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 May 30, 1999
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: 10,385,139 as of July 9, 1999.
<PAGE> 2
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
May 30, 1999 (Unaudited) and
February 28, 1999................................... 4
Consolidated Statements of Earnings
13 weeks ended May 30, 1999 and
May 31, 1998 (Unaudited)............................ 5
Condensed Consolidated Statements of Cash Flows
13 weeks ended May 30, 1999 and
May 31, 1998 (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
Item 3. Quantitative and Qualitative Disclosures About
Market Risk......................................... 14
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings ................................... 15
Item 6. Exhibits and Reports on Form 8-K .................... 15
SIGNATURES ..................................................... 16
EXHIBIT INDEX.................................................... 17
-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>
May 30, February 28,
1999 1999
------- ------------
<S> <C> <C>
ASSETS (Unaudited) *
Current assets:
Cash and cash equivalents $ 40,496 $ 36,682
Marketable securities 94,989 103,020
Accounts receivable, net 65,113 56,917
Inventories (Note 2) 25,979 25,703
Prepaid expenses and other current assets 7,456 7,874
-------- -------
Total current assets 234,033 230,196
Property, plant and equipment, net 116,726 118,012
Other assets 3,381 3,490
-------- --------
$354,140 $351,698
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,649 $ 31,019
Accrued liabilities 24,304 23,154
Income taxes payable 8,381 9,183
-------- --------
Total current liabilities 62,334 63,356
Long-term debt 100,000 100,000
Deferred income taxes 9,425 9,501
Deferred pension liability and other 13,649 14,195
Stockholders' equity:
Common stock 1,358 1,358
Additional paid-in capital 53,184 53,108
Retained earnings 147,208 142,336
Treasury stock, at cost (30,168) (30,354)
Accumulated other non-owner changes (2,850) (1,802)
--------- ---------
Total stockholders' equity 168,732 164,646
--------- ---------
$354,140 $351,698
========= =========
<FN>
*The balance sheet at February 29, 1999 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
-------------------------
May 30, May 31,
1999 1998
------- -------
<S> <C> <C>
Net sales $104,454 $99,855
Cost of sales 85,424 82,484
--------- --------
Gross profit 19,030 17,371
Selling, general and administrative expenses 11,666 10,135
--------- --------
Profit from operations 7,364 7,236
--------- --------
Other income (expense):
Interest and other income, net 1,630 2,049
Interest expense (1,397) (1,378)
--------- --------
Total other income 233 671
--------- --------
Earnings before income taxes 7,597 7,907
Income tax provision 1,899 2,372
--------- --------
Net earnings $ 5,698 $ 5,535
========= ========
Earnings per share (Note 3):
Basic $ .55 $ .48
Diluted $ .51 $ .46
Weighted average number of common and
common equivalent shares outstanding:
Basic 10,430 11,502
Diluted 12,972 14,073
Dividends per share $ .08 $ .08
</TABLE>
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<PAGE> 6
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited--in thousands)
<CAPTION>
13 weeks ended
----------------------
May 30, May 31,
1999 1998
------- -------
<S> <C> <C>
Net cash provided by operating activities $ 1,177 $ 4,118
-------- --------
Cash flows from investing activities:
Purchases of property, plant and
equipment, net (3,803) (6,444)
Purchases of marketable securities (70,158) (55,058)
Proceeds from sales of marketable
securities 78,035 44,231
-------- --------
Net cash provided by/(used) in investing
activities 4,074 (17,271)
-------- --------
Cash flows from financing activities:
Dividends paid (826) (912)
Proceeds from exercise of stock options 262 16
-------- --------
Net cash used in financing activities (564) (896)
-------- --------
Increase (decrease) in cash and cash equivalents
before exchange rate changes 4,687 (14,049)
Effect of exchange rate changes on cash
and cash equivalents (873) 246
-------- --------
Increase (decrease) in cash and cash equivalents 3,814 (13,803)
Cash and cash equivalents, beginning of
period 36,682 45,102
-------- --------
Cash and cash equivalents, end of period $40,496 $31,299
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 2,750 $ 2,750
Income taxes 2,406 187
</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 May 30, 1999, the
consolidated statements of earnings for the 13 weeks ended May 30, 1999
and May 31, 1998, and the condensed consolidated statements of cash flows
for the 13 weeks 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 May 30, 1999, 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
February 28, 1999.
<TABLE>
2. INVENTORIES
Inventories consist of the following:
<CAPTION> (In thousands)
May 30, February 28,
1999 1999
------- ------------
<S> <C> <C>
Raw materials $ 8,915 $ 8,787
Work-in-process 5,705 4,590
Finished goods 10,101 11,533
Manufacturing supplies 1,258 793
------- -------
$25,979 $25,703
======= =======
</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
--------------
May 30, May 31,
1999 1998
------- --------
<S> <C> <C>
Net income for basic EPS $ 5,698 $ 5,535
Add interest on 5.5% convertible
subordinated notes, net of taxes 908 905
------- -------
Net income for diluted EPS $ 6,606 $ 6,440
======= =======
Weighted average common shares
outstanding for basic EPS 10,430 11,502
Net effect of dilutive options 172 201
Assumed conversion of 5.5% convertible
subordinated notes 2,370 2,370
------- -------
Weighted average shares outstanding
for diluted EPS 12,972 14,073
======= =======
EPS-basic $ 0.55 $ 0.48
EPS-diluted $ 0.51 $ 0.46
</TABLE>
-7-
<PAGE> 8
4. BUSINESS SEGMENTS
Park Electrochemical Corp. ("Park"), through its subsidiaries
(collectively, the "Company"), is a leading global designer and
producer of advanced electronic materials used to fabricate complex
multilayer printed circuit boards and other electronic interconnect
systems. The Company's multilayer printed circuit board materials
include copper-clad laminates, prepregs and semi-finished multilayer
printed circuit board panels. Multilayer printed circuit boards and
interconnect systems are used in virtually all advanced electronic
equipment to direct, sequence and control electronic signals between
semiconductor devices and passive components. The Company also
designs and manufactures specialty adhesive tapes, advanced composite
materials, microwave circuitry materials and plumbing hardware for the
electronics, aerospace, industrial and plumbing markets.
Financial information concerning the Company's business segments
follows (in thousands):
<TABLE>
<CAPTION>
13 weeks ended
--------------------------
May 30, May 31,
1999 1998
------- -------
<S> <C> <C>
Electronic materials $ 95,637 $ 90,599
Engineered materials and plumbing
hardware 8,817 9,256
--------- ---------
Net sales $104,454 $ 99,855
========= =========
Electronic materials $ 8,530 $ 7,919
Engineered materials and plumbing
hardware 697 239
General corporate expense (1,863) (922)
Interest and other income, net 1,630 2,049
Interest expense (1,397) (1,378)
--------- ---------
Earnings before income taxes $ 7,597 $ 7,907
========= =========
Electronic materials $240,185 $211,186
Engineered materials and plumbing
hardware 12,524 12,410
Corporate(1) 101,431 133,240
--------- ---------
Total assets $354,140 $356,836
========= =========
(1) Corporate assets consist primarily of cash, cash equivalents and
marketable securities.
</TABLE>
-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 other electronic interconnect systems. Park's electronic
materials business is operated by its "Nelco" group of companies. 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 90% and 89%, respectively, of net sales worldwide in the last
two fiscal years and approximately 92% and 91%, respectively, in the three-
month periods ended May 30, 1999 and May 31, 1998. The Company's foreign
electronic materials operations accounted for approximately 39% and 31%,
respectively, of net sales worldwide in the 1999 and 1998 fiscal years and
approximately 36% in each of the three-month periods ended May 30, 1999 and
May 31, 1998.
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 10% and 11%,
respectively, of the Company's total net sales worldwide in each of the last
two fiscal years and approximately 8% and 9%, respectively, in the three-
month periods ended May 30, 1999 and May 31, 1998.
The sales growth that the Company achieved during the fiscal year
ended February 28, 1999 and prior fiscal years continued in the three-month
period ended May 30, 1999, led by growth in sales by the Company's Asian and
North American electronic materials operations, which was partially offset
by the loss of sales to Delco Electronics, discussed below. The earnings
growth that the Company achieved during its 1998 fiscal year, and that did
not continue in the 1999 fiscal year, resumed in the 2000 fiscal year first
quarter. This resumed growth was primarily a result of strong performances
by the Company's Asian and North American electronic materials operations
despite the significant negative impact caused 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 14.8% of the
Company's total sales worldwide for the fiscal year 1999 first quarter and
15.8% of the Company's total sales worldwide for the 1998 fiscal year.
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, were nil during the remainder of the 1999 fiscal year and
during the 2000 fiscal year first quarter and are expected to be nil during
the remainder of the 2000 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. 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.
-9-
<PAGE> 10
Although the Company's electronic materials segment was not
dependent on this single customer, the loss of this customer had a material
adverse effect on the business of the segment in the 1999 fiscal year and in
the 2000 fiscal year first quarter and may have a material adverse effect on
the business of this segment in the fiscal year ending February 27, 2000 and
in subsequent fiscal years.
Three Months Ended May 30, 1999 Compared with Three Months Ended May 31,
1998:
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 May 30, 1999. The strengthening of the
Company's North American and Asian printed circuit materials businesses
during the latter part of the 1999 fiscal year continued in the 2000 fiscal
year first quarter. However, the absence of the business with Delco
Electronics during the first quarter constrained the Company's sales volume
in North America and negatively affected the Company's margins.
The Company's results of operations and gross margins improved
in the 2000 fiscal year first quarter principally as a result of the
electronic materials business' reducing its internal costs and maximizing
the utilization of its manufacturing resources, working closely with its
suppliers to reduce its raw material costs, increasing its market share with
certain key customers, and increasing its sales of higher technology, higher
margin products. In addition, the Company's electronic materials business
experienced improved efficiencies resulting from the operation of its
facilities at levels close to their designed manufacturing capacity, which
favorably impacted the Company's margins.
Operating results of the Company's engineered materials and
plumbing hardware business segment improved during the three-month period
ended May 30, 1999. This improvement was attributable to the specialty
adhesive tape and plumbing hardware businesses. The results of the
Company's advanced composite materials business declined during the 2000
fiscal year first quarter.
Results of Operations
Sales for the three-month period ended May 30, 1999 increased 5%
to $104.5 million from $99.9 million for last fiscal year's comparable
period. Sales of the electronic materials business for the three-month
period ended May 30, 1999 were $95.6 million, or 92% of total sales
worldwide, compared with $90.6 million, or 91% of total sales worldwide, for
last fiscal year's comparable period. This 6% 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 May 30, 1999 were $8.8 million compared
with $9.3 million for last fiscal year's comparable period. This decrease
in sales was mainly the result of reduced sales of advanced composite
materials.
The Company's foreign electronic materials operations accounted
for $38.1 million of sales, or 36% of the Company's total sales worldwide,
during the three-month period ended May 30, 1999 compared with $35.7 million
of sales, or 36% of total sales worldwide, during last fiscal year's
comparable period. Sales by the Company's foreign operations during the
2000 fiscal year first quarter increased 7% from the 1999 fiscal year
comparable period. The increase in sales by foreign operations was due to
an increase in sales by the Company's Asian operations. The Company has
expanded the manufacturing capacity of its facility in Singapore during each
of the last three fiscal years.
-10-
<PAGE> 11
The gross margin for the Company's worldwide operations was
18.2% during the three-month period ended May 30, 1999 compared with 17.4%
for last fiscal year's comparable period. The improvement in the gross
margin was attributable to the increase in sales volume over last fiscal
year's comparable period, the continuing growth in sales of higher
technology, higher margin products and efficiencies resulting from operating
the Company's facilities at levels close to their designed capacity.
However, the favorable impact of these factors was partially offset by the
absence of sales volumes with Delco Electronics.
Selling, general and administrative expenses, measured as a
percentage of sales, were 11.1% during the three-month period ended May 30,
1999 compared with 10.2% during last fiscal year's comparable period. This
increase was a function of increased general and administrative expenses,
resulting, in part, from higher professional and transaction fees, some of
which are not recurring, and increased employee performance incentives.
For the reasons set forth above, profit from operations for the
three-month period ended May 30, 1999 increased 2% to $7.4 million from $7.2
million for last fiscal year's comparable period.
Interest and other income, principally investment income, was
$1.6 million for the three-month period ended May 30, 1999 compared with
$2.0 million for last fiscal year's comparable period. The decline in
investment income was attributable to a reduction in cash available for
investment and a decrease in prevailing interest rates. The Company's
investments were primarily short-term taxable instruments and government
securities. Interest expense for the three-month period ended May 30, 1999
was $1.4 million compared with the same amount during last fiscal year's
comparable period. 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 1996.
The Company's effective income tax rate for the three-month
period ended May 30, 1999 was 25.0% compared with 30.0% for last fiscal
year's comparable period. This decrease in the effective tax rate was
primarily the result of favorable foreign tax rate differentials.
Net earnings for the three-month period ended May 30, 1999
increased 3% to $5.7 million from $5.5 million for last fiscal year's
comparable period. Basic and diluted earnings per share increased to $0.55
and $0.51, respectively, for the three-month period ended May 30, 1999 from
$0.48 and $0.46, respectively, for last fiscal year's comparable period.
These increases in net earnings and earnings per share were attributable to
the Company's improved operating results.
Liquidity and Capital Resources:
At May 30, 1999, the Company's cash and temporary investments
were $135.5 million compared with $139.7 million at February 28, 1999, the
end of the Company's 1999 fiscal year. The decrease in the Company's cash
and investment position at May 30, 1999 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 $171.7
million at May 30, 1999 compared with $166.8 million at February 28, 1999.
The increase at May 30, 1999 compared with February 28, 1999 was due to
higher accounts receivable and lower accounts payable and income taxes
payable, offset in part by the decrease in cash and temporary investments.
The Company's current ratio (the ratio of current assets to current
liabilities) was 3.8 to 1 at May 30, 1999 compared with 3.6 to 1 at February
28, 1999.
-11-
<PAGE> 12
During the three-months ended May 30, 1999, cash provided by net
earnings before depreciation and amortization of $9.8 million was reduced by
a net increase in working capital items, resulting in $1.2 million of cash
provided from operating activities, and the Company expended $3.8 million
for the purchase of property, plant and equipment. Net expenditures for
property, plant and equipment were $24.4 million in the 1999 fiscal year.
The Company is planning further expansions of its electronic materials
operations in California, New York and Asia.
At May 30, 1999, 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.
Environmental Matters:
In the three-month periods ended May 30, 1999 and May 31, 1998,
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 May 30, 1999 and February 28, 1999, 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 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 inability to recognize "00" as the Year 2000.
To address Year 2000 issues, the Company has initiated a plan
comprised of the following four phases: inventory, assessment, remediation
and testing. The Company is applying this plan to the areas of information
technology related to internal systems and processes, embedded systems
related to manufacturing and other facility equipment, and external
relationships which includes evaluating the Year 2000 readiness of third
parties such as suppliers, customers and service providers. The Company is
utilizing external information technology consultants, in addition to the
Company's internal resources, to evaluate and monitor the Company's Year
2000 readiness.
In the information technology and embedded systems areas, the Company
has completed the inventory and assessment phases and is conducting the
remediation and testing phases. The Company anticipates that the remediation
and testing phases for all critical systems will be completed by September
30, 1999 and that after it has completed any necessary modifications, Year
2000 issues will not pose significant operating problems. The Company is
also in the process of assessing the Year 2000 compliance of third parties
it relies upon, and is developing contingency plans where possible. Such
contingency plans may include using alternate suppliers and increasing
inventory levels. The Company will continue to evaluate the readiness of its
suppliers and to refine its contingency plans on an ongoing basis.
-12-
<PAGE> 13
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.
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.
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.
Although the Company believes it is taking appropriate measures to
avoid any material adverse effects relating to Year 2000 issues, no amount
of preparation and testing can guarantee Year 2000 compliance. 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, other third parties and infrastructure failures. 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 Park's Annual Report on Form 10-K for the fiscal year ended February
28, 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risks for changes in foreign
currency exchange rates and interest rates. The Company's primary foreign
currency exchange exposure relates to the translation of the financial
statements of foreign subsidiaries using currencies other than the U.S.
dollar as their functional currency. The Company does not believe that a
10% fluctuation in foreign exchange rates would have had a material impact
on its consolidated results of operations or financial position. The
exposure to market risks for changes in interest rates relates to the
Company's short-term investment portfolio. This investment portfolio is
managed by outside professional managers in accordance with guidelines
-13-
<PAGE> 14
issued by the Company. These guidelines are designed to establish a high
quality fixed income portfolio of government and highly rated corporate debt
securities with a maximum weighted average maturity of less than one year.
The Company does not use derivative financial instruments in its investment
portfolio. Based on the average maturity of the investment portfolio at the
end of the 1999 fiscal year, a 10% increase in short term interest rates
would not have had a material impact on the consolidated results of
operations or financial position of the Company.
-14-
<PAGE> 15
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 during the three-month
period ended May 31, 1998, were negligible during the three-month period
ended August 30, 1998, were nil during the remainder of the 1999 fiscal year
and during the 2000 fiscal year first quarter and are expected to be nil
during the remainder of the 2000 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% and 17.3% of the Company's
total worldwide sales for the 1998 and 1997 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 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit
Number
27.01 Financial Data Schedule
(b) Reports on Form 8-K filed during the fiscal quarter ended May 30,
1999.
Report on Form 8-K dated March 15, 1999, Commission File No. 1-
4415, reporting in Item 5 that on March 15, 1999, the Board of
Directors of Park adopted amendments to its By-Laws, which require
stockholders to provide the Company with not less than 90 days nor
more than 120 days (rather than not less than 60 days nor more than
90 days) notice prior to the anniversary date of the immediately
preceding annual meeting of their intention to make nominations of
directors or bring new business at annual meetings of stockholders.
-15-
<PAGE> 16
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 12, 1999 /s/Brian E. Shore
---------------------------
Brian E. Shore
President and
Chief Executive Officer
Date: July 12, 1999 /s/Murray O. Stamer
---------------------------
Murray O. Stamer
Treasurer and
Chief Accounting Officer
-16-
<PAGE> 17
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).......... -
-17-
<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> FEB-27-2000
<PERIOD-END> MAY-30-1999
<CASH> 40,496
<SECURITIES> 94,989
<RECEIVABLES> 65,113
<ALLOWANCES> 0
<INVENTORY> 25,979
<CURRENT-ASSETS> 234,033
<PP&E> 225,793
<DEPRECIATION> 109,067
<TOTAL-ASSETS> 354,140
<CURRENT-LIABILITIES> 62,334
<BONDS> 100,000
0
0
<COMMON> 1,358
<OTHER-SE> 167,374
<TOTAL-LIABILITY-AND-EQUITY> 354,140
<SALES> 104,454
<TOTAL-REVENUES> 106,084
<CGS> 85,424
<TOTAL-COSTS> 97,090
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,397
<INCOME-PRETAX> 7,597
<INCOME-TAX> 1,899
<INCOME-CONTINUING> 5,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,698
<EPS-BASIC> .55
<EPS-DILUTED> .51
</TABLE>
