March 3,
1996 1996
------------ --------
<S> <C> <C>
Raw materials $12,593 $13,040
Work-in-process 4,990 4,280
Finished goods 7,711 9,674
Manufacturing supplies 675 718
------- -------
$25,969 $27,712
======= =======
</TABLE>
3. EARNINGS PER SHARE
Primary earnings per share are computed based on the weighted average
number of common and common equivalent shares outstanding during the
period. Fully diluted earnings per share reflects additional shares
assumed to be outstanding based upon (i) the assumed exercise of stock
options at the period-end market price of the Company's common stock if
such price is higher than the average market price during the period, and
(ii) the assumed conversion of the Company's Convertible Subordinated
Notes ("Notes"), if the effect would be dilutive. For the 26 weeks ended
September 1, 1996, the effect of the assumed conversion of the Notes was
antidilutive and, accordingly, the amount reported for fully diluted
earnings per share was equal to the amount reported for primary earnings
per share.
-7-
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Park is a leading global designer and producer of advanced
electronic materials used to fabricate complex multilayer printed circuit
boards and other electronic interconnect systems, such as backplanes and
semiconductor packaging systems. The Company's customers for its advanced
printed circuit materials include leading independent circuit board
fabricators and large electronic equipment manufacturers in the computer,
telecommunications, transportation, aerospace and instrumentation indus-
tries. The Company's electronic materials operations accounted for more
than 86% of net sales worldwide and more than 91% of operating profit in
each of the last two fiscal years and in the three-month and six-month
periods ended September 1, 1996. The Company's foreign electronic materials
operations accounted for approximately 24% and 29% of net sales worldwide
for the 1995 and 1996 fiscal years, respectively, and approximately 30% and
29%, respectively, for the three-month and six-month periods ended September
1, 1996.
Three and Six Months Ended September 1, 1996 Compared with Three and Six
Months Ended August 27, 1995:
The Company's electronic materials business was responsible for
the deterioration in the Company's results of operations for the three-month
and six-month periods ended September 1, 1996. The United States, Asian and
European markets for sophisticated printed circuit materials continued to
experience weakness during the 1997 fiscal year second quarter which the
Company believes was principally attributable to an industry-wide inventory
correction that began in the first quarter.
During the three-month and six-month periods ended September 1,
1996, the Company's electronic materials business experienced inefficiencies
caused by operating its facilities at levels significantly lower than their
designed manufacturing capacity and faced price pressure from its customers
resulting in an inability to pass along raw material cost increases which it
received earlier in the current year. These factors adversely affected the
Company's gross margins. The improvement in the Company's margins in the
second quarter of the 1997 fiscal year over the first quarter were achieved
from internal operating adjustments and the return of the Company's largest
customer to more normal business levels after it suffered a strike which
significantly reduced the Company's sales of electronic materials to that
customer during the first quarter and negatively affected the Company's
margins.
The Company's plumbing and industrial components segment
consists of the Company's specialty adhesive tape business, its advanced
composite materials business and its plumbing hardware business, all of
which operate as independent business units. The Company's specialty
adhesive tape business performed very well in the current fiscal year's
first and second quarters. The Company's advanced composite and microwave
circuitry materials business continued its improved performance in the
second quarter. The performance of the Company's plumbing hardware business
was disappointing again in the second quarter, and the Company continues to
explore and pursue its options with respect to that business.
Results of Operations
Sales for the three-month and six-month periods ended September
1, 1996 were $82.0 million and $157.4 million, respectively, compared with
$69.9 million and $145.3 million for last fiscal year's comparable periods.
Sales of the electronic materials business for the three-month and six-month
periods ended September 1, 1996 were $71.2 million and $136.6 million,
respectively, or 87% of total sales worldwide, compared with $61.9 million
-8-
<PAGE> 9
and $127.2 million, or 88% of total sales worldwide, for last fiscal year's
comparable periods. Sales of the plumbing and industrial components
business for the three-month and six-month periods ended September 1, 1996
were $10.8 million and $20.8 million, respectively, compared with $8.0
million and $18.1 million for last fiscal year's comparable periods.
The Company's foreign electronic materials operations accounted
for $24.4 million and $45.5 million, respectively, or 30% and 29% of the
Company's total sales worldwide, during the three-month and six-month
periods ended September 1, 1996 compared with $22.5 million and $43.9
million, respectively, of sales, or 32% and 30% of total sales worldwide,
during last fiscal year's comparable periods.
The gross margins for the Company's worldwide operations were
18.1% and $17.0%, respectively, during the three-month and six-month periods
ended September 1, 1996 compared with 21.7% and 22.7% for last fiscal year's
comparable periods. The deterioration in the gross margins was attributable
to inefficiencies caused by operating facilities at levels significantly
lower than their designed capacity, price pressure exerted by customers and,
in the first quarter of the current fiscal year, reduced sales volumes with
the Company's largest customer due to a strike which interrupted that
customer's operations, and increased costs associated with new facilities in
Newburgh, New York and Tempe, Arizona.
Selling, general and administrative expenses, measured as a
percentage of sales, were 10.2% and 10.3%, respectively, during the three-
month and six-month periods ended September 1, 1996 compared with 10.9% and
11.4% during last fiscal year's comparable periods. This reduction was a
function of reduced general and administrative expenses resulting, in part,
from lower employee bonus and profit sharing expenses due to lower operating
profits.
For the reasons set forth above, profit from operations for the
three-month and six-month periods ended September 1, 1996 decreased 15% to
$6.5 million and 36% to $10.5 million, respectively, from $7.6 million and
$16.4 million for last fiscal year's comparable periods.
Interest and other income, principally investment income,
increased 204% to $1.7 million and 215% to $3.5 million, respectively, for
the three-month and six-month periods ended September 1, 1996 from $0.6
million and $1.1 million for last fiscal year's comparable periods. The
increase in investment income was attributable to the substantial increase
in cash available for investment. The Company's investments were primarily
short-term taxable instruments and government securities. Interest expense
for the three-month and six-month periods ended September 1, 1996 was $1.4
million and $2.7 million, respectively, compared with minimal amounts during
last fiscal year's comparable periods. At the end of the 1996 fiscal year,
the Company issued $100 million principal amount of 5.5% Convertible
Subordinated Notes due 2006 (the "Notes"); as a result, such Notes were
outstanding during the entire fiscal periods ended September 1, 1996, which
resulted in the associated interest expense and cash available for
investment. The Company had no long-term debt outstanding during the first
or second quarters of the 1996 fiscal year.
The Company's effective income tax rate for the three-month and
six-month periods ended September 1, 1996 was 31.0% compared with 34.0% and
35.1% for last fiscal year's comparable periods. This decrease in the
effective tax rate was primarily the result of favorable foreign tax rate
differentials.
-9-
<PAGE> 10
Net earnings for the three-month and six-month periods ended
September 1, 1996 decreased 13% to $4.7 million and 31% to $7.8 millon,
respectively, from $5.4 million and $11.4 million for last fiscal year's
comparable periods. Primary and fully diluted earnings per share decreased
to $0.40 and $0.67 for the three-month and six-month periods ended September
1, 1996 from primary earnings per share of $0.45 and $0.97 and fully diluted
earnings per share of $0.45 and $0.96 for last fiscal year's comparable
periods. These decreases in net earnings and earnings per share were
attributable to the Company's lower operating results.
Liquidity and Capital Resources:
At September 1, 1996, the Company's cash and temporary
investments were $134.4 million compared with $143.2 million at March 3,
1996, the end of the Company's 1996 fiscal year. The decrease in the
Company's cash and investment position at September 1, 1996 was attributable
to investments in property, plant and equipment, as discussed below, and
repurchase of the Company's Common Stock. The Company's working capital was
$158.5 million at September 1, 1996 compared with $161.0 million at March 3,
1996. The decrease at September 1, 1996 compared with March 3, 1996 was due
to the reductions in cash and temporary investments and inventories offset
in part by the increase in receivables and the decrease in payables. The
Company's current ratio (the ratio of current assets to current liabilities)
was 4.1 to 1 at September 1, 1996 compared with 3.8 to 1 at March 3, 1996.
During the six-months ended September 1, 1996, cash provided by
net earnings before depreciation and amortization of $13.3 million was
reduced by a net increase in working capital items (other than cash and
marketable securities), resulting in $7.8 million of cash provided from
operating activities. The Company expended $8.6 million for the purchase of
property, plant and equipment and $6.3 million for repurchases of the
Company's Common Stock. Expenditures for property, plant and equipment were
$24.5 million and $17.5 million in the 1996 and 1995 fiscal years, respec-
tively. The Company currently expects the level of capital expenditures in
the 1997 fiscal year to be lower than in the 1996 fiscal year. The Company
is continuing to consider further expansions of its electronic materials
operations, particularly in the United States and Asia.
At September 1, 1996, the Company's only long-term debt was the
Notes. The Company believes its financial resources will be sufficient, for
the foreseeable future, to provide for continued investment in property,
plant and equipment and for general corporate purposes. Such resources
would also be available for appropriate acquisitions and other expansions of
the Company's business.
Factors That May Affect Future Results
Certain portions of this Report which do not relate to
historical financial information may be deemed to constitute forward-looking
statements that are subject to various factors which could cause actual
results to differ materially from Park's expectations or from results which
might be projected, forecast, estimated or budgeted by the Company in
forward-looking statements. Such factors include, but are not limited to,
general conditions in the electronics industry, Park's competitive position,
the status of customer orders, and the various factors set forth under the
caption "Factors That May Affect Future Results" in Item 7 of Park's Annual
Report on Form 10-K for the fiscal year ended March 3, 1996.
-10-
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) There are no material pending legal proceedings to which the
Company is a party or to which any of its properties is subject.
(b) No material pending legal proceeding was terminated during the
fiscal quarter ended September 1, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on July 17, 1996:
(a) the persons elected as directors of the Company and the voting for
such persons were as follows:
Authority
Name Votes For Withheld
-------------- ---------- ----------
Anthony Chiesa 10,388,578 112,539
Lloyd Frank 10,365,878 135,239
Norman M. Schneider 10,379,154 121,963
Brian E. Shore 10,401,547 99,570
Jerry Shore 10,378,157 122,960
E. Phillip Smoot 10,377,759 123,358
(b) amendments to the Company's 1992 Stock Option Plan were approved
by the Shareholders to increase the aggregate number of shares of Common
Stock of the Company authorized for issuance under such Plan by 550,000
shares and to add a provision with respect to section 162(m) of the Internal
Revenue Code of 1986, as amended. There were 10,169,977 votes for these
amendments, 278,757 votes against, and 52,383 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number
11.01 Computation of fully diluted earnings per share
27.01 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the fiscal quarter
ended September 1, 1996.
-11-
<PAGE> 12
SIGNATURES
Pursuant to the requirements 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.
Park Electrochemical Corp.
---------------------------
(Registrant)
Date: October 14, 1996 /s/Brian E. Shore
---------------- ---------------------------
Brian E. Shore
President
Date: October 14, 1996 /s/Paul R. Shackford
---------------- ---------------------------
Paul R. Shackford
Vice President and
Principal Financial Officer
-12-
<PAGE> 13
EXHIBIT INDEX
Exhibit No. Name Page
11.01 Computation of fully diluted
earnings per share............................ 14
27.01 Financial Data Schedule (filed
only by electronic transmission
with EDGAR filing with the
Securities and Exchange Commission).......... -
-13-
<TABLE>
EXHIBIT NO. 11.01
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(Unaudited--in thousands, except per share data)
<CAPTION>
13 Weeks Ended 26 Weeks Ended
------------------------ ------------------------
September 1, August 27, September 1, August 27,
1996 1995 1996 1995
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
ADJUSTMENT OF NET EARNINGS:
Net earnings $ 4,681 $ 5,366 $ 7,806 $11,390
Adjustments resulting from
assumed conversion of 5.5%
Convertible Subordinated
Notes ("Notes"):
Reduction of interest expense
and amortization of deferred
debt financing costs 1,370 - 2,725 -
Related tax effect on above (480) - (954) -
-------- -------- -------- --------
Net earnings, as adjusted $ 5,571 $ 5,366 $ 9,577 $11,390
======== ======== ======== ========
ADJUSTMENT OF WEIGHTED AVERAGE
NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Weighted average number of common
and common equivalent shares
outstanding 11,590 11,801 11,686 11,749
Add weighted average shares
assumed to be issued upon:
Conversion of Notes 2,370 - 2,370 -
Exercise of stock options at
period-end market price if
higher than average market
price for period - 28 - 65
-------- -------- -------- --------
Weighted average number of common
and common equivalent shares
outstanding, as adjusted 13,960 11,829 14,056 11,814
======== ======== ======== ========
Fully diluted earnings per share--
as computed $ .40 $ .45 $ .68* $ .96
======== ======== ======== ========
Fully diluted earnings per share--
as reported $ .40 $ .45 $ .67 $ .96
======== ======== ======== ========
*The results of the above computation for the 26 weeks ended September 1, 1996 is
antidilutive; accordingly, the reported fully diluted earnings per share is equal to the
reported primary earnings per share of $.67 per share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PARK ELECTROCHEMICAL CORP. AND IS QUALIFIED IN IT
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-02-1997
<PERIOD-END> SEP-01-1996
<CASH> 82,121
<SECURITIES> 52,304
<RECEIVABLES> 44,304
<ALLOWANCES> 0
<INVENTORY> 25,969
<CURRENT-ASSETS> 209,204
<PP&E> 157,518
<DEPRECIATION> 77,760
<TOTAL-ASSETS> 293,448
<CURRENT-LIABILITIES> 50,666
<BONDS> 100,000
0
0
<COMMON> 1,358
<OTHER-SE> 133,175
<TOTAL-LIABILITY-AND-EQUITY> 293,448
<SALES> 157,380
<TOTAL-REVENUES> 160,908
<CGS> 130,694
<TOTAL-COSTS> 146,870
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,725
<INCOME-PRETAX> 11,313
<INCOME-TAX> 3,507
<INCOME-CONTINUING> 7,806
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,806
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
</TABLE>
