SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 14(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 27, 2001
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 ISSERS 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 Section 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: 19,390,416
as of July 6, 2001.
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION: Number
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
May 27, 2001 (Unaudited) and February 25, 3
2001
Consolidated Statements of Earnings
13 weeks ended May 27, 2001 and May 28, 2000
(Unaudited) 4
Condensed Consolidated Statements of Cash
Flows
13 weeks ended May 27, 2001 and May 28, 2000 5
(Unaudited)
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Factors That May Affect Future Results 12
Item 3. Quantitive and Qualitative Disclosures About
Market Risk 12
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
May 27,
2001 February 25,
(Unaudited) 2001*
ASSETS
Current assets:
Cash and cash equivalents $149,506 $123,726
Marketable securities 17,461 32,017
Accounts receivable, net 40,002 71,105
Inventories (Note 2) 20,932 32,307
Prepaid expenses and other current 8,146 9,456
assets
Total current assets 236,047 268,611
Property, plant and equipment, net 147,503 159,309
Other assets 722 2,661
Total $384,272 $430,581
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 15,189 $ 29,481
Accrued liabilities 36,200 39,052
Income taxes payable 3,086 11,567
Total current liabilities 54,475 80,100
Long-term debt (Note 3) - 97,672
Deferred income taxes 13,279 12,679
Deferred pension liability and 10,712 11,224
other
Stockholders' equity:
Common stock 2,037 2,037
Additional paid-in capital 130,245 57,318
Retained earnings 187,375 203,150
Treasury stock, at cost (6,140) (27,835)
Accumulated other non-owner (7,711) (5,764)
changes
Total stockholders' equity 305,806 228,906
Total $384,272 $430,581
<FN>
*The balance sheet at February 25, 2001 has been derived from
the audited financial statements at that date.
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share amounts)
13 Weeks Ended
(Unaudited)
May 27, May 28,
2001 2000
Net sales $ 69,102 $120,159
Cost of sales 65,836 96,464
Gross profit 3,266 23,695
Selling, general and administrative 9,492 11,927
expenses
Loss on sale of NTI and closure of
related support facility (Note 4) 15,707 -
Other severance costs 681 -
(Loss)/Income from operations (22,614) 11,768
Other income:
Interest and other income, net 1,740 1,809
Interest expense - 1,402
Total other income 1,740 407
(Loss)/Earnings before income taxes (20,874) 12,175
Income tax (benefit)/provision (6,262) 3,346
Net (loss)/earnings $(14,612) $ 8,829
(Loss)/Earnings per share (Note 5):
Basic $ (.75) $ .56
Diluted $ (.75) $ .50
Weighted average number of common and
common equivalent shares outstanding:
Basic 19,420 15,858
Diluted 19,420 19,602
Dividends per share $ .06 $ .06
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
13 Weeks Ended
(Unaudited)
May 27, May 28,
2001 2000
Cash flows from operating
activities:
Net (loss) earnings $(14,612) $ 8,829
Depreciation and amortization 4,292 3,967
Loss on sale of fixed assets 10,636 -
Impairment of fixed assets 2,058 -
Change in operating assets and 18,446 9,993
liabilities
Net cash provided by operating $ 20,820 $22,789
activities
Cash flows from investing
activities:
Purchases of property, plant and
equipment, net (6,548) (9,719)
Purchases of marketable securities - (8,902)
Proceeds from sales and maturities
of marketable securities 14,565 24,674
Net cash provided by investing
activities 8,017 6,053
Cash flows from financing activities:
Redemption of long-term debt (Note 3) (1,738) -
Dividends paid (1,163) (361)
Proceeds from exercise of stock options 601 68
Net cash used in financing activities (2,300) (293)
Increase in cash and cash equivalents before
exchange rate changes 26,537 28,549
Effect of exchange rate changes on cash
and cash equivalents (757) (1,522)
Increase in cash and cash equivalents 25,780 27,027
Cash and cash equivalents, beginning
of period 123,726 53,153
Cash and cash equivalents, end of
period $149,506 $80,180
Supplemental cash flow information:
Cash paid during the period for:
Interest - $ 2,750
Income taxes $ 668 480
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 27, 2001, the
consolidated statements of earnings for the 13 weeks ended May 27,
2001 and May 28, 2000, 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 27,
2001, 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 February 25, 2001.
2. INVENTORIES
Inventories consist of the following:
(Amounts in thousands)
May 27, February 25,
2001 2001
Raw materials $10,167 $14,988
Work-in-process 3,133 5,075
Finished goods 6,736 11,319
Manufacturing supplies 896 925
$20,932 $32,307
3. LONG-TERM DEBT
On March 1, 2001, $95,934,000 principal amount of the Company's
5.5% Convertible Subordinated Notes due March 1, 2006 were converted
into 3,410,908 shares of the Company's common stock, and the remaining
$1,738,000 principal amount of the Notes were redeemed by the Company
on March 2, 2001 for cash.
4. SALE OF NELCO TECHNOLOGY, INC.
On April 27, 2001, the Company sold the assets and business of its
wholly owned subsidiary, Nelco Technology, Inc. ("NTI"), to Dynamic
Details Incorporated, Arizona, a wholly owned subsidiary of DDi Corp.
NTI was a manufacturer of semi-finished printed circuit boards,
commonly known as mass lamination. The Company recorded a charge of
$15.7 million in its fiscal 2002 first quarter in connection with this
sale and the closure of a related support facility.
5. EARNINGS PER SHARE
The following table sets forth the calculation of basic and
diluted earnings per share for the periods specified (amounts in
thousands, except per share amounts):
13 Weeks Ended
May 27, May 28,
2001 2000
Net(loss)/income for basic $14,612) $ 8,829
EPS
Add interest on 5.5%
Convertible Subordinated - 944
Notes, net of taxes
Net income for diluted EPS $(14,612) $ 9,773
Weighted average common
shares outstanding for basic EPS $19,420 $15,859
Net effect of dilutive options * 188
Assumed conversion of 5.5%
Convertible Subordinated Notes - 3,555
Weighted average shares
outstanding for diluted EPS 19,420 19,602
EPS-basic $( 0.75) $ 0.56
EPS-diluted $( 0.75) $ 0.50
*For the 13 weeks ended May 27, 2001, the effect of
employee stock options was not considered because it
was anti-dilutive.
6. BUSINESS SEGMENTS
The Company's specialty adhesive tape and film business, advanced
composite materials business and plumbing hardware business were
previously aggregated into the engineered materials and plumbing
hardware segment. During fiscal 2001, the Company closed and
liquidated its plumbing hardware business. In fiscal 2001, 2000
and 1999, the specialty adhesive tape, advanced composite
materials and plumbing hardware businesses comprised less than 10%
of the Company's consolidated revenues and assets, and therefore,
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, to a lesser extent, major electronic original
equipment manufacturers ("OEMs") located throughout North America,
Europe and Asia. The Company's specialty adhesive tape and
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 follows (in thousands):
13 Weeks Ended
May 27, May 28,
2001 2000
Sales:
North America $ 41,459 $ 72,469
Europe 16,981 29,267
Asia 10,662 18,423
Total sales $ 69,102 $120,159
Assets:
North America $211,716 $235,565
Europe 69,008 71,083
Asia 103,548 79,356
Total Assets $384,272 $386,004
7. COMPREHENSIVE (LOSS) INCOME
Total comprehensive (loss) income for the 13 weeks ended May 27,
2001 and May 28, 2000 was ($16,559,000) and $6,355,000,
respectively. Comprehensive (loss) income consists primarily of
net (loss) income and foreign currency translation adjustments.
8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities".
SFAS 133 establishes standards for the recognition and measurement
of derivatives and hedging activities and requires all derivative
instruments to be recorded on the balance sheet at fair value.
This statement is effective for fiscal years beginning after June
15, 2000. The Company's policy is to enter into forward foreign
currency contracts only to hedge specific transactions in order to
reduce exposure to foreign exchange risks. The adoption of these
standards did not have a material effect on the Company's
consolidated results of operation or financial position.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Park is a leading global designer and producer of advanced
electronic materials used to fabricate complex multilayer printed
circuit boards and 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 declined dramatically in the three-month
period ended May 27, 2001, with steep declines in sales by the
Company's North American, European and Asian operations. The earnings
growth that the Company achieved during its 2001 and 2000 fiscal years
halted in the 2002 fiscal year first quarter as a result of a severe
downturn in the global electronics industry.
Three Months Ended May 27, 2001 Compared with Three Months Ended May
28, 2000
The Company experienced a sharp decline in its results of
operations for the three-month period ended May 27, 2001 as the North
American, European and Asian markets for sophisticated printed circuit
materials experienced severe downturns during the 2002 fiscal year
first quarter.
In addition, the Company incurred a non-recurring, pre-tax
charge of $15.7 million during the 2002 fiscal year first quarter in
connection with the sale of the assets and business of Nelco
Technology, Inc. ("NTI"), the Company's wholly owned subsidiary that
manufactured semi-finished printed circuit boards, commonly known as
mass lamination, in Tempe, Arizona, and the closure of a related
support facility in Arizona. NTI formerly supplied Delco Electronics
Corporation with semi-finished printed circuit boards. The Company also
incurred pre-tax severance charges of $0.7 million during the 2002
fiscal year first quarter related to the layoff of employees at the
Company's continuing operations.
Results of Operations
Net sales for the three-month period ended May 27, 2001 declined
42% to $69.1 million from $120.2 million for last year's comparable
period. This decrease in net sales was the result of lower unit volumes
of materials shipped. The Company's foreign operations accounted for
$27.6 million of net sales, or 40% of the Company's total net sales
worldwide, during the three-month period ended May 27, 2001 compared
with $47.7 million of sales, or 40% of total net sales worldwide,
during last fiscal year's comparable period. Net sales by the Company's
foreign operations during the 2001 fiscal year first quarter declined
42% from the 2001 fiscal year comparable period. The decline in sales
by foreign operations was due to decreases in sales in both Asia and
Europe.
The gross margin for the Company's worldwide operations was 4.7%
during the three-month period ended May 27, 2001 compared with 19.7%
for last fiscal year's comparable period. The deterioration in the
gross margin was attributable to the significant decline in sales
volume compared with last fiscal year's comparable period. Although the
Company's cost of sales decreased significantly as a result of lower
production volumes and cost reduction measures implemented by the
Company, including significant employee lay-offs and annual salary
increase deferrals, the declines in sales and production volumes
resulted in lower volumes to absorb overhead costs and, consequently,
an increase in the cost of sales as a percentage of net sales.
Although selling, general and administrative expenses declined
$2.4 million, or 20%, during the three-month period ended May 27, 2001
compared with last year's comparable period, these expenses measured as
a percentage of sales, were 13.7% during the three-month period ended
May 27, 2001 compared with 9.9% during last fiscal year's comparable
period. This increase resulted from proportionately lower sales
compared to the comparable period during the last fiscal year.
For the reasons set forth above, income from operations
including the non-recurring, pre-tax charges described above, related
to the sale of NTI and the closure of a related support facility and
severance for the lay-off of employees at the Company's continuing
operations, declined to a loss of $22.6 million for the three month
period ended May 27, 2001 from a profit of $11.8 million for last
year's comparable period.
Interest and other income, principally investment income, was
$1.7 million for the three-month period ended May 27, 2001 compared
with $1.8 million for last fiscal year's comparable period. The
decrease in investment income was attributable to a decrease in
prevailing interest rates. The Company's investments were primarily
short-term taxable instruments and government securities. The Company
incurred no interest expense for the three-month period ended May 27,
2001 compared with approximately $1.4 million during last fiscal year's
comparable period. The Company's interest expense was related primarily
to its $100 million principal amount of 5.5% Convertible Subordinated
Notes due 2006 issued in 1996, $2,328,000 principal amount of which
were converted into 82,750 shares of the Company's common stock prior
to February 25, 2001, the end of the Company's 2001 fiscal year,
$95,934,000 of which were converted into 3,410,908 of the Company's
common stock on March 1, 2001, and $1,738,000 of which were redeemed by
the Company for cash on March 2, 2001.
The Company's effective income tax rate for the three-month
period ended May 27, 2001 was 30.0% compared with 27.5% for last fiscal
year's comparable period. This increase in the effective tax rate was
primarily the result of a change in the Company's income mix among the
tax jurisdictions in which the Company does business.
Net earnings, including the non-recurring, pre-tax charges,
described above, related to the sale of NTI and the closure of a
related support facility and severance for the lay-off of employees at
the Company's continuing operations, for the three-month period ended
May 27, 2001 declined to a net loss of $14.6 million from a profit of
$8.8 million for last fiscal year's comparable period. Basic and
diluted earnings per share decreased from $0.56 and $0.50,
respectively, for the three-month period ended May 28, 2000 to a loss
of $0.75 per share including the non-recurring, pre-tax charges for the
three-month period ended May 27, 2001.
Liquidity and Capital Resources:
At May 27, 2001, the Company's cash and temporary investments
were $167.0 million compared with $155.7 million at February 25, 2001,
the end of the Company's 2001 fiscal year. The increase in the
Company's cash and investment position at May 27, 2001 was attributable
to cash provided from operating activities in excess of investments in
property, plant and equipment, as discussed below, and proceeds from
the sale of NTI. The Company's working capital was $181.6 million at
May 27, 2001 compared with $188.5 million at February 25, 2001. The
decrease at May 27, 2001 compared with February 25, 2001 was due
principally to significantly lower accounts receivable and inventories,
offset partially by lower accounts payable and higher cash and
temporary investments. The Company's current ratio (the ratio of
current assets to current liabilities) was 4.3 to 1 at May 27, 2001
compared with 3.4 to 1 at February 25, 2001.
During the three months ended May 27, 2001, cash provided by the
Company's operations, before depreciation and amortization and before
non-cash losses related to the sale and impairment of fixed assets, of
$2.4 million was augmented by a significant net reduction in working
capital items, resulting in $20.8 million of cash provided from
operating activities. During the three months ended May 27, 2001, the
Company expended $9.5 million for the purchase of property, plant and
equipment. Net expenditures for property, plant and equipment were
$51.8 million in the 2001 fiscal year and $27.7 million in the 2000
fiscal year. During its 2000 fiscal year, the Company commenced
significant expansions of its electronic materials manufacturing
facilities in California and New York, which it expects to complete in
its 2002 fiscal year; and during the 2001 fiscal year, the Company
commenced a significant expansion of its higher technology product line
manufacturing facility in Arizona, which was completed in the 2002
fiscal year first quarter. During the 2002 fiscal year, the Company
will begin a significant expansion of its electronic materials
manufacturing facility in Singapore, which will involve total capital
spending of approximately $25 million during the 2002 and 2003 fiscal
years.
At May 27, 2001, 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 property,
plant and equipment and for general corporate purposes. Such resources
would also be available for appropriate acquisitions and other
expansion of the Company's business.
Environmental Matters:
In the three-month periods ended May 27, 2001 and May 28, 2000,
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 flows 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 27, 2001 and
February 25 2001, the recorded liability in accrued liabilities for
environmental matters was approximately $4.4 million. Management does
not expect that environmental matters will have a material adverse
effect on the liquidity, capital resources, business or consolidated
financial position of the Company.
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 February 25, 2001.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to market risks for changes in foreign
currency exchange rates and interest rates. The Company's primary
foreign currency exchange exposure relates to the translation of the
financial statements of foreign subsidiaries using currencies other
than the U.S. dollar as their functional currency. The Company does not
believe that a 10% fluctuation in foreign exchange rates would have had
a material impact on its consolidated results of operations or
financial position. The exposure to market risks for changes in
interest rates relates to the Company's short-term investment
portfolio. This investment portfolio is managed by outside professional
managers in accordance with guidelines issued by the Company. These
guidelines are designed to establish a high quality fixed income
portfolio of government and highly rated corporate debt securities with
a maximum weighted average maturity of less than one year. The Company
does not use derivative financial instruments in its investment
portfolio. Based on the average maturity of the investment portfolio at
the end of the 2001 fiscal year and at May 27, 2001, a 10% increase in
short-term interest rates would not have had a material impact on the
consolidated results of operations or financial position of the
Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In May 1998, the Company and its Nelco Techology, Inc. ("NTI")
subsidiary in Arizona filed a complaint against Delco Electronics
Corporation and the Delphi Automotive Systems unit of General Motors
Corp. in the United States District Court for the District of Arizona.
The complaint alleged, among other things, that Delco breached its
contract to purchase semi-finished multilayer printed circuit boards
from NTI and that Delphi interfered with NTI's contract with Delco,
that Delco breached the covenant of good faith and fair dealing implied
in the contract, that Delco engaged in negligent misrepresentation and
that Delco fraudulently induced NTI to enter into the contract. The
Company and NTI sought substantial compensatory and punitive damages.
On November 28, 2000, after a five day trial in Phoenix,
Arizona, a jury awarded damages to NTI in the amount of $32,280,000,
and on December 12, 2000 the judge in the United States District Court
entered judgment for NTI on its claim of breach of the implied covenant
of good faith and fair dealing with damages in the amount of
$32,280,000. Both parties filed motions for post-judgment relief and a
new trial, all of which the judge denied, and both parties have filed
notices to appeal the decision to the United States Court of Appeals
for the Ninth Circuit in San Francisco.
In March 1998, the Company had been informed by Delco
Electronics that Delco planned to close its printed circuit board
fabrication plant and exit the printed circuit board manufacturing
business. As a result, the Company's sales to Delco declined
significantly during the three-month period ended May 31, 1998, were
negligible during the three-month period ended August 30, 1998, have
been nil since that time and are expected to be nil in future periods.
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; 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.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None
(b) No reports on Form 8-K have been filed during the fiscal quarter
ended May 27, 2001.
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: July 6, 2001 ------------------------------
Brian E. Shore
President and
Chief Executive Officer
/s/Murray O. Stamer
Date: July 6, 2001 ------------------------------
Murray O. Stamer
Senior Vice President, Finance
Principal Financial Officer