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 June 1, 1997
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: 11,278,921 as of July 11, 1997.
<PAGE> 2
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 1, 1997 (Unaudited) and
March 2, 1997 ...................................... 4
Consolidated Statements of Earnings
13 weeks ended June 1, 1997 and
June 2, 1996 (Unaudited)............................ 5
Condensed Consolidated Statements of Cash Flows
13 weeks ended June 1, 1997 and
June 2, 1996 (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 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>
June 1, March 2,
1997 1997
------- --------
<S> <C> <C>
ASSETS (Unaudited) *
Current assets:
Cash and cash equivalents $ 44,754 $ 42,321
Marketable securities 111,969 102,232
Accounts receivable, net 46,589 50,314
Inventories (Note 2) 23,425 20,458
Prepaid expenses and other current assets 5,755 5,089
-------- -------
Total current assets 232,492 220,414
Property, plant and equipment, net 83,800 83,391
Other assets 4,368 4,057
-------- --------
$320,660 $307,862
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,731 $ 32,892
Accrued liabilities 17,436 18,565
Income taxes payable 6,458 3,953
-------- --------
Total current liabilities 62,625 55,410
Long-term debt 100,000 100,000
Deferred income taxes 8,363 7,963
Deferred pension liability 1,134 1,134
Stockholders' equity:
Common stock 1,358 1,358
Other stockholders' equity 147,180 141,997
-------- --------
Total stockholders' equity 148,538 143,355
-------- --------
$320,660 $307,862
======== ========
<FN>
*The balance sheet at March 2, 1997 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 amounts)
<CAPTION>
13 Weeks Ended
-------------------------
June 1, June 2,
1997 1996
------- -------
<S> <C> <C>
Net sales $91,633 $75,406
Cost of sales 73,592 63,574
-------- --------
Gross profit 18,041 11,832
Selling, general and administrative expenses 9,473 7,801
-------- --------
Profit from operations 8,568 4,031
-------- --------
Other income (expense):
Interest and other income, net 1,990 1,853
Interest expense (1,356) (1,355)
-------- --------
Total other income 634 498
-------- --------
Earnings before income taxes 9,202 4,529
Income tax provision 3,037 1,404
-------- --------
Net earnings $ 6,165 $ 3,125
======== ========
Earnings per share (Note 3):
Primary $ .54 $ .26
Fully diluted $ .51 $ .26
Weighted average number of common and
common equivalent shares outstanding:
Primary 11,477 11,829
Fully diluted 13,864 11,829
Dividends per share $ .08 $ .08
</TABLE>
-5-
<PAGE> 6
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited--in thousands)
<CAPTION>
13 weeks ended
----------------------
June 1, June 2,
1997 1996
------- -------
<S> <C> <C>
Net cash provided by operating activities $16,400 $ 2,712
-------- --------
Cash flows from investing activities:
Purchases of property, plant and
equipment, net (3,307) (3,584)
Purchases of marketable securities (46,636) (10,396)
Proceeds from sales of marketable
securities 36,862 23,543
-------- --------
Net cash (used in) provided by investing
activities (13,081) 9,563
-------- --------
Cash flows from financing activities:
Dividends paid (902) (924)
Proceeds from exercise of stock options 14 53
-------- --------
Net cash used in financing activities (888) (871)
-------- --------
Increase in cash and cash equivalents
before exchange rate changes 2,431 11,404
Effect of exchange rate changes on cash
and cash equivalents 2 24
-------- --------
Increase in cash and cash equivalents 2,433 11,428
Cash and cash equivalents, beginning of
period 42,321 75,970
-------- --------
Cash and cash equivalents, end of period $44,754 $87,398
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ 135 $ 700
</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 June 1, 1997, the
consolidated statements of earnings for the 13 weeks ended June 1, 1997
and June 2, 1996, and the condensed consolidated statements of cash flows
for the 13 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 June 1, 1997, 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 financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended March
2, 1997.
<TABLE>
2. INVENTORIES
Inventories consist of the following:
<CAPTION> (In thousands)
June 1, March 2,
1997 1997
------- --------
<S> <C> <C>
Raw materials $ 9,492 $ 8,459
Work-in-process 4,454 4,037
Finished goods 8,695 7,173
Manufacturing supplies 784 789
------- -------
$23,425 $20,458
======= =======
</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 reflect 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 5.5% Convertible Subordinated
Notes due 2006, if the effect is dilutive.
-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, semiconductor packages and other electronic interconnect 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 industries. The Company's electronic materials
operations accounted for approximately 88% of net sales worldwide in each of
the last two fiscal years and in the three-month periods ended June 2, 1996
and June 1, 1997. The Company's foreign electronic materials operations
accounted for approximately 29% of net sales worldwide in the 1996 and 1997
fiscal years and approximately 27% in each of the three-month periods ended
June 2, 1996 and June 1, 1997. The Company's electronic materials
operations accounted for approximately 96% and 89% of operating profit in
the 1996 and 1997 fiscal years, respectively, and approximately 91% and 94%
of operating profit in the three-month periods ended June 2, 1996 and June
1, 1997, respectively.
Park is also engaged in the engineered materials and plumbing
hardware businesses, which consist of the Company's specialty adhesive tape
and film business, its advanced composite materials business and its
plumbing hardware business, all of which operate as independent business
units. This segment accounted for approximately 13% of the Company's total
net sales worldwide in each of the last two fiscal years and approximately
13% and 11%, respectively, in the three-month periods ended June 2, 1996 and
June 1, 1997 and approximately 4% and 11% of operating profit in the 1996
and 1997 fiscal years, respectively, and approximately 9% and 6% of
operating profit in the three-month periods ended June 2, 1996 and June 1,
1997, respectively.
The strong growth in both sales and earnings that the Company
achieved during the fiscal year ended March 3, 1996 and prior fiscal years
resumed in the three-month period ended June 1, 1997, led by strong growth
in sales by the Company's North American and Asian electronic materials
operations.
Three Months Ended June 1, 1997 Compared with Three Months Ended June 2,
1996:
The Company's electronic materials business was principally
responsible for the improvement in the Company's results of operations for
the three-month period ended June 1, 1997. The North American and Asian
markets, and to a lesser extent the European market, for sophisticated
printed circuit materials were strong during the 1998 fiscal year first
quarter, and the Company's electronic materials operations located in these
regions performed well as a result.
During the three-month period ended June 1, 1997, the Company's
electronic materials business experienced improved efficiencies resulting
from the operation of its facilities at levels close to their designed
manufacturing capacity. This favorably impacted the Company's margins in
the 1998 fiscal year first quarter over last year's first quarter.
Operating results of the Company's engineered materials and
plumbing hardware business improved considerably during the three-month
period ended June 1, 1997.
-8-
<PAGE> 9
Results of Operations
Sales for the three-month period ended June 1, 1997 increased
21.5% to $91.6 million from $75.4 million for last fiscal year's comparable
period. Sales of the electronic materials business for the three-month
period ended June 1, 1997 were $81.4 million, or 89% of total sales
worldwide, compared with $65.4 million, or 87% of total sales worldwide, for
last fiscal year's comparable period. This 25% increase in sales of
electronic materials was principally the result of higher volume of
electronic materials shipped and an increase in sales of higher technology
products. Sales of the engineered materials and plumbing hardware business
for the three-month period ended June 1, 1997 were $10.2 million compared
with a slightly lower amount for last fiscal year's comparable period.
Increased sales in the specialty adhesive tape and film business resulting
from higher volumes were largely offset by lower sales in the plumbing
hardware business.
The Company's foreign electronic materials operations accounted
for $24.7 million of sales, or 27% of the Company's total sales worldwide,
during the three-month period ended June 1, 1997 compared with $21.0 million
of sales, or 28% of total sales worldwide, during last fiscal year's
comparable period. Sales by the Company's foreign operations during the
1998 fiscal year first quarter increased 17% from the 1997 fiscal year
comparable period. While sales by each of the Company's foreign operations
were higher in the 1998 fiscal year first quarter compared with the 1997
fiscal year first quarter, the increase in sales by foreign operations was
principally due to an increase in sales by the Company's Asian operations.
The Company expanded the manufacturing capacity of its facility in Singapore
during the latter part of the 1997 fiscal year and is planning a further
expansion of the Singapore manufacturing facility during the Company's 1998
fiscal year.
The gross margin for the Company's worldwide operations was
19.7% during the three-month period ended June 1, 1997 compared with 15.7%
for last fiscal year's comparable period. The improvement in the gross
margin was attributable to efficiencies resulting from operating the
Company's facilities at levels close to their designed capacity and the
continuing growth in sales of higher technology, higher margin products.
Selling, general and administrative expenses, measured as a
percentage of sales, were 10.3% during the three-month period ended June 1,
1997 and during last fiscal year's comparable period.
For the reasons set forth above, profit from operations for the
three-month period ended June 1, 1997 increased 113% to $8.6 million from
$4.0 million for last fiscal year's comparable period.
Interest and other income, principally investment income,
increased 7% to $2.0 million for the three-month period ended June 1, 1997
from $1.9 million for last fiscal year's comparable period. The slight
increase in investment income was attributable to an 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 period ended June 1, 1997 was $1.4 million compared with the
same amount during last fiscal year's comparable period. 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, all of
such Notes were outstanding during the quarter ended June 1, 1997 and the
last fiscal year, which resulted in the associated interest expense and
contributed to the cash available for investment.
The Company's effective income tax rate for the three-month
period ended June 1, 1997 was 33.0% compared with 31.0% for last fiscal
year's comparable period. This increase in the effective tax rate was
primarily the result of less favorable foreign tax rate differentials.
-9-
<PAGE> 10
Net earnings for the three-month period ended June 1, 1997
increased 97% to $6.2 million from $3.1 million for last fiscal year's
comparable period. Primary and fully diluted earnings per share increased
to $0.54 and $0.51, respectively, for the three-month period ended June 1,
1997 from $0.26 for last fiscal year's comparable period. These increases
in net earnings and earnings per share were attributable to the Company's
strong operating results.
Liquidity and Capital Resources:
At June 1, 1997, the Company's cash and temporary investments
were $156.7 million compared with $144.6 million at March 2, 1997, the end
of the Company's 1997 fiscal year. The increase in the Company's cash and
investment position at June 1, 1997 was attributable to cash provided from
operating activities in excess of investments in property, plant and
equipment, as discussed below. The Company's working capital was $169.9
million at June 1, 1997 compared with $165.0 million at March 2, 1997. The
increase at June 1, 1997 compared with March 2, 1997 was due to the increase
in cash and temporary investments and inventories, offset in part by lower
receivables and higher payables. The Company's current ratio (the ratio of
current assets to current liabilities) was 3.7 to 1 at June 1, 1997 compared
with 4.0 to 1 at March 2, 1997.
During the three-months ended June 1, 1997, cash provided by net
earnings before depreciation and amortization of $9.2 million was increased
by a net decrease in working capital items, resulting in $16.4 million of
cash provided from operating activities, and the Company expended $3.3
million for the purchase of property, plant and equipment. Expenditures for
property, plant and equipment were $18.7 million and $24.5 million in the
1997 and 1996 fiscal years, respectively. The Company expects the level of
capital expenditures in the 1998 fiscal year to be higher than in the 1997
fiscal year. The Company is planning further expansions of its electronic
materials operations, particularly in the United States and Asia.
At June 1, 1997, 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.
In the three month periods ended June 1, 1997 and June 2, 1996,
the Company charged less than $0.1 million against pretax income for
environmental remedial response and voluntary cleanup costs (including legal
fees). While annual expenditures have generally been constant from year to
year, and may increase over time, the Company expects it will be able to
fund such expenditures from cash flow from operations. The timing of
expenditures depends on a number of factors, including regulatory approval
of cleanup projects, remedial techniques to be utilized and agreements with
other parties. At June 1, 1997 and March 2, 1997, the recorded liability in
accrued liabilities for environmental matters was $1.2 million. Management
does not expect that environmental matters will have a material adverse
effect on the liquidity, capital resources, business or consolidated
financial position of the Company.
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" after Item 7 of Park's
Annual Report on Form 10-K for the fiscal year ended March 2, 1997.
-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 June 1, 1997.
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 June 1, 1997.
-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: July 14, 1997 /s/Brian E. Shore
---------------------------
Brian E. Shore
President and
Chief Executive Officer
Date: July 14, 1997 /s/Murray O. Stamer
---------------------------
Murray O. Stamer
Corporate Controller and
Chief Accounting 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-
<PAGE> 14
<TABLE>
EXHIBIT NO. 11.01
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(Unaudited--in thousands, except per share amounts)
<CAPTION>
13 weeks ended
----------------------
June 1, June 2,
1997 1996
------ ------
<S> <C> <C>
ADJUSTMENT OF NET EARNINGS:
Net earnings $ 6,165 $ 3,125
Adjustments resulting from assumed
conversion of 5.5% Convertible
Subordinated Notes ("Notes"):
Reduction of interest expense and
amortization of deferred debt
financing costs 1,343 1,355
Related tax effect on above (470) (474)
-------- --------
Net earnings, as adjusted $ 7,038 $ 4,006
======== ========
ADJUSTMENT OF WEIGHTED AVERAGE
NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Weighted average number of common and
common equivalent shares outstanding 11,477 11,829
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 17 -
-------- --------
Weighted average number of common
and common equivalent shares
outstanding, as adjusted 13,864 14,199
======== ========
Fully diluted earnings per share--
as computed $ .51 $ .28
======== ========
Fully diluted earnings per share--
as reported $ .51 $ .26*
======== ========
</TABLE>
*The results of the above computation for the 13 weeks ended June 2, 1996 is
antidilutive; accordingly, the reported fully diluted earnings per share is
equal to the reported primary earnings per share of $.26 per share.
-14-
<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 ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-01-1998
<PERIOD-END> JUN-01-1997
<CASH> 44,754
<SECURITIES> 111,969
<RECEIVABLES> 46,589
<ALLOWANCES> 0
<INVENTORY> 23,425
<CURRENT-ASSETS> 232,492
<PP&E> 168,953
<DEPRECIATION> 85,153
<TOTAL-ASSETS> 320,660
<CURRENT-LIABILITIES> 62,625
<BONDS> 100,000
0
0
<COMMON> 1,358
<OTHER-SE> 147,180
<TOTAL-LIABILITY-AND-EQUITY> 320,660
<SALES> 91,633
<TOTAL-REVENUES> 93,623
<CGS> 73,592
<TOTAL-COSTS> 83,065
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,356
<INCOME-PRETAX> 9,202
<INCOME-TAX> 3,037
<INCOME-CONTINUING> 6,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,165
<EPS-PRIMARY> .54
<EPS-DILUTED> .51
</TABLE>
