-----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, SoNbpBb1tfKD+evKs7bb4rWFHQHylf3Zos5QMeIxzt5vZt1K8LCU39gBaO6OLNR9 uRrRBAmJqMrgndAHLlpniw== 0000076267-98-000008.txt : 19980720 0000076267-98-000008.hdr.sgml : 19980720 ACCESSION NUMBER: 0000076267-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980714 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARK ELECTROCHEMICAL CORP CENTRAL INDEX KEY: 0000076267 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 111734643 STATE OF INCORPORATION: NY FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04415 FILM NUMBER: 98665665 BUSINESS ADDRESS: STREET 1: 5 DAKOTA DR CITY: LAKE SUCCESS STATE: NY ZIP: 11042 BUSINESS PHONE: 5163544100 MAIL ADDRESS: STREET 1: 5 DAKOTA DR CITY: LAKE SUCCESS STATE: NY ZIP: 11042 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 F O R M 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ___________________ Commission file number 1-4415 PARK ELECTROCHEMICAL CORP. ---------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) New York 11-1734643 - ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5 Dakota Drive, Lake Success, N.Y. 11042 - ------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (516) 354-4100 Not Applicable ----------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant:(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 11,400,427 as of July 10, 1998. 2 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES TABLE OF CONTENTS Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheets May 31, 1998 (Unaudited) and March 1, 1998 ...................................... 4 Consolidated Statements of Earnings 13 weeks ended May 31, 1998 and June 1, 1997 (Unaudited)............................ 5 Condensed Consolidated Statements of Cash Flows 13 weeks ended May 31, 1998 and June 1, 1997 (Unaudited)............................ 6 Notes to Condensed Consolidated Financial Statements (Unaudited) ............................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ......................................... 9 PART II. OTHER INFORMATION: Item 1. Legal Proceedings ................................... 13 Item 6. Exhibits and Reports on Form 8-K .................... 13 SIGNATURES ..................................................... 14 EXHIBIT INDEX.................................................... 15 -2- 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. The Company's Financial Statements begin on the next page. -3- 4 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
May 31, March 1, 1998 1998 ------- -------- ASSETS (Unaudited) * Current assets: Cash and cash equivalents $ 31,299 $ 45,102 Marketable securities 124,169 113,358 Accounts receivable, net 52,640 53,511 Inventories (Note 2) 24,782 26,953 Prepaid expenses and other current assets 8,522 8,456 -------- ------- Total current assets 241,412 247,380 Property, plant and equipment, net 111,669 108,116 Other assets 3,755 3,833 -------- -------- $356,836 $359,329 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 29,046 $ 37,426 Accrued liabilities 23,696 25,261 Income taxes payable 10,030 8,140 -------- -------- Total current liabilities 62,772 70,827 Long-term debt 100,000 100,000 Deferred income taxes 9,069 8,781 Deferred pension liability and other 13,539 13,317 Stockholders' equity: Common stock 1,358 1,358 Additional paid-in capital 52,990 52,990 Retained earnings 135,058 130,435 Treasury stock, at cost (17,105) (17,113) Accumulated other non-owner changes (845) (1,266) --------- --------- Total stockholders' equity 171,456 166,404 --------- --------- $356,836 $359,329 ========= ========= *The balance sheet at March 1, 1998 has been derived from the audited financial statements at that date.
-4- 5 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited--in thousands, except per share amounts)
13 Weeks Ended ------------------------- May 31, June 1, 1998 1997 ------- ------- Net sales $99,855 $91,633 Cost of sales 82,484 73,592 -------- -------- Gross profit 17,371 18,041 Selling, general and administrative expenses 10,135 9,473 -------- -------- Profit from operations 7,236 8,568 -------- -------- Other income (expense): Interest and other income, net 2,049 1,990 Interest expense (1,378) (1,356) -------- -------- Total other income 671 634 -------- -------- Earnings before income taxes 7,907 9,202 Income tax provision 2,372 3,037 -------- -------- Net earnings $ 5,535 $ 6,165 ======== ======== Earnings per share (Note 3): Basic $ .48 $ .55 Diluted $ .46 $ .51 Weighted average number of common and common equivalent shares outstanding: Basic 11,502 11,273 Diluted 14,073 13,847 Dividends per share $ .08 $ .08
-5- 6 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited--in thousands)
13 weeks ended ---------------------- May 31, June 1, 1998 1997 ------- ------- Net cash provided by operating activities $ 4,118 $16,400 -------- -------- Cash flows from investing activities: Purchases of property, plant and equipment, net (6,444) (3,307) Purchases of marketable securities (55,058) (46,636) Proceeds from sales of marketable securities 44,231 36,862 -------- -------- Net cash used in investing activities (17,271) (13,081) -------- -------- Cash flows from financing activities: Dividends paid (912) (902) Proceeds from exercise of stock options 16 14 -------- -------- Net cash used in financing activities (896) (888) -------- -------- (Decrease) increase in cash and cash equivalents before exchange rate changes (14,049) 2,431 Effect of exchange rate changes on cash and cash equivalents 246 2 -------- -------- (Decrease) increase in cash and cash equivalents (13,803) 2,433 Cash and cash equivalents, beginning of period 45,102 42,321 -------- -------- Cash and cash equivalents, end of period $31,299 $44,754 ======== ======== Supplemental cash flow information: Cash paid during the period for: Interest $ 2,750 $ - Income taxes 187 135
-6- 7 PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheet as of May 31, 1998, the consolidated statements of earnings for the 13 weeks ended May 31, 1998 and June 1, 1997, and the condensed consolidated statements of cash flows for the 13 weeks then ended have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at May 31, 1998, and the results of operations and cash flows for all periods presented, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1998. 2. INVENTORIES Inventories consist of the following:
(In thousands) May 31, March 1, 1998 1998 ------- -------- Raw materials $10,664 $10,686 Work-in-process 4,622 5,740 Finished goods 8,502 9,806 Manufacturing supplies 994 721 ------- ------- $24,782 $26,953 ======= =======
3. EARNINGS PER SHARE The following table sets forth the calculation of basic and diluted earnings per share for the periods specified (in thousands, except per share amounts):
13 weeks ended -------------- May 31, March 1, 1998 1998 ------- -------- Net income for basic EPS 5,535 6,165 Add interest on 5.5% convertible subordinated notes, net of taxes 905 873 ------ ------ Net income for diluted EPS 6,440 7,038 ====== ====== Weighted average common shares outstanding for basic EPS 11,502 11,273 Net effect of dilutive options 201 204 Assumed conversion of 5.5% convertible subordinated notes 2,370 2,370 ------ ------ Weighted average shares outstanding for diluted EPS 14,073 13,847 ====== ====== EPS-basic 0.48 0.55 EPS-diluted 0.46 0.51
-7- 8 4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Effective March 2, 1998 the Company adopted Statement of Financial Accounting Standards No. 130 - "Reporting Comprehensive Income" (SFAS No. 130), which establishes standards for reporting changes in equity from non-owner sources in the financial statements. Total non-owner changes in stockholders' equity were $5,956,000 and $6,071,000 for the three months ended May 31, 1998 and June 1, 1997, respectively, which primarily represents net income and foreign currency translation adjustments. -8- 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Park is a leading global designer and producer of advanced electronic materials used to fabricate complex multilayer printed circuit boards, semiconductor packages and other electronic interconnect systems. In October 1997, the Company acquired Dielektra GmbH, a manufacturer of advanced electronic materials, including continuously produced copper-clad laminates and mass-laminated multilayer panels, located in Cologne, Germany. The Company's customers for its advanced printed circuit materials include leading independent circuit board fabricators and large electronic equipment manufacturers in the computer, telecommunications, transportation, aerospace and instrumentation industries. The Company's electronic materials operations accounted for approximately 89% and 87%, respectively, of net sales worldwide in the last two fiscal years and approximately 91% and 89%, respectively, in the three- month periods ended May 31, 1998 and June 1, 1997. The Company's foreign electronic materials operations accounted for approximately 31% and 29%, respectively, of net sales worldwide in the 1998 and 1997 fiscal years and approximately 36% in the three-month period ended May 31, 1998 and approximately 27% in the three-month period ended June 1, 1997. Park is also engaged in the engineered materials and plumbing hardware businesses, which consist of the Company's specialty adhesive tape and film business, its advanced composite materials business and its plumbing hardware business, all of which operate as independent business units. These businesses accounted for approximately 11% and 13%, respectively, of the Company's total net sales worldwide in each of the last two fiscal years and approximately 9% and 11%, respectively, in the three- month periods ended May 31, 1998 and June 1, 1997. The sales growth that the Company achieved during the fiscal year ended March 1, 1998 and prior fiscal years continued in the three-month period ended May 31, 1998, led by growth in sales by the Company's Asian and European electronic materials operations and the inclusion of Dielektra in the Company's sales, which was only partially offset by the slight decline in sales by the Company's North American electronic materials operations. However, the earnings growth that the Company achieved during its 1998 fiscal year did not continue in the 1999 fiscal year first quarter, primarily as a result of earnings declines in the Company's North American electronic materials operations. During the Company's 1999 fiscal year first quarter and during its 1998 fiscal year and for several years prior thereto, more than 10% of the Company's total sales were to Delco Electronics Corporation, a subsidiary of General Motors Corp. Sales to Delco Electronics represented 15.8%, 17.3% and 17.1% of the Company's total sales worldwide for the 1998, 1997 and 1996 fiscal years, respectively. 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 significantly during the three-month period ended May 31, 1998 and are expected to be negligible during the remainder of the 1999 fiscal year and in future years. In May 1998, the Company and its subsidiary, Nelco Technology, Inc., filed a complaint against Delco Electronics Corporation and the Delphi Automotive Systems unit of General Motors Corp. in the United States District Court for the District of Arizona. The complaint alleges, among other things, that Delco breached its contract to purchase semi-finished multilayer printed circuit boards from Nelco and that Delphi interfered with Nelco's contract with Delco, and seeks compensatory and punitive damages of not less than $170 million. -9- 10 Although the Company's electronic materials segment is not dependent on this single customer, the loss of this customer may have a material adverse effect on the business of this segment in the fiscal year ending February 28, 1999 and in subsequent fiscal years. Three Months Ended May 31, 1998 Compared with Three Months Ended June 1, 1997: The Company's electronic materials business was principally responsible for the decline in the Company's results of operations for the three-month period ended May 31, 1998. The market for sophisticated printed circuit materials experienced weakness during the 1999 fiscal year first quarter which the Company believes was attributable to an industry-wide inventory correction and the Asian financial crisis. During the three-month period ended May 31, 1998, the Company's electronic materials business experienced inefficiencies caused by operating its facilities at levels significantly lower than their designed manufacturing capacity and faced price pressure from its customers. These factors adversely affected the Company's gross margins. The Company's performance was also adversely affected by a significant decline in the volume of its business with Delco Electronics during the quarter, which negatively affected the Company's margins. Operating results of the Company's engineered materials and plumbing hardware business also declined considerably during the three-month period ended May 31, 1998. Results of Operations Sales for the three-month period ended May 31, 1998 increased 9.0% to $99.9 million from $91.6 million for last fiscal year's comparable period. Sales of the electronic materials business for the three-month period ended May 31, 1998 were $90.6 million, or 91% of total sales worldwide, compared with $81.4 million, or 89% of total sales worldwide, for last fiscal year's comparable period. This 11% increase in sales of electronic materials was principally the result of higher volume of electronic materials shipped and an increase in sales of higher technology products. Sales of the engineered materials and plumbing hardware business for the three-month period ended May 31, 1998 were $9.3 million compared with $10.2 million for last fiscal year's comparable period. This decrease in sales was the result of reduced sales of plumbing hardware products, which surpassed an increase in sales in the advanced composite materials business. The Company's foreign electronic materials operations accounted for $35.7 million of sales, or 36% of the Company's total sales worldwide, during the three-month period ended May 31, 1998 compared with $24.7 million of sales, or 27% of total sales worldwide, during last fiscal year's comparable period. Sales by the Company's foreign operations during the 1999 fiscal year first quarter increased 45% from the 1998 fiscal year comparable period. While sales by each of the Company's foreign operations were higher in the 1999 fiscal year first quarter compared with the 1998 fiscal year first quarter, the increase in sales by foreign operations was principally due to the inclusion of Dielektra in the Company's sales and an increase in sales by the Company's Asian operations. The Company expanded the manufacturing capacity of its facility in Singapore during the 1998 and 1997 fiscal years and is engaged in a further expansion of the Singapore manufacturing facility during the Company's 1999 fiscal year. -10- 11 The gross margin for the Company's worldwide operations was 17.4% during the three-month period ended May 31, 1998 compared with 19.7% for last fiscal year's comparable period. The deterioration in the gross margin was attributable to inefficiencies caused by operating facilities at levels significantly lower than their designed capacity, price pressure exerted by customers, and reduced sales volumes with Delco Electronics, which offset the continuing growth in sales of higher technology, higher margin products. Selling, general and administrative expenses, measured as a percentage of sales, were 10.2% during the three-month period ended May 31, 1998 compared with 10.3% during last fiscal year's comparable period. For the reasons set forth above, profit from operations for the three-month period ended May 31, 1998 decreased 16% to $7.2 million from $8.6 million for last fiscal year's comparable period. Interest and other income, principally investment income, was $2.0 million for the three-month period ended May 31, 1998 compared with the same amount for last fiscal year's comparable period. The Company's investments were primarily short-term taxable instruments and government securities. Interest expense for the three-month period ended May 31, 1998 was $1.4 million compared with the same amount during last fiscal year's comparable period. At the end of the 1996 fiscal year, the Company issued $100 million principal amount of 5.5% Convertible Subordinated Notes due 2006 (the "Notes"); as a result, all of such Notes were outstanding during the quarter ended May 31, 1998 and the last fiscal year, which resulted in the associated interest expense and contributed to the cash available for investment. The Company's effective income tax rate for the three-month period ended May 31, 1998 was 30.0% compared with 33.0% for last fiscal year's comparable period. This decrease in the effective tax rate was primarily the result of favorable foreign tax rate differentials. Net earnings for the three-month period ended May 31, 1998 decreased 10% to $5.5 million from $6.2 million for last fiscal year's comparable period. Basic and diluted earnings per share decreased to $0.48 and $0.46, respectively, for the three-month period ended May 31, 1998 from $0.55 and $0.51, respectively, for last fiscal year's comparable period. These decreases in net earnings and earnings per share were attributable to the Company's lower operating results. Liquidity and Capital Resources: At May 31, 1998, the Company's cash and temporary investments were $155.5 million compared with $158.5 million at March 1, 1998, the end of the Company's 1998 fiscal year. The decrease in the Company's cash and investment position at May 31, 1998 was attributable to investments in property, plant and equipment in excess of cash provided from operating activities, as discussed below. The Company's working capital was $178.6 million at May 31, 1998 compared with $176.6 million at March 1, 1998. The increase at May 31, 1998 compared with March 1, 1998 was due to lower accounts payable and accrued liabilities, offset in part by the decrease in cash and temporary investments and modest decreases in accounts receivable and inventories. The Company's current ratio (the ratio of current assets to current liabilities) was 3.8 to 1 at May 31, 1998 compared with 3.5 to 1 at March 1, 1998. During the three-months ended May 31, 1998, cash provided by net earnings before depreciation and amortization of $9.0 million was reduced by a net increase in working capital items, resulting in $4.1 million of cash provided from operating activities, and the Company expended $6.4 million for the purchase of property, plant and equipment. Net expenditures for -11- 12 property, plant and equipment were $18.3 million and $18.7 million in the 1998 and 1997 fiscal years, respectively. The Company expects the level of capital expenditures in the 1999 fiscal year to be higher than in the 1998 fiscal year. The Company is planning further expansions of its electronic materials operations, particularly in the United States and Asia. At May 31, 1998, the Company's only long-term debt was the Notes. The Company believes its financial resources will be sufficient, for the foreseeable future, to provide for continued investment in property, plant and equipment and for general corporate purposes. Such resources would also be available for appropriate acquisitions and other expansions of the Company's business. In the three month periods ended May 31, 1998 and June 1, 1997, the Company charged less than $0.1 million against pretax income for environmental remedial response and voluntary cleanup costs (including legal fees). While annual expenditures have generally been constant from year to year, and may increase over time, the Company expects it will be able to fund such expenditures from cash flow from operations. The timing of expenditures depends on a number of factors, including regulatory approval of cleanup projects, remedial techniques to be utilized and agreements with other parties. At May 31, 1998 and March 1, 1998, the recorded liability in accrued liabilities for environmental matters was $3.5 million. Management does not expect that environmental matters will have a material adverse effect on the liquidity, capital resources, business or consolidated financial position of the Company. Factors That May Affect Future Results. Certain portions of this Report which do not relate to historical financial information may be deemed to constitute forward-looking statements that are subject to various factors which could cause actual results to differ materially from Park's expectations or from results which might be projected, forecast, estimated or budgeted by the Company in forward-looking statements. Such factors include, but are not limited to, general conditions in the electronics industry, the Company's competitive position, the status of the Company's relationships with its customers, economic conditions in international markets, and the various factors set forth under the caption "Factors That May Affect Future Results" after Item 7 of Park's Annual Report on Form 10-K for the fiscal year ended March 1, 1998. -12- 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings. In May 1998, The Company and its subsidiary, Nelco Technology, Inc., filed a complaint against Delco Electronics Corporation and Delphi Automotive Systems in the United States District Court for the District of Arizona. The complaint alleges, among other things, that Delco breached its contract to purchase semi-finished multilayer printed circuit boards from Nelco and that Delphi interfered with Nelco's contract with Delco and seeks compensatory and punitive damages of not less than $170 million. The Company announced in March 1998 that it had been informed by Delco Electronics that Delco planned to close its printed circuit board fabrication plant and exit the printed circuit board manufacturing business. As a result, the Company's sales to Delco declined significantly during the three-month period ended May 31, 1998 and are expected to be negligible during the remainder of the 1999 fiscal year and in future years. The Company had been Delco's principal supplier of semi-finished multilayer printed circuit board materials for more than ten years. These materials were used by Delco to produce finished multilayer printed circuit boards. Sales to Delco Electronics represented 15.8%, 17.3% and 17.1% of the Company's total worldwide sales for the 1998, 1997 and 1996 fiscal years, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of this Report and "Factors That May Affect Future Results" after Item 2 of this Report. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: Exhibit Number 27.01 Financial Data Schedule (b) No reports on Form 8-K have been filed during the fiscal quarter ended May 31, 1998. -13- 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Park Electrochemical Corp. --------------------------- (Registrant) Date: July 13, 1998 /s/Brian E. Shore --------------------------- Brian E. Shore President and Chief Executive Officer Date: July 13, 1998 /s/Murray O. Stamer --------------------------- Murray O. Stamer Corporate Controller and Chief Accounting Officer -14- 15 EXHIBIT INDEX Exhibit No. Name Page 27.01 Financial Data Schedule (filed only by electronic transmission with EDGAR filing with the Securities and Exchange Commission).......... - -15- EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF PARK ELECTROCHEMICAL CORP. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS FEB-28-1999 MAY-31-1998 31,299 124,169 52,640 0 24,782 241,412 209,390 97,721 356,836 62,772 100,000 0 0 1,358 170,098 356,836 99,855 101,904 82,484 92,619 0 0 1,378 7,907 2,372 5,535 0 0 0 5,535 .48 .46
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