UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 27,November 25, 2018

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)

                  (631) 465-3600                    

(Registrant’sRegistrant's Telephone Number, Including Area Code)

                  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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [  ] Accelerated Filer [X] Non-Accelerated Filer [  ] Smaller Reporting Company [  ] Emerging Growth Company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

Indicate the number of shares outstanding of each of the issuer’sissuer's classes of common stock, as of the latest practicable date: 20,244,55820,279,408 as of June 27, 2018.January 3, 2019.

PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES

TABLE OF CONTENTS

1.CONSOLIDATED FINANCIAL STATEMENTS

1.	CONSOLIDATED FINANCIAL STATEMENTS

The Condensed Consolidated Balance Sheet as of May 27,November 25, 2018, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Earnings (Loss) for the 13 weeks and 39 weeks ended May 27,November 25, 2018 and May 28,November 26, 2017 and the Condensed Consolidated Statements of Cash Flows for the 1339 weeks then ended have been prepared by Park Electrochemical Corp. (the “Company”), without audit. In the opinion of management, these unaudited consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at May 27,November 25, 2018 and the results of operations and cash flows for all periods presented. The Consolidated Statements of Operations are not necessarily indicative of the results to be expected for the full fiscal year or any subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted. It is suggested that theseThese consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K10-K for the fiscal year ended February 25, 2018. There have been no significant changes to such accounting policies during the 1339 weeks ended May 27,November 25, 2018.

2.FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.ei.e.., the “exit price”) in an orderly transaction between market participants at the measurement date.

Fair value measurements are broken down into three levels based on the reliability of inputs as follows:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves observable at commonly quoted intervals or current market), and contractual prices for the underlying financial instrument, as well as other relevant economic measures.

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying value due to their short-term nature. Due to the variable interest rates periodically adjusting with the current LIBOR, the carrying value of outstanding borrowings under the Company’s long-term debt approximates its fair value. (See Note 5). Certain assets and liabilities of the Company are required to be recorded at fair value on either a recurring or non-recurring basis. On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs. (See Note 3)3).

The Company’s non-financial assets measured at fair value on a non-recurring basis include goodwill and any long-lived assets written down to fair value. To measure the fair value of such assets, the Company uses Level 3 inputs consisting of techniques including an income approach and a market approach. The income approach is based on a discounted cash flow analysis and calculates the fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the discounted cash flow analysis require the exercise of significant judgment, including judgment about appropriate discount rates, terminal values, growth rates and the amount and timing of expected future cash flows. There were no transfers between levels within the fair value hierarchy during the 1339 weeks ended May 27,November 25, 2018 and May 28,November 26, 2017. With respect to goodwill, the Company first assesses qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If, based on that assessment, the Company believes it is more likely than not that fair value is less than carrying value, a goodwill impairment test is performed. There have been no changes in events or circumstances which required impairment charges to be recorded during the 13 or 39 weeks ended May 27,November 25, 2018.

3.MARKETABLE SECURITIES

All marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, included in comprehensive earnings.earnings (loss). Realized gains and losses, amortization of premiums and discounts, and interest and dividend income are included in interest and other income in the Consolidated Statements of Operations. The costs of securities sold are based on the specific identification method.

The following is a summary of available-for-sale securities:

4. INVENTORIES

Inventories from continuing operations are stated at the lower of cost (first-in, first-out(first-in, first-out method) or market.net realizable value. 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’sCompany's products and market conditions. Inventories from continuing operations consisted of the following:

5. LONG-TERM DEBT

On January 15, 2016, the Company entered into a three-yearthree-year revolving credit facility agreement (the “Credit Agreement”) with HSBC Bank USA, National Association (“HSBC Bank”). This Credit Agreement replaced the Amended Credit Agreement that the Company entered into with PNC Bank in February 2014. The Credit Agreement provided for loans up to $75,000$75,000 and letters of credit up to $2,000.$2,000.

On January 3, 2018, in connection with the Company’s voluntary prepayment of the entire loan balance, the Company terminated the Credit Agreement. The prepayment was made with the Company’s cash and cash equivalents, marketable securities and restricted cash.

Interest expense recorded under the Credit Agreement was $0 and $510$0 during the 13-week13-week and 39-week periods ended May 27,November 25, 2018 and May 28,$689 and $1,802 during the 13-week and 39-week periods ended November 26, 2017, respectively.

6. STOCK-BASED COMPENSATION

As of May 27,November 25, 2018, the Company had a 20022018 Stock Option Plan (the “Plan”“2018 Plan”), and no other stock-based compensation plan. The 2018 Plan was adopted by the Board of Directors of the Company on May 8, 2018 and approved by the shareholders of the Company at the Annual Meeting of Shareholders of the Company on July 24, 2018. No options have been granted under the 2018 Plan. Prior to the 2018 Plan, the Company had the 2002 Stock Option Plan (the “2002 Plan”) which had been approved by the Company’s shareholders and provided for the grant of stock options to directors and key employees of the Company. All options granted under the 2002 Plan have exercise prices equal to the fair market value of the underlying common stock of the Company at the time of grant, which, pursuant to the terms of the 2002 Plan, iswas the reported closing price of the common stock on the New York Stock Exchange on the date preceding the date the option iswas granted. Options granted under the 2002 Plan become exercisable 25% one year after the date of grant, with an additional 25% exercisable each succeeding anniversary of the date of grant, and expire 10 years after the date of grant.

The Plan terminated on May 21, 2018, and authority to grant additional options under the Plan expired on that date. All options granted under the Plan will expire in April 2028 or earlier. The Board of Directors of the Company has adopted a 2018 Stock Option Plan subject to approval by the shareholders of the Company at the Annual Meeting of Shareholders of the Company to be held on July 24, 2018.

During the 1339 weeks ended May 27,November 25, 2018, the Company granted options to purchase a total of 2,650 shares of common stock to certain of its employees. The future compensation expense to be recognized in earnings before income taxes was $10 and will be recorded on a straight-line basis over the requisite service period. The fair value of the granted options was $3.66 per share using the Black-Scholes option pricing model with the following assumptions: risk freerisk-free interest rate of 2.83%; expected volatility factor of 24.7%; expected dividend yield of 2.32%; and estimated option term of 5.2 years.

The risk-free interest rates were based on U.S. Treasury rates at the date of grant with maturity dates approximately equal to the estimated terms of the options at the date of the grant. Volatility factors were based on historical volatility of the Company’s common stock. The expected dividend yields were based on the regular quarterly cash dividend per share most recently declared by the Company and on the exercise price of the options granted during the 1339 weeks ended May 27,November 25, 2018. The estimated term of the options was based on evaluations of the historical and expected future employee exercise behavior.

The 2002 Plan terminated on May 21, 2018, and authority to grant additional options under the 2002 Plan expired on that date. All options granted under the 2002 Plan will expire in April 2028 or earlier.

The following is a summary of option activity for the 1339 weeks ended May 27,November 25, 2018:

7.     RESTRUCTURING CHARGES

During the 2018 fiscal year, the Company consolidated its Nelco Products, Inc. Business Unit located in Fullerton, California and its Neltec, Inc. Business Unit located in Tempe, Arizona. The Company estimates the remaining pre-tax charge in connection with the consolidation to be approximately $1,020, which the Company expects to incur primarily during the fiscal year ending February 28, 2021.

The Company recorded restructuring charges of $52 and $1,250 during the 13-week periods ended May 27, 2018 and May 28, 2017 respectively, related to the consolidation.

The following table sets forth the charges and accruals related to the consolidation:

The Company recorded additional restructuring charges of $131 and $111 during the 13-week periods ended May 27, 2018 and May 28, 2017, respectively, related to the closure in the 2009 fiscal year of the Company’s New England Laminates Co., Inc. Business Unit located in Newburgh, New York. The New England Laminates Co., Inc. building in Newburgh, New York is held for sale. In the 2004 fiscal year, the Company reduced the book value of the building to zero, and the Company intends to sell it during the 2019 fiscal year.

8.EARNINGS PER SHARE

Basic earnings per share are computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are 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 potentially dilutive securities outstanding during the period. Stock options are the only potentially dilutive securities;securities that have been issued by the Company; and the number of dilutive options is computed using the treasury stock method.

The following table sets forth the calculation of basic and diluted earnings per share:

98. SHAREHOLDERS’SHAREHOLDERS’ EQUITY EQUITY

During the 1339 weeks ended May 27,November 25, 2018, the Company sold 2,98737,837 shares of the Company’s treasury stock pursuant to the exercises of employee stock options and received proceeds of $47$661 from such exercises andexercises. The Company recognized stock-based compensation expense, net of recognized tax benefits, of $201. These transactions resulted in a $187 increase in additional paid-in capital during the period.$594.

On January 8, 2015, the Company announced that its Board of Directors authorized the Company’s purchase, on the open market and in privately negotiated transactions, of up to 1,250,000 shares of its common stock, representing approximately 6% of the Company’s 20,945,634 total outstanding shares as of the close of business on January 7, 2015. This authorization superseded all prior Board of Directors’ authorizations to purchase shares of the Company’s common stock.

On March 10, 2016, the Company announced that its Board of Directors authorized the Company’s purchase, on the open market and in privately negotiated transactions, of up to 1,000,000 additional shares of its common stock, in addition to the unused prior authorization to purchase shares of the Company’s common stock announced on January 8, 2015. As a result, the Company is authorized to purchase up to a total of 1,531,412 shares of its common stock, representing approximately 7.6% of the Company’s 20,244,55820,279,408 total outstanding shares as of the close of business on June 27, 2018.January 3, 2019.

The Company did not purchase any shares of its common stock during the 1339 weeks ended May 27,November 25, 2018 or during the 1339 weeks ended May 28,November 26, 2017.

109. INCOME TAXES

The Company’s effective tax rate for the 13 weeks ended May 27, 2018 was 17.6% compared to negative 194.3% for the 13 weeks ended May 28, 2017. The effective tax rates for the 13 weeks and 39 weeks ended May 27,November 25, 2018 were 22.9% and May 28, 2017 were lower than8.8%, respectively, compared to 31.3% and 25.6%, respectively, for the United States Federal income tax rate primarily due to portions of taxable income in jurisdictions with lower effective income tax rates, larger foreign tax incentives13 weeks and a reversal of a tax reserve of $688 in the 1339 weeks ended May 28, 2017 related to certain foreign tax credit positions taken in prior years.November 26, 2017.

The Company continuously evaluates the liquidity and capital requirements of its operations in the United States and of its foreign operations. As a result of such evaluations, the Company repatriated $5,750,$135,300$113,700 and $6,800$135,300 in cash from the Company’s subsidiary in Singapore in the 2019 fiscal year first quarter and in the 2018 and 2017 fiscal years, respectively.

110. GEOGRAPHIC REGIONSDISCONTINUED OPERATIONS

On July 25, 2018, the Company entered into a definitive agreement to sell its Electronics Business for $145,000 in cash. The Company completed this transaction on December 4, 2018.

The Company is a global advanced materials company which develops, manufactures, markets and sells advanced composite materials, primary and secondary structures and assemblies and low-volume tooling forhas classified the aerospace markets and high-technology digital and RF/microwave printed circuit materials principally foroperating results of its Electronics Business, together with certain costs related to the telecommunications and internet infrastructure, enterprise and military/aerospace markets. The Company’s products are sold to customerstransaction, as discontinued operations, net of tax, in North America, Asia and Europe. The Company’s manufacturing facilities are located in Kansas, Singapore, France, Arizona and California.the Consolidated Statements of Operations.

Sales are attributed to geographic regions based uponThe following table shows the region in whichsummary operating results of the materials were delivered to the customer. Sales between geographic regions were not significant.

Financial information regarding the Company’s operations by geographic region is as follows:discontinued operations:

12.INFORMATION ON BUSINESS SEGMENTS

The Company operatesrecorded additional restructuring charges of $101 and $357 during the 13-week and 39-week periods ended November 25, 2018, respectively, and $112 and $312 during the 13-week and 39-week periods ended November 26, 2017, respectively, related to the closure in two business segments: Aerospace and Electronics. As reviewed bythe 2009 fiscal year of the Company’s chief operating decision maker,New England Laminates Co., Inc. Business Unit located in Newburgh, New York. The New England Laminates Co., Inc. building in Newburgh, New York was sold on November 15, 2018; the Company evaluatesgain on the performance of each segment based on operating income. Operating income for each business segment includes corporate expenses that are directly allocable to such segment,sale was $2,945 and was recorded in the Company allocates depreciation13-week and amortization directly to each segment. Accounts receivable, inventory, property and equipment, goodwill and intangible assets are the primary assets identified by segment. The accounting policies for segment reporting are the same for the Company as a whole and transactions between the two operating segments are not material.39-week periods ended November 25, 2018.

Aerospace - designs, develops and manufactures advanced composite materials, primary and secondary structures and assemblies and low-volume tooling for the aerospace markets.

Electronics - designs, develops and manufactures high-technology digital and RF/microwave printed circuit materials principally for the telecommunications and internet infrastructure, enterprise and military/aerospace markets.

Selected Financial Data by Business Segment:

131. CONTINGENCIES

Litigation