-----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, UEC2ZXptDVcZq5sbLZ72P6QumKqpEbd2VTJNBDBXNs3rfie9B3V2HGcgswOBMNYR uhpgsvBqICD1dFLKRrY8aw== 0000076267-01-500013.txt : 20010627 0000076267-01-500013.hdr.sgml : 20010627 ACCESSION NUMBER: 0000076267-01-500013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010225 FILED AS OF DATE: 20010524 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-K SEC ACT: SEC FILE NUMBER: 001-04415 FILM NUMBER: 1647395 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-K 1 test10k6.txt 10-K DOCUMENT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 10549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 25, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 of Organization) Identification No.) 5 Dakota Drive, Lake Success, New York 11042 (Address of Principal Executive (Zip Code) Offices) Registrant's telephone number, including area code (516) 354-4100 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, par value $.10 per share New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 [ ] [cover page 1 of 2 pages] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X} State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within 60 days prior to the date of filing. Aggregate Market As of Close of Title of Class Value Business On Common Stock,par value $.10 per share $453,729,580* May 18, 2001 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Shares As of Close of Title of Class Outstanding Business On Common Stock,par value $.10 per share 19,390,153 May 18, 2001 DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement for Annual Meeting of Shareholders to be held July 18, 2001 incorporated by reference into Part III of this Report. *Included in such amount are 1,463,353 shares of common stock valued at $23.40 per share and held by Jerry Shore, the Registrant's Chairman of the Board and a member of the Registrant's Board of Directors. (page> TABLE OF CONTENTS Page PART I Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Executive Officers of the Registrant PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Factors That May Affect Future Results Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K SIGNATURES FINANCIAL STATEMENT SCHEDULES Schedule II - Valuation and Qualifying Accounts EXHIBIT INDEX PART I Item 1. Business. General Park Electrochemical Corp. ("Park"), through its subsidiaries (unless the context otherwise requires, Park and its subsidiaries are hereinafter called the "Company"), is primarily engaged in the design, production and marketing of advanced electronic materials used to fabricate complex multilayer printed circuit boards and other electronic interconnection systems. Park specializes in advanced materials for high layer count circuit boards and high speed digital broadband telecommunications, internet and networking applications. Park's electronic materials business operates under the "Nelco" name through fully integrated business units in Asia, Europe and North America. The Company's major electronic materials manufacturing facilities are located in Singapore, England, France, Germany, New York, Arizona and California. The Company is also engaged in the design, production and marketing of specialty adhesive tapes and films through its Dielectric Polymers subsidiary in Holyoke, Massachusetts and advanced composite materials through its FiberCote Industries subsidiary in Waterbury, Connecticut for the electronics, aerospace and industrial markets. Park was founded in 1954 by Jerry Shore, the Company's Chairman of the Board and largest shareholder. Unless otherwise indicated, all information in this Report has been adjusted to give effect to the Company's three-for-two stock split in the form of a stock dividend, which was distributed November 8, 2000 to shareholders of record at the close of business on October 20, 2000. In the fiscal years ended February 28, 1999 and February 27, 2000, the Company's business was divided into two industry segments: (1) electronic mate rials and (2) engineered materials and plumbing hardware. However, during the fourth quarter of the 2000 fiscal year, the Company decided to close and liquidate the plumbing hardware portion of its engineered materials and plumbing hardware business segment. See Notes 14 and 15 of the Notes to Consolidated Financial Statements in Item 8 of this Report for information concerning the closure of the plumbing hardware business. In addition, in the fiscal year ended February 25, 2001, the engineered materials and plumbing hardware businesses comprised less than 10% of the Company's consolidated revenues, earnings and assets, and the Company considered itself to operate in one business segment. See Note 12 of the Notes to Consolidated Financial Statements in Item 8 of this Report for information concerning the Company's business segments. The sales and long-lived assets of the Company's operations by geographic area for the last three fiscal years are set forth in Note 12 of the Notes to Consolidated Financial Statements in Item 8 of this Report. The Company's foreign operations are conducted principally by the Company's subsidiaries in England, France, Germany and Singapore. The Company's foreign operations are subject to the impact of foreign currency fluctuations. See Note 1 of the Notes to Consolidated Financial Statements in Item 8 of this Report. Electronic Materials Operations 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, such as multilayer back- planes, wireless packages, high speed/low loss multilayers, high density interconnects ("HDIs") and semiconductor packaging systems. The Company's multilayer printed circuit materials include copper-clad laminates and prepregs. The Company has long-term relationships with its major customers, which include leading independent printed circuit board fabricators, electronic manufacturing service companies, electronic contract manufacturers and, to a lesser extent, major electronic equipment manufacturers. 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 (such as microprocessors and memory and logic devices), passive components (such as resistors and capacitors) and connection devices (such as infra-red couplings, fiber optics and surface mount connectors). Examples of end uses of the Company's printed circuit materials include high speed routers and servers, supercomputers, laptops, satellite switching equipment, cellular telephones and transceivers and wireless personal digital assistants ("PDAs"). The Company has developed long- term relationships with major customers as a result of its leading edge products, extensive technical and engineering service support and responsive manufacturing capabilities. Park believes it founded the modern day printed circuit industry in 1957 by inventing a composite material consisting of an epoxy resin substrate reinforced with fiberglass cloth which was laminated together with sheets of thin copper foil. This epoxy-glass copper-clad laminate system is still used to construct the large majority of today's advanced printed circuit products. The Company also believes that in 1962 it invented the first multilayer printed circuit materials system used to construct multilayer printed circuit boards. The Company also pioneered vacuum lamination and many other manufacturing technologies used in the industry today. In addition, the Company's subsidiary, Dielektra GmbH in Germany, which the Company acquired in 1997, owns a patented process for continuously producing thin copper-clad laminates for printed circuit board applications. The Company believes it is one of the industry's technological leaders. As a result of its leading edge products, extensive technical and engineering service support and responsive manufacturing capabilities, the Company expects to continue to take advantage of several industry trends. These trends include the increasing global demand for electronic products and technology, the increasingly advanced electronic materials required for interconnect performance and manufacturability, the increasing miniaturization and portability of advanced electronic equipment, the consolidation of the printed circuit board fabrication industry and the time-to-market and time-to- volume pressures requiring closer collaboration with materials suppliers. The Company believes that it is one of the world's largest manufacturers of multilayer printed circuit materials and the market leader in North American and Southeast Asia. It also believes that it is the only significant independent manufacturer of multilayer printed circuit materials in the world. The Company was the first manufacturer in the printed circuit materials industry to establish manufacturing presences in the three major global markets of North America, Europe and Asia, with facilities established in Europe in 1969 and Asia in 1986. Industry Background The electronic materials manufactured by the Company and its competitors are used to construct and fabricate complex multilayer printed circuit boards and other advanced electronic interconnect systems. Multilayer printed circuit materials consist of prepregs and copper-clad laminates, as well as semi- finished multilayer printed circuit board panels. Prepregs are chemically and electrically engineered plastic resin systems which are impregnated into and reinforced by a specially manufactured fiberglass cloth product or other woven or non-woven reinforcing fiber. This insulating dielectric substrate is .030 inch to .002 inch in thickness or less in some cases. These resin systems are usually based upon an epoxy chemistry. One or more plies of prepreg are laminated together to form an insulating dielectric substrate to support the copper circuitry patterns of a multilayer printed circuit board. Copper-clad laminates consist of one or more plies of prepreg laminated together with specialty thin copper foil laminated on the top and bottom. Copper foil is specially formed in thin sheets which may vary from .0030 inch to .0002 inch in thickness and normally have a thickness of .0014 inch or .0007 inch. The Company supplies both copper-clad laminates and prepregs to its customers, which use these products as a system to construct multilayer printed circuit boards. The printed circuit board fabricator processes copper-clad laminates to form the inner layers of a multilayer printed circuit board. The fabricator photoimages these laminates with a dry film or liquid photoresist. After development of the photoresist, the copper surfaces of the laminate are etched to form the circuit pattern. The fabricator then assembles these etched laminates by inserting one or more plies of dielectric prepreg between each of the inner layer etched laminates and also between an inner layer etched laminate and the outer layer copper plane, and then laminating the entire assembly in a press. Prepreg serves as the insulator between the multiple layers of copper circuitry patterns found in the multilayer circuit board. When the multilayer configuration is laminated, these plies of prepreg form an insulating dielectric substrate supporting and separating the multiple inner and outer planes of copper circuitry. The fabricator drills vertical through- holes or vias in the multilayer assembly and then plates the through-holes or vias to form vertical conductors between the multiple layers of circuitry patterns. These through holes or vias combine with the conductor paths on the horizontal circuitry planes to create a three-dimensional electronic interconnect system. The outer two layers of copper foil are then imaged and etched to form the finished multilayer printed circuit board. The completed multilayer board is a three-dimensional interconnect system with electronic signals traveling in the horizontal planes of multiple layers of copper circuitry patters, as well as the vertical plane through the plated holes or vias. The global market for advanced electronic products is growing as a result of technological change and frequent new product introductions. This growth is principally attributable to increased sales and more complex electronic content of newer products, such as cellular telephones, pagers, personal computers and portable computing devices, and greater use of electronics in other products, such as automobiles. Further, large, almost completely untapped markets for advanced electronic equipment have emerged in such areas as India and China and other areas of the Pacific Rim. Semiconductor manufacturers have introduced successive generations of more powerful microprocessors and memory and logic devices. Electronic equipment manufacturers have designed these advanced semiconductors into more compact and often portable products. High performance computing devices in these smaller portable platforms require greater reliability, closer tolerances, higher component and circuit density and increased overall complexity. As a result, the interconnect industry has developed smaller, lighter, faster and more cost-effective interconnect systems, including advanced multilayer printed circuit boards and new types of semiconductor packaging systems such as ball-grid arrays and multi-chip modules. Advanced interconnect systems require higher technology printed circuit materials to insure the performance of the electronic system and to improve the manufacturability of the interconnect platform. The growth of the market for more advanced printed circuit materials has outpaced the market growth for standard printed circuit materials in recent years. Printed circuit board fabricators and electronic equipment manufacturers require advanced printed circuit materials that have increasingly higher temperature tolerances and more advanced electrical properties in order to support high speed computing in a miniaturized and often portable environment. With the very high density circuit demands of miniaturized high performance interconnect systems, the uniformity, purity, consistency, performance predictability, dimensional stability and production tolerances of printed circuit materials have become successively more critical. High density printed circuit boards and interconnect systems often involve higher layer count multilayer circuit boards where the multiple planes of circuitry and dielectric insulating substrates are very thin (dielectric insulating substrate layers may be .002 inch or less) and the circuit line and space geometries in the circuitry plane are very narrow (.002 inch or less). In addition, advanced surface mount interconnect systems are typically designed with very small pad sizes and very narrow plated through holes or vias which electrically connect the multiple layers of circuitry planes. High density interconnect systems must utilize printed circuit materials whose dimensional characteristics and purity are consistently manufactured to very high tolerance levels in order for the printed circuit board fabricator to attain and sustain acceptable product yields. Shorter product life cycles and competitive pressures have induced electronic equipment manufacturers to bring new products to market and increase production volume to commercial levels more quickly. These trends have highlighted the importance of front-end engineering of electronic products and have increased the level of collaboration among system designers, fabricators and printed circuit materials suppliers. As the complexity of electronic products increases, materials suppliers must provide greater technical support to interconnect systems fabricators on a timely basis regarding manufacturability and performance of new materials systems. Products and Services The Company produces a broad line of advanced printed circuit materials used to fabricate complex multilayer printed circuit boards and other electronic interconnect systems, including backplanes, wireless packages, high speed/low loss multilayers, high density interconnects ("HDIs") and semiconductor packaging systems. The Company's subsidiary, Dielektra GmbH in Germany, also manufactures semi-finished multilayer printed circuit board panels for a select group of customers. The Company's diverse advanced printed circuit materials product line is designed to address a wide array of end-use applications and performance requirements. The Company's product line has been developed internally and through long- term development projects with its principal suppliers. The Company focuses its research and development efforts on developing industry leading product technology to meet the most demanding product requirements and has designed its product line with a focus on the higher performance, higher technology end of the materials spectrum. All of the Company's existing electronic materials products have been introduced since 1990. Most of the Company's research and development expenditures are attributable to the efforts of its electronic materials operations. In response to the rapid technological changes in the electronic materials business, these expenditures on research and product development have increased over the past several years. The Company's products include high-speed, low-loss, digital broadband engineered formulations, high-temperature modified epoxies, bismaleimide triazine epoxies ("BT epoxy"), non-MDA polyimides, enhanced polimides, high performance epoxy Thermount materials ("Thermount" is a registered trademark of E.I. duPont de Nemours & Co.), APPE resin technology (a licensed product of Asahi Chemical Industry Co., Ltd.), SI (Signal Integrity) products, cyanate esters and polytetrafluoroethylene ("PTFE") formulations for RF/microwave applications. The Company has developed long-term relationships with select customers through broad-based technical support and service, as well as manufacturing proximity and responsiveness at multiple levels of the customer's organization. The Company focuses on developing a thorough understanding of its customer's business, product lines, processes and technological challenges. The Company seeks customers which are industry leaders committed to maintaining and improving their industry leadership positions and which are committed to long-term relationships with their suppliers. The Company also seeks business opportunities with the more advanced printed circuit fabricators and electronic equipment manufacturers which are interested in the full value of products and services provided by their suppliers. The Company believes its proactive and timely support in assisting its customers with the integration of advanced materials technology into new product designs further strengthens its relationships with its customers. The Company's emphasis on service and close relationship with its customers is reflected in its relatively short lead times. The Company has designed its manufacturing processes and service organizations to provide the customer with its printed circuit materials products on a just-in-time basis. The Company has located its advanced printed circuit materials manufacturing operations in strategic locations intended to serve specific regional markets. By situating its facilities in close geographical proximity to its customers, the Company is able to rapidly adjust its manufacturing processes to meet customers' new requirements and respond quickly to customers' technical needs. The Company has full technical staffs based at each of its manufacturing locations, which allows the rapid dispatch of technical personnel to a customer's facility to assist the customer in quickly solving design, process, production or manufacturing problems. Customers and End Markets The Company's customers for its advanced electronic materials include the leading independent printed circuit board fabricators, electronic manufacturing service companies, electronic contract manufacturers and, to a lesser extent, major electronic equipment manufacturers in the computer, networking, telecommunications, transportation, aerospace and instrumentation industries located throughout North America, Europe and Asia. The Company seeks to align itself with the larger, more technologically-advanced and better capitalized independent printed circuit board fabricators and major electronic equipment manufacturers which are industry leaders committed to maintaining and improving their industry leadership positions and to building long-term relationships with their suppliers. The Company's selling effort typically involves several stages and relies on the talents of Company personnel at different levels, from management to sales personnel and quality engineers. The Company's strategy emphasizes the use of multiple facilities established in market areas in close proximity to its customers. During the Company's 2001 fiscal year, approximately 25.1% of the Company's sales were to Sanmina Corporation, a leading electronics contract manufacturer and manufacturer of printed circuit boards. During the Company's 2000 fiscal year, approximately 13.6% of the Company's sales were to Hadco Corporation, a large manufacturer of printed circuit boards, and a significant amount, but less than 10%, of Park's sales were to Sanmina Corporation. Hadco Corporation merged into Sanmina Corporation in June 2000. During the Company's 1998 fiscal year, 15.8% of the Company's sales were to Delco Electronics Corporation, a subsidiary of General Motors Corp. Delco Electronics had purchased significant amounts of product from the Company for more than three years. However, in March 1998 the Company was informed by Delco that Delco planned to close its printed circuit board fabrication plant and exit the printed circuit board manufacturing business. After the plant closure, Delco purchased all of its printed circuit boards from outside suppliers and Delco was no longer a customer of the Company's. Since that time, the Company marketed its semi-finished multilayer circuit board material manufacturing capability to leading printed circuit board fabricators, contract assemblers and electronic original equipment manufacturers in North America. The Company had not previously marketed this capability as its semi- finished multilayer capacity had been largely committed to supplying Delco Electronics. Although the Company's electronic materials business was not dependent on this single customer, the loss of this customer had a material adverse effect on the business in the fiscal years ended February 28, 1999, February 27, 2000 and February 25, 2001. In the first quarter of the fiscal year ending March 3, 2002, the Company announced that it was selling the assets and business of its subsidiary in Arizona that conducted the mass lamination business and announced that it expects to record a charge of approximately $15 million in its 2002 fiscal year first quarter ending May 27, 2001 in connection with the sale and the closure of a related support facility to the mass lamination business also located in Arizona. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Report for a discussion of the significant pre-tax losses incurred during the 2000 fiscal year by the Company's Arizona based business unit which formerly supplied Delco Electronics Corporation with semi-finished circuit boards; and see Item 3 of this Report for a discussion of legal proceedings initiated by the Company against Delco Electronics Corporation. Although the electronic materials business is not dependent on any single customer, the loss of a major customer or of a group of customers could have a material adverse effect on the electronic materials business. The Company's electronic materials products are marketed by sales personnel in industrial centers in North America, Europe and Asia. Such personnel include both salaried employees and independent sales representatives who work on a commission basis. Manufacturing The process for manufacturing multilayer printed circuit materials is capital intensive and requires sophisticated equipment as well as clean-room environments. The key steps in the Company's manufacturing process include: the impregnation of specially designed fiberglass cloth with a resin system and the partial curing of that resin system; the assembling of laminates consisting of single or multiple plies of prepreg and copper foil in a clean- room environment; the vacuum lamination of the copper-clad assemblies under simultaneous exposure to heat, pressure and vacuum; and the finishing of the laminates to customer specifications. Prepreg is manufactured in a treater. A treater is a roll-to-roll continuous machine which sequences specially designed fiberglass cloth or other reinforcement fabric into a resin tank and then sequences the resin- coated cloth through a series of ovens which partially cure the resin system into the cloth. This partially cured product or prepreg is then sheeted or paneled and packaged by the Company for sale to customers, or used by the Company to construct its copper-clad laminates. The Company manufacturers copper-clad laminates by first setting up in a clean room an assembly of one or more plies of prepreg stacked together with a sheet of specially manufactured copper foil on the top and bottom of the assembly. This assembly, together with a large quantity of other laminate assemblies, is then inserted into a large, multiple opening vacuum lamination press. The laminate assemblies are then laminated under simultaneous exposure to heat, pressure and vacuum. After the press cycle is complete, the laminates are removed from the press and sheeted, paneled and finished to customer specifications. The product is then inspected and packaged for shipment to the customer. In addition, the Company manufactures very thin copper-clad laminates utilizing Dielektra's unique, patented continuous lamination technology. The Company manufactures multilayer printed circuit materials at eight fully integrated facilities located in the United States, Europe and Southeast Asia. The Company opened its California facility in 1965, its England facility in 1969, its first Arizona and France facilities in 1984, its Singapore facility in 1986 and its second Arizona and France facilities in 1992, and in 1997, the Company acquired Dielektra GmbH with a fully integrated facility in Cologne, Germany. The Company services the North America market principally through its United States manufacturing facilities, the European market principally through its manufacturing facilities in England, France and Germany, and the Asian market principally through its Singapore manufacturing facility. In the first quarter of its 2002 fiscal year, the Company announced that it was establishing a business center in China to supply the demand for advanced multilayer printed circuitry materials in China. The Company has located its manufacturing facilities in its important markets. By maintaining full technical and engineering staffs at each of its manufacturing facilities, the Company is able to deliver fully-integrated products and services on a timely basis. 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 its 2002 fiscal year. During the 2001 fiscal year, the Company commenced a significant expansion of its higher technology product line manufacturing facility in Arizona, which the Company completed during the first quarter of its 2002 fiscal year. In the first quarter of its 2002 fiscal year, the Company announced a significant expansion of its electronic materials manufacturing facility in Singapore and the establishment of a business center in China. All of the Company's multilayer printed circuit materials manufacturing facilities are used for manufacturing, engineering and product development. All of the Company's Nelco and Dielektra printed circuit materials manufacturing facilities are ISO 9002 certified. Materials and Sources of Supply The principal materials used in the manufacture of the Company's electronic products are specially manufactured copper foil, fiberglass cloth and synthetic reinforcements, and specially formulated resins and chemicals. The Company attempts to develop and maintain close working relationships with suppliers of those materials who have dedicated themselves to complying with the Company's stringent specifications and technical requirements. While the Company's philosophy is to work with a limited number of suppliers, the Company has identified alternate sources of supply for each of these materials. However, there are a limited number of qualified suppliers of these materials, substitutes for these materials are not readily available, and, in the recent past, the industry has experienced shortages in the market for certain of these materials. While the Company has not experienced significant problems in the delivery of these materials and considers its relationships with its suppliers to be strong, a disruption of the supply of materials could materially adversely affect the business, financial condition and results of operations of the Company. Significant increases in the cost of materials purchased by the Company could also have a material adverse effect on the Company's business, financial condition and results of operations if the Company were unable to pass such price increases through to its customers. Competition The multilayer printed circuit materials industry is characterized by intense competition and ongoing consolidation. The Company's competitors are primarily divisions of subsidiaries of very large, diversified multinational manufacturers which are substantially larger and have greater financial resources than the Company and, to a lesser degree, smaller regional producers. Because the Company focuses on the higher technology segment of the electronic materials market, technological innovation, quality and service, as well as price, are significant competitive factors. The Company believes that there are approximately ten significant multilayer printed circuit materials manufacturers in the world and many of these competitors have or are developing significant presences in the three major global markets of North America, Europe and Asia. The Company believes that the multilayer printed circuit materials industry is rapidly becoming more global and that the remaining smaller regional manufacturers will find it increasingly difficult to remain competitive. The Company believes that it is currently one of the world's largest multilayer printed circuit materials manufacturers. The Company further believes it is the only significant independent manufacturer of multilayer printed circuit materials in the world today. The markets in which the Company's electronic materials operations compete are characterized by rapid technological advances, and the Company's position in these markets depends largely on its continued ability to develop technologically advanced and highly specialized products. Although the Company believes it is an industry technology leader and directs a significant amount of its time and resources toward maintaining its technological competitive advantage, there is no assurance that the Company will be technologically competitive in the future, or that the Company will continue to develop new products that are technologically competitive. Specialty Tape and Advanced Composites Operations For many years, the Company was also engaged in the specialty adhesive tape and film and advanced composite materials businesses and the plumbing hardware business. However, during the fourth quarter of the 2000 fiscal year, the Company decided to close and liquidate its plumbing hardware business. See Note 14 of the Notes to Consolidated Financial Statements in Item 8 of this Report for information concerning the closure of the plumbing hardware business. Dielectric Polymers, Inc., the Company's specialty adhesive tape and film business, produces tapes and bonding films for a variety of applications including joining industrial components together. FiberCote Industries, Inc., the Company's composites business, designs and produces engineered advanced composite materials for the electronics, aerospace and industrial markets. Marketing and Customers The Company's specialty adhesive tape and advanced composite materials customers, substantially all of which are located in the United States, include manufacturers in the electronics, aerospace and industrial industries. Such materials are marketed by sales personnel including both salaried employees and independent sales representatives who work on a commission basis. While no single specialty adhesive tape or advanced composite materials customer accounted for 10% or more of the Company's total sales during the last fiscal year, the loss of a major customer or of a group of some of the largest customers of the specialty adhesive tape and advanced composite materials business could have a material adverse effect upon the business. Manufacturing and Sources of Supply The Company's advanced composite materials manufacturing facility is located in Waterbury, Connecticut, and its specialty adhesive tape and film business is located in Holyoke, Massachusetts. The Company designs and manufactures its advanced composite materials and industrial tapes and films to its own specifications and to the specifications of its customers. Product development efforts are devoted toward the conforming of the Company's advanced composites to the specifications of, and the obtaining of approvals from, the Company's customers. The materials used in the manufacture of these engineered materials include chemicals, films, resins, fiberglass, plastics, and other fabricated materials and adhesives. The Company purchases these materials from several suppliers. Although satisfactory substitutes for many of these materials are not readily available, the Company has experienced no difficulties in obtaining such materials. Competition The Company has many competitors in the specialty adhesive tape and advanced composite materials businesses, including some major corporations which have substantially greater financial resources than the Company. The Company competes for business on the basis of product performance and development, product qualification and approval, the ability to manufacture and deliver products in accordance with customers' needs and requirements, and price. Backlog The Company records an item as backlog when it receives a purchase order specifying the number of units to be purchased, the purchase price, specifications and other customary terms and conditions. At April 30, 2001, the unfilled portion of all purchase orders received by the Company and believed by it to be firm was approximately $9,696,000, compared to $30,484,000 at April 28, 2000. The decline in backlog at April 30, 2001 compared to April 28, 2000 was due primarily to the downturn in the Company's business during the first two months of its 2002 fiscal year resulting from the severe downturn and correction in the global electronics industry. Various factors contribute to the size of the Company's backlog. Accordingly, the foregoing information may not be indicative of the Company's results of operations for any period subsequent to the fiscal year ended February 25, 2001. Patents and Trademarks The Company holds several patents and trademarks or licenses thereto. In the Company's opinion, some of these patents and trademarks are important to its products. Generally, however, the Company does not believe that an inability to obtain new, or to defend existing, patents and trademarks would have a material adverse effect on the Company. Employees At February 25, 2001, the Company had approximately 3,010 employees. Of these employees, 2,850 were engaged in the Company's electronic materials operations, 105 in its specialty adhesive tape and advanced composite materials operations and 55 consisted of executive personnel and general administrative staff. However, as a result of a severe correction and downturn in the global electronics industry and, consequently, in the Company's electronic materials business, the Company reduced its total number of employees during the first two months of its 2002 fiscal year to approximately 2,330 total employees at April 30, 2001. None of the Company's employees are subject to a collective bargaining agreement. Management considers its employee relations to be good. Environmental Matters The Company is subject to stringent environmental regulation of its use, storage, treatment and disposal of hazardous materials and the release of emissions into the environment. The Company believes that it currently is in substantial compliance with the applicable federal, state and local environmental laws and regulations to which it is subject and that continuing compliance therewith will not have a material effect on its capital expenditures, earnings or competitive position. The Company does not currently anticipate making material capital expenditures for environmental control facilities for its existing manufacturing operations during the remainder of its current fiscal year or its succeeding fiscal year. However, developments, such as the enactment or adoption of even more stringent environmental laws and regulations, could conceivably result in substantial additional costs to the Company. The Company and certain of its subsidiaries have been named by the Environmental protection Agency (the "EPA") or a comparable state agency under the Comprehensive Environmental Response, Compensation and Liability Act (the "Superfund Act") or similar state law as potentially responsible parties in connection with alleged releases of hazardous substances at nine sites. In addition, a subsidiary of the Company has received cost recovery claims under the Superfund Act from other private parties involving two other sites and has received requests from the EPA under the Superfund Act for information with respect to its involvement at three other sites. Under the Superfund Act and similar state laws, all parties who may have contributed any waste to a hazardous waste disposal site or contaminated area identified by the EPA or comparable state agency may be jointly and severally liable for the cost of cleanup. Generally, these sites are locations at which numerous persons disposed of hazardous waste. In the case of the Company's subsidiaries, generally the waste was removed from their manufacturing facilities and disposed at the waste sites by various companies which contracted with the subsidiaries to provide waste disposal services. Neither the Company nor any of its subsidiaries have been accused of or charged with any wrongdoing or illegal acts in connection with any such sites. The Company believes it maintains an effective and comprehensive environmental compliance program. Management believes the ultimate disposition of known environmental matters will not have a material adverse effect upon the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Environmental Matters" included in Item 7 of this Report and Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Report. Item 2. Properties. The following chart indicates the significant properties owned and leased by the Company, the business which uses the properties, and the location and size of each such property. All of such properties, except for the Lake Success, New York property, are used principally as manufacturing, warehouse and assembly facilities.
Location Owned or Use Size Leased (Square Footage) Lake Success, NY Leased Executive Offices 7,000 Walden, NY Owned Electronic Materials 51,000 Newburgh, NY Leased Electronic Materials 171,000 Fullerton, CA Leased Electronic Materials 95,000 Anaheim, CA Leased Electronic Materials 26,000 Anaheim, CA Leased Electronic Materials 41,000 Tempe, AZ Leased Electronic Materials 29,000 Tempe, AZ Leased Electronic Materials 81,000 Tempe, AZ Leased Electronic Materials 6,000 Mirebeau, France Owned Electronic Materials 81,000 Lannemezan, Owned Electronic Materials 29,000 France Cologne, Germany Owned Electronic Materials 193,000 Sindelfingen, Leased Germany Skelmersdale, Owned Electronic Materials 54,000 England Singapore Leased Electronic Materials 48,000 Singapore Leased Electronic Materials 10,000 Holyoke, MA Leased Specialty 46,000 AdhesiveTapes and Films Waterbury, CT Leased Advanced Composites 100,000
The Company believes its facilities and equipment to be in good condition and reasonably suited and adequate for its current needs. Item 3. Legal Proceedings. In May 1998, the Company and its Nelco Technology, Inc. ("NTI") 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 alleged among other things, that Delco breached its contract to purchase semi-finished multilayer printed circuit boards from NTI and that Delphi interfered with NTI'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 NTI to enter into the contract. The Company and NTI sought substantial compensatory and punitive damages. On November 29, 2000, after a five day trial in Phoenix, Arizona, a jury awarded damages to NTI in the amount of $32,280,000, and on December 12, 2000 the judge in the United States District Court entered judgment for NTI 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 filed motions for post- judgment relief and a new trial, all of which the judge denied, and both parties have filed notices to appeal the decision to the United States Court of Appeals for the Ninth Circuit in San Francisco. Park 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. After the plant closure, Delco purchased all of its printed circuit boards from outside suppliers and Delco was no longer a customer of the Company's. 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. 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% of the Company's total worldwide sales for the 1998 fiscal year. See "Business-Electronic Materials Operations-Customers and End Markets" in Item 1 of this Report, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Report, "Factors That May Affect Future Results" after Item 7 of this Report and Note 13 of the Notes to Consolidated Financial Statements in Item 8 of this Report. Item 4. Submission of Matters to a Vote of Security Holders. None Executive Officers of the Registrant. Name Title Age Brian E. Shore Chief Executive Officer, President and a Director 49 Robert A. Forcier Senior Vice President, OEM Marketing and Technology 51 George L. Frantz Senior Vice President and Chief Information Officer 53 Stephen E. Gilhuley Senior Vice President, Secretary and General Counsel 56 Emily J. Groehl Senior Vice President, Sales and Marketing 54 Thomas T. Spooner Senior Vice President, Corporate and Technology 64 Development Murray O. Stamer Senior Vice President, Finance 43 Gary M. Watson Senior Vice President, Engineering and Technology 53 Brian Shore has served as a Director of the Company for more than the past five years. Brian Shore was elected a Vice President of the Company in January 1993, Executive Vice President in May 1994, President effective March 4, 1996, the first day of the Company's 1997 fiscal year, and Chief Executive Officer in November 1996. Brian Shore also served as General Counsel of the Company from April 1988 until April 1994. Mr. Forcier has been employed by one of Park's "Nelco" business units for more than the past five years. He was president of Nelco Technology, Inc. from December 1987 to August 1992 and was Vice President, New Product Marketing of Nelco International Corporation from 1993 until June 1999, when Nelco International Corporation merged into Park Electrochemical Corp. He was elected Senior Vice President of Park in May 1999. He also has been President of Neltec, Inc. since July 1999. Mr. Frantz was elected Senior Vice President of the Company in December 1999. Prior thereto, he was employed by the Atlantic Richfield Company since 1974 as an information technology executive in a number of capacities and positions at both the parent company and division levels. Mr. Gilhuley has been General Counsel of the Company since April 1994 and Secretary since July 1996. He was elected a Senior Vice President in March 2001. Ms. Groehl has been with one of Park's "Nelco" business units for more than the past five years. She was elected Vice President of New England Laminates Co., Inc. in 1988 and was Vice President, Marketing and Sales of Nelco International Corporation from 1993 until June 1999, when Nelco International Corporation merged into Park Electrochemical Corp. She was elected Senior Vice President of Park in May 1999. Mr. Spooner has been employed by one of Park's "Nelco" business units for more than the past five years. He was Vice President, Technology of Nelco International Corporation from 1993 until June 1999, when Nelco International Corporation merged into Park Electrochemical Corp. He was elected Senior Vice President, Technology of Park in May 1999. His title was changed to Senior Vice President, Corporate and Technology Development in May 2001. Mr. Stamer has been employed by the Company since 1989 and served as the Company's Corporate Controller from 1993 to May 1999, when he was elected Treasurer. He was elected Senior Vice President, Finance in March 2001. Mr. Watson was elected Senior Vice President, Engineering in June 2000. His title was changed to Senior Vice President, Engineering and Technology in May 2001. Prior to June 2000, Mr. Watson was Senior Director, Manufacturing Process Technology of Fort James Corporation since March 1999; Vice President, Research and Development of Boise Cascade Corporation from 1992 to March 1999; and Business Division Technology Manager of Weyerhauser Company from 1986 to 1992. There are no family relationships between the directors or executive officers of the Company, except that Brian Shore is the son of Jerry Shore, who is the Chairman of the Board and a Director of the Company and who also served as President of the Company for more than five years until March 4, 1996 and as Chief Executive Officer of the Company for more than five years until November 19, 1996. The term of office of each executive officer of the Company expires upon the election and qualification of his successor. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. The Company's Common Stock is listed and trades on the New York Stock Exchange (trading symbol PKE). (The Common Stock also trades on the Midwest Stock Exchange.) The following table sets forth, for each of the quarterly periods indicated, the high and low sales prices for the Common Stock as reported on the New York Stock Exchange Composite Tape and dividends declared on the Common Stock, all as adjusted for the three-for-two stock split in the form of a stock dividend distributed November 8, 2000 to stockholders of record at the close of business on October 20, 2000. For the Fiscal Year Stock Price Dividends Ended February 25, 2001 High Low Declared First Quarter $18.01 $14.41 $.053 Second Quarter 27.41 15.41 $.053 Third Quarter 50.06 26.21 $.060 Fourth Quarter 42.93 20.41 $.060 For the Fiscal Year Stock Price Dividends Ended February 27, 2000 High Low Declared First Quarter $18.50 $15.42 $.053 Second Quarter 21.08 15.42 $.053 Third Quarter 25.71 18.50 $.053 Fourth Quarter 23.96 12.08 $.053 As of May 22, 2001, there were approximately 2,070 holders of record of Common Stock. The Company expects, for the immediate future, to continue to pay regular cash dividends. Item 6. Selected Financial Data. The following selected consolidated financial data of Park and its subsidiaries is qualified by reference to, and should be read in conjunction with, the consolidated financial statements, related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere herein. Insofar as such consolidated financial information relates to the five fiscal years ended February 25, 2001 and is as of the end of such periods, it is derived from the consolidated financial statements for such periods and as of such dates audited by Ernst & Young LLP, independent auditors. The Consolidated financial statements as of February 25, 2001 and February 27, 2000 and for the three years ended February 25, 2001, together with the independent auditors' report for the three years ended February 25, 2001, appear in Item 8 of this Report.
Fiscal Year Ended (In thousands, except per share amounts) Feb. 25, Feb. 27, Feb. 28, Mar. 1, Mar. 2, 2001 2000 1999 1998 1997 STATEMENT OF EARNINGS INFORMATION: Net sales $522,197 $425,261 $387,634 $376,158 $334,490 Cost of sales 404,527 351,841 328,884 301,968 275,372 Gross profit 117,670 73,420 58,750 74,190 59,118 Selling, general and administrative expenses 49,897 45,508 41,279 39,418 34,366 Closure of plumbing hardware business(1) - 4,464 - - - Profit from operations 67,773 23,448 17,471 34,772 24,752 Other income: Interest and other 8,419 6,654 7,642 8,382 7,653 income, net Interest expense 5,593 5,720 5,400 5,468 5,508 Total other income 2,826 934 2,242 2,914 2,145 Earnings before income 70,599 24,382 19,713 37,686 26,897 taxes Income tax provision 21,180 6,085 4,337 12,436 8,338 Net earnings $ 49,419 $ 18,297 $ 15,376 $ 25,250 $ 18,559 Earnings per share: Basic $ 3.10 $ 1.16 $ .93 $ 1.48 $ 1.09 Diluted $ 2.65 $ 1.12 $ .92 $ 1.38 $ 1.05 Weighted average number of common Shares outstanding: Basic 15,932 15,761 16,470 17,030 17,023 Diluted 20,002 19,643 16,707 20,922 20,898 Cash dividends per $ .23 $ .21 $ .21 $ .21 $ .21 common share BALANCE SHEET INFORMATION: Working capital $188,511 $176,113 $166,840 $176,553 $165,004 Total assets 430,581 365,252 351,698 359,329 307,862 Long-term debt 97,672 100,000 100,000 100,000 100,000 Stockholders' equity 228,906 179,118 164,646 166,404 143,355 See Note 14 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
Item 7. 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 interconnection systems. The Company's customers for its advanced printed circuit materials include leading independent circuit board fabricators, electronic manufacturing service companies and large electronic equipment manufacturers in the computer, telecommunications, transportation, aerospace and instrumentation industries. The Company's electronic materials operations accounted for approximately 95% of the Company's total net sales worldwide in the 2001 fiscal year and approximately 92% and 90% of net sales worldwide in the 2000 and 1999 fiscal years, respectively. The Company's foreign operations accounted for approximately 40% of the Company's total net sales worldwide in the 2001 fiscal year and approximately 37% and 39% of net sales worldwide in the 2000 and 1999 fiscal years, respectively. Park is also engaged in the specialty adhesive tape business and advanced composite business, both of which operate as independent business units. In addition, Park operated a plumbing hardware business, which it decided to close and liquidate in the 2000 fiscal year fourth quarter. The Company's specialty adhesive tape, advanced composite and plumbing hardware businesses accounted for approximately 5% of the Company's total net sales worldwide in the 2001 fiscal year and approximately 8% and 10% of net sales worldwide in the 2000 and 1999 fiscal years, respectively. The Company's sales growth during the last three fiscal years is attributable to strong growth in sales by its electronic materials operations in North America, excluding the loss of sales to Delco Electronics, discussed below, and its electronic materials operations in Europe and Asia. The Company's ongoing efforts to expand its higher technology, higher margin product lines have been significant factors in the growth of the Company's sales of electronic materials, and the Company introduced several new electronic materials products during the past three fiscal years. While the Company's sales increased during each of the last three fiscal years, the earnings growth that the Company achieved during its 1998 fiscal year did not continue in the 1999 fiscal year, primarily as a result of an earnings decline in the Company's North American electronic materials operations, which was caused by the loss of sales to Delco Electronics. Nevertheless, the Company's earnings growth resumed in the 2000 fiscal year, despite the significant losses incurred by the Company's mass lamination busi ness in Arizona which formerly supplied Delco Electronics and despite the significant charges related to the closure and the write-down of the assets of the plumbing hardware business and the 2000 fiscal year operating loss of that business. In the 2001 fiscal year, the Company's earnings reached record levels as a result of the surge in demand for the Company's electronic materials products throughout the global electronics markets served by the Company and the Company's continuing emphasis on its higher technology product lines. Growth of the Company's electronic materials business was constrained in various geographic regions during the last three fiscal years by the Company's available manufacturing capacity, although the Company has been expanding the manufacturing capacity of its electronic materials facilities in recent years. Nevertheless, all the Company's electronic materials facilities were operating at full capacity during the 2001 fiscal year. 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 its 2002 fiscal year. During the 2001 fiscal year, the Company commenced a significant expansion of its higher technology product line manufacturing facility in Arizona, which was recently completed. During the Company's 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. 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 and 2001 fiscal years and are expected to be nil in future years. In May 1998, the Company and its Nelco Technology, Inc. ("NTI") 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 alleged, among other things, that Delco breached its contract to purchase semi-finished multilayer printed circuit boards from NTI and that Delphi interfered with NTI'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 NTI to enter into the contract. The Company and NTI sought substantial compensatory and punitive damages. In November 2000, a jury awarded damages to NTI in the amount of $32,280,000, and in December 2000 the judge in the United States District Court for the District of Arizona entered judgment for NTI 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 filed motions for post-judgment relief and a new trial, all of which the judge denied, and both parties have filed notices to appeal the decision to the United States Court of Appeals for the Ninth Circuit in San Francisco. Although the Company's electronic materials business was not dependent on this single customer, the loss of this customer had a material adverse effect on this business in the last three fiscal years and may have a material adverse effect on this business in the fiscal year ending March 3, 2002 and in subsequent fiscal years. On April 26, 2001, the Company announced that it was selling the assets and business of NTI and announced that it expects to record a charge of approximately $15 million in its 2002 fiscal year first quarter ending May 27, 2001 in connection with the sale of NTI and the closure of a related support facility also located in Arizona. The Company also announced in late April 2001 that as a result of a severe correction and downturn in the global electronics industry, the Company's electronic materials sales volumes during the first two months of the 2002 fiscal year are running at approximately one half of the sales levels during the 2001 fiscal year and that the Company expects to report a loss in its 2002 fiscal year first quarter. Fiscal Year 2001 Compared with Fiscal Year 2000: The Company's electronic materials business was largely responsible for the dramatic improvement in the Company's results of operations for the fiscal year ended February 25, 2001. The North American, Asian and European markets for sophisticated printed circuit materials were extremely strong during the 2001 fiscal year, and the Company's electronic materials operations located in all three geographic areas performed well as a result. The Company's results of operations and margins improved in the 2001 fiscal year principally as a result of the optimal utilization of the electronic materials business' manufacturing resources and the business' increase in its market share with certain key customers and increase in its sales of higher technology, higher margin products. Results of Operations Sales for the fiscal year ended February 25, 2001 increased 23% to $522.2 million from $425.3 million for the fiscal year ended February 27, 2000. Sales of the electronic materials business for the 2001 fiscal year were $496.1 million, or 95% of total sales worldwide, compared with $392.3 million, or 92% of total sales worldwide, for the 2000 fiscal year. This 26% 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 specialty adhesive tape and advanced composite businesses increased during the 2001 fiscal year as the result of higher volume of materials shipped. Sales by the specialty adhesive tape and advanced composite businesses increased 24% to $24.2 million in the 2001 fiscal year from $19.5 million in the 2000 fiscal year. Sales of the plumbing hardware business, which the Company closed and liquidated in the first half of the 2001 fiscal year, declined from $13.5 million in the 2000 fiscal year to $1.9 million in the 2001 fiscal year. The Company's foreign operations accounted for $209.3 million of sales, or 40% of the Company's total sales worldwide, during the 2001 fiscal year compared with $159.1 million of sales, or 37% of total sales worldwide, during the 2000 fiscal year. Sales by the Company's foreign operations during the 2001 fiscal year increased 32% from the 2000 fiscal year. The increase in sales by the Company's foreign operations in the 2001 fiscal year was due to increases in sales by both the Asian and European operations of the Company. The gross margin for the Company's continuing worldwide operations was 22.5% during the 2001 fiscal year compared with 17.3% for the 2000 fiscal year. The increase in the gross margin was attributable to efficiencies achieved by operating facilities at levels close to their designed capacity in the 2001 fiscal year, the continuing growth in sales of higher technology, higher margin products as a percentage of total sales and increases in market share with certain key electronic materials customers. Selling, general and administrative expenses, measured as a percentage of sales, were 9.5% during the 2001 fiscal year compared with 10.7% during the 2000 fiscal year. This decrease was a result of the partially fixed nature of these expenses and the Company's increased sales in the 2001 fiscal year. For the reasons set forth above, profit from operations for the 2001 fiscal year increased 190% to $67.8 million from $23.4 million for the 2000 fiscal year. Interest and other income, principally investment income, increased 25% to $8.4 million for the 2001 fiscal year from $6.7 million for the 2000 fiscal year. The increase in investment income was attributable to increased cash available for investment and higher prevailing interest rates during the 2001 fiscal year. The Company's investments were primarily short-term taxable instruments and government securities. Interest expense for the 2001 fiscal year was $5.6 million compared with $5.7 million during the 2000 fiscal year. The Company's interest expense was related primarily to its $100 million principal amount of 5.5% Convertible Subordinated Notes due 2006 issued in February 1996. See "Liquidity and Capital Resources" elsewhere in this Item 7. The Company's effective income tax rate for the 2001 fiscal year was 30.0% compared with 25.0% for the 2000 fiscal year. This increase in the effective tax rate was primarily the result of a change in the Company's income mix among the tax jurisdictions in which the Company does business. Net earnings for the 2001 fiscal year increased 170% to $49.4 million from $18.3 million for the 2000 fiscal year. Basic and diluted earnings per share increased to $3.10 and $2.65, respectively, for the 2001 fiscal year from $1.16 and $1.12, respectively, for the 2000 fiscal year. This increase in net earnings and earnings per share was primarily attributable to the increase in the profit from operations offset, in part, by the higher effective tax rate. Fiscal Year 2000 Compared with Fiscal Year 1999: The Company's electronic materials business was largely responsible for the improvement in the Company's results of operations for the fiscal year ended February 27, 2000. The North American, European and Asian markets for sophisticated printed circuit materials strengthened during the 2000 fiscal year, and the Company's electronic materials operations located in each region performed well as a result. However, the absence of business with Delco Electronics during the 2000 fiscal year adversely affected the Company's sales volume in North America and negatively affected the Company's margins. The Company's results of operations and margins improved in the 2000 fiscal year principally as a result of the electronic material business' enhanced capacity utilization and the business' increase in its market share with certain key customers and increase in its sales of higher technology, higher margin products. 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 consummated in the 2000 fiscal year second quarter, price pressure exerted by customers, and, most important, significant pre-tax losses at its Arizona based business unit which formerly supplied Delco Electronics Corporation with semi-finished circuit boards, or mass lamination product, all of which negatively affected the Company's margins during the year. Operating results of the Company's specialty adhesive tape, advanced composite materials and plumbing hardware businesses declined severely during the 2000 fiscal year. This decline was attributable to a $4.5 million pre-tax charge for the closure of the plumbing hardware business and the related write- down of the assets of that business and to the $0.6 million operating loss of the plumbing hardware business during the year. Results of Operations Sales for the fiscal year ended February 27, 2000 increased 10% to $425.3 million from $387.6 million for the fiscal year ended February 28, 1999. Sales of the electronic materials business for the 2000 fiscal year were $392.3 million, or 92% of total sales worldwide, compared with $350.3 million, or 90% of total sales worldwide, for the 1999 fiscal year. This 12% 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 specialty adhesive tape, advanced composite materials and plumbing hardware businesses declined during the 2000 fiscal year due to reduced volume of plumbing hardware products shipped, which more than offset the sales increases by the specialty adhesive tape and advanced composite businesses. This resulted in an overall decline of 12% in the specialty adhesive tape, advanced composite materials and plumbing hardware businesses' sales to $33.0 million in the 2000 fiscal year from $37.3 million in the 1999 fiscal year. For the fiscal year ended February 27, 2000, sales of the Company's continuing operations, excluding the plumbing hardware business which the Company decided to close during the fourth quarter of the 2000 fiscal year, increased 11% to $411.9 million from $369.4 million for the fiscal year ended February 28, 1999. The Company's foreign operations accounted for $159.1 million of sales, or 37% of the Company's total sales worldwide, during the 2000 fiscal year, compared with $151.9 million of sales, or 39% of total sales worldwide, during the 1999 fiscal year. Sales by the Company's foreign operations during the 2000 fiscal year increased 5% from the 1999 fiscal year. The increase in sales by the Company's foreign operations in the 2000 fiscal year was principally due to an increase in sales by the Company's European electronic materials operations. The gross margin for the Company's worldwide operations was 16.2% during the 2000 fiscal year compared with 15.2% for the 1999 fiscal year. The gross margin for the Company's continuing worldwide operations, excluding the plumbing hardware business, was 17.3% during the 2000 fiscal year compared with 15.1% for the 1999 fiscal year. The improvement in the gross margin was attributable to the increases in sales volumes over the 1999 fiscal year, 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 consummated in the 2000 fiscal year second quarter, price pressure exerted by customers and the significant losses incurred by the Company's mass lamination business in Arizona which formerly supplied Delco Electronics. Selling, general and administrative expenses, measured as a percentage of sales, were 10.7% during the 2000 fiscal year and the 1999 fiscal year and, excluding the plumbing hardware business closure and asset write-down charge and operating loss, were 10.4% during the 2000 fiscal year and 10.5% during the 1999 fiscal year. The decline resulted from proportionately greater sales compared to the 1999 fiscal year. For the reasons set forth above, profit from operations for the 2000 fiscal year increased 34% to $23.4 million from $17.5 million for the 1999 fiscal year, while profit from the Company's continuing operations, excluding the plumbing hardware business, for the 2000 fiscal year increased 68% to $28.5 million from $17.0 million for the 1999 fiscal year. Interest and other income, principally investment income, declined 13% to $6.7 million for the 2000 fiscal year from $7.6 million for the 1999 fiscal year. The decrease in investment income was attributable to the reduction in cash available for investment and a decline in the prevailing interest rates during the 2000 fiscal year. The Company's investments were primarily short- term taxable instruments and government securities. Interest expense for the 2000 fiscal year was $5.7 million compared with $5.4 million during the 1999 fiscal year. The increase in interest expense was attributable to the reduction in interest capitalized to fixed assets. The Company's interest expense was related primarily to its $100 million principal amount of 5.5% Convertible Subordinated Notes due 2006 issued in February 1996. See "Liquidity and Capital Resources" elsewhere in this Item 7. The Company's effective income tax rate for the 2000 fiscal year was 25.0% compared with 22.0% for the 1999 fiscal year. This increase in the effective tax rate was primarily the result of a change in the Company's income mix among the tax jurisdictions in which the Company does business. Net earnings for the 2000 fiscal year increased 19% to $18.3 million from $15.4 million for the 1999 fiscal year. Basic and diluted earnings per share increased to $1.16 and $1.12, respectively, for the 2000 fiscal year from $0.93 and $0.92, respectively, for the 1999 fiscal year. This increase in net earnings and earnings per share was primarily attributable to the increase in the profit from operations, which was constricted by the higher effective tax rate, the charge for the closure and the related write-down of the assets of the plumbing hardware business, the operating loss of the plumbing hardware business and the loss incurred in the 2000 fiscal year by the business unit in Arizona which formerly supplied Delco Electronics Corporation with semi- finished multilayer circuit boards. Without the plumbing hardware business closure and asset write-down charge and operating loss, net earnings for the 2000 fiscal year would have increased 40% to $21.6 million from $15.4 million for the 1999 fiscal year, and basic and diluted earnings per share would have increased by $0.21 and $0.17, respectively, for the 2000 fiscal year. Liquidity and Capital Resources: At February 25, 2001, the Company's cash and temporary investments were $155.7 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 investment position at February 25, 2001 was attributable to increased cash provided from operating activities, as discussed below. The Company's working capital was $188.5 million at February 25, 2001 compared with $176.1 million at February 27, 2000. The increase at February 25, 2001 compared with February 27, 2000 was due principally to higher cash and temporary investments and inventories, offset in part by higher current liabilities. The increase in inventories and current liabilities at February 25, 2001 compared with February 27, 2000 was a result principally of increased operating activity in support of higher sales volumes. The Company's current ratio (the ratio of current assets to current liabilities) was 3.4 to 1 at February 25, 2001 compared with 3.9 to 1 at February 27, 2000. During the 2001 fiscal year, the Company generated funds from operations of $77.4 million and expended $51.8 million for the net purchase of property, plant and equipment. Cash provided by net earnings, before depreciation and amortization, of $66.1 million combined with a net decrease in non-cash working capital items resulted in $77.4 million of cash provided from operating activities. A major portion of the 2001 fiscal year's capital expenditures related to the expansions of the Company's electronic materials facilities in Arizona, California and New York. These expansions will increase the Company's capacity and capability for the production of sophisticated printed circuit materials. Net expenditures for property, plant and equipment were $51.8 million, $27.7 million and $24.4 million in the 2001, 2000 and 1999 fiscal years, respectively. The Company expects the capital expenditures in the 2002 fiscal year to be less than the expenditures in the 2001 fiscal year but greater than the expenditures in the 2000 fiscal year. At February 25, 2001, the Company's only long-term debt was the 5.5% Convertible Subordinated Notes due 2006 (the "Notes") issued at the end of the 1996 fiscal year. During the Company's 2001 fiscal year, $2,328,000 principal amount of Notes was converted into 82,750 shares of the Company's Common Stock, and immediately after the end of the 2001 fiscal year, $95,934,000 principal amount of Notes was converted into 3,410,908 shares of the Company's Common Stock, all at a conversion price of $28.125 per share. On March 2, 2001, the Company redeemed $1,738,000 principal amount of Notes for a redemption price of $1,000.15 (including accrued interest) for each $1,000 principal amount Note pursuant to a previous announcement that on March 2, 2001 it would redeem all of the outstanding Notes that were not converted on or before March 1, 2001. See Notes 6 and 16 of the Notes to Consolidated Financial Statements in Item 8 of this Report. The Company believes its financial resources will be sufficient, for the foreseeable future, to provide for continued investment 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: The Company is subject to various federal, state and local government requirements relating to the protection of the environment. The Company believes that, as a general matter, its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and that its handling, manufacture, use and disposal of hazardous or toxic substances are in accord with environmental laws and regulations. However, mainly because of past operations and operations of predecessor companies, which were generally in compliance with applicable laws at the time of the operations in question, the Company, like other companies engaged in similar businesses, is a party to claims by government agencies and third parties and has incurred remedial response and voluntary cleanup costs associated with environmental matters. Additional claims and costs involving past environmental matters may continue to arise in the future. It is the Company's policy to record appropriate liabilities for such matters when remedial efforts are probable and the costs can be reasonably estimated. In the 2001, 2000 and 1999 fiscal years, the Company charged approximately $0.3 million, $0.2 million and $0.2 million, respectively, against pretax income for 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 February 25, 2001 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 or consolidated financial position of the Company. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Report for a discussion of the Company's commitments and contingencies, including those related to environmental matters. Factors That May Affect Future Results. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their companies without fear of litigation so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the statement. 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, forecasted, estimated or budgeted by the Company in forward-looking statements. Accordingly, the Company hereby identifies the following important factors which could cause the Company's actual results to differ materially from any such results which might be projected, forecast, estimated or budgeted by the Company in forward-looking statements. . The Company's customer base is concentrated, in part, because the Company's business strategy has been to develop long-term relationships with a select group of customers. During the Company's fiscal year ended February 25, 2001, the Company's ten largest customers accounted for approximately 66.5% of net sales. The Company expects that sales to a relatively small number of customers will continue to account for a significant portion of its net sales for the foreseeable future. A loss of one or more of such key customers could affect the Company's profitability. See "Business- Electronic Materials Operations-Customers and End Markets" in Item 1 of this Report, "Legal Proceedings" in Item 3 of this Report and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Report for discussions of the loss of a key customer early in the 1999 fiscal year. . The Company's business is dependent on certain aspects of the electronics industry, which is a cyclical industry and which has experienced recurring downturns. The downturns, such as occurred in the first quarter of the Company's fiscal year ended March 2, 1997 and in the first quarter of the Company's fiscal year ending March 3, 2002, can be unexpected and have often reduced demand for, and prices of, electronic materials. . The Company's operating results are affected by a number of factors, including various factors beyond the Company's control. Such factors include economic conditions in the electronics industry, the timing of customer orders, product prices, process yields, the mix of products sold and maintenance-related shutdowns of facilities. Operating results also can be influenced by development and introduction of new products and the costs associated with the start-up of new facilities. . The Company's production processes require the use of substantial amounts of gas and electricity, the cost and available supply of which are beyond the control of the Company. Changes in the cost or availability of gas or electricity could materially increase the Company's cost of operations. . Rapid technological advances in semiconductors and electronic equipment have placed rigorous demands on the electronic materials manufactured by the Company and used in printed circuit board production. The Company's operating results will be affected by the Company's ability to maintain and increase its technological and manufacturing capability and expertise in this rapidly changing industry. . The electronic materials industry is intensely competitive and the Company competes worldwide in the market for materials used in the production of complex multilayer printed circuit boards. The Company's principal competitors are substantially larger and have greater financial resources than the Company, and the Company's operating results will be affected by its ability to maintain its competitive position in the industry. . There are a limited number of qualified suppliers of the prin cipal materials used by the Company in its manufacture of electronic materials products. Substitutes for these products are not readily available, and in the recent past there have been shortages in the market for certain of these materials. . The Company typically does not obtain long-term purchase orders or commitments. Instead, it relies primarily on continual communication with its customers to anticipate the future volume of purchase orders. A variety of conditions, both specific to the individual customer and generally affecting the customer's industry, can cause a customer to reduce or delay orders previously anticipated by the Company. . The Company, from time to time, is engaged in the expansion of certain of its manufacturing facilities for electronic materials. The anticipated costs of such expansions cannot be determined with precision and may vary materially from those budgeted. In addition, such expansions will increase the Company's fixed costs. The Company's future profitability depends upon its ability to utilize its manufacturing capacity in an effective manner. . The Company's business is capital intensive and, in addition, the introduction of new technologies could substantially increase the Company's capital expenditures. In order to remain competitive the Company must continue to make significant investments in capital equipment and expansion of operations. This may require that the Company continue to be able to access capital on terms acceptable to the Company. . The Company may acquire businesses, product lines or technologies that expand or complement those of the Company. The integration and management of an acquired company or business may strain the Company's management resources and technical, financial and operating systems. In addition, implementation of acquisitions can result in large one-time charges and costs. A given acquisition, if consummated, may materially affect the Company's business, financial condition and results of operations. . The Company's international operations are subject to risks, including unexpected changes in regulatory requirements, exchange rates, tariffs and other barriers, political and economic instability and potentially adverse tax consequences. . A portion of the sales and costs of the Company's international operations are denominated in currencies other than the U.S. dollar and may be affected by fluctuations in currency exchange rates. . The Company's success is dependent upon its relationship with key management and technical personnel. . The Company's future success depends in part upon its intel lectual property which the Company seeks to protect through a combination of contract provisions, trade secret protections, copyrights and patents. . The Company's production processes require the use, storage, treatment and disposal of certain materials which are considered hazardous under applicable environmental laws and the Company is subject to a variety of regulatory requirements relating to the handling of such materials and the release of emissions and effluents into the environment. Other possible developments, such as the enactment or adoption of additional environmental laws, could result in substantial costs to the Company. . The market price of the Company's securities can be subject to fluctuations in response to quarter to quarter variations in operating results, changes in analysts' earnings estimates, market conditions in the electronic materials industry, as well as general economic conditions and other factors external to the Company. . The Company's results could be affected by changes in the Company's accounting policies and practices or changes in the Company's organization, compensation and benefit plans, or changes in the Company's material agreements or understandings with third parties. Item 7A. 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 man agers 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 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 2001 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. Item 8. Financial Statements and Supplementary Data. The Company's Financial Statements begin on the next page. REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders of Park Electrochemical Corp. Lake Success, New York We have audited the accompanying consolidated balance sheets of Park Electrochemical Corp. and subsidiaries as of February 25, 2001 and February 27, 2000 and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended February 25, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Park Electrochemical Corp. and subsidiaries as of February 25, 2001 and February 27, 2000 and the consolidated results of their operations and their cash flows for each of the three years in the period ended February 25, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New York, New York April 27, 2001 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
Proforma (In thousands, except share (See Note 6) and per share amounts) February 25, February 25, February 27, 2001 2001 2000 ASSETS Unaudited Current assets: Cash and cash equivalents $121,988 $123,726 $ 53,153 Marketable securities (Note 2) 32,017 32,017 78,309 Accounts receivable, less allowance for doubtful accounts of $2,074 and $2,388, respectively 71,105 71,105 68,335 Inventories (Note 3) 32,307 32,307 27,368 Prepaid expenses and other 9,456 9,456 9,614 (Note 7) Total current assets 266,873 268,611 236,779 Property, plant and equipment, net of accumulated depreciation and amortization (Note 4) 159,309 159,309 125,977 Other assets (Note 7) 748 2,661 2,496 Total $426,930 $430,581 $365,252 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 29,481 $ 29,481 $ 24,964 Accrued liabilities (Notes 39,052 39,052 28,973 5 and 11) Income taxes payable 11,567 11,567 6,729 Total current 80,100 80,100 60,666 liabilities Long-term debt (Note 6) - 97,672 100,000 Deferred income taxes (Note 12,679 12,679 11,933 7) Deferred pension liability and other (Note 10) 11,224 11,224 13,535 Commitments and contingencies (Notes 10 and 11) Stockholders' equity (Notes 6, 8, 9 and 10): Preferred stock, $1 par value per share-authorized, 500,000 shares; issued, none - - - Common stock, $.10 par value per share-authorized, 60,000,000 and 30,000,000 shares, respectively; issued, 20,369,986 shares 2,037 2,037 2,037 Additional paid-in capital 129,959 57,318 54,115 Retained earnings 203,150 203,150 157,308 Accumulated other non- owner changes (5,764) (5,764) (5,291) 329,382 256,741 208,169 Less treasury stock, at cost, 1,030,451, 4,441,359 and 4,672,230 shares, respectively (6,455) (27,835) (29,051) Total stockholders' equity 322,927 228,906 179,118 Total $426,930 $430,581 $365,252 See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except share and per share amounts)
52 Weeks Ended February 25, February 27, February 28, 2001 2000 1999 Net sales $522,197 $425,261 $387,634 Cost of sales 404,527 351,841 328,884 Gross profit 117,670 73,420 58,750 Selling, general and administrative expenses 49,897 45,508 41,279 Closure of plumbing hardware business (Note 14) - 4,464 - Profit from operations 67,773 23,448 17,471 Other income: Interest and other income, 8,419 6,654 7,642 net Interest expense (Note 6) 5,593 5,720 5,400 Total other income 2,826 934 2,242 Earnings before income taxes 70,599 24,382 19,713 Income taxes (Note 7) 21,180 6,085 4,337 Net earnings $ 49,419 $ 18,297 $ 15,376 Earnings per share (Note 9): Basic $3.10 $1.16 $ .93 Diluted $2.65 $1.12 $ .92 See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share and per share amounts)
Additional Common Stock Paid-in Retained Shares Amount Capital Earnings Balance, March 1, 1998 20,369,986 $2,037 $52,311 $130,435 Net earnings 15,376 Exchange rate changes Change in pension liability adjustment Stock options exercised 118 Cash dividends ($.21 per share) (3,475) Purchase of treasury stock Comprehensive income Balance, February 28, 1999 20,369,986 2,037 52,429 142,336 Net earnings 18,297 Exchange rate changes Change in pension liability adjustment Market revaluation Stock options exercised 1,686 Cash dividends ($.21 per share) (3,325) Comprehensive income Balance, February 27, 2000 20,369,986 2,037 54,115 157,308 Net earnings 49,419 Exchange rate changes Change in pension liability adjustment Market revaluation Conversion of long-term debt 1,810 Stock options exercised 1,393 Purchase of treasury stock Cash dividends ($.23 per share) (3,577) Comprehensive income Balance, February 25, 2001 20,369,986 $2,037 $57,318 $203,150 See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share and per share amounts)
Accumulated Other Non- Comprehen- Owner Treasury Stock sive Changes Shares Amount Income Balance, March 1, 1998 $(1,266) 3,271,871 $(17,113) Net earnings $15,376 Exchange rate changes 98 98 Change in pension liability adjustment (634) (634) Stock options exercised (39,120) 211 Cash dividends ($.21 per share) Purchase of treasury stock 1,654,818 (13,452) Comprehensive income $14,840 Balance, February 28, 1999 (1,802) 4,887,569 (30,354) Net earnings $18,297 Exchange rate changes (3,407) (3,407) Change in pension liability adjustment 149 149 Market revaluation (231) (231) Stock options exercised (215,339) 1,303 Cash dividends ($.21 per share) Comprehensive income $14,808 Balance, February 27, 2000 (5,291) 4,672,230 (29,051) Net earnings $49,419 Exchange rate changes (2,255) (2,255) Change in pension liability adjustment 1,481 1,481 Market revaluation 301 301 Conversion of long-term debt (82,750) 519 Stock options exercised (156,666) 978 Purchase of treasury stock 8,545 (281) Cash dividends ($.23 per share) Comprehensive income $48,946 Balance, February 25, 2001 $(5,764) 4,441,359 $(27,835) See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
52 Weeks Ended February 25, February 27, February 28, 2001 2000 1999 Cash flows from operating activities: Net earnings $ 49,419 $ 18,297 $ 15,376 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 16,724 16,264 14,291 Provision for plumbing business closure costs - 3,230 - Provision for write-down of fixed assets 1,146 1,234 - Provision for doubtful accounts receivable 228 725 237 Provision for deferred income taxes 2,781 600 828 Other, net (1,026) 107 (165) Changes in operating assets and liabilities: Accounts receivable (4,324) (13,722) (3,624) Inventories (5,410) (2,831) 1,298 Prepaid expenses and other current assets (3,404) 292 333 Other assets (476) 1,281 579 Accounts payable 5,004 (5,140) (6,481) Accrued liabilities 10,599 3,922 (1,627) Income taxes payable 6,141 (2,777) 1,137 Net cash provided by operating activities 77,402 21,482 22,182 Cash flows from investing activities: Purchases of property, plant and (55,011) (27,846) (24,760) equipment Proceeds from sales of property, plant and equipment 3,250 117 385 Purchases of marketable securities (70,144) (127,677) (129,693) Proceeds from sales and maturities of marketable securities 117,245 152,388 140,031 Net cash used in investing (4,660) (3,018) (14,037) activities Cash flows from financing activities: Dividends paid (3,577) (3,325) (3,475) Proceeds from exercise of stock options 1,722 2,478 232 Purchase of treasury stock - - (13,452) Net cash used in financing activities (1,855) (847) (16,695) Increase (decrease) in cash and cash equivalents before effect of exchange rate changes 70,887 17,617 (8,550) Effect of exchange rate changes on cash and cash equivalents (314) (1,146) 130 Increase (decrease) in cash and cash equivalents 70,573 16,471 (8,420) Cash and cash equivalents, beginning 53,153 36,682 45,102 of year Cash and cash equivalents, end of year $123,726 $ 53,153 $ 36,682 See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three years ended February 25, 2001 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 interconnection systems. The Company's multilayer printed circuit board materials include copper-clad laminates and prepregs. Multilayer printed circuit boards and interconnection 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 and advanced composite materials for the electronics, aerospace and industrial markets. During the 2001 fiscal year, the Company closed and liquidated its plumbing hardware business. a. Principles of Consolidation - The consolidated financial statements include the accounts of Park and its subsidiaries. All significant intercompany balances and transactions have been eliminated. b. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. c. Accounting Period - The Company's fiscal year is the 52 or 53 week period ending the Sunday nearest to the last day of February. The 2001, 2000 and 1999 fiscal years ended on February 25, 2001, February 27, 2000 and February 28, 1999, respectively. Fiscal 2001, 2000 and 1999 each consisted of 52 weeks. d. Marketable Securities - All marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, included in comprehensive income. Realized gains and losses, amortization of premiums and discounts, and interest and dividend income are included in other income. The cost of securities sold is based on the specific identification method. e. Inventories - Inventories are stated at the lower of cost (first-in, first-out method) or market. f. Revenue Recognition - Revenues are recognized at the time product is shipped to the customer. g. Shipping Costs - The amounts paid to third-party shippers for transporting products to customers is classified as a selling expense. The amounts included in selling, general and administrative expenses were approximately $6,485,000, $6,483,000 and $6,704,000 for fiscal years 2001, 2000 and 1999, respectively. h. Depreciation and Amortization - Depreciation and amortization are computed principally by the straight-line method over the estimated useful lives of the related assets or, with respect to leasehold improvements, the term of the lease, if shorter. i. Deferred Charges - Costs incurred in connection with the issuance of debt are deferred and included in other assets and amortized, using the effective interest method, over the debt repayment period. j. Income Taxes - Deferred income taxes are provided for temporary differences in the reporting of certain items, primarily depreciation, for income tax purposes as compared with financial accounting purposes. United States ("U.S.") Federal income taxes have not been provided on the undistributed earnings (approximately $86,400,000 at February 25, 2001) of the Company's foreign subsidiaries, because it is management's practice and intent to reinvest such earnings in the operations of such subsidiaries. k. Foreign Currency Translation - Assets and liabilities of foreign subsidiaries using currencies other than the U.S. dollar as their functional currency are translated into U.S. dollars at fiscal year- end exchange rates, and income and expense items are translated at average exchange rates for the period. Gains and losses resulting from translation are recorded as currency translation adjustments in comprehensive income. l. Consolidated Statements of Cash Flows - The Company considers all money market securities and investments with maturities at the date of purchase of 90 days or less to be cash equivalents. Supplemental cash flow information:
Fiscal Year 2001 2000 1999 Cash paid during the year for: Interest $ 5,593,000 $5,524,000 $5,500,000 Income taxes 12,281,000 7,976,000 2,159,000
m. Financial Instruments - In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 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 effect on the Company's consolidated results of operations or financial position. 2. MARKETABLE SECURITIES The following is a summary of available-for-sale securities:
Gross Gross Amortized Unrealized Unrealized Estimated Fair Cost Gains Losses Value February 25, 2001: U.S. Treasury and other government $ 1,007,000 $ 11,000 $ - $ 1,018,000 securities U.S. corporate debt securities 30,800,000 231,000 102,000 30,929,000 Total debt 31,807,000 242,000 102,000 31,947,000 securities Equity securities 5,000 65,000 - 70,000 $ 31,812,000 $307,000 $102,000 $ 32,017,000 February 27, 2000: U.S. Treasury and other government $ 17,491,000 $ - $ 42,000 $ 17,449,000 securities U.S. corporate debt securities 61,070,000 3,000 259,000 60,814,000 Total debt 78,561,000 3,000 301,000 78,263,000 securities Equity securities 5,000 41,000 - 46,000 $ 78,566,000 $ 44,000 $301,000 $ 78,309,000
The gross realized gains on sales of available-for-sale securities totaled $26,000, $9,000 and $39,000 for fiscal 2001, 2000 and 1999, respectively, and the gross realized losses totaled $0, $11,000 and $9,000 for fiscal 2001, 2000 and 1999, respectively. The amortized cost and estimated fair value of the debt and marketable equity securities at February 25, 2001, by contractual maturity, are shown below:
Estimated Cost Fair Value Due in one year or less $26,069,000 $26,197,000 Due after one year through five years 5,738,000 5,750,000 31,807,000 31,947,000 Equity securities 5,000 70,000 $31,812,000 $32,017,000
3. INVENTORIES
February 25, February 27, 2001 2000 Raw materials $14,988,000 $10,870,000 Work-in-process 5,075,000 5,249,000 Finished goods 11,319,000 10,323,000 Manufacturing supplies 925,000 926,000 $32,307,000 $27,368,000
4. PROPERTY, PLANT AND EQUIPMENT
February 25, February 27, 2001 2000 Land, buildings and improvements $ 48,501,000 $ 44,606,000 Machinery, equipment, furniture and fixtures 233,078,000 190,656,000 281,579,000 235,262,000 Less accumulated depreciation and amortization 122,270,000 109,285,000 $159,309,000 $125,977,000
Depreciation and amortization expense relating to property, plant and equipment amounted to $16,724,000, $16,200,000 and $14,255,000 for fiscal 2001, 2000 and 1999, respectively. Pretax charges of $1,146,000 and $1,234,000 were recorded in fiscal 2001 and fiscal 2000, respectively, for the write-down of operating equipment that will no longer be utilized, to its estimated net realizable value. Interest expense capitalized to property, plant and equipment amounts to $239,000, $93,000 and $395,000 for fiscal 2001, 2000 and 1999, respectively. 5. ACCRUED LIABILITIES
February 25, February 27, 2001 2000 Payroll and payroll related $12,067,000 $ 8,991,000 Taxes, other than income taxes 1,139,000 1,884,000 Interest 2,700,000 2,750,000 Employee benefits 7,275,000 3,437,000 Environmental reserve 4,431,000 4,400,000 Other 11,440,000 7,511,000 $39,052,000 $28,973,000
6. LONG-TERM DEBT On February 28, 1996, the Company issued $100,000,000 principal amount of 5.5% Convertible Subordinated Notes due 2006 (the "Notes") with interest payable semiannually on March 1 and September 1 of each year, commencing September 1, 1996. The Notes were unsecured and subordinated to other long-term debt and were convertible at the option of the holder at any time prior to maturity, unless previously redeemed or repurchased, into shares of the Company's common stock at $28.125 per share, subject to adjustment under certain conditions. The Notes were not redeemable at the option of the Company prior to March 1, 1999; at any time on or after such date, the Notes were redeemable at the option of the Company, in whole or in part, initially at 102.75% of the principal amount of such Notes redeemed and thereafter at prices declining to 100% on March 1, 2001, together with accrued interest. Prior to February 25, 2001, $2,328,000 principal amount of the Notes were converted into 82,750 shares of the Company's common stock. At February 25, 2001 and February 27, 2000, the fair value of the Notes approximated $109,220,000 and $84,750,000, respectively. On March 1, 2001, subsequent to the Company's 2001 fiscal year end, $95,934,000 principal amount of Notes were converted into 3,410,908 shares of the Company's common stock, and the remaining $1,738,000 principal amount of Notes were redeemed by the Company for cash. The accompanying proforma balance sheet is adjusted as of February 25, 2001 to reflect the changes in long-term debt other assets and stockholders' equity as a result of the aforementioned transactions. Foreign lines of credit totaled $4,100,000 at February 25, 2001, all of which remains available to the Company's foreign subsidiaries. 7. INCOME TAXES The income tax provision includes the following:
Fiscal Year 2001 2000 1999 Current: Federal $ 8,367,000 $2,445,000 $ 724,000 State and local 1,509,000 339,000 608,000 Foreign 8,523,000 2,587,000 2,177,000 18,399,000 5,371,000 3,509,000 Deferred: Federal 1,722,000 (869,000) 31,000 State and local 259,000 (46,000) 62,000 Foreign 800,000 1,629,000 735,000 2,781,000 714,000 828,000 $21,180,000 $6,085,000 $4,337,000
The Company's effective income tax rate differs from the statutory U.S. Federal income tax rate as a result of the following: Fiscal Year 2001 2000 1999 Statutory U.S. Federal tax rate 35.0% 35.0% 35.0% State and local taxes, net of Federal benefit 1.6 0.8 2.0 Foreign tax rate differentials (8.3) (9.3) (13.7) Reversal of reserves no longer required - (3.1) (3.5) Other, net 1.7 1.6 2.2 30.0% 25.0% 22.0% The Company had foreign net operating loss carryforwards of approximately $31,600,000 and $39,500,000 in fiscal 2001 and 2000, respectively. Most of the net operating loss carryforwards were acquired in fiscal 1998 when the Company purchased the capital stock of Dielektra GmbH ("Dielektra"), a German corporation located in Cologne, Germany. Long-term deferred tax assets arising from these net operating loss carryforwards were valued at $0 at both February 25, 2001 and February 27, 2000, net of valuation reserves of approximately $11,400,000 and $19,500,000, respectively. None of the acquired net operating loss carryforwards relate to goodwill or other intangible assets. Approximately $1,100,000 of the foreign net operating loss carryforwards expire in varying amounts from fiscal 2002 through fiscal 2006, and the remainder have an indefinite expiration. At February 25, 2001 and February 27, 2000, current deferred tax assets of $1,844,000 and $3,879,000, respectively, which were primarily attributable to expenses not currently deductible, were included in other current assets. The long-term deferred tax liabilities consisted primarily of timing differences relating to depreciation. 8. STOCKHOLDERS' EQUITY a. Stock Split and Number of Authorized Shares - On October 10, 2000, the Company's Board of Directors approved a three-for-two stock split in the form of a stock dividend. The stock dividend was distributed November 8, 2000 to stockholders of record on October 20, 2000. All share and per share data for prior periods has been retroactively restated to reflect the stock split. In addition, on October 10, 2000, the Company's stockholders approved an increase in the number of authorized shares of common stock from 30,000,000 to 60,000,000 shares. b. Stock Options - Under the 1992 Stock Option Plan (the "Plan") approved by the Company's stockholders, directors and key employees may be granted options to purchase shares of common stock of the Company exercisable at prices not less than the fair market value at the date of grant. Options become exercisable 25% one year from the date of grant, with an additional 25% exercisable each succeeding anniversary of the date of grant. On July 12, 2000, the Company's stockholders approved an amendment to the Plan to increase the aggregate number of shares of Common Stock authorized for issuance under the Plan by 450,000 shares. Options to purchase a total of 2,625,000 shares of common stock are authorized for grant under such Plan. The Plan will expire in March 2002. The Company has elected the disclosure provision of Statement of Financial Standards No. 123, "Accounting for Stock-Based Compensation", and continues to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related interpretations in accounting for the Plan. Under APB 25, because the exercise price of the granted options is not less than the market price at the date of the grant, no compensation expense is recognized. The weighted averaged fair value for options was estimated at the date of grant using the Black-Scholes option-pricing model to be $8.40 for fiscal 2001, $5.77 for fiscal 2000 and $4.92 for fiscal 1999, with the following weighted average assumptions: risk free interest rate of 5.0% for fiscal 2001 and 5.5% for fiscal 2000 and 1999; expected volatility factors of 39%, 40% and 41% for fiscal 2001, 2000 and 1999, respectively; expected dividend yield of 1.5% for fiscal 2001 and 2% for fiscal 2000 and 1999; and estimated option lives of 4.0 years for fiscal 2001, 3.6 years for fiscal 2000 and 4.1 years for fiscal 1999. For the purpose of pro forma disclosures, the effect of applying SFAS 123 on net income and earnings per share for fiscal 2001, 2000 and 1999 would approximate the amounts shown below (in thousands, except EPS data):
2001 2000 1999 As Pro As Pro As Pro Reported forma Reported forma Reported forma Net income $49,419 $47,935 $18,297 $17,303 $15,376 $14,692 EPS-basic $ 3.10 $ 3.01 $ 1.16 $ 1.10 $ .93 $ .89 EPS-diluted $ 2.65 $ 2.58 $ 1.12 $ 1.07 $ .92 $ .89
Information with respect to the Plan follows:
Weighted Average Range of Outstanding Exercise Exercise Prices Options Price Balance, March 1, 1998 $ 3.67 -$18.42 937,088 $11.62 Granted 12.59 - 15.83 269,400 15.56 Exercised 3.67 - 16.42 (39,120) 5.93 Cancelled 8.75 - 16.42 (26,130) 14.87 Balance, February 28, 1999 $ 3.67 -$18.42 1,141,238 $12.67 Granted 16.37 - 23.96 346,350 16.71 Exercised 3.67 - 16.42 (217,589) 11.61 Cancelled 8.75 - 16.54 (54,205) 15.91 Balance, February 27, 2000 $ 3.67 -$23.96 1,215,794 $13.87 Granted 15.92 - 43.63 360,075 23.71 Exercised 3.67 - 18.42 (156,667) 12.79 Cancelled 4.54 - 16.54 (61,050) 16.16 Balance, February 25,2001 $ 3.67 -$43.63 1,358,152 $16.50 Exercisable, February 25, $ 3.67 -$23.96 611,174 $10.68 2001
The following table summarizes information concerning currently outstanding and exercisable options.
Options Outstanding Options Exercisable Weighted Average Remaining Weighted Weighted Contractual Average Number Average Range of Number of Life Exercise Exercis- Exercise Exercise Prices Outstanding (Years) Price able Price $ 3.67 -$ 9.99 210,450 2.27 $ 6.17 210,450 $ 6.17 10.00 - 19.99 1,008,202 6.66 15.89 398,474 15.54 20.00 - 43.63 139,500 9.54 36.43 2,250 23.96 1,358,152 611,174
Stock options available for future grant under the Plan at February 25, 2001 and February 27, 2000 were 737,096 and 586,421, respectively. c. Stockholders' Rights Plan - On February 2, 1989, the Company adopted a stockholders' rights plan designed to protect stockholder interests in the event the Company is confronted with coercive or unfair takeover tactics. Under the terms of the plan, as amended on July 12, 1995, each share of the Company's common stock held of record on February 15, 1989 or issued thereafter received one right. In the event that a person has acquired, or has the right to acquire, 15% (25% in certain cases) or more of the then outstanding common stock of the Company (an "Acquiring Person") or tenders for 15% or more of the then outstanding common stock of the Company, such rights will become exercisable, unless the Board of Directors otherwise determines. Upon becoming exercisable as aforesaid, each right will entitle the holder thereof to purchase one one-hundredth of a share of Series A Preferred Stock for $75, subject to adjustment (the "Purchase Price"). In the event that any person becomes an Acquiring Person, each holder of an unexercised exercisable right, other than an Acquiring Person, shall have the right to purchase, at a price equal to the then current Purchase Price, such number of shares of the Company's common stock as shall equal the then current Purchase Price divided by 50% of the then market price per share of the Company's common stock. In addition, if after a person becomes an Acquiring Person, the Company engages in any of certain business combination transactions as specified in the plan, the Company will take all action to ensure that, and will not consummate any such business combination unless, each holder of an unexercised exercisable right, other than an Acquiring Person, shall have the right to purchase, at a price equal to the then current Purchase Price, such number of shares of common stock of the other party to the transaction for each right held by such holder as shall equal the then current Purchase Price divided by 50% of the then market price per share of such other party's common stock. The Company may redeem the rights for a nominal consideration at any time, and after any person becomes an Acquiring Person, but before any person becomes the beneficial owner of 50% or more of the outstanding common stock of the Company, the Company may exchange all or part of the rights for shares of the Company's common stock at a one-for-one exchange ratio. Unless redeemed, exchanged or exercised earlier, all rights expire on July 12, 2005. d. Reserved Common Shares - At February 25, 2001, 3,472,763 shares of common stock were reserved for issuance upon conversion of the Notes and 2,095,248 shares were reserved for issuance upon exercise of stock options. e. Accumulated Other Non-Owner Changes - Accumulated balances related to each component of other comprehensive income (loss) were as follows:
February 25, February 27, 2001 2000 Currency translation $(5,855) $(3,600) adjustment Pension liability (43) (1,524) adjustment Unrealized gains/(losses) on investments 134 (167) Accumulated balance $(5,764) $(5,291)
9. EARNINGS PER SHARE The following table sets forth the calculation of basic and diluted earnings per share for the fiscal years:
2001 2000 1999 Net income for basic EPS $49,419,000 $18,297,000 $15,376,000 Add interest on 5.5% Convertible Subordinated Notes, net of taxes 3,585,000 3,702,000 - Net income for diluted EPS $53,004,000 $21,999,000 $15,376,000 Weighted average common shares outstanding for 15,932,000 15,761,000 16,470,000 basic EPS Net effect of dilutive options 548,000 327,000 237,000 Assumed conversion of 5.5% Convertible Subordinated Notes 3,522,000 3,555,000 - Weighted average shares outstanding for diluted EPS 20,002,000 19,643,000 16,707,000 EPS-basic $3.10 $1.16 $ .93 EPS-diluted $2.65 $1.12 $ .92
During the first half of the 2001 fiscal year, the Company closed and liquidated its plumbing hardware business. The net income shown above includes losses of $25,000 and $5,022,000 for the 2001 and 2000 fiscal years, respectively, and profits of $476,000 for the 1999 fiscal year for the discontinued plumbing hardware business. The weighted average number of shares outstanding and the earnings per share for each year have been adjusted to give retroactive effect to the three-for-two split of the Company's common stock declared October 10, 2000 payable November 8, 2000 to stockholders of record on October 20, 2000. 10. EMPLOYEE BENEFIT PLANS a. Profit Sharing Plan - Park and certain of its subsidiaries have a non- contributory profit sharing retirement plan covering their regular full-time employees. The plan may be modified or terminated at any time, but in no event may any portion of the contributions revert back to the Company. The Company's contributions under the plan amounted to $4,597,000, $2,269,000 and $1,641,000 for fiscal 2001, 2000 and 1999, respectively. Contributions are discretionary and may not exceed the amount allowable as a tax deduction under the Internal Revenue Code. In addition, the Company sponsors a 401(k) savings plan, pursuant to which the contributions of employees of certain subsidiaries were partially matched by the Company in the amounts of $751,000, $848,000 and $789,000 in fiscal 2001, 2000 and 1999, respectively. b. Pension Plans - The domestic subsidiary of the Company which conducted the plumbing hardware business had two pension plans, neither of which are active, covering its union employees. On February 27, 2000, the two plans were merged in order to simplify the administration of the plans. The Company's funding policy is to contribute annually the amounts necessary to satisfy applicable funding standards. There were no changes made to funding levels or retiree benefits as a result of the merger of the two plans. In connection with the closure of the plumbing hardware business, the Company terminated the plan and purchased annuity contracts to fund the pension liability. A foreign subsidiary of the Company has a non-contributory defined benefit plan which covers certain employees. Under the terms of the plan, participants may not accrue additional service time after December 31, 1987. The Company's policy with respect to this plan is to contribute annually the amounts necessary to meet current payment obligations of the plan. The Company records its deferred pension liability related to its two defined benefit pension plans in accordance with SFAS 87 which amounted to $8,451,000 and $9,773,000 at February 25, 2001 and February 27, 2000, respectively. The effect on the Company's consolidated financial statements in recording the liability was to record a corresponding reduction to accumulated non-owner changes of $43,000 and $1,524,000 at those same dates. Net pension costs include the following components:
Fiscal Year Changes in Benefit Obligation 2001 2000 Benefit obligation at beginning $14,130,000 $ 14,601,000 of year Service cost 96,000 97,000 Interest cost 839,000 953,000 Actuarial loss 148,000 513,000 Currency translation (gain)/loss (633,000) (1,189,000) Benefits paid (871,000) (845,000) Payment for annuities (4,301,000) - Benefit obligation at end of $ 9,408,000 $ 14,130,000 year Changes in Plan Assets Fair value of plan assets at beginning of year $ 3,213,000 $ 3,261,000 Actual return on plan assets 169,000 (38,000) Employer contributions 1,831,000 835,000 Benefits paid (871,000) (845,000) Payment for annuities (4,301,000) - Administrative expenses paid (41,000) - Fair value of plan assets $ - $ 3,213,000 Underfunded status $(9,408,000) $(10,917,000) Unrecognized net transition obligation - (1,000) Unrecognized net loss 1,000,000 2,669,000 Net accrued pension cost $(8,408,000) $ (8,249,000)
Fiscal Year Components of Net Periodic Benefit 2001 2000 1999 Cost Service cost - benefits earned during the period $ 96,000 $ 97,000 $ 131,000 Interest cost on projected benefit 839,000 953,000 949,000 obligation Expected return on plan assets (252,000) (262,000) (250,000) Amortization of unrecognized transition obligation - 17,000 29,000 Amortization of prior service cost - 14,000 24,000 Recognized net actuarial loss 38,000 58,000 53,000 Effect of curtailment 1,761,000 144,000 - Net periodic pension cost $2,482,000 $1,021,000 $ 936,000
The projected benefit obligation for the domestic plan was determined using an assumed discount rate of 7.50% for fiscal 2000 and the assumed long-term rate of return on plan assets was 8%. Projected wage increases are not applicable as benefits pursuant to the plan are based upon years of service without regard to levels of compensation. The projected benefit obligation for the foreign plan was determined using an assumed discount rate of 6% for fiscal years 2001 and 2000. Projected wage increases of 2.1% and 3% and inflation factors of 1.5% and 2% were also assumed for fiscal years 2001 and 2000, respectively. As previously stated, the Company's funding policy with respect to this plan is to contribute annually the amounts necessary to meet current payment obligations of the plan. 11. COMMITMENTS AND CONTINGENCIES a. Lease Commitments - The Company conducts certain of its operations in leased facilities, which include several manufacturing plants, warehouses and offices, and land leases. The leases on facilities are for terms of up to 10 years, the latest of which expires in 2008. Many of the leases contain renewal options for periods ranging from one to ten years and require the Company to pay real estate taxes and other operating costs. The latest land lease expiration is 2013 and this land lease contains renewal options of up to 35 years. These non-cancelable operating leases have the following payment schedule. Fiscal Amount Year 2002 $ 2,452,000 2003 1,640,000 2004 962,000 2005 477,000 2006 342,000 Thereafter 700,000 $6,573,000 Rental expense, inclusive of real estate taxes and other costs, amounted to $3,710,542, $3,424,000 and $2,861,000 for fiscal 2001, 2000 and 1999, respectively b. Environmental Contingencies - The Company and certain of its subsidiaries have been named by the Environmental Protection Agency (the "EPA") or a comparable state agency under the Comprehensive Environmental Response, Compensation and Liability Act (the "Superfund Act") or similar state law as potentially responsible parties in connection with alleged releases of hazardous substances at nine sites. In addition, a subsidiary of the Company has received cost recovery claims under the Superfund Act from other private parties involving two other sites, and has received requests from the EPA under the Superfund Act for information with respect to its involvement at three other sites. Under the Superfund Act and similar state laws, all parties who may have contributed any waste to a hazardous waste disposal site or contaminated area identified by the EPA or comparable state agency may be jointly and severally liable for the cost of cleanup. Generally, these sites are locations at which numerous persons disposed of hazardous waste. In the case of the Company's subsidiaries, generally the waste was removed from their manufacturing facilities and disposed at waste sites by various companies which contracted with the subsidiaries to provide waste disposal services. Neither the Company nor any of its subsidiaries have been accused of or charged with any wrongdoing or illegal acts in connection with any such sites. The Company believes it maintains an effective and comprehensive environmental compliance program. The insurance carriers that provided general liability insurance coverage to the Company and its subsidiaries for the years during which the Company's subsidiaries' waste was disposed at these sites have agreed to pay, or reimburse the Company and its subsidiaries for, 100% of their legal defense and remediation costs associated with three of these sites and 25% of such costs associated with another three of these sites. The total costs incurred by the Company and its subsidiaries in connection with these sites, including legal fees incurred by the Company and its subsidiaries and their assessed share of remediation costs and excluding amounts paid or reimbursed by insurance carriers, were approximately $300,000, $200,000 and $200,000 in fiscal 2001, 2000 and 1999, respectively. The recorded liabilities included in accrued liabilities for environmental matters were $4,431,000 at February 25, 2001, $4,350,000 at February 27, 2000 and $3,500,000 at February 28, 1999. Included in cost of sales are charges for actual expenditures and accruals, based on estimates, for certain environmental matters described above. The Company accrues estimated costs associated with known environmental matters, when such costs can be reasonably estimated and when the outcome appears probable. Management believes the ultimate disposition of known environmental matters will not have a material adverse effect on the liquidity, capital resources, business or consolidated financial position of the Company. However, one or more of such environmental matters could have a significant negative impact on the Company's consolidated financial results for a particular reporting period. 12. BUSINESS SEGMENTS The Company's specialty adhesive tape and film business, advanced composite business and plumbing hardware business were previously aggregated into the engineered materials and plumbing hardware segment. During fiscal 2001, the Company closed and liquidated its plumbing hardware business (See Note 14). In fiscal 2001, 2000 and 1999, the specialty adhesive tape, advanced composite and plumbing hardware businesses comprised less than 10% of the Company's consolidated revenues and assets, and the Company considered itself to operate in one business segment. The Company's electronic materials products are marketed primarily to major independent printed circuit board fabricators, contract manufacturers and, to a lesser extent, large electronic original equipment manufacturers ("OEMs") located throughout North America, Europe and Asia. The Company's specialty adhesive tape and advanced composite customers, the majority of which are located in the United States, include OEMs, independent firms and distributors in the electronics, aerospace and industrial industries. Sales are attributed to geographic region based upon the region from which the materials were shipped to the customer. Intersegment sales and sales between geographic areas were not significant. Financial information regarding the Company's operations by geographic area follows (in thousands):
Fiscal Year 2001 2000 1999 United States $312,851 $266,158 $235,699 Europe 121,329 95,812 90,112 Asia 88,017 63,291 61,823 Total sales $522,197 $425,261 $387,634 United States $108,804 $ 74,846 $ 65,231 Europe 24,657 27,484 30,948 Asia 26,596 24,092 22,814 Total long-lived assets $160,057 $126,422 $118,993
13. CUSTOMER AND SUPPLIER CONCENTRATIONS a. Customers - Sales to Sanmina Corporation were 25.1% and 23.4% of the Company's total worldwide sales for fiscal years 2001 and 2000, respectively. The fiscal year 2000 percentage has been adjusted to reflect the combined sales to Sanmina Corporation and Hadco Corporation, which merged into Sanmina Corporation in June 2000. While no other customer accounted for 10% or more of the total sales of the Company in fiscal 2001, and the Company is not dependent on any single customer, the loss of a major electronic materials customer or of a group of customers could have a material adverse effect on the Company's business. b. Sources of Supply - The principal materials used in the manufacture of the Company's electronic materials products are specially manufactured copper foil, fiberglass cloth and synthetic reinforcements, and specially formulated resins and chemicals. Although there are a limited number of qualified suppliers of these materials, the Company has nevertheless identified alternate sources of supply for each of the aforementioned materials. While the Company has not experienced significant problems in the delivery of these materials and considers its relationships with its suppliers to be strong, a disruption of the supply of material from a principal supplier could adversely affect the Company's electronic materials business. Furthermore, substitutes for the aforesaid materials are not readily available and an inability to obtain essential materials, if prolonged, could materially adversely affect the Company's electronic materials business. 14. CLOSURE OF THE PLUMBING HARDWARE BUSINESS In the fourth quarter of the 2000 fiscal year, the Company decided to close and liquidate its plumbing hardware business. The pre-tax charges to earnings for the 2000 fiscal year related to the closure of the plumbing hardware business totaled $4,464,000, including $1,234,000 for the impairment of long-lived assets, $1,111,000 for other asset write-offs, and $2,119,000 for facility and other costs related to the closure. During the 2001 fiscal year, the Company closed and liquidated its plumbing hardware business. In the fourth quarter of the 2001 fiscal year, the Company realized $1,262,000 in gains from the sale of real estate and other plumbing hardware business assets, collected $290,000 more of accounts receivable than originally anticipated, and reversed $600,000 of liabilities accrued in fiscal year 2000 for other costs to close the business, which were no longer required. At February 25, 2001, there are $875,000 of accrued liabilities remaining related to the closure of the plumbing hardware business. In the fourth quarter of the 2001 fiscal year, an expense of $1,149,000 was incurred for the purchase of annuity contracts to fund the liability of the pension plan that was terminated. The operating results of the plumbing hardware business included in the Consolidated Statement of Earnings are as follows (in thousands):
52 Weeks Ended February 25, February 27, February 28, 2001 2000 1999 Net sales $1,883 $13,491 $18,197 Cost of sales 1,001 11,486 15,080 Gross profit 882 2,005 3,117 Selling, general and 907 2,563 2,641 administrative expenses (Loss) profit from $ (25) $ (558) $ 476 operations
15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter First Second Third Fourth (In thousands, except per share amounts) Fiscal 2001: Net sales $120,159 $129,902 $142,608 $129,528 Gross profit 23,695 28,393 34,116 31,466 Net earnings 8,829 11,655 14,827 14,108 Earnings per share: Basic $.56 $.73 $.93 $.88 Diluted $.50 $.63 $.78 $.74 Weighted average common shares outstanding: Basic 15,858 15,882 15,940 16,047 Diluted 19,602 19,939 20,217 20,249 Fiscal 2000: Net sales $104,454 $107,729 $108,183 $104,895 Gross profit 19,030 19,418 18,704 16,268 Net earnings 5,698 6,047 5,790 762 Earnings per share: Basic $.37 $.39 $.37 $.05 Diluted $.34 $.35 $.34 $.05 Weighted average common shares outstanding: Basic 15,645 15,734 15,819 15,848 Diluted 19,458 19,644 19,832 16,085
During the fourth quarter of the 2000 fiscal year, the Company decided to close and liquidate its plumbing hardware business. The pre-tax charges to earnings for the fourth quarter of the 2000 fiscal year related to the discontinued plumbing hardware business totaled $5,022,000, including $1,234,000 related to the impairment of long-lived assets, $1,111,000 for other asset write-offs, $2,119,000 for other facility and costs related to the plumbing hardware business closure, and $520,000 of operating losses. Without the plumbing hardware business charges and operating loss in the fourth quarter of the 2000 fiscal year, the net earnings for the quarter would have been $4,002,000 and the basic and diluted earnings per share for the quarter would have increased by $.21 and $.20, respectively. Earnings per share is computed separately for each quarter. Therefore, the sum of such quarterly per share amounts may differ from the total for the years. The weighted average number of shares outstanding and the earnings per share for each period, have been adjusted to give retroactive effect to the three-for-two split of the Company's common atock declared October 10, 2000 payable November 8, 2000 to stockholders of record on October 20, 2000. 16. SUBSEQUENT EVENTS On March 1, 2001, $95,934,000 principal amount of the Company's 5.5% Convertible Subordinated Notes due March 1, 2006 were converted into 3,410,908 shares of the Company's common stock, and the remaining $1,738,000 principal amount of the Notes were redeemed by the Company on March 2, 2001 for cash. On April 27, 2001, the Company sold the assets and business of its wholly owned subsidiary, Nelco Technology, Inc. ("NTI"), to Dynamic Details Incorporated, Arizona, a wholly owned subsidiary of DDi Corp. NTI was a manufacturer of semi-finished printed circuit boards, commonly known as mass lamination. The Company expects to record a charge of approximately $15 million in its fiscal 2002 first quarter in connection with this sale and the closure of a related support facility. For the fiscal year ended February 25, 2001, NTI had net sales of approximately $39 million of mass lamination products. ******* Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. The information called for by this item (except for information as to the Company's executive officers, which information appears elsewhere in this Report) is incorporated by reference to the Company's definitive proxy statement for the 2001 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A. Item 11. Executive Compensation. The information called for by this Item is incorporated by reference to the Company's definitive proxy statement for the 2001 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information called for by this Item is incorporated by reference to the Company's definitive proxy statement for the 2001 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions. The information called for by this Item is incorporated by reference to the Company's definitive proxy statement for the 2001 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A. PART IV Item 14. Exhibits, Financial Statement Schedules, and Page Reports on Form 8-K. (a) Documents filed as a part of this Report (1) Financial Statements: The following Consolidated Financial Statement of the Company are included in Part II, Item 8: Report of Ernst & Young LLP, independent auditors Balance Sheets Statement of Earnings Statement of Stockholders' Equity Statement of Cash Flows Notes to Consolidated Financial Statement (1-16) (2) Financial Statement Schedules: The following additional information should be read in conjunction with the Consolidated Financial Statements of the Registrant described in item 14(a)(1) above: Schedule II - Valuation and Qualifying Accounts All other schedules have been omitted because they are not applicable or not required, or the information is included elsewhere in the financial statements or notes thereto. (3) Exhibits: The information required by this Item relating to Exhibits to this Report is included in the Exhibit Index on pages 54 to 59 hereof. (b) Reports on Form 8-K. No reports on Form 8-K have been filed during the fiscal quarter ended February 25, 2001. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 23, 2001 PARK ELECTROCHEMICAL CORP. By:/s/Brian E. Shore Brian E. Shore, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/Brian E. Shore President and Chief Brian E. Shore Executive Officer and Director May 23, 2000 (principal executive officer) /s/Murray O. Stamer Senior Vice President, Murray O. Stamer Finance (principal financial and May 23, 2000 accounting officer) /s/Jerry Shore Chairman of the Board and Jerry Shore Director May 23, 2000 /s/Mark S. Ain Mark S. Ain Director May 23, 2000 /s/Anthony Chiesa Anthony Chiesa Director May 23, 2000 /s/Lloyd Frank Lloyd Frank Director May 23, 2000 /s/Ronald F. Ostrow Ronald F. Ostrow Director May 23, 2000 Schedule II PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Column A Column B Column C Balance at Charged to Beginning Cost and Description of Period Expenses ALLOWANCE FOR DOUBTFUL ACCOUNTS: 52 weeks ended February 25, 2001 $2,388,000 $ 228,000 52 weeks ended February 27, 2000 $2,030,000 $ 725,000 52 weeks ended February 28, 1999 $1,858,000 $ 238,000 Schedule II (continued) PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Column D Column E Other Balance at Accounts Translation End of Written Adjustment Period Off (A) $(477,000) $ (65,000) $2,074,000 $(332,000) $ (35,000) $2,388,000 $ $ (3,000) $2,030,000 (63,000) (A) Uncollectable accounts, net of recoveries.
EXHIBIT INDEX Exhibit Numbers Description Page 3.01 Restated Certificate of Incorporation, dated March 28, 1989, filed with the Secretary of State of the State of New York on April 10, 1989, as amended by Certificate of Amendment of the Certificate of Incorporation, increasing the number of authorized shares of Common stock from 15,000,000 to 30,000,000 shares, dated July 12, 1995, filed with the Secretary of State of the State of New York on July 17, 1995, and by Certificate of Amendment of the Certificate of Incorporation, amending certain provisions relating to the rights, preferences and limitations of the shares of a series of Preferred Stock, date August 7, 1995, filed with the Secretary of State of the State of New York on August 16, 1995 (Reference is made to Exhibit 3.01 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 27, 1995, Commission File No. 1- 4415, which is incorporated herein by reference.) - 3.02 By-Laws, as amended March 15, 1999. (Reference is made to Exhibit 3(i) the Company's Current Report on Form 8- K dated March 15, 1999, Commission File No. 1-4415, which is incorporated herein by reference.) - 4.01 Amended and Restated Rights Agreement, dated as of July 12, 1995, between the Company and Registrar and Transfer Company, as Rights Agent, relating to the Company's Preferred Stock Purchase Rights. (Reference is made to Exhibit 1 to Amendment No. 1 on Form 8-A/A filed on August 10, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.01 Lease dated December 12, 1989 between Nelco Products, Inc. and James Emmi regarding real property located at 1100 East Kimberly Avenue, Anaheim, California and letter dated December 29, 1994 from Nelco Products, Inc. to James Emmi exercising its option to extend such Lease. (Reference is made to Exhibit 10.01 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.02 Lease dated December 12, 1989 between Nelco Products, Inc. and James Emmi regarding real property located at 1107 East Kimberly Avenue, Anaheim, California and letter dated December 29, 1994 from Nelco Products, Inc. to James Emmi exercising its option to extend such Lease. (Reference is made to Exhibit 10.02 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.03 Lease Agreement dated August 16, 1983 and Exhibit C, First Addendum to Lease, between Nelco Products, Inc. and TCLW/Fullerton regarding real property located at 1411 E. Orangethorpe Avenue, Fullerton, California. (Reference is made to Exhibit 10.03 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.03(a) Second Addendum to Lease dated January 26, 1987 to Lease Agreement dated August 16, 1983 (see Exhibit 10.03 hereto) between Nelco Products, Inc. and TCLW/Fullerton regarding real property located at 1421 E. Orangethorpe Avenue, Fullerton, California. (Reference is made to Exhibit 10.03(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.03(b) Third Addendum to Lease dated January 7, 1991 and Fourth Addendum to Lease dated January 7, 1991 to Lease Agreement dated August 16, 1983 (see Exhibit 10.03 hereto) between Nelco Products, Inc. and TCLW/Fullerton regarding real property located at 1411, 1421 and 1431 E. Orangethorpe Avenue, Fullerton, California. (Reference is made to Exhibit 10.03(b) of the Company's Annual Report on Form 10-K for the fiscal year ended March 2, 1997, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.03(c) Fifth Addendum to Lease dated July 5, 1995 to Lease dated August 16, 1983 (see Exhibit 10.03 hereto) between Nelco Products, Inc. and TCLW/Fullerton regarding real property located at 1411 E. Orangethorpe Avenue, Fullerton, California. (Reference is made to Exhibit 10.03(c) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.04 Lease Agreement dated May 26, 1982 between Nelco Products Pte. Ltd. (lease was originally entered into by Kiln Technique (Private) Limited, which subsequently assigned this lease to Nelco Products Pte. Ltd.) and the Jurong Town Corporation regarding real property located at 4 Gul Crescent, Jurong, Singapore. (Reference is made to Exhibit 10.05 of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.04(a) Deed of Assignment, dated April 17, 1986 between Nelco Products Pte. Ltd., Kiln Technique (Private) Limited and Paul Ma, Richard Law, and Michael Ng, all of Peat Marwick & Co., of the Lease Agreement dated May 26, 1982 (see Exhibit 10.04 hereto) between Kiln Technique (Private) Limited and the Jurong Town Corporation regarding real property located at 4 Gul Crescent, Jurong, Singapore. (Reference is made to Exhibit 10.05(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.05(a) Amended and Restated 1982 Stock Option Plan of the Company. (Reference is made to Exhibit 10.06(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1992, Commission File No. 1-4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) - 10.05(b) 1992 Stock Option Plan of the Company, as amended by First Amendment thereto. (Reference is made to Exhibit 10.06(b) of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1998, Commission File No. 1-4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) - 10.06 Amended and Restated Employment Agreement dated February 28, 1994 between the Company and Jerry Shore. (Reference is made to Exhibit 10.07(c) of the Company's Annual Report on Form 10-K for the fiscal year ended February 27, 1994, Commission File No. 1-4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) - 10.06(a) Amendment No. 1 dated March 1, 1995 to the Amended and Restated Employment Agreement dated February 28, 1994 (see Exhibit 10.06 hereto) between the Company and Jerry Shore. (Reference is made to Exhibit 10.07(c) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1- 4415, which exhibit is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) - 10.06(b) Amendment No. 2 dated December 5, 1996 to the Amended and Restated Employment Agreement dated February 28, 1994 (see Exhibit 10.06 hereto) between the Company and Jerry Shore. (Reference is made to Exhibit 10.07(b) of the Company's Annual Report on Form 10-K for the fiscal year ended March 2, 1997, Commission File No. 1-4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) - 10.06(c) Amendment No. 3 dated October 14, 1997 to the Amended and Restated Employment Agreement dated February 28, 1994 (see Exhibit 10.06 hereto) between the Company and Jerry Shore. (Reference is made to Exhibit 10.07(c) of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1998, Commission File No. 1-4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) - 10.07 Lease dated April 15, 1988 between FiberCote Industries, Inc. (lease was initially entered into by USP Composites, Inc., which subsequently changed its name to FiberCote Industries, Inc.) and Geoffrey Etherington, II regarding real property located at 172 East Aurora Street, Waterbury, Connecticut. (Reference is made to Exhibit 10.08 of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.07(a) Amendment to Lease dated December 21, 1992 to Lease dated April 15, 1988 (see Exhibit 10.07 hereto) between FiberCote Industries, Inc. and Geoffrey Etherington II regarding real property located at 172 East Aurora Street, Waterbury, Connecticut. (Reference is made to Exhibit 10.08(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.07(b) Letter dated June 30, 1997 from FiberCote Industries, Inc. to Geoffrey Etherington II extending the Lease dated April 15, 1988 (see Exhibit 10.07 hereto) between FiberCote Industries, Inc. and Geoffrey Etherington II regarding real property located at 172 East Aurora Street, Waterbury Connecticut. (Reference is made to Exhibit 10.08(b) of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1998, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.08 Lease dated August 31, 1989 between Nelco Technology, Inc. and Cemanudi Associates regarding real property located at 1104 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.11 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.08(a) First Amendment to Lease dated October 21, 1994 to Lease dated August 31, 1989 (see Exhibit 10.08 hereto) between Nelco Technology, Inc. and Cemanudi Associates regarding real property located at 1104 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.11(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.09 Lease dated March 24, 1995 between Nelco Technology, Inc. and CMD Southwest Inc. regarding real property located at 1131 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.09(a) First Amendment to Lease dated January 18, 1996 to Lease dated March 24, 1995 (see Exhibit 10.09 hereto) between Nelco Technology, Inc. and CMD Southwest Inc. regarding real property located at 1131 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.12(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1- 4415, which is incorporated herein by reference.) - 10.10 Lease dated December 12, 1990 between Neltec, Inc. and NZ Properties, Inc. regarding real property located at 1420 W. 12th Place, Tempe, Arizona. (Reference is made to Exhibit 10.13 of the Company's Annual Report on Form 10-K for the fiscal year ended March 2, 1997, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.10(a) Letter dated January 8, 1996 from Neltec, Inc. to NZ Properties, Inc. exercising its option to extend the Lease dated December 12, 1990 (see Exhibit 10.10 hereto) between Neltec, Inc. and NZ Properties, Inc. regarding real property located at 1420 W. 12th Place, Tempe, Arizona. (Reference is made to Exhibit 10.13(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 2, 1997, Commission File No. 1- 4415, which is incorporated herein by reference.) - 10.11 Lease dated January 8, 1992 between Nelco Technology, Inc. and CMD Southwest, Inc. regarding real property located at 1135 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.15 of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1992, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.11(a) First Amendment dated July 8, 1996 to Lease dated January 8, 1992 (see Exhibit 10.11 hereto) between Nelco Technology, Inc. and CMD Southwest, Inc. regarding real property located at 1135 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.15(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 2, 1997, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.12 Tenancy Agreement dated October 8, 1992 between Nelco Products Pte. Ltd. and Jurong Town Corporation regarding real property located at 36 Gul Lane, Jurong Town, Singapore. (Reference is made to Exhibit 10.18 of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1- 4415, which is incorporated herein by reference.) - 10.12(a) Tenancy Agreement dated November 3, 1995 between Nelco Products Pte. Ltd. and Jurong Town Corporation regarding real property located at 36 Gul Lane, Jurong Town, Singapore. (Reference is made to Exhibit 10.16(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 2, 1997, Commission File No. 1- 4415, which is incorporated herein by reference.) - 10.13 Lease Contract dated February 26, 1988 between the New York State Department of Transportation and the Edgewater Stewart Company regarding real property located at 15 Governor Drive in the Stewart International Airport Industrial Park, New Windsor, New York. (Reference is made to Exhibit 10.19 of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1- 4415, which is incorporated herein by reference.) - 10.13(a) Assignment and Assumption of Lease dated February 16, 1995 between New England Laminates Co., Inc. and the Edgewater Stewart Company regarding the assignment of the Lease Contract (see Exhibit 10.13 hereto) for the real property located at 15 Governor Drive in the Stewart International Airport Industrial Park, New Windsor, New York. (Reference is made to Exhibit 10.19(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) - 10.13(b) Lease Amendment No. 1 dated February 17, 1995 between New England Laminates Co., Inc. and the New York State Department of Transportation to Lease Contract dated February 26, 1988 (see Exhibit 10.13 hereto) regarding the real property located at 15 Governor Drive in the Stewart International Airport Industrial Park, New Windsor, New York. (Reference is made to Exhibit 10.19(b) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by - reference.) 10.14 Sale and Purchase Agreement dated 29 October 1997 between Dieter G. Weiss, Lothar Hubert Reinartz, Nelco International Corporation and Park Electrochemical Corp. relating to the sale and purchase of shares of capital in Dielektra GmbH. (Reference is made to Exhibit 10.01 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1997, Commission File No. 1-4415, which is incorporated herein by reference.) - 21.01 Subsidiaries of the Company 60 23.01 Consent of Ernst & Young LLP 61 EXHIBIT 21.01 SUBSIDIARIES OF PARK ELECTROCHEMICAL CORP. The following table lists Park's subsidiaries and the jurisdiction in which each such subsidiary is organized. Name Jurisdiction of Incorporation Dielectric Polymers, Inc. Massachusetts Dielektra GmbH Germany FiberCote Industries, Inc. Connecticut Nelco GmbH West Germany Nelco Products, Inc. Delaware Nelco Products Pte. Ltd. Singapore Nelco Products Snd. Bhd. Malaysia Nelco S.A. France Nelco STS, Inc. Delaware Nelco Technology, Inc. Delaware Neltec, Inc. Delaware Neltec S.A. France Neluk, Inc. Delaware New England Laminates Co., Inc. New York New England Laminates (U.K.) Ltd. England Park Advanced product Development Delaware Corp. ParkNelco SNC France Technocharge Limited England Exhibit 23.01 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statements Nos. 33-3777, 33-16650, 33-55383, 33-63956 and 333-12463 on Form S-8 of our report, dated April 27, 2001, with respect to the consolidated financial statements and schedule of Park Electrochemical Corp. included in the Annual Report on Form 10-K of Park Electrochemical Corp. for the fiscal year ended February 25, 2001. ERNST & YOUNG LLP New York, New York May 23, 2001 -----END PRIVACY-ENHANCED MESSAGE-----