10-Q 1 q304.txt THIRD QUARTER 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 14(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to__________ Commission file Number 1-4415 PARK ELECTROCHEMICAL CORP. (Exact Name of Registrant as Specified in Its Charter) New York 11-1734643 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5 Dakota Drive, Lake Success, N.Y. 11042 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (516) 354- 4100 Not Applicable ----------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No[ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes[X] No[ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 19,782,521 as of January 9, 2004. PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION: Number Item 1. Financial Statements Condensed Consolidated Balance Sheets November 30, 2003 (Unaudited) and March 2, 2003...................................... 3 Consolidated Statements of Operations 13 weeks and 39 weeks ended November 30, 2003 and December 1, 2002 Unaudited............... 4 Condensed Consolidated Statements of Cash Flows 39 weeks ended November 30, 2003 and December 1, 2003 (Unaudited)............. 5 Notes to Condensed Consolidated Financial Statements (Unaudited)....................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 13 Factors That May Affect Future Results....... 23 Item 3. Quantitive and Qualitative Disclosures About Market Risk.................................. 23 Item 4. Controls and Procedures...................... 23 PART II. OTHER INFORMATION: Item 1. Legal Proceedings............................ 25 Item 6. Exhibits and Reports on Form 8-K............. 26 SIGNATURES............................................... 27 EXHIBIT INDEX............................................ 28 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
November 30, 2003 March 2, (Unaudited) 2003* ASSETS Current assets: Cash and cash equivalents $119,873 $111,036 Marketable securities 62,948 51,899 Accounts receivable, net 33,593 30,272 Inventories (Note 2) 13,309 12,688 Prepaid expenses and other current assets 4,268 4,690 --------- --------- Total current assets 233,991 210,585 Property, plant and equipment, net 87,198 90,503 Other assets 527 454 --------- --------- Total $321,716 $301,542 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 15,862 $ 15,145 Accrued liabilities 31,848 21,790 Income taxes payable 4,385 3,376 --------- --------- Total current liabilities 52,095 40,311 Deferred income taxes 2,647 4,539 Deferred pension liability 12,191 10,991 Stockholders' equity: Common stock 2,037 2,037 Additional paid-in capital 133,085 133,172 Retained earnings 125,525 117,506 Treasury stock, at cost (4,213) (4,582) Accumulated other non-owner changes (1,651) (2,432) --------- --------- Total stockholders' equity 254,783 245,701 --------- --------- Total $321,716 $301,542 ========= ========= *The balance sheet at March 2, 2003 has been derived from the audited financial statements at that date.
See accompanying Notes to the Consolidated Financial Statements. PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts)
13 Weeks Ended 39 Weeks Ended (Unaudited) (Unaudited) November 30, December 1, November 30, December 1, 2003 2002 2003 2002 ------------ ----------- ------------ ----------- Net sales $54,277 $53,587 $151,374 $167,049 Cost of sales 45,872 48,179 133,701 149,171 -------- -------- --------- --------- Gross profit 8,405 5,408 17,673 17,878 Selling, general and administrative expenses 8,319 6,608 22,080 22,603 Litigation settlement gain - - (33,088) - (Note 8 and 10) Restructuring and - 4,794 14,580 4,794 severance charges (Note 4) Gain on sale of of UK real estate (Note 11) (429) - (429) - Gain on sale of DPI (Note 9) - - - (3,170) ------- ------- ------- ------- Income (loss) from operations 515 (5,994) 14,530 (6,349) Interest and other income 708 824 2,205 2,537 ------- ------- ------- ------- Earnings (loss) before income taxes 1,223 (5,170) 16,735 (3,812) Income tax provision 238 134 5,163 541 ------- -------- -------- -------- Net earnings (loss) $ 985 $(5,304) $ 11,572 $(4,353) ------- -------- -------- -------- Earnings (loss) per share (Note 5): Basic $ .05 $ (.27) $ .59 $ (.22) Diluted $ .05 $ (.27) $ .58 $ (.22) Weighted average number of common and common equivalent shares outstanding: Basic 19,763 19,682 19,744 19,671 Diluted 20,083 19,682 19,932 19,671 Dividends per share $ .06 $ .06 $ .18 $ .18
See accompanying Notes to the Consolidated Financial Statements PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)
39 Weeks Ended (Unaudited) --------------------------- November 30, December 1, 2003 2002 Cash flows from operating activities: Net earnings (loss) $ 11,572 $ (4,353) Depreciation and amortization 8,998 13,620 Gain on sale of Dielectric Polymers, Inc. - (3,170) Gain on sale of fixed assets (429) - Non cash restructuring charges - 2,150 Change in operating assets and liabilities 4,949 (214) -------- -------- Net cash provided by operating activities 25,090 8,461 -------- -------- Cash flows from investing activities: Purchases of property, plant and equipment, net (3,750) (5,436) Proceeds from the sale of Dielectric Polymers, Inc. - 5,000 Proceeds from the sale of fixed assets 1,954 - Purchases of marketable securities (67,676) (46,005) Proceeds from sales and maturities of marketable securities 56,627 39,558 -------- -------- Net cash used in investing activities (12,845) (6,883) -------- -------- Cash flows from financing activities: Dividends paid (3,553) (3,507) Proceeds from exercise of stock options 282 370 -------- -------- Net cash used in financing activities (3,271) (3,137) -------- -------- Change in cash and cash equivalents before exchange rate changes 8,974 (1,559) Effect of exchange rate changes on cash and cash equivalents (137) 667 -------- -------- Change in cash and cash equivalents 8,837 (892) Cash and cash equivalents, beginning of period 111,036 99,492 --------- --------- Cash and cash equivalents, end of period $119,873 $98,600 ========= ========= Supplemental cash flow information: Cash paid during the period for income taxes $ 5,471 $ 1,400
See accompanying Notes to the Consolidated Financial Statements. PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Amounts in thousands, except per share amounts) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheet as of November 30, 2003, the consolidated statements of operations for the 13 weeks and 39 weeks ended November 30, 2003 and December 1, 2002, and the condensed consolidated statements of cash flows for the 39 weeks then ended have been prepared by the Company, without audit. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at November 30, 2003 and the results of operations and cash flows for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 2, 2003. 2. INVENTORIES Inventories consisted of the following:
November 30, March 2, 2003 2003 Raw materials $ 4,285 $ 4,072 Work-in-process 3,493 3,424 Finished goods 5,049 4,680 Manufacturing supplies 482 512 ------- ------- $13,309 $12,688 ======= =======
3. STOCK OPTIONS As of November 30, 2003, the Company had two fixed stock option plans. All options under the plans had an exercise price equal to the market value of the underlying common stock of the Company on the date of grant. The Company continues to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related interpretations for the plans. If compensation costs of the grants had been determined based upon the fair market value at the grant dates consistent with the FASB No. 123 "Accounting for Stock-Based Compensation", the Company's net earnings and earnings per share would have approximated the amounts shown below.
13 weeks ended 39 weeks ended ------------------------ ------------------------ November 30, December 1, November 30, December 1, 2003 2002 2003 2002 Net Earnings $ 985 $(5,304) $11,572 $(4,353) Deduct: Total stock- based employee compensation determined under fair value based method for all awards, 474 475 1,379 1,450 net of tax effects ------ -------- -------- -------- Pro forma net income (loss)$ 511 $(5,779) $10,193 $(5,803) ====== ======== ======== ======== EPS-basic as reported $ 0.05 $ (0.27) $ 0.59 $ (0.22) ====== ======== ======== ======== EPS-basic pro forma $ 0.03 $ (0.29) $ 0.52 $ (0.30) ====== ======== ======== ======== EPS-diluted as reported $ 0.05 $ (0.27) $ 0.58 $ (0.22) ====== ======== ======== ======== EPS-diluted pro forma $ 0.03 $ (0.29) $ 0.51 $ (0.30) ====== ======== ======== ========
4. REALIGNMENT AND SEVERANCE CHARGES The Company recorded pre-tax charges of $8,076 during the first quarter of fiscal year 2004 related to the closure of the Company's mass lamination operation in Cologne, Germany, the realignment of its North America FR-4 business operations in Newburgh, New York and Fullerton, California and related workforce reductions and recorded pre-tax charges of $6,504 during the second quarter of fiscal year 2004 related to the realignment of its North American FR-4 business operations. The components of these charges and the related liability balances and activity for the quarter ended November 30, 2003 are set forth below.
Charges 11/30/03 Closure Incurred Remaining Charges or Paid Reversals Liabilities ------- --------- --------- ----------- Dielektra charges: Severance payments $ 6,142 $4,679 $ - $1,463 NY/CA Realignment charges: Lease payments, taxes, utilities and other 7,292 475 - 6,817 Severance payments 1,146 1,146 - - ------- ------ ---- ------ $14,580 $6,300 $ - $8,280 ======= ====== ==== ======
The severance payments are for the termination of hourly and salaried, administrative, manufacturing and support employees. Such employees were terminated during the 2004 fiscal year first, second and third quarters. The severance payments have been paid, and are expected to continue to be paid, to such employees in installments during fiscal year 2004. The lease charges cover one lease obligation payable through December 2004 and a portion of another lease obligation payable through September 2013. The Company recorded pre-tax charges of $4,674 and $120 in the fiscal year 2003 third quarter ended December 1, 2002 in connection with the closure of its Nelco UK manufacturing facility located in Skelmersdale, England and severance costs at a North American business unit. The components of these charges and the related liability balances at November 30, 2003 are set forth below.
Charges 11/30/03 Closure Incurred or Remaining Charges Paid Reversals Liabilities ------- ----------- --------- ----------- United Kingdom charges: Impairment of long lived assets $1,993 $1,993 $ - $ - Severance payments and related costs 1,997 1,997 - - Utilities, maintenance, taxes, other 684 684 - - ------ ------ ---- ---- 4,674 4,674 - - Other severance payments and related costs 120 120 - - ------ ------ ---- ---- $4,794 $4,794 $ - $ - ====== ====== ==== ====
The severance payments and related costs are for the termination of hourly and salaried, administrative, manufacturing and support employees, most of whom were terminated during the 2003 fiscal year third and fourth quarters, and the remainder of whom were terminated during the 2004 fiscal year first, second and third quarters. Severance payments and related costs for such terminated employees (totaling $2,117) were paid during such quarters. As a result of the foregoing employee terminations and other less significant employee terminations in connection with business contractions and in the ordinary course of business and employee resignations and retirements in the ordinary course of business, the total number of employees employed by the Company declined to approximately 1,240 as of August 31, 2003 from approximately 1,490 as of March 2, 2003. As a result of the Company's realignment of its North American FR-4 business operations and the concomitant workforce increase at the Company's California facility and the increase in the Company's sales during the 2004 fiscal year third quarter, the total number of employees employed by the Company increased to approximately 1,260 as of November 30, 2003. 5. EARNINGS PER SHARE Basic earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the sum of (a) the weighted average number of shares of common stock outstanding during the period and (b) the potential common stock equivalents outstanding during the period. Stock options are the only common stock equivalents and are computed using the treasury stock method. The following table sets forth the basic and diluted weighted average number of shares of common stock and potential common stock equivalents outstanding during the periods specified:
13 weeks ended 39 weeks ended ------------------------ ------------------------ November 30, December 1, November 30, December 1, 2003 2002 2003 2002 Weighted average shares outstanding for basic EPS 19,763 19,682 19,744 19,671 Weighted average shares outstanding for diluted EPS 20,083 19,682 19,932 19,671
Common stock equivalents, which were not included in the computation of diluted earnings per share because either the effect would have been antidilutive or the options' exercise prices were greater than the average market price of the common stock, were 57 and 448 for the thirteen weeks ended November 30, 2003 and December 1, 2002, respectively, and 191 and 471 for the thirty-nine weeks ended November 30, 2003 and December 1, 2002, respectively. 6. BUSINESS SEGMENTS The Company considers itself to operate in one business segment. The Company's electronic materials products are marketed primarily to leading independent printed circuit board fabricators, electronic manufacturing service companies, electronic contract manufacturers and major electronic original equipment manufacturers ("OEMs") located throughout North America, Europe and Asia. The Company's advanced composite materials 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. Sales between geographic regions were not significant. Financial information concerning the Company's operations by geographic area follow:
13 Weeks Ended 39 Weeks Ended ------------------------ ------------------------ November 30, December 1, November 30, December 1, 2003 2002 2003 2002 Sales: North America $26,793 $28,505 $ 76,659 $ 91,832 Europe 12,755 14,396 35,587 41,265 Asia 14,729 10,686 39,128 33,952 ------- ------- -------- -------- Total sales $54,277 $53,587 $151,374 $167,049 ======= ======= ======== ========
November 30, March 2, 2003 2003 Long-lived assets: United States $39,936 $44,425 Europe 26,233 25,373 Asia 21,556 21,159 ------- ------- Total long-lived assets $87,725 $90,957 ======= =======
7. COMPREHENSIVE INCOME Total comprehensive income (loss) for the 13 weeks ended November 30, 2003 and December 1, 2002 was $2,506 and ($5,208), respectively. Total comprehensive income (loss) for the 39 weeks ended November 30, 2003 and December 1, 2002 was $12,353 and ($958), respectively. Comprehensive income consisted primarily of net income and foreign currency translation adjustments and unrealized gains and losses on marketable securities. 8. SALE OF NELCO TECHNOLOGY, INC. During the Company's 1998 fiscal year and for several years prior thereto, more than 10% of the Company's total worldwide sales were to Delco Electronics Corporation, a subsidiary of General Motors Corp., and the Company's wholly owned subsidiary, Nelco Technology, Inc. ("NTI") located in Tempe, Arizona, had been Delco's principal supplier of semi-finished multilayer printed circuit board materials, commonly known as mass lamination, which were used by Delco to produce finished multilayer printed circuit boards. 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. As a result, the Company's sales to Delco declined during the three-month period ended May 31, 1998, were negligible during the remainder of the 1999 fiscal year and have been nil in subsequent years. After March 1998, the business of NTI languished and its performance was unsatisfactory due primarily to the absence of the unique, high-volume, high-quality business that had been provided by Delco Electronics and the absence of any other customer in the North American electronic materials industry with a similar demand for the large volumes of semi-finished multilayer printed circuit board materials that Delco purchased from NTI. Although NTI's business experienced a resurgence in the 2001 fiscal year as the North American market for printed circuit materials became extremely strong and demand exceeded supply for the electronic materials manufactured by NTI, the Company's internal expectations and projections for the NTI business were for continuing volatility in the business' performance over the foreseeable future. Consequently, the Company commenced efforts to sell the business in the second half of its 2001 fiscal year; and in April 2001, the Company sold the assets and business of NTI and closed a related support facility, also located in Tempe, Arizona. As a result of this sale, the Company exited the mass lamination business in North America. In connection with the sale of NTI and the closure of the related support facility, the Company recorded non- recurring, pre-tax charges of $15,707 in its fiscal year 2002 first quarter ended May 27, 2001. The components of these charges and the related liability balances and activity from the May 27, 2001 balance sheet date to the November 30, 2003 balance sheet date are set forth below:
Charges 11/30/03 Closure Incurred or Remaining Charges Paid Reversals Liabilities ------- ----------- --------- ----------- NTI charges: Loss on sale of assets and busines $10,580 $10,580 $ - $ - Severance payments 387 387 - - Medical and other costs 95 95 - - Support facility charges: Impairment of long lived assets 2,058 2,058 - - Write down of accounts receivable 350 319 31 - Write down of inventory 590 590 - - Severance payments 688 688 - - Medical and other costs 133 133 - - Lease payments, taxes, utilities, maintenance 781 458 - 323 Other 45 45 - - ------- ------- --- ---- $15,707 $15,353 $31 $323 ======= ======= === ====
The severance payments and medical and other costs incurred in connection with the sale of NTI and the closure of the related support facility were for the termination of hourly and salaried, administrative, manufacturing and support employees, all of whom were terminated during the first and second fiscal quarters ended May 27, 2001 and August 26, 2001, respectively, and substantially all of the severance payments and related costs for such terminated employees (totaling $1,303) were paid during such quarters. The lease obligations will be paid through August 2004 pursuant to the related lease agreements. 9. SALE OF DIELECTRIC POLYMERS, INC. On June 27, 2002, the Company sold its Dielectric Polymers, Inc. subsidiary to Adhesive Applications, Inc. of Easthampton, Massachusetts. The Company recorded a gain of approximately $3.2 million in its fiscal year 2003 second quarter ended September 1, 2002 in connection with the sale. 10. LITIGATION SETTLEMENT The United States District Court for the District of Arizona has entered final judgment in favor of the Company's subsidiary, Nelco Technology, Inc., in its lawsuit against Delco Electronics Corporation, a subsidiary of Delphi Automotive Systems Corporation, on Nelco's claim for breach of the implied covenant of good faith and fair dealing. As a result, the Company received a net amount of $33 million from Delco on July 1, 2003 in settlement of the lawsuit. 11. SALE OF UK REAL ESTATE During the third quarter of fiscal year 2004, the Company sold real estate previously used by its Nelco UK subsidiary, which has ceased operations. As a result, the company recorded a pre-tax gain of $429. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General: Park is a leading global designer and producer of advanced electronic materials used to fabricate complex multilayer printed circuit boards and other electronic interconnect systems. The Company's customers include leading independent printed circuit board fabricators, electronic manufacturing service companies, electronic contract manufacturers and major electronic original equipment manufacturers in the computer, telecommunications, transportation, aerospace and instrumentation industries. The Company's sales increased slightly in the three-month period ended November 30, 2003 compared with last fiscal year's comparable period principally as a result of continuing increases in sales of the Company's advanced technology products and sales by the Company's operations in Asia, while the Company's sales declined in the nine-month period ended November 30, 2003 compared with last fiscal year's comparable period as a result of declines in sales by the Company's North American and European operations. The earnings growth that the Company achieved during its 2001 and 2000 fiscal years halted in the 2002 fiscal year as a result of a severe downturn in the global electronics industry, and the industry continued to be very depressed throughout the 2003 fiscal year and during the 2004 fiscal year first and second quarters. The electronics industry began to improve slightly at the end of the 2004 fiscal year second quarter and continued to improve in the third quarter, and there exist some indications that the improvement will continue. However, it is not completely clear whether and to what degree the improvement is sustainable. The Company's advanced electronic materials business and its business unit in Singapore, which serves the Asian electronic materials markets, performed reasonably well during the three-month and nine-month periods ended November 30, 2003, while the Company's higher-volume FR-4 business units in Europe and North America performed poorly. During the three months ended November 30, 2003, the Company opened a facility at its advanced products business unit in Arizona that had been constructed in its 2002 fiscal year and that is now being well utilized, continued the construction of its facility expansion in Singapore and proceeded with its final planning for the installation of a new manufacturing facility in China. During the six months ended August 31, 2003, the Company realigned its North American FR-4 business operations located in New York and California. As part of the realignment, the New York operation was scaled down to a smaller focused operation and the California operation was scaled up to a larger volume operation, and there were significant workforce reductions at the Company's New York facility and significant workforce increases at the Company's California facility, with the end result being a net reduction in the Company's workforce in North America. A large portion of the New York facility was mothballed, and the Company will have the flexibility in the future to scale back up the Newburgh, New York facility if the opportunity to do so presents itself. The realignment was designed to help the Company achieve improved operating and cost efficiencies in its North American FR-4 business and to help the Company best service all of its North American customers. In the Company's 2004 fiscal year first quarter, Dielektra GmbH, the Company's advanced electronic materials business located in Cologne, Germany, closed its mass lamination operation. Dielektra's mass lamination operation supplied higher-end mass lamination products to European circuit board manufacturers. However, the market for these products in Europe had eroded to the point where the Company no longer believed it was possible to operate a viable mass lamination business in Europe, and the Company did not believe that, at any time in the foreseeable future, the higher-end European mass lamination market would recover to the extent necessary to justify the Company's operating a mass lamination business in Europe. As a result of the closure of its mass lamination operation, Dielektra's manufacturing operations consist exclusively of high technology treating and Dielektra's proprietary DatlamT automated continuous laminate manufacturing. The Company is continuing to review its FR-4 manufacturing operations in Europe. As a result of the Company's realignment of its North American FR-4 business operations and closure of Dielektra's mass lamination operation in Germany and related workforce reductions, the Company recorded pre-tax charges totaling $8.1 million in the Company's 2004 fiscal year first quarter, and the Company recorded additional pre-tax charges of $6.5 million in the 2004 fiscal year second quarter due to such realignment. The Company also recorded a pre-tax gain of $0.4 million in the 2004 fiscal year third quarter resulting from the sale of real estate previously used by its Nelco UK subsidiary, which ceased operations after its closure in the 2003 fiscal year third quarter. See Note 4 of the Notes to Consolidated Financial Statements in Item 1 of Part I of this Report for additional information regarding the realignment and closures. During the Company's 1998 fiscal year and for several years prior thereto, more than 10% of the Company's total worldwide sales were to Delco Electronics Corporation, a subsidiary of General Motors Corp.("Delco"), and the Company's wholly owned subsidiary, Nelco Technology, Inc. ("NTI") located in Tempe, Arizona, had been Delco's principal supplier of semi- finished multilayer printed circuit board materials, commonly known as mass lamination, which were used by Delco to produce finished multilayer printed circuit boards. 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. As a result, the Company's sales to Delco declined during the three-month period ended May 31, 1998, were negligible during the remainder of the 1999 fiscal year and have been nil since that time. In May 1998, the Company and NTI filed a complaint against Delco 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. In November 2000, a jury awarded damages to NTI in the amount of $32.3 million, 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 $32.3 million. Both parties appealed the decision to the United States Court of Appeals for the Ninth Circuit in San Francisco; and in May 2003, a panel of three judges in the Court of Appeals for the Ninth Circuit rendered a unanimous decision affirming the jury verdict. In June 2003, the United States District Court for the District of Arizona entered final judgment in favor of NTI; and, on July 1, 2003, NTI received a net amount of $33.1 million in payment of such judgment. The Company recorded a non-recurring, pre-tax gain of $33.1 million in the 2004 fiscal year second quarter related to such payment. See Item 1 of Part II of this Report for additional information regarding the lawsuit against Delco. The Company is not engaged in any related party transactions involving relationships or transactions with persons or entities that derive benefits from their non- independent relationship with the Company or the Company's related parties, or in any transactions with parties with whom the Company or its related parties have a relationship that enables the parties to negotiate terms of material transactions that may or would not be available from other, more clearly independent parties on an arm's-length basis, or in any trading activities involving non-exchange traded commodity or other contracts that are accounted for at fair value or otherwise or in any energy trading or risk management activities, other than certain limited foreign currency contracts intended to hedge the Company's contractual commitments to pay certain obligations or to realize certain receipts in foreign currencies and certain limited energy purchase contracts intended to protect the Company from increased utilities costs. The Company believes that an evaluation of its ongoing operations would be difficult if the disclosure of its financial results were limited to generally accepted accounting principles ("GAAP") financial measures. Accordingly, in addition to disclosing its financial results determined in accordance with GAAP, the Company discloses non-GAAP operating results that exclude certain items in order to assist its shareholders and other readers in assessing the Company's operating performance. Such non-GAAP financial measures are provided to supplement the results provided in accordance with GAAP. Three and Nine Months Ended November 30, 2003 Compared with Three and Nine Months Ended December 1, 2002: The Company's operations generated a modest profit during the three months ended November 30, 2003 as a result of a small increase in net sales and a significant improvement in its gross profit margin resulting from higher percentages of sales of higher margin, advanced technology products and reduced costs compared to last years comparable three-month period, and the Company reported net earnings of $985 thousand for the three-month period after a pre-tax gain of $429 thousand on the sale of real estate previously used by its Nelco UK subsidiary which has ceased operations. However, during the nine-months ended November 30, 2003, the Company's operations generated a loss, despite an improvement in the Company's gross profit margin, as the markets for sophisticated printed circuit materials continued to experience depressed conditions during the 2004 fiscal year first and second quarters. For the nine months ended November 30, 2003, the Company reported net earnings of $11.6 million after the gain on the sale of the UK real estate, after a pre-tax gain of $33.1 million related to the payment by Delco Electronics Corporation of the judgment against it in favor of the Company's subsidiary, Nelco Technology, Inc., in the lawsuit against Delco, and after pre- tax charges totaling $14.6 million related to the realignment of the Company's North American FR-4 business operations and the closure of Dielektra's mass lamination operation in Germany and related workforce reductions. While the Company's gross profit in the nine months ended November 30, 2003 was slightly lower than its gross profit in the prior fiscal year's first nine months, its gross profit in the 2004 fiscal year third quarter was substantially higher than the gross profit in the prior year's comparable quarter as a result of the Company's reductions of its costs and expenses and higher percentages of sales of higher margin, advanced technology products. These changes in gross profits were despite lower levels of sales of electronic materials in the nine months ended November 30, 2003 and only slightly increased sales in the third quarter, operating inefficiencies resulting from operating certain facilities at levels below their designed manufacturing capacities and from the Company's realignment of it North American FR-4 business operations, and competitive pressures. In addition to its depressed financial results of operations, the Company recorded pre-tax charges of $8.1 million in the 2004 fiscal year first quarter related to the Company's realignment of its North American FR-4 business operations, the closure of Dielektra's mass lamination operation and related workforce reductions and pre-tax charges of $6.5 million in the 2004 fiscal year second quarter related to such realignment. Operating results of the Company's advanced composite materials business were essentially the same for the three- month and nine-month periods ended November 30, 2003 as they were for the comparable periods in the 2003 fiscal year, but such results improved sequentially during the 2004 fiscal year first, second and third quarters due primarily to improved profit margins resulting from a more favorable product mix from quarter to quarter. Results of Operations Net sales for the three-month period ended November 30, 2003 increased 1% to $54.3 million from $53.6 million for last year's third quarter, while net sales for the nine-month period ended November 30, 2003 declined 9% to $151.4 million from $167.0 million for last fiscal year's comparable period. The increase in net sales during the third quarter was the result of increased sales of the Company's advanced technology products and increased sales by the Company's operations in Asia, which were partially offset by decreased sales by the Company's operations in Europe and North America. The decline in net sales during the nine months ended November 30, 2003 was the result of lower sales by the Company's operations in Europe and North America, which were only slightly offset by higher sales by the Company's operations in Asia. The Company's foreign operations accounted for $27.5 million and $74.7 million, respectively, of net sales, or 51% and 49% of the Company's total net sales worldwide, during the three-month and nine-month periods ended November 30, 2003 compared with $25.1 million and $75.2 million, respectively, of net sales, or 47% and 45%, respectively, of total net sales worldwide, during last fiscal year's comparable periods. Net sales by the Company's foreign operations during the three- month period ended November 30, 2003 increased 10% from the 2003 fiscal year comparable period, while net sales by the Company's foreign operations during the nine-month period ended November 30, 2003 declined about 1%. The increase in net sales by foreign operations during the third quarter was due to increased sales by the Company's operations in Asia, which were partially offset by decreased sales by the Company's operations in Europe. The decline in net sales by foreign operations during the nine months ended November 30, 2003 was due to a decrease in sales by the Company's operations in Europe, which resulted from decreases in sales by the Company's FR-4 operations and the Company's closure of its UK facility in the fourth quarter of its 2003 fiscal year. The overall gross profit as a percentage of net sales for the Company's worldwide operations improved to 15.5% and 11.7%, respectively, for the three months and nine months ended November 30, 2003 compared with 10.1% and 10.7% for last fiscal year's comparable periods. The increases in the gross profit were the result of higher percentages of sales of higher margin, advanced technology products and decreases in the Company's cost of sales. The Company's cost of sales decreased significantly compared to the comparable periods in the prior fiscal year due to personnel reductions and cost savings resulting from the Company's realignment of its North American FR-4 business, other cost reduction measures implemented by the Company, including workforce reductions and the reduction of overtime, and lower production volumes during the first and second quarters of the 2004 fiscal year. In addition, the Company continued to implement an annual salary freeze for significant numbers of salaried employees, especially senior management employees, and paid no performance bonuses or significantly reduced bonuses and other incentives. Selling, general and administrative expenses increased by $1.7 million, or by 26%, during the three-month period ended November 30, 2003 compared with last fiscal year's comparable period, but declined $0.5 million, or by 2%, during the nine- month period ended November 30, 2003, and these expenses, measured as a percentage of sales, were 15.3% and 14.6%, respectively, during the three-month and nine-month periods ended November 30, 2003 compared with 12.3% and 13.5%, respectively, during last fiscal year's comparable periods. Notwithstanding the decrease in selling, general and administrative expenses in dollar terms, the increase in the expenses as percentages of sales in the nine months ended November 30, 2003 resulted from proportionately lower sales compared to the comparable periods in the last fiscal year. These expenses increased in the 2004 fiscal year third quarter compared to the 2003 fiscal year third quarter as a result of shipping costs incurred by the Company to meet its customers' customized manufacturing and quick-turn-around requirements. The Company recorded a pre-tax gain of $0.4 million in the 2004 fiscal year third quarter resulting from the sale of real estate in Skelmersdale, England previously used by its Nelco UK subsidiary, which ceased operations after its closure in the 2003 fiscal year third quarter, and a pre-tax gain of $33.1 million during the 2004 fiscal year second quarter related to the payment by Delco Electronics Corporation of the judgment against Delco in favor of the Company's subsidiary, Nelco Technology, Inc., in its lawsuit against Delco. The Company also recorded pre-tax charges totaling $8.1 million, and after- tax charges totaling $7.4 million, in the 2004 fiscal year first quarter in connection with the realignment of its North American FR-4 business operations, the closure of Dielektra's mass lamination operation in Germany and related workforce reductions and recorded additional pre-tax charges of $6.5 million, and after-tax charges of $4.9 million, in the 2004 fiscal year second quarter due to such realignment. The Company recorded pre-tax charges of $4.8 million in the 2003 fiscal year third quarter in connection with the closure of its Nelco UK manufacturing facility in Skelmersdale, England and severance costs at a North American business unit; and the Company recorded a pre-tax gain of $3.2 million in the 2003 fiscal year second quarter in connection with the sale of its Dielectric Polymers, Inc. ("DPI") subsidiary in June 2002 for $5.0 million cash. For the reasons set forth above, income from operations was $0.5 million for the three months ended November 30, 2003, including the pre-tax gain described above resulting from the sale of real estate in England, compared with a loss from operations of $6.0 million for the three months ended December 1, 2002, including the pre-tax charges described above relating to the closure of the Nelco UK manufacturing facility and severance costs at a North American business unit, and income from operations was $14.5 million for the nine months ended November 30, 2003, including the pre-tax gains described above resulting from the sale of real estate in England and the payment by Delco Electronics Corporation of the judgment against it in favor of the Company's subsidiary, Nelco Technology, Inc., in Nelco's lawsuit against Delco and the pre- tax charges described above related to the realignment of the Company's North American FR-4 business operations, the closure of Dielektra's mass lamination operation and related workforce reductions, compared with a loss from operations of $6.3 million for the nine months ended December 1, 2002, including the pre-tax charges described above relating to the closure of the Nelco UK manufacturing facility and severance costs at a North American business unit and the pre-tax gain described above relating to the sale of DPI. Excluding the pre-tax gains and the pre-tax charges described above, the Company reported income from operations of $0.1 million and a loss from operations of $4.4 million, respectively, for the three months and nine months ended November 30, 2003 compared with losses of $1.2 million and $4.7 million, respectively, for the three months and nine months ended December 1, 2002. Interest and other income, net, principally investment income, was $0.7 million and $2.2 million, respectively, for the three-month and nine-month periods ended November 30, 2003 compared with $0.8 million and $2.5 million, respectively, for last fiscal year's comparable periods. The decreases in investment income were attributable to declines in prevailing interest rates. The Company's investments were primarily short- term taxable instruments. The Company's effective income tax rates for continuing operations, excluding the pre-tax gains and the pre-tax charges described above, for the three-month and nine-month periods ended November 30, 2003 were 30.0% compared with the same rates for the three-month and nine-month periods ended December 1, 2002. The effective income tax rates on earnings, including the pre-tax gains and the pre-tax charges, were 19.5% and 30.9% for the three months and nine months ended November 30, 2003, principally as a result of the tax impact of the gain on the Delco litigation payment, compared with negative rates of 2.6% and 14.2% principally as a result of the tax impact of the realignment and closure charges for the three-month and nine- month periods ended December 1, 2002. For the reasons set forth above, net earnings for the three-month period ended November 30, 2003, including the pre- tax gain described above resulting from the sale of real estate in England, were $1.0 million compared with a net loss of $5.3 million for the three-month period ended December 1, 2002, including the pre-tax charges described above relating to the closure of the Nelco U.K. manufacturing facility and severance costs at a North American business unit, and net earnings for the nine-month period ended November 30, 2003 were $11.6 million, including the pre-tax gains described above resulting from the sale of real estate in England and the payment by Delco Electronics Corporation of the judgment in favor of the Company's subsidiary, Nelco Technology, Inc., and the pre-tax charges described above related to the realignment of the Company's North American FR-4 business operations, the closure of Dielektra's mass lamination operation and related workforce reductions, compared with a net loss of $4.4 million for the nine-month period ended December 1, 2002, including the pre-tax charges described above relating to the closure of the Nelco UK manufacturing facility and severance costs at a North American business unit and the pre-tax gain described above related to the sale of DPI. Excluding the pre-tax gains and the pre-tax charges described above, the Company reported net earnings of $0.6 million and a net loss of $1.5 million, respectively, for the three-month and nine-month periods ended November 30, 2003, compared with net losses of $0.3 million and $1.5 million, respectively, for the three-month and nine-month periods ended December 1, 2002. Basic and diluted earnings per share, including the pre- tax gains and charges described above, were $0.05 for the three- month period ended November 30, 2003 and $0.59 and $0.58, respectively, for the nine-month period ended November 30, 2003, compared to basic and diluted losses per share of $0.27 and $0.22, respectively, for the three-month and nine-month periods ended December 1, 2002, including the pre-tax gain and pre-tax charges described above. Excluding the pre-tax gains and charges described above, basic and diluted earnings per share were $0.03 for the three months ended November 30, 2003 and basic and diluted losses per share were $0.08 for the nine months ended November 30, 2003, compared to basic and diluted per share losses, excluding the pre-tax gain and pre-tax charges for the prior year's comparable periods, of $0.01 and $0.08, respectively. Liquidity and Capital Resources: At November 30, 2003, the Company's cash and temporary investments were $182.8 million compared with $162.9 million at March 2, 2003, the end of the Company's 2003 fiscal year. The increase in the Company's cash and investments at November 30, 2003 was attributable to cash received from Delco Electronics Corporation in payment of the judgment in favor of the Company's subsidiary, Nelco Technology, Inc., in its lawsuit against Delco. The Company's working capital (which includes cash and temporary investments) was $181.9 million at November 30, 2003 compared with $170.3 million at March 2, 2003. The increase in working capital at November 30, 2003 compared with March 2, 2003 was due principally to the increases in cash and temporary investments and accounts receivable, which were only partially offset by increases in accrued liabilities and income taxes payable. The increase in accounts receivable was due to increased sales, and the increase in accrued liabilities was due to the provision for charges related to the Company's realignment of its North American FR-4 business operations. The Company's current ratio (the ratio of current assets to current liabilities) was 4.5 to 1 at November 30, 2003 compared to 5.2 to 1 at March 2, 2003. During the nine-months ended November 30, 2003, cash used in the Company's operating activities, including $5.9 million paid as severance in connection with workforce reductions, was significantly enhanced by the $33.1 million that the Company received on July 1, 2003 from Delco Electronics Corporation in settlement of the lawsuit by the Company's subsidiary, Nelco Technology, Inc., against Delco, resulting in $25.1 million of cash provided from operating activities. See Notes 8 and 10 of the Notes to Consolidated Financial Statements in Item 1 of Part I of this Report and Item 1 of Part II of this Report for additional information regarding the lawsuit. During the same nine-month period, the Company expended $3.8 million for the purchase of property, plant and equipment compared with $5.4 million for the nine-month period ended December 1, 2002 and paid $3.6 million in dividends on its common stock during the nine months ended November 30, 2003 compared with $3.5 million during the nine months ended December 1, 2002. At November 30, 2003, the Company had no long-term debt. 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 purchases of the Company's common stock, appropriate acquisitions and other expansions of the Company's business. The Company is not aware of any circumstances or events that are reasonably likely to occur that could materially affect its liquidity. The Company's liquidity is not dependent on the use of, and the Company is not engaged in, any off-balance sheet financing arrangements, such as securitization of receivables or obtaining access to assets through special purpose entities. The Company's contractual obligations and other commercial commitments to make future payments under contracts, such as lease agreements, consist only of operating lease commitments. The Company has no long-term debt, capital lease obligations, unconditional purchase obligations or other long-term obligations, standby letters of credit, guarantees, standby repurchase obligations or other commercial commitments or contingent commitments, other than a standby letter of credit in the amount of $1,728,000 to secure the Company's obligations under its workers' compensation insurance program. Environmental Matters: In the nine-month periods ended November 30, 2003 and December 1, 2002 the Company charged less than $0.1 million against pretax income for environmental remedial response and voluntary cleanup costs (including legal fees). While annual expenditures have generally been constant from year to year and may increase over time, the Company expects it will be able to fund such expenditures from available cash. The timing of expenditures depends on a number of factors, including regulatory approval of cleanup projects, remedial techniques to be utilized and agreements with other parties. At November 30, 2003 and March 2, 2003, the recorded liabilities in accrued liabilities for environmental matters were approximately $4.3 million and $4.2 million, respectively. Management does not expect that environmental matters will have a material adverse effect on the liquidity, capital resources, business, consolidated results of operations or consolidated financial position of the Company. Critical Accounting Policies and Estimates: In response to financial reporting release, FR-60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies", issued by the Securities and Exchange Commission in December 2001, the following information is provided regarding critical accounting policies that are important to the Consolidated Financial Statements and that entail, to a significant extent, the use of estimates, assumptions and the application of management's judgment. General The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent liabilities. On an on-going basis, the Company evaluates its estimates, including those related to sales allowances, bad debts, inventories, valuation of long- lived assets, income taxes, restructuring, pensions and other employee benefit programs, and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. Sales Allowances The Company provides for the estimated costs of sales allowances at the time such costs can be reasonably estimated. The Company is focused on manufacturing the highest quality electronic materials and other products possible and employs stringent manufacturing process controls and works with raw material suppliers who have dedicated themselves to complying with the Company's specifications and technical requirements. However, if the quality of the Company's products declines, the Company may incur higher sales allowances. Bad Debt The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company's customers deteriorates, resulting in an impairment of their ability to make payments, additional allowances may be required. Inventory The Company writes down its inventory for estimated obsolescence or unmarketability based upon the age of the inventory and assumptions about future demand for the Company's products and market conditions. If actual demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Valuation of Long-lived Assets The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Important factors that could trigger an impairment review include, but are not limited to, significant negative industry or economic trends and significant changes in the use of the Company's assets or strategy of the overall business. Income Taxes The carrying value of the Company's net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's consolidated statement of operations. Management evaluates the realizability of the deferred tax assets quarterly and assesses the need for additional valuation allowances quarterly. Restructuring During the fiscal year ended March 2, 2003, the Company recorded significant charges in connection with the realignment of its North American FR-4 business operations, the closures of its mass lamination operation in Germany and its manufacturing facility in England and employee severance costs at a North American business unit; during the three-month period ended June 1, 2003, the Company recorded additional significant charges in connection with the realignment of its North American FR-4 business operations, the closure of its mass lamination operation in Germany and related employee severance costs; and during the three-month period ended August 31, 2003, the Company recorded additional significant charges in connection with the realignment of its North American FR-4 business operations. During the fiscal year ended March 3, 2002, the Company recorded significant charges in connection with the restructuring relating to the sale of Nelco Technology, Inc., the closure of a related support facility and the realignment of Dielektra, GmbH. These charges include estimates pertaining to employee separation costs and the settlements of contractual obligations resulting from the Company's actions. Although the Company does not anticipate significant changes, the actual costs incurred by the Company may differ from these estimates. Contingencies and Litigation The Company is subject to a small number of proceedings, lawsuits and other claims related to environmental, employment, product and other matters. The Company is required to assess the likelihood of any adverse judgments or outcomes in these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters. Pension and Other Employee Benefit Programs One of the Company's subsidiaries in Europe has significant pension costs that are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates and wage inflation rates. The Company is required to consider current market conditions, including changes in interest rates and wage costs, in selecting these assumptions. Changes in the related pension costs may occur in the future in addition to changes resulting from fluctuations in the Company's related headcount due to changes in the assumptions. The Company's obligations for workers' compensation claims and employee-health care benefits are effectively self-insured. The Company uses an insurance company administrator to process all such claims and benefits. The Company accrues its workers' compensation liability based upon the claim reserves established by the third-party administrator and historical experience. The Company's employee health insurance benefit liability is based on its historical claims experience. The Company and certain of its subsidiaries have a non- contributory profit sharing retirement plan covering their regular full-time employees. In addition, the Company's subsidiaries have various bonus and incentive compensation programs, most of which are determined at management's discretion. The Company's reserves associated with these self-insured liabilities and benefit programs are reviewed by management for adequacy at the end of each reporting period. Factors that May Affect Future Results. Certain portions of this Report which do not relate to historical financial information may be deemed to constitute forward-looking statements that are subject to various factors which could cause actual results to differ materially from Park's expectations or from results which might be projected, forecast, estimated or budgeted by the Company in forward- looking statements. Such factors include, but are not limited to, general conditions in the electronics industry, the Company's competitive position, the status of the Company's relationships with its customers, economic conditions in international markets, the cost and availability of utilities, and the various factors set forth under the caption "Factors That May Affect Future Results" after Item 7 of Park's Annual Report on Form 10-K for the fiscal year ended March 2, 2003. Item 3. Quantitative and Qualitative Disclosure About Market Risk. The Company's market risk exposure at November 30, 2003 is consistent with, and not greater than, the types of market risk and amount of exposures presented in the Annual Report on Form 10-K for the fiscal year ended March 2, 2003. Item 4. Controls and Procedures. (a) Disclosure Controls and Procedures. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of November 30, 2003, the end of the period covered by this quarterly report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act. (b) Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. PART II. OTHER INFORMATION Item 1. 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. In November 2000, after a trial in Phoenix, Arizona, a jury awarded damages to NTI in the amount of $32.3 million, and in December 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 $32.3 million. Both parties appealed the decision to the United States Court of Appeals for the Ninth Circuit in San Francisco, and in May 2003, a panel of three judges in the Court of Appeals for the Ninth Circuit rendered a unanimous decision affirming the jury verdict. In June 2003, the United States District Court for the District of Arizona entered final judgment in favor of NTI, and Delco paid NTI on July 1, 2003. NTI received a net amount of $33.1 million. See Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Report. 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. During the Company's 1999 fiscal year first quarter and during its 1998 fiscal year and for several years prior thereto, more than 10% of the Company's total worldwide sales were to Delco Electronics Corporation; and the Company had been Delco's principal supplier of semi- finished multilayer printed circuit board materials for more than ten years. These materials were used by Delco to produce finished multilayer printed circuit boards. See "Factors That May Affect Future Results" after Item 2 of Part I of this Report. In the first quarter of the fiscal year ended March 3, 2002, the Company sold the assets and business of NTI and recorded pre-tax charges of approximately $15.7 million in its 2002 fiscal year first quarter ended May 27, 2001 in connection with the sale of NTI and the closure of a related support facility also located in Arizona. See Note 8 of the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Report. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a). 31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a). 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: Report on Form 8-K, dated October 1, 2003, Commission File No. 1-4415, reporting in Item 12 that Park issued a news release on October 1, 2003 reporting its results of operations for the fiscal year 2004 second quarter ended August 31, 2003 and furnishing the news release to the Securities and Exchange Commission. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Park Electrochemical Corp. -------------------------- (Registrant) /s/Brian E. Shore Date: January 13, 2004 ----------------------- Brian E. Shore President and Chief Executive Officer /s/Murray O. Stamer Date: January 13, 2004 ----------------------- Murray O. Stamer Senior Vice President and Chief Financial Officer EXHIBIT INDEX Exhibit No. Name Page ----------- ---- ---- 31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a) 29 31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a) 31 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 33 32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 34