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 November 26, 2000
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: 15,885,992 as of January 5,
2001.
<PAGE> 2
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
November 26, 2000 (Unaudited) and
February 27, 2000 .................................. 3
Consolidated Statements of Earnings
13 weeks and 39 weeks ended November 26, 2000 and
November 28, 1999 (Unaudited)....................... 4
Condensed Consolidated Statements of Cash Flows
39 weeks ended November 26, 2000 and
November 28, 1999 (Unaudited)....................... 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) ............................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ......................................... 9
Factors That May Affect Future Results............... 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk......................................... 12
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings ................................... 13
Item 4. Submission of Matters to a Vote of Security Holders.. 13
Item 6. Reports on Form 8-K ................................. 13
SIGNATURES ..................................................... 15
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<CAPTION>
November 26, February 27,
2000 2000
(Unaudited) (Audited)
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 83,797 $ 53,153
Marketable securities 65,120 78,309
Accounts receivable, net 81,746 68,335
Inventories (Note 2) 34,162 27,368
Prepaid expenses and other current assets 9,611 9,614
-------- --------
Total current assets 274,436 236,779
Property, plant and equipment, net 144,127 125,977
Other assets 3,335 2,496
-------- --------
$421,898 $365,252
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 35,179 $ 24,964
Accrued liabilities 42,433 28,973
Income taxes payable 9,196 6,729
-------- --------
Total current liabilities 86,808 60,666
Long-term debt 98,509 100,000
Deferred income taxes 14,893 11,933
Deferred pension and other liabilities 12,393 13,535
Stockholders' equity:
Common stock (Note 5) 2,037 1,358
Additional paid-in capital 55,887 54,794
Retained earnings 189,996 157,308
Treasury stock, at cost (28,212) (29,051)
Accumulated other non-owner changes (10,413) (5,291)
--------- ---------
Total stockholders' equity 209,295 179,118
--------- ---------
$421,898 $365,252
========= =========
</TABLE>
<PAGE> 4
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share amounts)
<CAPTION>
13 Weeks Ended 39 Weeks Ended
(Unaudited) (Unaudited)
------------------------ ------------------------
November 26, November 28, November 26, November 28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $142,608 $108,183 $392,669 $320,366
Cost of sales 108,492 89,479 306,465 263,214
--------- -------- --------- ---------
Gross profit 34,116 18,704 86,204 57,152
Selling, general and
administrative expenses 13,034 11,273 37,533 34,398
--------- -------- --------- ---------
Profit from
operations 21,082 7,431 48,671 22,754
--------- -------- --------- ---------
Other income (expense):
Interest and other
income, net 2,115 1,686 5,979 4,818
Interest expense (1,401) (1,397) (4,205) (4,192)
--------- -------- --------- ---------
Total other income 714 289 1,774 626
--------- -------- --------- ---------
Earnings before income taxes 21,796 7,720 50,445 23,380
Income tax provision 6,969 1,930 15,134 5,845
--------- --------- --------- ---------
Net earnings $ 14,827 $ 5,790 $35,311 $17,535
========= ========= ========= =========
Earnings per share (Note 3):
Basic $ .93 $ .37 $ 2.22 $ 1.11
Diluted $ .78 $ .34 $ 1.91 $ 1.03
Weighted average number of
common and common equivalent
shares outstanding:
Basic 15,940 15,819 15,894 15,732
Diluted 20,217 19,832 19,920 19,644
Dividends per share $ .06 $ .05 $ .16 $ .16
</TABLE>
<PAGE> 5
<TABLE>
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<CAPTION>
39 Weeks Ended
(Unaudited)
--------------------------
November 26, November 28,
2000 1999
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $54,583 $16,637
-------- --------
Cash flows from investing activities:
Purchases of property, plant and
equipment, net (34,802) (19,494)
Purchases of marketable securities (70,642) (119,435)
Proceeds from sales of marketable
securities 84,786 119,027
-------- --------
Net cash used in investing
activities (20,658) (19,902)
-------- --------
Cash flows from financing activities:
Dividends paid (2,623) (2,488)
Proceeds from exercise of stock options 1,286 2,351
-------- --------
Net cash used in financing activities (1,337) (137)
-------- --------
Increase (decrease) in cash and cash equivalents
before effect of exchange rate changes 32,588 (3,402)
Effect of exchange rate changes on cash
and cash equivalents (1,944) (933)
-------- --------
Increase (decrease) in cash and cash equivalents 30,644 (4,335)
Cash and cash equivalents, beginning of period 53,153 36,682
-------- --------
Cash and cash equivalents, end of period $83,797 $32,347
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 5,500 $ 5,500
Income taxes $ 8,142 $ 7,422
</TABLE>
<PAGE> 6
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of November 26, 2000, the
consolidated statements of earnings for the 13 weeks and 39 weeks ended
November 26, 2000 and November 28, 1999, 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,
these unaudited consolidated financial statements contain all adjustments
necessary to present fairly the financial position, results of operations,
and cash flows for the interim periods reported. However, such financial
statements may not be necessarily indicative of annual results.
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 February 27, 2000.
<TABLE>
2. INVENTORIES
Inventories consisted of the following:
<CAPTION> (Amounts in thousands)
November 26, February 27,
2000 2000
----------- ------------
<S> <C> <C>
Raw materials $14,243 $10,870
Work-in-process 7,037 5,249
Finished goods 11,868 10,323
Manufacturing supplies 1,014 926
------- -------
Total inventories $34,162 $27,368
</TABLE> ======= =======
<TABLE>
3. EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted
earnings per share for the periods specified (amounts in thousands
except per share amounts):
<CAPTION> 13 weeks ended 39 weeks ended
-------------- --------------
November 26, November 28, November 26, November 28,
2000 1999 2000 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net income for basic EPS $14,827 $ 5,790 $35,311 $17,535
Add interest on 5.5% convertible
subordinated notes, net of taxes 911 908 2,733 2,725
------- ------- ------- -------
Net income for diluted EPS $15,738 $ 6,698 $38,044 $20,260
======= ======= ======= =======
Weighted average common shares
outstanding for basic EPS 15,940 15,819 15,894 15,732
Net effect of dilutive options 774 458 488 357
Assumed conversion of 5.5%
convertible subordinated notes 3,503 3,555 3,538 3,555
------- ------- ------- -------
Weighted average shares
outstanding for diluted EPS 20,217 19,832 19,920 19,644
======= ======= ======= =======
EPS-basic $ .93 $ .37 $ 2.22 $ 1.11
EPS-diluted $ .78 $ .34 $ 1.91 $ 1.03
</TABLE>
<PAGE> 7
4. BUSINESS SEGMENTS
Electronic Materials.
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, semiconductor packages 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.
Engineered Materials.
The Company also designs and manufactures specialty adhesive tapes,
advanced composite materials and microwave circuitry materials for the
electronics, aerospace and industrial markets. During the first half
of the 2001 fiscal year, the Company closed and liquidated its
plumbing hardware business, which had been included in this segment.
Financial information concerning the Company's business segments
follows (amounts in thousands):
<TABLE>
<CAPTION>
13 weeks ended 39 weeks ended
-------------- --------------
November 26, November 28, November 26, November 28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales
Electronic materials $136,831 $100,045 $373,330 $294,198
Engineered materials 5,777 8,138 19,339 26,168
--------- --------- --------- ---------
Net sales $142,608 $108,183 $392,669 $320,366
========= ========= ========= =========
Profit/(Loss)
Electronic materials $ 23,357 $ 8,421 $ 55,268 $ 25,867
Engineered materials 225 316 1,135 1,517
General corporate expense (2,500) (1,306) (7,732) (4,630)
Interest and other income,
net 2,115 1,686 5,979 4,818
Interest expense (1,401) (1,397) (4,205) (4,192)
--------- --------- --------- ---------
Earnings before income taxes $ 21,796 $ 7,720 $ 50,445 $ 23,380
========= ========= ========= =========
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
November 26, February 27,
2000 2000
------------ ------------
<S> <C> <C>
Assets
Electronic materials $248,582 $206,250
Engineered materials 8,547 10,101
Corporate(1) 164,769 148,901
--------- ---------
Total assets $421,898 $365,252
========= =========
<FN>
(1) Corporate assets consisted primarily of cash, cash equivalents and
marketable securities.
</TABLE>
5. STOCKHOLDERS' EQUITY
On October 10, 2000, the Board of Directors declared a three-for-two
(50%) stock split in the form of a stock dividend distributed on November
8, 2000 to shareholders of record on October 20, 2000. The weighted
average number of shares outstanding during each period and the number
of outstanding shares on which dividends were declared have been adjusted
to give retroactive effect to the October 2000 split.
6. COMPREHENSIVE INCOME
Total comprehensive income was $13,255,000 and $30,189,000 for the three
and nine months ended November 26, 2000 and $4,819,000 and $15,063,000
for the three and nine months ended November 28, 1999. Comprehensive
income consisted primarily of net income and foreign currency translation
adjustments.
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFA 133), "Accounting for
Derivative Instruments and Hedging Activities". SFAS 133 establishes
standards for the recognition and measurement of derivatives and hedging
activities and requires all derivative instruments to be recorded on the
balance sheet at fair value. This statement is effective for fiscal years
beginning after June 15, 2000. The Company's policy is to enter into
forward foreign currency contracts only to hedge specific transactions
in order to reduce exposure to foreign exchange risks. The Company
believes the adoption of these standards will not have a material adverse
effect on the Company's consolidated results of operation or financial
position.
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
Park is a leading global designer and producer of advanced
electronic materials used to fabricate complex multilayer printed circuit
boards, semiconductor packages and other electronic interconnect systems.
Park's electronic materials business operates under the "Nelco" name. The
Company's customers for its advanced printed circuit materials include
leading printed circuit board fabricators, contract manufacturers and large
electronic equipment manufacturers, all of which serve the computer,
telecommunications, transportation, aerospace and instrumentation indus-
tries.
The Company's electronic materials operations accounted for
approximately 96% and 95% of net sales worldwide in the three-month and
nine-month periods, respectively, ended November 26, 2000 and approximately
92% in the three-month and nine-month periods ended November 28, 1999.
Park is also engaged in the engineered materials business, which
consists of the Company's specialty adhesive tape and film business and its
advanced composite materials business, both of which operate as independent
business units. In addition, Park operated a plumbing hardware business,
which it closed and liquidated in the first half of the current fiscal year.
These businesses accounted for approximately 4% and 5%, respectively, of net
sales worldwide in the three-month and nine-month periods ended November 26,
2000 and approximately 8% in the three-month and nine-month periods ended
November 28, 1999.
Three and Nine Months Ended November 26, 2000 Compared with Three and Nine
Months Ended November 28, 1999:
Results of Operations
Net sales for the three-month and nine-month periods ended
November 26, 2000 increased 32% to $142.6 million and 23% to $392.7 million,
respectively, from $108.2 million and $320.4 million for last fiscal year's
comparable periods. Net sales of the electronic materials segment for the
three-month and nine-month periods ended November 26, 2000 were $136.8
million and $373.3 million, respectively, compared with $100.0 million and
$294.2 million, respectively, for last fiscal year's comparable periods.
Increased sales of electronic materials were principally the result of
higher unit volumes of electronic materials shipped and an improved mix of
higher priced, higher technology electronic materials.
Growth of the Company's electronic materials business was
constrained during the three-month and nine-month periods ended November 26,
2000 by the Company's available manufacturing capacity. The Company has
been expanding the manufacturing capacity of its electronic materials
facilities in recent years. During the 2000 fiscal year, the Company
completed expansions of its electronic materials operations in Singapore and
France, acquired additional manufacturing capacity in California, and
commenced significant additional expansions of its electronic materials
operations in California and New York, which it expects to complete in the
2002 fiscal year. During the 2001 fiscal year second quarter, the Company
commenced a significant expansion of its higher technology product line
manufacturing facility in Arizona, which the Company expects to complete
during the first half of the Company's 2002 fiscal year.
The Company's foreign electronic materials operations accounted
for $55.9 million and $155.0 million, respectively, of net sales, or 39% of
the Company's total sales worldwide, during the three-month and nine-month
periods ended November 26, 2000 compared with $41.4 million and $117.0
million, respectively, of net sales, or 38% and 37% of the Company's total
sales worldwide, during last fiscal year's comparable periods. Higher net
<PAGE> 10
sales by foreign operations during the three-month period ended November 26,
2000 was due principally to greater demand in the Company's principal
markets in Europe and Asia.
Net sales of the engineered materials and plumbing hardware
businesses for the three-month and nine-month periods ended November 26,
2000 decreased 29% to $5.8 million and 26% to $19.3 million, respectively,
from $8.1 million and $26.2 million for last fiscal year's comparable
periods. Lower net sales was primarily attributable to the closing and
liquidation of the plumbing hardware business that was completed during the
first half of its 2001 fiscal year. Net sales of the two remaining
engineered materials businesses increased 9% and 18% for the three month and
nine month periods, respectively, over the last fiscal year's comparable
periods.
The overall gross margins as a percentage of net sales for the
Company's worldwide operations were 23.9% and 22.0%, respectively, during
the three-month and nine-month periods ended November 26, 2000 compared with
17.3% and 17.8%, respectively, for last fiscal year's comparable periods.
The improvements in the gross margins were attributable to manufacturing
efficiencies attendant the increases in sales volumes over last fiscal
year's comparable periods and higher percentages of sales of higher
technology, higher margin products.
Selling, general and administrative expenses, measured as a
percentage of net sales, were 9.1% and 9.6%, respectively, during the three-
month and nine-month periods ended November 26, 2000 compared with 10.4% and
10.7%, respectively, during last fiscal year's comparable periods. The lower
percentages for the current fiscal year periods resulted from the relatively
fixed component of many of the Company's operating expenses.
Profit from operations for the three-month period ended November
26, 2000 increased 184% to $21.1 million from $7.4 million for last fiscal
year's comparable period, and profit from operations for the nine-month
period ended November 26, 2000 increased 114% to $48.7 million from $22.8
million for last fiscal year's comparable period.
Interest and other income, net, principally investment income,
increased 25% to $2.1 million and 3% to $6.0 million, respectively, for the
three-month and nine-month periods ended November 26, 2000 from $1.7 million
and $4.8 million, respectively, for last fiscal year's comparable periods.
The increases were attributable to increased cash available for investment
and higher prevailing interest rates. The Company's investments were
primarily short-term taxable instruments.
Interest expense for the three-month and nine-month periods
ended November 26, 2000 was $1.4 million and $4.2 million, respectively,
compared with approximately the same amounts during last fiscal year's
comparable periods. The Company's interest expense related primarily to its
5.5% Convertible Subordinated Notes due 2006 (the "Notes") issued in
February 1996.
The Company's effective income tax rate for the three-month
period ended November 26, 2000 was 32% compared with 25% for last fiscal
year's comparable period, and the Company's effective income tax rate for
the nine-month period ended November 26, 2000 was 30% compared with 25% for
last fiscal year's comparable period. The increases in the effective tax
rates were primarily the result of adjusting the Company's year-to-date tax
rate to 30% to reflect its more recent forecast 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 nine-month periods ended
November 26, 2000 increased 156% to $14.8 million and 101% to $35.3 million,
respectively, from $5.8 million and $17.5 million, respectively, for last
fiscal year's comparable periods. Basic and diluted earnings per share
increased to $0.93 and $0.78, respectively, for the three-month period ended
November 26, 2000 from $0.37 and $0.34, respectively, for last fiscal year's
comparable period, and basic and diluted earnings per share increased to
<PAGE> 11
$2.22 and $1.91, respectively, for the nine-month period ended November 26,
2000 from $1.11 and $1.03, respectively, for last fiscal year's comparable
period. All earnings per share amounts reflect the three-for-two stock split
effective November 8, 2000.
Liquidity and Capital Resources:
At November 26, 2000, the Company's cash and temporary
investments were $148.9 million compared with $131.5 million at February 27,
2000, the end of the Company's 2000 fiscal year. The increase in the
Company's cash and temporary investments position at November 26, 2000 was
attributable to increased cash provided from operating activities, as
discussed below. The Company's working capital (which includes cash and
temporary investments) was $187.6 million at November 26, 2000 compared with
$176.1 million at February 27, 2000. The increase in working capital at
November 26, 2000 compared with February 27, 2000 was due principally to
higher cash and investments, receivables and inventories, offset in part by
higher current liabilities. The Company's current ratio (the ratio of
current assets to current liabilities) was 3.2 to 1 at November 26, 2000
compared with 3.9 to 1 at February 27, 2000.
During the nine-months ended November 26, 2000, net cash
provided by operations was $54.6 million compared with $16.6 million in last
fiscal year's comparable period. The increase reflects higher net income
and a decrease in net operating assets due to an increase in current
liabilities in the current fiscal year. Cash increased primarily due to
increased net cash provided from operations and proceeds from disposition of
marketable securities, which was partially offset by increased capital
expenditures. Net purchases of property, plant and equipment were $34.8
million compared to the prior year's $19.5 million. The higher amount in
the current year reflects spending on previously announced capacity
expansions at the electronic materials operations in New York and
California, which the Company expects to complete in the 2002 fiscal year.
The Company also announced in the second quarter of its 2001 fiscal year, a
significant expansion of its higher technology manufacturing facility in
Arizona, which it expects to complete during the first half of the 2002
fiscal year. Capital expenditures for the 2001 fiscal year are estimated to
total approximately $50 million.
At November 26, 2000, the Company's only long-term debt was
$98.5 million in outstanding Notes. During the third quarter of its 2001
fiscal year, $1.5 million of the Notes were converted into 53,004 shares of
the Company's Common Stock. The Company believes its financial resources
will be sufficient, for the foreseeable future, to provide for continued
investments in working capital and 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.
Environmental Matters:
In the nine-month periods ended November 26, 2000 and November
28, 1999, the Company charged less than $0.2 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 November 26, 2000 and February 27, 2000,
the recorded liability in accrued liabilities for environmental matters was
$4.4 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.
<PAGE> 12
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
February 27, 2000.
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
issued by the Company. These guidelines are designed to establish a high
quality fixed income portfolio 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 2000 fiscal year and at November
26, 2000, 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.
<PAGE> 13
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 the Delphi Automotive
Systems unit of General Motors Corp. in the United States District Court for
the District of Arizona. The complaint, as subsequently amended, alleged,
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, that Delco breached the
covenant of good faith and fair dealing implied in the contract, that Delco
engaged in negligent misrepresentation and that Delco fraudulently induced
Nelco to enter into the contract. The Company and Nelco sought substantial
compensatory and punitive damages.
On November 29, 2000, after a five day trial in Phoenix, Arizona,
a jury awarded damages to Nelco in the amount of $32,280,000, and on
December 12, 2000 the judge in the United States District Court for the
District of Arizona entered judgment for Nelco on its claim of breach of the
implied covenant of good faith and fair dealing with damages in the amount
of $32,280,000. Both parties have filed motions for post-judgment relief and
a new trial and, when judgment is final, both parties have rights to appeal
the decision to the United States Court of Appeals for the Ninth Circuit in
San Francisco.
In March 1998, the Company 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, have been nil since that time and are expected to be
nil in future periods. 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;
and 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. See "Factors That May Affect Future Results" after Item 2 in Part I
of this Report.
Item 4. Submission of Matters to a Vote of Security Holders
At a Special Meeting of Shareholders held on October 10, 2000, an
amendment to the Company's Restated Certificate of Incorporation was
approved by the shareholders to increase the number of authorized shares of
Common Stock of the Company from 30,000,000 shares to 60,000,000 shares.
There were 8,321,828 votes for this amendment, 586,196 votes against, and
110,545 abstentions.
Item 6. Reports on Form 8-K
Reports on Form 8-K filed during the fiscal quarter ended November 26,
2000:
Report on Form 8-K dated November 8, 2000, Commission File No. 1-
4415, reporting in Item 5 that as a result of the three-for-two (3-for-2)
stock split in the form of a stock dividend of one share of Common Stock,
par value $.10 per share (the "Common Stock"), of the Company for each
issued two shares of Common Stock declared by the Board of Directors of the
Company on October 10, 2000 payable November 8, 2000 to shareholders of
record at the close of business on October 20, 2000, (1) the Conversion
Price of the 5.5% Convertible Subordinated Notes due March 1, 2006 issued by
the Company pursuant to the Indenture, dated as of February 1, 1996 (the
<PAGE> 14
"Indenture"), between the Company and The Chase Manhattan Bank, N.A., as
Trustee, shall be adjusted, pursuant to Section 15.5(a) of the Indenture,
from $42.188 per share to $28.125 per share effective at the close of
business on November 8, 2000 and (2) the preferred stock purchase rights
distributed by the Company pursuant to the Amended and Restated Rights
Agreement, dated as of July 12, 1995 (the "Rights Agreement"), between the
Company and Registrar and Transfer Company, as Rights Agent, shall be
adjusted, pursuant to Section 11(d) of the Rights Agreement, so that each
share of Common Stock following the stock split shall represent two-thirds
(2/3) of a Right.
<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.
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(Registrant)
Date: January 8, 2001 /s/ Brian E. Shore
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Brian E. Shore
President and
Chief Executive Officer
Date: January 8, 2001 /s/ F. Gordon Bitter
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F. Gordon Bitter
Senior Vice President and
Chief Financial Officer
