-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EAFya5PU9SzxIFwttCSRes5lOyn9Z31cAI8oERQpuy4gaDRAezhTiGXNrpfGF30c uuz8dn44jd/0fCBTeI53dQ== 0000076267-00-000001.txt : 20000202 0000076267-00-000001.hdr.sgml : 20000202 ACCESSION NUMBER: 0000076267-00-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991128 FILED AS OF DATE: 20000111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARK ELECTROCHEMICAL CORP CENTRAL INDEX KEY: 0000076267 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 111734643 STATE OF INCORPORATION: NY FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04415 FILM NUMBER: 505041 BUSINESS ADDRESS: STREET 1: 5 DAKOTA DR CITY: LAKE SUCCESS STATE: NY ZIP: 11042 BUSINESS PHONE: 5163544100 MAIL ADDRESS: STREET 1: 5 DAKOTA DR CITY: LAKE SUCCESS STATE: NY ZIP: 11042 10-Q 1 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 28, 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: 10,462,198 as of January 7, 2000. 2 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES TABLE OF CONTENTS Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheets November 28, 1999 (Unaudited) and February 28, 1999 .................................. 4 Consolidated Statements of Earnings 13 weeks and 39 weeks ended November 28, 1999 and November 29, 1998 (Unaudited)....................... 5 Condensed Consolidated Statements of Cash Flows 39 weeks ended November 28, 1999 and November 29, 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 ......................................... 10 Factors That May Affect Future Results........................ 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................... 15 PART II. OTHER INFORMATION: Item 1. Legal Proceedings ................................... 16 Item 6. Exhibits and Reports on Form 8-K .................... 16 SIGNATURES ..................................................... 17 EXHIBIT INDEX.................................................... 18 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements The Company's Financial Statements begin on the next page. 4 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
November 28, February 28, 1999 1999 ----------- ------------ ASSETS (Unaudited) * Current assets: Cash and cash equivalents $ 32,347 $ 36,682 Marketable securities 103,420 103,020 Accounts receivable, net 66,802 56,917 Inventories (Note 2) 29,603 25,703 Prepaid expenses and other current assets 8,397 7,874 -------- -------- Total current assets 240,569 230,196 Property, plant and equipment, net 123,493 118,012 Other assets 3,340 3,490 -------- -------- $367,402 $351,698 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 31,103 $ 31,019 Accrued liabilities 26,445 23,154 Income taxes payable 6,261 9,183 -------- -------- Total current liabilities 63,809 63,356 Long-term debt 100,000 100,000 Deferred income taxes 10,360 9,501 Deferred pension and other liabilities 13,661 14,195 Stockholders' equity: Common stock 1,358 1,358 Additional paid-in capital 54,233 53,108 Retained earnings 157,383 142,336 Treasury stock, at cost (29,128) (30,354) Accumulated other non-owner changes (Note 5) (4,274) (1,802) --------- --------- Total stockholders' equity 179,572 164,646 --------- --------- $367,402 $351,698 ========= ========= *The balance sheet at February 28, 1999 has been derived from the audited financial statements at that date.
5 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited--in thousands, except per share amounts)
13 Weeks Ended 39 Weeks Ended ------------------------ ------------------------ November 28, November 29, November 28, November 29, 1999 1998 1999 1998 ----------- ----------- ----------- ----------- Net sales $108,183 $103,290 $320,366 $289,493 Cost of sales 89,479 87,294 263,214 247,133 --------- -------- --------- --------- Gross profit 18,704 15,996 57,152 42,360 Selling, general and administrative expenses 11,273 10,991 34,398 30,786 --------- -------- --------- --------- Profit from operations 7,431 5,005 22,754 11,574 --------- -------- --------- --------- Other income (expense): Interest and other income, net 1,686 1,788 4,818 5,936 Interest expense (1,397) (1,393) (4,192) (4,165) --------- -------- --------- --------- Total other income 289 395 626 1,771 --------- -------- --------- --------- Earnings before income taxes 7,720 5,400 23,380 13,345 Income tax provision 1,930 1,151 5,845 3,336 --------- --------- --------- --------- Net earnings $ 5,790 $ 4,249 $17,535 $10,009 ========= ========= ========= ========= Earnings per share (Note 3): Basic $ .55 $ .41 $ 1.67 $ .90 Diluted $ .51 $ .40 $ 1.55 $ .89 Weighted average number of common and common equivalent shares outstanding: Basic 10,546 10,483 10,488 11,166 Diluted 13,221 12,941 13,096 11,302 Dividends per share $ .08 $ .08 $ .24 $ .24
6 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited--in thousands)
39 Weeks Ended -------------------------- November 28, November 29, 1999 1998 ----------- ----------- Net cash provided by operating activities $16,637 $ 8,288 -------- -------- Cash flows from investing activities: Purchases of property, plant and equipment, net (19,494) (18,682) Purchases of marketable securities (119,435) (105,061) Proceeds from sales of marketable securities 119,027 115,487 -------- -------- Net cash used in investing activities (19,902) (8,256) -------- -------- Cash flows from financing activities: Dividends paid (2,488) (2,650) Proceeds from exercise of stock options 2,351 183 Purchase of treasury stock - (13,452) -------- -------- Net cash used in financing activities (137) (15,919) -------- -------- Decrease in cash and cash equivalents before effect of exchange rate changes (3,402) (15,887) Effect of exchange rate changes on cash and cash equivalents (933) 857 -------- -------- Decrease in cash and cash equivalents (4,335) (15,030) Cash and cash equivalents, beginning of period 36,682 45,102 -------- -------- Cash and cash equivalents, end of period $32,347 $30,072 ======== ======== Supplemental cash flow information: Cash paid during the period for: Interest $ 5,500 $ 5,500 Income taxes $ 7,422 $ 1,479
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 November 28, 1999, the consolidated statements of earnings for the 13 weeks and 39 weeks ended November 28, 1999 and November 29, 1998, and the condensed consolidated statements of cash flows for the 39 week periods then ended have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at November 28, 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 consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1999. 2. INVENTORIES Inventories consist of the following:
(In thousands) November 28, February 28, 1999 1999 ----------- ------------ Raw materials $11,405 $ 8,787 Work-in-process 6,199 4,590 Finished goods 10,903 11,533 Manufacturing supplies 1,096 793 ------- ------- $29,603 $25,703
======= ======= 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):
13 weeks ended 39 weeks ended -------------- -------------- November 28, November 29, November 28, November 29, 1999 1998 1999 1998 ----------- ----------- ----------- ------------ Net income for basic EPS $ 5,790 $ 4,249 $17,535 $10,009 Add interest on 5.5% convertible subordinated notes, net of taxes 908 905 2,725 * ------- ------- ------- ------- Net income for diluted EPS $ 6,698 $ 5,154 $20,260 $10,009 ======= ======= ======= ======= Weighted average common shares outstanding for basic EPS 10,546 10,483 10,488 11,166 Net effect of dilutive options 305 88 238 136 Assumed conversion of 5.5% convertible subordinated notes 2,370 2,370 2,370 * ------- ------- ------- ------- Weighted average shares outstanding for diluted EPS 13,221 12,941 13,096 11,302 ======= ======= ======= ======= EPS-basic $ .55 $ .41 $ 1.67 $ .90 EPS-diluted $ .51 $ .40 $ 1.55 $ .89 *For the 39 weeks ended November 29, 1998 the effects of the 5.5% convertible subordinated notes were not considered as their effect was anti-dilutive.
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):
13 weeks ended 39 weeks ended -------------- -------------- November 28, November 29, November 28, November 29, 1999 1998 1999 1998 ----------- ----------- ----------- ----------- Revenues Electronic materials $100,045 $ 93,606 $294,198 $261,422 Engineered materials and plumbing hardware 8,138 9,684 26,168 28,071 --------- --------- --------- --------- Net sales $108,183 $103,290 $320,366 $289,493 ========= ========= ========= ========= Profit/(Loss) Electronic materials $ 8,421 $ 5,403 $ 25,867 $ 13,344 Engineered materials and plumbing hardware 316 946 1,517 1,567 General corporate expense (1,306) (1,344) (4,630) (3,337) Interest and other income, net 1,686 1,788 4,818 5,936 Interest expense (1,397) (1,393) (4,192) (4,165) --------- --------- --------- --------- Earnings before income taxes $ 7,720 $ 5,400 $ 23,380 $ 13,345 ========= ========= ========= =========
November 28, February 28, 1999 1999 ------------ ------------ Assets Electronic materials $256,002 $233,886 Engineered materials and plumbing hardware 12,062 11,752 Corporate(1) 99,338 106,060 --------- --------- Total assets $367,402 $351,698 ========= ========= (1) Corporate assets consist primarily of cash, cash equivalents and marketable securities.
9 5. COMPREHENSIVE INCOME Statement of Financial Accounting Standards No. 130 - "Reporting Comprehensive Income" (SFAS No. 130), establishes standards for reporting changes in equity from non-owner sources in the financial statements. Total non-owner changes in stockholders' equity for the 13 weeks ended November 28, 1999 and November 29, 1998 were $4,819,000 and $4,972,000, respectively. Total non-owner changes for the 39 weeks ended November 28, 1999 and November 29, 1998 were $15,063,000 and $11,863,000, respectively. Comprehensive income consists primarily of net income and foreign currency translation adjustments. 10 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 operates under the "Nelco" name. The Company's customers for its advanced printed circuit materials include leading independent circuit board fabricators, contract manufacturers 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 ended February 28, 1999 and March 1, 1998, approximately 92% in the three-month and nine-month periods ended November 28, 1999 and approximately 91% and 90% in the three-month period and nine-month period, respectively, ended November 29, 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, approximately 38% and 37% in the three-month period and nine-month period, respectively, ended November 28, 1999 and approximately 42% and 40% in the three-month period and nine-month period, respectively, ended November 29, 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 the last two fiscal years, approximately 8% in the three-month and nine-month periods ended November 28, 1999 and approximately 9% and 10% in the three-month period and nine-month period, respectively, ended November 29, 1998. The Company's sales continued to grow in the three-month and nine-month periods ended November 28, 1999, led by growth in sales by the Company's North American and Asian 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, second and third quarters. This resumed growth was primarily a result of strong performances by the Company's 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, second and third quarters 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 Dis- 11 trict 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 damages of not less than $70 million and substantial punitive damages. 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, second and third quarters 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 and Nine Months Ended November 28, 1999 Compared with Three and Nine Months Ended November 29, 1998: The Company's electronic materials business was principally responsible for the improvement in the Company's results of operations for the three-month and nine-month periods ended November 28, 1999. The strengthening of the Company's printed circuit materials businesses during the latter part of the 1999 fiscal year continued in the 2000 fiscal year first, second and third quarters. However, the absence of the business with Delco Electronics during the 2000 fiscal year 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 and second quarters 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. These factors continued to favorably impact the Company's operations and margins in the 2000 fiscal year third quarter; however, the Company's electronic materials business also experienced inefficiencies resulting from the operation of certain of its facilities at levels in excess of their designed manufacturing capacity, difficulty associated with the integration of a small acquisition which was closed in the 2000 fiscal year second quarter, less than satisfactory performance by certain of the Company's electronic materials business units and price pressure exerted by customers, all of which negatively affected the Company's margins in the third quarter. Operating results of the Company's engineered materials and plumbing hardware businesses declined during the three-month and nine-month periods ended November 28, 1999. This decline was attributable to the plumbing hardware business and was only partially offset by improvements in the specialty adhesive tape and film business and advanced composite materials business. Results of Operations Sales for the three-month and nine-month periods ended November 28, 1999 increased 5% to $108.2 million and 11% to $320.4 million, respectively, from $103.3 million and $289.5 million for last fiscal year's comparable periods. Sales of the electronic materials business for the three-month and nine-month periods ended November 28, 1999 were $100.0 million and $294.2 million, respectively, compared with $93.6 million and $261.4 million, respectively, for last fiscal year's comparable periods. The increases in sales of electronic materials were principally the result of higher volumes of electronic materials shipped and increases in sales of higher technology products. Sales of the engineered materials and plumbing hardware businesses for the three-month and nine-month periods ended November 28, 1999 decreased 16% to $8.1 million and 7% to $26.2 million, respectively, from $9.7 million and $28.1 million for last fiscal year's comparable periods. 12 The Company's foreign electronic materials operations accounted for $41.4 million and $117.0 million, respectively, of sales during the three-month and nine-month periods ended November 28, 1999 compared with $43.5 million and $116.1 million, respectively, of sales during last fiscal year's comparable periods. The decline in sales by foreign operations during the three-month period ended November 28, 1999 was due principally to a decline in sales by the Company's European operations, while the slight increase in such sales during the nine-month period ended November 28, 1999 was due principally to an increase in sales by the Company's Asian operations. The gross margins for the Company's worldwide operations were 17.3% and 17.8%, respectively, during the three-month and nine-month periods ended November 28, 1999 compared with 15.5% and 14.6%, respectively, for last fiscal year's comparable periods. The improvements in the gross margins were attributable to the increases in sales volumes over last fiscal year's comparable periods, the continuing growth in sales of higher technology, higher margin products and increases in market share with certain key electronic materials customers. However, the favorable impact of these factors was partially offset by the absence of sales volumes with Delco Electronics, inefficiencies caused by operating certain facilities at levels in excess of their designed manufacturing capacity, difficulty associated with the integration of a small acquisition which was closed in the 2000 fiscal year second quarter, less than satisfactory performance by certain of the Company's electronic materials business units and price pressure exerted by customers. Selling, general and administrative expenses, measured as a percentage of sales, were 10.4% and 10.7%, respectively, during the three- month and nine-month periods ended November 28, 1999 compared with 10.7% and 10.6%, respectively, during last fiscal year's comparable periods. The decline for the three-month period resulted from proportionately greater sales compared to the comparable period during the last fiscal year, while the increase for the nine-month period was a function of increased general and administrative expenses, resulting, in part, from higher professional fees, some of which are non-recurring, and increased employee performance incentives. For the reasons set forth above, profit from operations for the three-month period ended November 28, 1999 increased 48% to $7.4 million from $5.0 million for last fiscal year's comparable period, and profit from operations for the nine-month period ended November 28, 1999 increased 97% to $22.8 million from $11.6 million for last fiscal year's comparable period. Interest and other income, principally investment income, declined 6% to $1.7 million and 19% to $4.8 million, respectively, for the three-month and nine-month periods ended November 28, 1999 from $1.8 million and $5.9 million, respectively, for last fiscal year's comparable periods. The declines in investment income were attributable to reductions 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 and nine-month periods ended November 28, 1999 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 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's effective income tax rate for the three-month period ended November 28, 1999 was 25.0% compared with 21.3% for last fiscal year's comparable period, and the Company's effective income tax rate for the nine-month period ended November 28, 1999 was 25.0% compared with the same rate for last fiscal year's comparable period. This increase in the effective tax rate for the three-month period was primarily the result of a change in the Company's income mix among the tax jurisdictions in which the Company does business. 13 Net earnings for the three-month and nine-month periods ended November 28, 1999 increased 36% to $5.8 million and 75% to $17.5 million, respectively, from $4.2 million and $10.0 million, respectively, for last fiscal year's comparable periods. Basic and diluted earnings per share increased to $0.55 and $0.51, respectively, for the three-month period ended November 28, 1999 from $0.41 and $0.40, respectively, for last fiscal year's comparable period, and basic and diluted earnings per share increased to $1.67 and $1.55, respectively, for the nine-month period ended November 28, 1999 from $0.90 and $0.89, respectively, for last fiscal year's comparable period. These increases in net earnings and earnings per share were attributable to the Company's significantly improved operating results. Liquidity and Capital Resources: At November 28, 1999, the Company's cash and temporary investments were $135.8 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 temporary investment position at November 28, 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 $176.8 million at November 28, 1999 compared with $166.8 million at February 28, 1999. The increase at November 28, 1999 compared with February 28, 1999 was due principally to higher receivables and inventories and lower income taxes payable, offset in part by the reduction in cash and temporary investments and higher accrued liabilities. The Company's current ratio (the ratio of current assets to current liabilities) was 3.8 to 1 at November 28, 1999 compared with 3.6 to 1 at February 28, 1999. During the nine-months ended November 28, 1999, cash provided by net earnings, before depreciation and amortization, of $29.8 million was reduced by a net increase in working capital items, resulting in $16.6 million of cash provided from operating activities, and the Company expended $19.5 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. In the 2000 fiscal year second quarter, the Company announced large expansion programs relating to its electronic materials operations in New York and California, and the Company expects to complete an expansion of its electronic materials operations in Asia during the current fiscal year. At November 28, 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 nine-month periods ended November 28, 1999 and November 29, 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 November 28, 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, consolidated results of operations or consolidated financial position of the Company. 14 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 date 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 conducted a plan comprised of the following four phases: inventory, assessment, remediation and testing. The Company has applied 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 included evaluating the Year 2000 readiness of third parties such as suppliers, customers and service providers. The Company utilized 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, assessment, remediation and testing phases. The Company anticipates that Year 2000 issues will not pose significant operating problems. The Company is also continually assessing the Year 2000 compliance of third parties on whom it relies, and has developed contingency plans where possible. Such contingency plans 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. The Company is upgrading its information systems to improve their functionality and efficiency. As part of this ongoing system upgrade, the Company has modified or replaced 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 upgraded the existing legacy systems 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 is 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 hardware and software. The incremental cost of the Company's Year 2000 compliance program did not 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 and other third parties, and infra-structure 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. As of January 7, 2000, the Company has not experienced any material adverse effects relating to Year 2000 issues. 15 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 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 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 and at November 28, 1999, 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. 16 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 damages of not less than $70 million and substantial punitive damages. 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, were nil during the remainder of the 1999 fiscal year and during the 2000 fiscal year first, second and third quarters 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) No reports on Form 8-K have been filed during the fiscal quarter ended November 28, 1999. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Park Electrochemical Corp. --------------------------- (Registrant) Date: January 10, 2000 /s/Brian E. Shore --------------------------- Brian E. Shore President and Chief Executive Officer Date: January 10, 2000 /s/Murray O. Stamer --------------------------- Murray O. Stamer Treasurer and Chief Accounting Officer 18 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).......... - EX-27 2
5 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. 1000 9-MOS FEB-27-2000 NOV-28-1999 32,347 103,420 66,802 0 29,603 240,569 240,286 116,793 367,402 63,809 100,000 0 0 1,358 178,214 367,402 320,366 325,184 263,214 297,612 0 0 4,192 23,380 5,845 17,535 0 0 0 17,535 1.67 1.55
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