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 December 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: 11,269,628 as of January 10,
1997.
<PAGE> 2
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
December 1, 1996 (Unaudited) and
March 3, 1996................................... 4
Consolidated Statements of Earnings
13 weeks and 39 weeks ended December 1, 1996
(Unaudited) and November 26, 1995 (Unaudited)... 5
Condensed Consolidated Statements of Cash Flows
39 weeks ended December 1, 1996 (Unaudited)
and November 26, 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 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>
December 1, March 3,
1996 1996
----------- --------
<S> <C> <C>
ASSETS (Unaudited) *
Current assets:
Cash and cash equivalents $ 62,631 $ 75,970
Marketable securities 80,677 67,243
Accounts receivable, net 48,222 42,821
Inventories (Note 2) 21,826 27,712
Prepaid expenses & other current assets 4,472 4,026
-------- -------
Total current assets 217,828 217,772
Property, plant and equipment, net 82,201 76,439
Other assets 4,406 4,764
-------- --------
$304,435 $298,975
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,133 $ 35,924
Accrued liabilities 16,247 16,941
Income taxes payable 3,379 3,942
-------- --------
Total current liabilities 56,759 56,807
Long-term debt 100,000 100,000
Deferred income taxes 7,158 6,324
Deferred pension liability 1,417 1,417
Stockholders' equity:
Common stock 1,358 1,358
Other stockholders' equity 137,743 133,069
-------- --------
Total stockholders' equity 139,101 134,427
-------- --------
$304,435 $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 39 Weeks Ended
------------------------ ------------------------
December 1, November 26, December 1, November 26,
1996 1995 1996 1995
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales $88,972 $81,866 $246,352 $227,215
Cost of sales 73,587 63,469 204,281 175,892
-------- -------- --------- ---------
Gross profit 15,385 18,397 42,071 51,323
Selling, general and
administrative expenses 8,810 9,312 24,986 25,799
-------- -------- --------- ---------
Profit from operations 6,575 9,085 17,085 25,524
-------- -------- --------- ---------
Other income (expense):
Interest and other
income, net 1,846 564 5,374 1,683
Interest expense 1,337 - 4,062 -
-------- -------- --------- ---------
Total other income 509 564 1,312 1,683
-------- -------- --------- ---------
Earnings before income taxes 7,084 9,649 18,397 27,207
Income tax provision 2,196 3,182 5,703 9,350
-------- -------- --------- ---------
Net earnings $ 4,888 $ 6,467 $ 12,694 $ 17,857
======== ======== ========= =========
Earnings per share (Note 3):
Primary $ .43 $ .55 $ 1.09 $ 1.52
Fully diluted $ .42 $ .55 $ 1.09 $ 1.51
Weighted average number of
common and common equivalent
shares outstanding:
Primary 11,444 11,857 11,617 11,763
Fully diluted 13,835 11,857 11,617 11,801
Dividends per share $ .08 $ .08 $ .24 $ .20
</TABLE>
-5-
<PAGE> 6
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<CAPTION>
39 Weeks Ended
-------------------------
December 1, November 26,
1996 1995
----------- ------------
<S> <C> <C>
Net cash provided by operating activities $ 22,530 $ 17,152
--------- ---------
Cash flows from investing activities:
Purchases of property, plant and
equipment, net (13,826) (19,029)
Purchases of marketable securities (82,708) (20,206)
Proceeds from sales of marketable
securities 69,319 13,094
--------- ---------
Net cash used in investing activities (27,215) (26,141)
--------- ---------
Cash flows from financing activities:
Purchase of treasury stock (6,293) -
Dividends paid (2,746) (2,298)
Proceeds from exercise of stock options 229 682
Other 1 (1)
--------- ---------
Net cash used in financing activities (8,809) (1,617)
--------- ---------
Decrease in cash and cash equivalents
before effect of exchange rate changes (13,494) (10,606)
Effect of exchange rate changes on cash
and cash equivalents 155 (44)
--------- ---------
Decrease in cash and cash equivalents (13,339) (10,650)
Cash and cash equivalents, beginning
of period 75,970 30,803
--------- ---------
Cash and cash equivalents, end of period $ 62,631 $ 20,153
========= =========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 2,781 $ -
Income taxes $ 5,238 $ 6,803
</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 December 1, 1996, the
consolidated statements of earnings for the 13 weeks and 39 weeks ended
December 1, 1996 and November 26, 1995, and the condensed consolidated
statements of cash flows for the 39 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 December 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.
2. INVENTORIES
<TABLE>
Inventories consist of the following:
<CAPTION>
(In thousands)
December 1, March 3,
1996 1996
----------- --------
<S> <C> <C>
Raw materials $ 9,166 $13,040
Work-in-process 4,531 4,280
Finished goods 7,213 9,674
Manufacturing supplies 916 718
------- -------
$21,826 $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 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 (the "Notes"), if the effect would be dilutive. For the
39 weeks ended December 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 92% of operating profit in
each of the last two fiscal years and in the three-month and nine-month
periods ended December 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 32% and 30%, respectively, for the three-month and nine-
month periods ended December 1, 1996.
Three and Nine Months Ended December 1, 1996 Compared with Three and Nine
Months Ended November 26, 1995:
The Company's electronic materials business was responsible
for the deterioration in the Company's results of operations for the
three-month and nine-month periods ended December 1, 1996. The United
States and European markets for sophisticated printed circuit materials
continued to experience weakness during the 1997 fiscal year third 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 nine-month periods ended December
1, 1996, the Company's electronic materials business experienced
inefficiencies caused by operating its facilities at levels lower than
their designed manufacturing capacity and faced price pressure from its
customers. These factors adversely affected the Company's margins in both
the three-month and nine-month periods. The Company's performance in the
third quarter of the 1997 fiscal year was also adversely affected by a
significant disruption of the Company's business with its largest customer
caused by the Canadian Auto Workers' and United Auto Workers' strikes
against General Motors.
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 three quarters. The Company's advanced composite materials business
performed reasonably well in the third quarter. The Company continues to
explore and pursue its options with respect to its plumbing hardware
business.
Results of Operations
Sales for the three-month and nine-month periods ended
December 1, 1996 were $89.0 million and $246.4 million, respectively,
compared with $81.9 million and $227.2 million for last fiscal year's
comparable periods. Sales of the electronic materials business for the
three-month and nine-month periods ended December 1, 1996 were $78.2
million and $214.8 million, respectively, or 88% and 87% of total sales
worldwide, compared with $72.6 million and $199.9 million, or 89% and 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 nine-month periods ended December 1, 1996 were $10.7 million and
$31.5 million, respectively, compared with $9.3 million and $27.4 million
for last fiscal year's comparable periods.
-8-
<PAGE> 9
The Company's foreign electronic materials operations
accounted for $28.1 million and $73.6 million, respectively, or 32% and
30% of the Company's total sales worldwide, during the three-month and
nine-month periods ended December 1, 1996 compared with $24.1 million and
$68.0 million, respectively, of sales, or 29% and 30% of total sales
worldwide, during last fiscal year's comparable periods.
The gross margins for the Company's worldwide operations were
17.3% and 17.1%, respectively, during the three-month and nine-month
periods ended December 1, 1996 compared with 22.5% and 22.6% for last
fiscal year's comparable periods. The deterioration in the gross margins
was attributable to inefficiencies caused by operating facilities at
levels lower than their designed capacity, price pressure exerted by
customers, and significant disruptions in the Company's business with its
largest customer caused by the Canadian Auto Workers' and United Auto
Workers' strikes against General Motors.
Selling, general and administrative expenses, measured as a
percentage of sales, were 9.9% and 10.1%, respectively, during the three-
month and nine-month periods ended December 1, 1996 compared with 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 nine-month periods ended December 1, 1996 decreased
28% to $6.6 million and 33% to $17.1 million, respectively, from $9.1
million and $25.5 million for last fiscal year's comparable periods.
Interest and other income, principally investment income,
increased 227% to $1.8 million and 219% to $5.4 million, respectively, for
the three-month and nine-month periods ended December 1, 1996 from $0.6
million and $1.7 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 nine-month periods ended December
1, 1996 was $1.3 million and $4.1 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; as a result, such Notes
were outstanding during the entire nine-month period ended December 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 three quarters of the 1996 fiscal year.
The Company's effective income tax rate for the three-month
and nine-month periods ended December 1, 1996 was 31.0% compared with
33.0% and 34.4% for last fiscal year's comparable periods. This decrease
in the effective tax rate was primarily the result of favorable foreign
tax rate differentials.
Net earnings for the three-month and nine-month periods ended
December 1, 1996 decreased 24% to $4.9 million and 29% to $12.7 millon,
respectively, from $6.5 million and $17.9 million for last fiscal year's
comparable periods. Primary earnings per share decreased to $0.43 and
$1.09 and fully diluted earnings per share decreased to $0.42 and $1.09
for the three-month and nine-month periods ended December 1, 1996 from
primary earnings per share of $0.55 and $1.52 and fully diluted earnings
per share of $0.55 and $1.51 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.
-9-
<PAGE> 10
Liquidity and Capital Resources:
At December 1, 1996, the Company's cash and temporary
investments were $143.3 million compared with $143.2 million at March 3,
1996, the end of the Company's 1996 fiscal year. The Company's working
capital was $161.1 million at December 1, 1996 compared with $161.0
million at March 3, 1996. The slight increase at December 1, 1996
compared with March 3, 1996 was due to the increase in cash and temporary
investments, with the large decrease in inventories offsetting the
increases in accounts receivable and prepaid expenses and other expenses.
The Company's current ratio (the ratio of current assets to current
liabilities) was 3.8 to 1 at December 1, 1996 and March 3, 1996.
During the nine-months ended December 1, 1996, cash provided
by net earnings before depreciation and amortization of $21.4 million was
increased by a net decrease in working capital items (other than cash and
marketable securities) and an increase in deferred income taxes, resulting
in $22.5 million of cash provided from operating activities. The Company
expended $13.8 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, respectively. 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 December 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 December 1, 1996.
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 December 1, 1996.
-11-
<PAGE> 12
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
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: January 13, 1997 /s/Brian E. Shore
---------------- -------------------------
Brian E. Shore
President and
Chief Executive Officer
Date: January 13, 1997 /s/Murray O. Stamer
---------------- -------------------------
Murray O. Stamer
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 data)
<CAPTION>
13 Weeks Ended 39 Weeks Ended
------------------------ ------------------------
December 1, November 26, December 1, November 26,
1996 1995 1996 1995
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
ADJUSTMENT OF NET EARNINGS:
Net earnings $ 4,888 $ 6,467 $12,694 $17,857
Adjustments resulting from
assumed conversion of 5.5%
Convertible Subordinated
Notes ("Notes"):
Reduction of interest expense
and amortization of deferred
debt financing costs 1,337 - 4,062 -
Related tax effect on above (468) - (1,422) -
-------- -------- -------- --------
Net earnings, as adjusted $ 5,757 $ 6,467 $15,334 $17,857
======== ======== ======== ========
ADJUSTMENT OF WEIGHTED AVERAGE
NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Weighted average number of common
and common equivalent shares
outstanding 11,444 11,857 11,617 11,763
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 21 - - 38
-------- -------- -------- --------
Weighted average number of common
and common equivalent shares
outstanding, as adjusted 13,835 11,857 13,987 11,801
======== ======== ======== ========
Fully diluted earnings per share--
as computed $ .42 $ .55 $ 1.10* $ 1.51
======== ======== ======== ========
Fully diluted earnings per share--
as reported $ .42 $ .55 $ 1.09 $ 1.51
======== ======== ======== ========
*The results of the above computation for the 39 weeks ended December 1, 1996 is
antidilutive; accordingly, the reported fully diluted earnings per share is equal
to the reported primary earnings per share of $1.09 per share.
</TABLE>
-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> 9-MOS
<FISCAL-YEAR-END> MAR-02-1997
<PERIOD-END> DEC-01-1996
<CASH> 62,631
<SECURITIES> 80,677
<RECEIVABLES> 48,222
<ALLOWANCES> 0
<INVENTORY> 21,826
<CURRENT-ASSETS> 217,828
<PP&E> 163,040
<DEPRECIATION> 80,839
<TOTAL-ASSETS> 304,435
<CURRENT-LIABILITIES> 56,759
<BONDS> 100,000
0
0
<COMMON> 1,358
<OTHER-SE> 137,743
<TOTAL-LIABILITY-AND-EQUITY> 304,435
<SALES> 246,352
<TOTAL-REVENUES> 251,726
<CGS> 204,281
<TOTAL-COSTS> 229,267
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,062
<INCOME-PRETAX> 18,397
<INCOME-TAX> 5,703
<INCOME-CONTINUING> 12,694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,694
<EPS-PRIMARY> $1.09
<EPS-DILUTED> $1.09
</TABLE>
