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 August 30, 1998
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: 10,420,227 as of October 9,
1998.
<PAGE> 2
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
August 30, 1998 (Unaudited) and
March 1, 1998 ...................................... 4
Consolidated Statements of Earnings
13 weeks and 26 weeks ended August 30, 1998 and
August 31, 1997 (Unaudited)....................... 5
Condensed Consolidated Statements of Cash Flows
26 weeks ended August 30, 1998 and
August 31, 1997 (Unaudited)....................... 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) ............................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ......................................... 9
Factors That May Affect Future Results........................ 13
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings ................................... 14
Item 4. Submission of Matters to a Vote of
Security Holders..................................... 14
Item 6. Exhibits and Reports on Form 8-K .................... 14
SIGNATURES ..................................................... 15
EXHIBIT INDEX.................................................... 16
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Company's Financial Statements begin on the next page.
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<PAGE> 4
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
August 30, March 1,
1998 1998
----------- --------
<S> <C> <C>
ASSETS (Unaudited) *
Current assets:
Cash and cash equivalents $ 43,347 $ 45,102
Marketable securities 109,513 113,358
Accounts receivable, net 49,084 53,511
Inventories (Note 2) 25,105 26,953
Prepaid expenses and other current assets 8,486 8,456
-------- --------
Total current assets 235,535 247,380
Property, plant and equipment, net 116,147 108,116
Other assets 3,680 3,833
-------- --------
$355,362 $359,329
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,896 $ 37,426
Accrued liabilities 22,393 25,261
Income taxes payable 8,271 8,140
-------- --------
Total current liabilities 60,560 70,827
Long-term debt 100,000 100,000
Deferred income taxes 9,303 8,781
Deferred pension and other liabilities 13,856 13,317
Stockholders' equity:
Common stock 1,358 1,358
Additional paid-in capital 52,993 52,990
Retained earnings 134,371 130,435
Treasury stock, at cost (16,944) (17,113)
Accumulated other non-owner changes (135) (1,266)
--------- ---------
Total stockholders' equity 171,643 166,404
--------- ---------
$355,362 $359,329
========= =========
<FN>
*The balance sheet at March 1, 1998 has been derived from the audited
financial statements at that date.
</TABLE>
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<PAGE> 5
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited--in thousands, except per share amounts)
<CAPTION>
13 Weeks Ended 26 Weeks Ended
------------------------ ------------------------
August 30, August 31, August 30, August 31,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $86,348 $83,086 $186,203 $174,719
Cost of sales 77,355 68,146 159,839 141,738
-------- -------- --------- ---------
Gross profit 8,993 14,940 26,364 32,981
Selling, general and
administrative expenses 9,660 8,518 19,795 17,991
-------- -------- --------- ---------
Profit (loss) from
operations (667) 6,422 6,569 14,990
-------- -------- --------- ---------
Other income (expense):
Interest and other
income, net 2,099 2,174 4,148 4,164
Interest expense (1,394) (1,354) (2,772) (2,710)
-------- -------- --------- ---------
Total other income 705 820 1,376 1,454
-------- -------- --------- ---------
Earnings before income taxes 38 7,242 7,945 16,444
Income tax provision (benefit) (187) 2,390 2,185 5,427
-------- -------- --------- ---------
Net earnings $ 225 $ 4,852 $ 5,760 $11,017
======== ======== ========= =========
Earnings per share (Note 3):
Basic $ .02 $ .43 $ .50 $ .98
Diluted $ .02 $ .41 $ .49 $ .92
Weighted average number of
common and common equivalent
shares outstanding:
Basic 11,512 11,283 11,507 11,278
Diluted 11,633 13,915 11,668 13,881
Dividends per share $ .08 $ .08 $ .16 $ .16
</TABLE>
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<PAGE> 6
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited--in thousands)
<CAPTION>
26 Weeks Ended
-------------------------
August 30, August 31,
1998 1997
---------- ------------
<S> <C> <C>
Net cash provided by operating activities $ 8,992 $18,299
-------- --------
Cash flows from investing activities:
Purchases of property, plant and
equipment, net (13,666) (6,714)
Purchases of marketable securities (85,995) (78,086)
Proceeds from sales of marketable
securities 89,919 65,373
-------- --------
Net cash used in investing
activities (9,742) (19,427)
-------- --------
Cash flows from financing activities:
Dividends paid (1,824) (1,804)
Proceeds from exercise of stock options 180 200
-------- --------
Net cash used in financing activities (1,644) (1,604)
-------- --------
Decrease in cash and cash equivalents
before effect of exchange rate changes (2,394) (2,732)
Effect of exchange rate changes on cash
and cash equivalents 639 (294)
-------- --------
Decrease in cash and cash equivalents (1,755) (3,026)
Cash and cash equivalents, beginning of period 45,102 42,321
-------- --------
Cash and cash equivalents, end of period $43,347 $39,295
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 2,750 $ 2,750
Income taxes $ 1,264 $ 5,300
</TABLE>
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<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 August 30, 1998, the
consolidated statements of earnings for the 13 weeks and 26 weeks ended
August 30, 1998 and August 31, 1997, 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 August 30, 1998, 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 1, 1998.
<TABLE>
2. INVENTORIES
Inventories consist of the following:
<CAPTION> (In thousands)
August 30, March 1,
1998 1998
---------- ----------
<S> <C> <C>
Raw materials $10,667 $10,686
Work-in-process 4,882 5,740
Finished goods 8,522 9,806
Manufacturing supplies 1,034 721
------- -------
$25,105 $26,953
</TABLE> ======= =======
<TABLE>
3. EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted
earnings per share for the periods specified (in thousands, except per
share amounts):
<CAPTION> 13 weeks ended 26 weeks ended
-------------- --------------
August 30, August 31, August 30, August 31,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income for basic EPS $ 225 $ 4,852 $ 5,760 $11,017
Add interest on 5.5% convertible
subordinated notes, net of taxes * 873 * 1,746
------- ------- ------- -------
Net income for diluted EPS $ 225 $ 5,725 $ 5,760 $12,763
======= ======= ======= =======
Weighted average common shares
outstanding for basic EPS 11,512 11,283 11,507 11,278
Net effect of dilutive options 121 262 161 233
Assumed conversion of 5.5%
convertible subordinated notes * 2,370 * 2,370
------- ------- ------- -------
Weighted average shares
outstanding for diluted EPS 11,633 13,915 11,668 13,881
======= ======= ======= =======
EPS-basic $ .02 $ .43 $ .50 $ .98
EPS-diluted $ .02 $ .41 $ .49 $ .92
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<PAGE> 8
<FN>
*For the 13 and 26 weeks ended August 30, 1998 the effects of the 5.5%
convertible subordinated notes were not considered as their effect was anti-
dilutive.
</TABLE>
4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Effective March 2, 1998 the Company adopted Statement of Financial
Accounting Standards No. 130 - "Reporting Comprehensive Income" (SFAS No.
130), which establishes standards for reporting changes in equity from
non-owner sources in the financial statements. Total non-owner changes
in stockholders' equity were $935,000 and $3,941,000 for the three-month
periods ended August 30, 1998 and August 31, 1997, respectively, and
$6,891,000 and $10,012,000 for the six-month periods ended August 30, 1998
and August 31, 1997, respectively, which represents primarily net income
and foreign currency translation adjustments.
5. SUBSEQUENT EVENT
During the month of September 1998, the Company repurchased 1,103,200
shares of its common stock at a total cost of $13,452,000 pursuant to
share repurchase authorizations announced on June 24, 1998 and September
9, 1998.
-8-
<PAGE> 9
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 electronic interconnect systems. Park's electronic materials
business is operated by its "Nelco" group of companies. In October 1997,
the Company acquired Dielektra GmbH, a manufacturer of advanced electronic
materials, including mass-laminated multilayer panels and continuously
produced copper-clad laminates, located in Cologne, Germany. 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 89% and 87%, respectively, of net sales worldwide in the last
two fiscal years, approximately 89% and 90% in the three-month period and
six-month period, respectively, ended August 30, 1998 and approximately 88%
in each of the three-month and six-month periods ended August 31, 1997. The
Company's foreign electronic materials operations accounted for
approximately 31% and 29%, respectively, of net sales worldwide in the 1998
and 1997 fiscal years, approximately 43% and 39% in the three-month period
and six-month period, respectively, ended August 30, 1998 and approximately
28% in each of the three-month and six-month periods ended August 31, 1997.
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. These businesses accounted for approximately 11% and 13%,
respectively, of the Company's total net sales worldwide in the last two
fiscal years, approximately 11% and 10% in the three-month period and six-
month period, respectively, ended August 30, 1998 and approximately 12% in
each of the three-month and six-month periods ended August 31, 1997.
The sales growth that the Company achieved during the fiscal
year ended March 1, 1998 and prior fiscal years continued in the three-month
and six-month periods ended August 30, 1998, led by growth in sales by the
Company's Asian electronic materials operations and the inclusion of
Dielektra in the Company's sales, which was only partially offset by the
declines in sales by the Company's North American electronic materials
operations resulting principally from the loss of sales to Delco
Electronics, discussed below. However, the earnings growth that the Company
achieved during its 1998 fiscal year did not continue in the 1999 fiscal
year first and second quarters, primarily as a result of earnings declines
in the Company's North American electronic materials operations, which were
caused primarily by the loss of sales to Delco Electronics.
During the Company's 1999 fiscal year first quarter and during
its 1998 fiscal year and for several years prior thereto, more than 10% of
the Company's total sales were to Delco Electronics Corporation, a
subsidiary of General Motors Corp. Sales to Delco Electronics represented
15.8%, 17.3% and 17.1% of the Company's total sales worldwide for the 1998,
1997 and 1996 fiscal years, respectively.
However, in March 1998, the Company was informed by Delco that
Delco planned to close its printed circuit board fabrication plant and
completely exit the printed circuit board manufacturing business. As a
result, the Company's sales to Delco declined during the three-month period
ended May 31, 1998, were negligible during the three-month period ended
August 30, 1998 and are expected to be negligible during the remainder of
the 1999 fiscal year and in future years. In May 1998, the Company and its
Nelco subsidiary in Arizona filed a complaint against Delco Electronics
Corporation and the Delphi Automotive Systems unit of General Motors Corp.
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<PAGE> 10
in the United States District Court for the District of Arizona. The
complaint alleges, among other things, that Delco breached its contract to
purchase semi-finished multilayer printed circuit boards from Nelco and that
Delphi interfered with Nelco's contract with Delco, and seeks compensatory
and punitive damages of not less than $170 million.
The loss of this customer had a material adverse effect on the
business of the Company's electronic materials segment during the three-
month period ended August 30, 1998 and may continue to have a negative
effect during the remaining portion of the fiscal year ending February 28,
1999 and in subsequent fiscal years.
Three and Six Months Ended August 30, 1998 Compared with Three and Six
Months Ended August 31, 1997:
The Company's electronic materials business was principally
responsible for the decline in the Company's results of operations for the
three-month and six-month periods ended August 30, 1998. The market for
sophisticated printed circuit materials experienced weakness during the 1999
fiscal year first and second quarters, and the Company believes this was
attributable to an industry-wide inventory correction, the Asian financial
crisis and global economic weakness.
During the three-month and six-month periods ended August 30,
1998, the Company's electronic materials business experienced inefficiencies
caused by operating its facilities at levels significantly lower than their
designed manufacturing capacity and faced intense price pressure from its
customers. These factors adversely affected the Company's gross margins.
The Company's performance was also adversely affected by a decline in the
volume of its business with Delco Electronics during the first quarter and
the absence of such business during the second quarter, which negatively
affected the Company's margins.
Operating results of the Company's engineered materials and
plumbing hardware business also declined during the three-month and six-
month periods ended August 30, 1998. This decline was attributable
primarily to the plumbing hardware business.
Results of Operations
Sales for the three-month and six-month periods ended August 30,
1998 increased 4% to $86.3 million and 7% to $186.2 million, respectively,
from $83.1 million and $174.7 million for last fiscal year's comparable
periods. Sales of the electronic materials business for the three-month and
six-month periods ended August 30, 1998 were $77.2 million and $167.8
million, respectively, or approximately 89% and 90%, respectively, of total
sales worldwide, compared with $72.8 million and $154.2 million,
respectively, or 88% of total sales worldwide for last fiscal year's
comparable periods. The increases in sales of electronic materials was
principally the result of higher volume of electronic materials shipped, an
increase in sales of higher technology products and the inclusion of
Dielektra in the Company's sales. Sales of the engineered materials and
plumbing hardware business for the three-month and six-month periods ended
August 30, 1998 were $9.1 million and $18.4 million, respectively, compared
with approximately 12% higher sales for last fiscal year's comparable
periods. This decrease was mainly the result of reduced sales in the
plumbing hardware business.
The Company's foreign electronic materials operations accounted
for $36.9 million and $72.6 million, respectively, of sales, or 43% and 39%
of the Company's total sales worldwide, during the three-month and six-month
periods ended August 30, 1998 compared with $24.0 million and $48.6 million,
respectively, of sales, or 29% and 28% of total sales worldwide, during last
fiscal year's comparable periods. While sales by each of the Company's
foreign operations were higher in the 1999 fiscal year first and second
quarters compared with the 1998 fiscal year first and second quarters, the
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<PAGE> 11
increase in sales by foreign operations was principally due to the inclusion
of Dielektra in the Company's sales and an increase in sales by the
Company's Asian operations. The Company expanded the manufacturing capacity
of its facility in Singapore during the 1998 and 1997 fiscal years and is
engaged in a further expansion of the Singapore manufacturing facility
during the Company's 1999 fiscal year.
The gross margins for the Company's worldwide operations were
10.4% and 14.2%, respectively, during the three-month and six-month periods
ended August 30, 1998 compared with 18.0% and 18.9%, respectively, for last
fiscal year's comparable periods. The decline in the gross margins in the
1999 fiscal year first half was attributable to inefficiencies caused by
operating facilities at levels significantly lower than their designed
capacity, price pressure exerted by customers, and reduced sales volumes
with Delco Electronics, which offset the continuing growth in sales of
higher technology, higher margin products.
Selling, general and administrative expenses, measured as a
percentage of sales, were 11.2% and 10.7% during the three-month period and
six-month period, respectively, ended August 30, 1998 compared with 10.3%
during each of last fiscal year's comparable periods.
For the reasons set forth above, profit from operations for the
three-month period ended August 30, 1998 declined to a loss of $667 thousand
from $6.4 million for last fiscal year's comparable period, while profit
from operations for the six-month period ended August 30, 1998 declined 56%
to $6.6 million from $15.0 million for last fiscal year's comparable period.
Interest and other income, principally investment income, was
$2.1 million and $4.2 million, respectively, for the three-month and six-
month periods ended August 30, 1998 compared with approximately the same
amounts for last fiscal year's comparable periods. The Company's
investments were primarily short-term taxable instruments and government
securities. Interest expense for the three-month and six-month periods
ended August 30, 1998 was $1.4 million and $2.8 million, respectively,
compared with approximately the same amounts during last fiscal year's
comparable periods. The Company's interest expense is related primarily to
its $100 million principal amount of 5.5% Convertible Subordinated Notes due
2006 (the "Notes") issued in February 1996.
The Company recorded a tax benefit of $187,000 for the three-
month period ended August 30, 1998 compared with an effective income tax
rate of 33.0% for last fiscal year's comparable period, and the Company's
effective income tax rate for the six-month period ended August 30, 1998 was
27.5% compared with 33.0% for last fiscal year's comparable period. This
decrease in the effective tax rate was primarily the result of a change in
the Company's income mix among the tax jurisdictions in which the Company
does business.
Net earnings for the three-month and six-month periods ended
August 30, 1998 decreased 95% to $225 thousand and 48% to $5.8 million,
respectively, from $4.9 million and $11.0 million, respectively, for last
fiscal year's comparable periods. Basic and diluted earnings per share each
decreased to $0.02 for the three-month period ended August 30, 1998 from
$0.43 and $0.41, respectively, for last fiscal year's comparable period, and
basic and diluted earnings per share decreased to $0.50 and $0.49,
respectively, for the six-month period ended August 30, 1998 from $0.98 and
$0.92, respectively, for last fiscal year's comparable period. These
decreases in net earnings and earnings per share were attributable to the
Company's lower operating results.
Liquidity and Capital Resources:
At August 30, 1998, the Company's cash and temporary investments
were $152.9 million compared with $158.5 million at March 1, 1998, the end
of the Company's 1998 fiscal year. The decrease in the Company's cash and
investment position at August 30, 1998 was attributable to investments in
property, plant and equipment in excess of cash provided from operating
activities, as discussed below. The Company's working capital was $175.0
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<PAGE> 12
million at August 30, 1998 compared with $176.6 million at March 1, 1998.
The decrease at August 30, 1998 compared with March 1, 1998 was due
principally to the reductions in cash and temporary investments, receivables
and inventories, offset in part by lower payables and accrued liabilities.
The Company's current ratio (the ratio of current assets to current
liabilities) was 3.9 to 1 at August 30, 1998 compared with 3.5 to 1 at March
1, 1998.
During the six-months ended August 30, 1998, cash provided by
net earnings before depreciation and amortization of $12.4 million was
reduced by a net increase in working capital items, resulting in $9.0
million of cash provided from operating activities, and the Company expended
$13.7 million for the purchase of property, plant and equipment. Net
expenditures for property, plant and equipment were $18.3 million and $18.7
million in the 1998 and 1997 fiscal years, respectively. The Company is
planning further expansions of its electronic materials operations,
particularly in the United States and Asia.
At August 30, 1998, 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,
including the proceeds from the Notes, would also be available for
appropriate acquisitions and other expansions of the Company's business.
In the six month periods ended August 30, 1998 and August 31,
1997, 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 August 30, 1998 and March 1, 1998, the recorded liability
in accrued liabilities for environmental matters was $3.5 million.
Management does not expect that environmental matters will have a material
adverse effect on the liquidity, capital resources, business, consolidated
results of operations or consolidated financial position of the Company.
Year 2000:
Year 2000 issues relate to system failures or errors resulting
from computer programs and embedded computer chips which utilize dates with
only two digits instead of four digits to represent a year. A dated field
with two digits representing a year may result in an error or failure due to
the system's not being able to recognize "00" as the Year 2000. The Company
is reviewing its worldwide computer systems, including systems controlling
manufacturing equipment and facilities operations, for Year 2000 readiness
and is implementing a plan to resolve existing issues.
The Company is upgrading its information systems to improve
their functionality and efficiency. As part of this ongoing system
development, the Company is modifying or replacing existing computer
programs so that they will function properly with respect to dates beyond
December 31, 1999. The customization and development of the Company's
computer programs is being undertaken with the assistance of external
consultants. A major component of this project includes the replacement of
legacy computer programs with a fully integrated Oracle based system. The
Oracle system is being implemented at one Company location at a time. The
Company has developed a contingency plan to upgrade the existing legacy
system to function beyond 1999 for those locations which have not completed
the conversion to the Oracle based system.
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<PAGE> 13
The Company anticipates that all critical systems will be
modified for Year 2000 compliance by mid-1999 and believes that, after such
modifications have been completed, Year 2000 issues will not pose
significant operational problems. As mentioned in the preceding paragraph,
the primary reason for the extensive system modifications which are being
undertaken by the Company was the improvement of the functionality and
efficiency of the Company's existing information systems. Accordingly, the
Company's budget for these information technology improvements included
enhanced Year 2000 compliant software. Management does not expect that the
incremental cost of its Year 2000 compliance program will have a material
adverse effect on the liquidity, capital resources, business, consolidated
results of operations or consolidated financial position of the Company.
Environmental Matters:
In addition to the risks of the failure to locate and correct
Year 2000 problems in the Company's information systems and software
programs that control various equipment functions, the Company is exposed to
the risk of the Year 2000 readiness of its suppliers, as well as suppliers
to its suppliers, customers and other third parties. Although the Company
has initiated a program to communicate with all of its significant suppliers
and customers to determine the extent to which the Company is vulnerable to
a failure by such a third party to adequately address its own Year 2000
issues, the Company does not have control over these third parties and, as
a result, cannot currently estimate to what extent the failure of these
third parties to successfully address their Year 2000 issues may adversely
affect the Company's liquidity, capital resources, business, consolidated
results of operations or consolidated financial position.
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, the Company's competitive
position, the status of the Company's relationships with its customers,
economic conditions in international markets, and the various factors set
forth under the caption "Factors That May Affect Future Results" after Item
7 of the Company's Annual Report on Form 10-K for the fiscal year ended
March 1, 1998.
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<PAGE> 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In May 1998, the Company and its Nelco subsidiary in Arizona filed
a complaint against Delco Electronics Corporation and Delphi Automotive
Systems in the United States District Court for the District of Arizona.
The complaint alleges, among other things, that Delco breached its contract
to purchase semi-finished multilayer printed circuit boards from Nelco and
that Delphi interfered with Nelco's contract with Delco and seeks
compensatory and punitive damages of not less than $170 million.
The Company announced in March 1998 that it had been informed by
Delco Electronics that Delco planned to close its printed circuit board
fabrication plant and exit the printed circuit board manufacturing business.
As a result, the Company's sales to Delco declined significantly during the
three-month period ended May 31, 1998, were negligible during the three-
month period ended August 30, 1998 and are expected to be negligible during
the remainder of the 1999 fiscal year and in future years. The Company had
been Delco's principal supplier of semi-finished multilayer printed circuit
board materials for more than ten years. These materials were used by Delco
to produce finished multilayer printed circuit boards. Sales to Delco
Electronics represented 15.8%, 17.3% and 17.1% of the Company's total
worldwide sales for the 1998, 1997 and 1996 fiscal years, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 2 of this Report and "Factors That May Affect Future
Results" after Item 2 of this Report.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on July 15, 1998:
(a) the persons elected as directors of the Company and the voting for
such persons were as follows:
Authority
Name Votes For Withheld
-------------- ---------- ---------
Mark S. Ain 10,164,121 300,802
Anthony Chiesa 10,213,257 251,666
Lloyd Frank 10,215,557 249,366
Brian E. Shore 10,222,067 242,856
Jerry Shore 10,221,463 243,460
E. Phillip Smoot 10,222,593 242,330
(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 300,000
shares and to authorize the grant of stock options under such Plan to
directors of the Company who are not employees of the Company. There were
9,643,655 votes for these amendments, 512,284 votes against, and 308,980
abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number
27.01 Financial data schedule
(b) No reports on Form 8-K have been filed during the fiscal quarter
ended August 30, 1998.
-14-
<PAGE> 15
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 13, 1998 /s/Brian E. Shore
---------------- ---------------------------
Brian E. Shore
President and
Chief Executive Officer
Date: October 13, 1998 /s/Murray O. Stamer
---------------- ---------------------------
Murray O. Stamer
Corporate Controller and
Chief Accounting Officer
-15-
<PAGE> 16
EXHIBIT INDEX
Exhibit No. Name Page
27.01 Financial data schedule (filed
only by electronic transmission
with EDGAR filing with the
Securities and Exchange Commission).......... -
-16-
<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> 6-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> AUG-30-1998
<CASH> 43,347
<SECURITIES> 109,513
<RECEIVABLES> 49,084
<ALLOWANCES> 0
<INVENTORY> 25,105
<CURRENT-ASSETS> 235,535
<PP&E> 217,660
<DEPRECIATION> 101,513
<TOTAL-ASSETS> 355,362
<CURRENT-LIABILITIES> 60,560
<BONDS> 100,000
0
0
<COMMON> 1,358
<OTHER-SE> 170,285
<TOTAL-LIABILITY-AND-EQUITY> 355,362
<SALES> 186,203
<TOTAL-REVENUES> 190,351
<CGS> 159,839
<TOTAL-COSTS> 179,634
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,772
<INCOME-PRETAX> 7,945
<INCOME-TAX> 2,185
<INCOME-CONTINUING> 5,760
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,760
<EPS-PRIMARY> .50
<EPS-DILUTED> .49
</TABLE>
