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 25, 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: 19,456,000 as of January 4, 2002.
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION: Number
Item 1. Financial Statements
Consolidated Balance Sheets
November 25, 2001(Unaudited) and February 25, 3
2001
Consolidated Statements of Operations
13 weeks and 39 weeks ended November 25, 2001
and November 26, 2000 (Unaudited) 4
Condensed Consolidated Statements of Cash
Flows
39 weeks ended November 25, 2001 and November
26, 2000 (Unaudited) 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Factors That May Affect Future Results 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 15
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
November 25,
2001 February 25,
(Unaudited) 2001*
<s> <c> <c>
ASSETS
Current assets:
Cash and cash equivalents $126,670 $123,726
Marketable securities 27,694 32,017
Accounts receivable, net 29,847 71,105
Inventories (Note 2) 14,433 32,307
Prepaid expenses and other current 12,493 9,456
assets
Total current assets 211,137 268,611
Property, plant and equipment, net 152,258 159,309
Other assets 941 2,661
Total $364,336 $430,581
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 15,349 $ 29,481
Accrued liabilities 29,455 39,052
Income taxes payable - 11,567
Total current liabilities 44,804 80,100
Long-term debt (Note 3) - 97,672
Deferred income taxes 14,080 12,679
Deferred pension liability and other 10,993 11,224
Stockholders' equity:
Common stock 2,037 2,037
Additional paid-in capital 130,426 57,318
Retained earnings 175,151 203,150
Treasury stock, at cost (6,013) (27,835)
Accumulated other non-owner changes (7,142) (5,764)
Total stockholders' equity 294,459 228,906
Total $364,336 $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 OPERATIONS
(Amounts in thousands, except per share amounts)
13 Weeks Ended 39 Weeks Ended
(Unaudited) (Unaudited)
November November November November
25, 26, 25, 26,
2001 2000 2001 2000
<s> <c> <c> <c> <c>
Net sales $ 52,625 $142,608 $173,470 $392,669
Cost of sales 51,086 108,492 167,243 306,465
Gross profit 1,539 34,116 6,227 86,204
Selling, general and
administrative expenses 8,380 13,034 26,300 37,533
Loss on sale of NTI and
closure of related
support facility (Note 4) - - 15,707 -
Restructuring and other
severance charges (Note 5) 3,046 - 3,727 -
(Loss)/income from
operations (9,887) 21,082 (39,507) 48,671
Other income/(expense):
Interest and other
income, net 1,149 2,115 4,496 5,979
Interest expense - (1,401) - (4,205)
Total other income 1,149 714 4,496 1,774
(Loss)/earnings before
income taxes (8,738) 21,796 (35,011) 50,445
Income tax
(benefit)/provision (2,621) 6,969 (10,503) 15,134
Net (loss)/earnings $ (6,117) $ 14,827 $(24,508) $ 35,311
(Loss)/earnings per
share (Note 6):
Basic $ (.31) $ .93 $ (1.26) $ 2.22
Diluted $ (.31) $ .78 $ (1.26) $ 1.91
Weighted average number
of common and common
equivalent shares
outstanding:
Basic 19,559 15,940 19,508 15,894
Diluted 19,559 20,217 19,508 19,920
Dividends per share $ .06 $ .06 $ .18 $ .16
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
39 Weeks Ended
(Unaudited)
November November
25, 26,
2001 2000
<s> <c> <c>
Cash flows from operating
activities:
Net (loss) earnings $(24,508) $35,311
Depreciation and amortization 12,276 12,105
Loss on sale of fixed assets 10,636 -
Impairment of fixed assets 2,959 1,266
Change in operating assets and
liabilities 23,000 5,901
Net cash provided by operating
activities 24,363 54,583
Cash flows from investing
activities:
Purchases of property, plant and
equipment, net (20,871) (34,802)
Purchases of marketable securities (20,647) (70,642)
Proceeds from sales and maturities
of marketable securities 24,773 84,786
Net cash used in investing activities (16,745) (20,658)
Cash flows from financing activities:
Redemption of long-term debt (Note 3) (1,738) -
Dividends paid (3,491) (2,623)
Proceeds from exercise of stock options 909 1,286
Net cash used in financing activities (4,320) (1,337)
Increase in cash and cash equivalents
before exchange rate changes 3,298 32,588
Effect of exchange rate changes on cash
and cash equivalents (354) (1,944)
Increase in cash and cash equivalents 2,944 30,644
Cash and cash equivalents, beginning
of period 123,726 53,153
Cash and cash equivalents, end of
period $126,670 $83,797
Supplemental cash flow information:
Cash paid during the period for:
Interest - $ 5,500
Income taxes $ 6,847 8,142
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of November 25, 2001, the
consolidated statements of operations for the 13 weeks and 39
weeks ended November 25, 2001 and November 26, 2000, 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
consolidated financial statements contain all adjustments
necessary to present fairly the financial position at
November 25, 2001 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 February 25, 2001.
2. INVENTORIES
Inventories consisted of the following:
(Amounts in thousands)
November February
25, 25,
2001 2001
<s> <c> <c>
Raw materials $ 6,311 $14,988
Work-in-process 3,446 5,075
Finished goods 4,049 11,319
Manufacturing supplies 627 925
$14,433 $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 was converted into 3,410,908 shares of the Company's
common stock, and the remaining $1,738,000 principal amount
of the Notes was 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"). NTI was a manufacturer of semi-finished printed
circuit boards commonly known as mass lamination. As a result
of this sale, the Company exited the mass lamination business
in North America. In addition to the sale of NTI, the Company
also closed a related support facility.
In connection with the sale of NTI's assets and business, the
Company incurred pre-tax charges of $10,580,000 in the fiscal
quarter ended May 27, 2001. In addition, the Company paid
$482,000 in severance payments and related costs for
terminated employees in the fiscal quarter ended May 27,
2001, all of whom were terminated in such quarter.
The Company closed the related NTI support facility during
May 2001 and terminated all the manufacturing and support
employees at that facility by the end of the second fiscal
quarter ended August 26, 2001. In conjunction with the
closure of the facility, the Company incurred pre-tax charges
in the first quarter of fiscal year 2002 totaling $4,645,000,
consisting of $2,058,000 related to the impairment of long
lived assets, $940,000 to write down inventories and accounts
receivables to their estimated net realizable values,
$821,000 of employee severance payments and related costs,
$781,000 of ongoing lease and other facility related costs,
and $45,000 of other exit costs. As of November 25, 2001, the
inventories and accounts receivable have been disposed of and
all the severance payments have been made, while $641,000 of
accrued liabilities, principally related to unexpired lease
obligations, remained.
NTI did not have a material effect on Park's consolidated
financial position, results of operations, capital resources,
liquidity or continuing operations, and the sale of NTI is
not expected to have a material effect on the Company's
future operating results.
5. RESTRUCTURING AND OTHER SEVERANCE CHARGES
During the third fiscal quarter ended November 25, 2001, the
Company incurred non-recurring, pre-tax charges totaling
$2,921,000 to close down the conventional lamination line of
Dielektra GmbH ("Dielektra"), its advanced electronic
materials business located in Cologne, Germany, and to reduce
the size of Dielektra's mass lamination operations to enable
Dielektra to focus on its unique DatlamT automated continuous
lamination and paneling technology and on the marketing and
manufacturing of high technology, higher layer count mass
lamination product. The charges included $2,020,000 for
severance payments and related costs for terminated
employees, all of whom were terminated in the third fiscal
quarter, and $901,000 for fixed asset impairments. At
November 25, 2001, $2,002,000 of accrued expenses relating to
employee severance payments and related costs remained. All
of these accrued expenses are expected to be paid before
September 1, 2002, the end of the first half of the Company's
2003 fiscal year. The Company also incurred $125,000 in pre-
tax charges for severance payments and related costs for
terminated employees, all of whom were terminated in the
third quarter, at another business unit.
In addition, during the fiscal quarter ended May 27, 2001,
the Company incurred pre-tax severance charges of $681,000
for severance payments and related costs for terminated
employees, all of whom were terminated in such quarter, at
the Company's continuing operations.
6. 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):
<caption> 13 weeks ended 39 weeks ended
November November November November
25, 26, 25, 26,
2001 2000 2001 2000
<s> <c>
Net (loss)/income for
basic EPS $(6,117) $14,827 $(24,508) $ 35,311
Add interest on 5.5%
Convertible Subordinated
Notes, net of taxes - 911 - 2,733
Net (loss)/income for
diluted EPS $(6,117) $15,738 $(24,508) $38,044
Weighted average common
shares outstanding for
basic EPS 19,559 15,940 19,508 15,894
Net effect of dilutive
options * 774 * 488
Assumed conversion of 5.5%
Convertible Subordinates
Notes - 3,503 - 3,538
Weighted averages shares
outstanding for diluted EPS 19,559 20,217 19,508 19,920
Basic (loss)/earnings per
share $ (.31) $ .93 $ (1.26) $ 2.22
Diluted (loss)/earnings
per share $ (.31) $ .78 $ (1.26) $ 1.91
<FN>
*For the 13 weeks and 39 weeks ended November 25, 2001,
the effect of employee stock options was not considered
because it was anti-dilutive.
7. 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 (amounts in thousands):
13 weeks ended 39 weeks ended
November November November November
25, 26, 25, 26,
2001 2000 2001 2000
<s> <c> <c> <c> <c>
Sales:
North America $ 27,493 $ 86,687 $ 98,650 $237,645
Europe 13,482 30,378 43,763 90,622
Asia 11,650 25,543 31,057 64,402
Total sales $ 52,625 $142,608 $173,470 $392,669
November November
25, 26,
2001 2000
<s> <c> <c>
Assets
North America $199,362 $250,809
Europe 59,902 74,057
Asia 105,072 97,032
Total assets $364,336 $421,898
8. COMPREHENSIVE (LOSS) INCOME
Total comprehensive (loss) income for the 13 weeks ended
November 25, 2001 and November 26, 2000 was $(7,390,000) and
$13,255,000, respectively. Total comprehensive (loss) income
for the 39 weeks ended November 25, 2001 and November 26,
2000 was $(25,886,000) and $30,189,000, respectively.
Comprehensive (loss) income consisted primarily of net (loss)
income and foreign currency translation adjustments.
9. RECENTLY ISSUED ACCOUNTING PROUNOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141,
"Business Combinations", and Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible
Assets", effective for fiscal years beginning after December
15, 2001. Under the new rules set forth in these Statements,
goodwill and other intangible assets deemed to have
indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be
amortized over their useful lives. In addition, Statement 141
eliminates the pooling-of-interests method of accounting for
business combinations, except for qualifying business
combinations that were initiated prior to July 1, 2001. The
Company will apply the new rules on accounting for goodwill
and other intangible assets beginning in the first quarter of
its fiscal year ending March 2, 2003. The Company does not
have any goodwill on its balance sheet and has virtually no
intangible assets, and is not engaged in any transactions,
that are affected by SFAS 141 or SFAS 142; and, therefore,
the Company believes that application of the non-amortization
provisions of the Statements will not have a material adverse
effect on the Company's consolidated results of operations or
financial position.
In October 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"), which supercedes Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). Although
it retains the basic requirements of SFAS 121 regarding when
and how to measure an impairment loss, SFAS 144 provides
additional implementation guidance. SFAS 144 is effective for
all fiscal years beginning after December 15, 2001. The
Company has not yet determined what effect SFAS 144 will have
on the Company's consolidated results of operations or
financial position.
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 declined dramatically in the three-
month and nine-month periods ended November 25, 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 three quarters as a result of a severe downturn in the
global electronics industry.
Three and Nine Months Ended November 25, 2001 Compared with Three
and Nine Months Ended November 26, 2000:
The Company experienced a sharp decline in its results of
operations for the three-month and nine-month periods ended
November 25, 2001 as the North American, European and Asian
markets for sophisticated printed circuit materials experienced
severe downturns during such periods.
During the three months ended November 25, 2001, the
Company incurred pre-tax charges totaling $2.9 million in
connection with the realignment of the operations of its German
subsidiary, Dielektra GmbH, the Company's advanced electronic
materials business located in Cologne, Germany. The realignment
included the closure of Dielektra's conventional lamination line
to enable it to better focus its efforts and capabilities on its
unique DatlamT automated continuous lamination and paneling
manufacturing technology and the reduction of the size of its mass
lamination operations in order to focus on the marketing and
manufacturing of high technology, higher layer count mass
lamination product. The Company also incurred $125,000 in pre-tax
charges during the third quarter for a workforce reduction at
another business unit.
In addition, the Company incurred a 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 in connection
with workforce reductions at the Company's continuing operations.
Results of Operations
Net sales for the three-month and nine-month periods ended
November 25, 2001 declined 63% to $52.6 million and 56% to $173.5
million, respectively, from $142.6 million and $392.7 million for
last fiscal year's comparable periods. These decreases in net
sales were the result of lower unit volumes of materials shipped
and the absence of sales by NTI, which, as described above, the
Company sold in the 2002 fiscal year first quarter.
Although the net sales of NTI during the nine-month period
ended November 26, 2000 were material relative to the Company's
consolidated net sales during such period, the operations of NTI
were not material to the Company's consolidated financial
position, results of operations, capital resources or liquidity,
and the sale of NTI is not expected to have any material effect on
the Company's future operating results, financial position,
capital resources, liquidity or continuing operations.
The Company's foreign operations accounted for $25.1
million and $74.8 million, respectively, of net sales, or 48% and
43% of the Company's total net sales worldwide, during the three-
month and nine-month periods ended November 25, 2001 compared with
$55.9 million and $155.0 million, respectively, of net sales, or
39% of the Company's total net sales worldwide, during last fiscal
year's comparable periods. Net sales by the Company's foreign
operations during the three-month and nine-month periods ended
November 25, 2001 declined 55% and 52%, respectively, from the
2001 fiscal year comparable periods. The declines in sales by
foreign operations were due to decreases in sales in both Asia and
Europe.
The overall gross margins as a percentage of net sales for
the Company's worldwide operations were 2.9% and 3.6%,
respectively, during the three-month and nine-month periods ended
November 25, 2001 compared with 23.9% and 22.0%, respectively, for
last fiscal year's comparable periods. The deteriorations in the
gross margins were attributable to the significant declines in
sales volumes compared with last fiscal year's comparable periods.
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 workforce
reductions and the decision to not implement annual salary
increases, the declines in sales and production volumes resulted
in lower volumes to absorb fixed overhead costs and, consequently,
increases in the costs of sales as percentages of net sales in the
three-month and nine-month periods ended November 25, 2001.
Although selling, general and administrative expenses
declined by $4.7 million and $11.2 million, respectively, or by
36% and 30%, during the three-month period and nine-month period,
respectively, ended November 25, 2001 compared with last year's
comparable periods, these expenses, measured as a percentage of
sales, were 15.9% and 15.2% during the three-month period and nine-
month period, respectively, ended November 25, 2001 compared with
9.1% and 9.6%, respectively, during last fiscal year's comparable
periods. The increases in the selling, general and administrative
expenses as percentages of sales in the 2002 fiscal year periods
resulted from proportionately lower sales compared to the
comparable periods during the last fiscal year.
For the reasons set forth above, for the three-month period
ended November 25, 2001, income from operations, including the non-
recurring, pre-tax charges, described above, related to the
realignment of the operations of the Company's German business
unit and a workforce reduction at another business unit, declined
to a loss of $9.9 million and income from operations, before the
non-recurring, pre-tax charges, declined to a loss of $6.8
million, in both cases compared to a profit of $21.1 million for
last fiscal year's comparable period; and for the nine-month
period ended November 25, 2001, income from operations, including
the non-recurring, pre-tax charges, described above, related to
the realignment of the German business unit and a workforce
reduction at another business unit and related to the sale of NTI
and the closure of a related support facility and severance for
workforce reductions at the Company's continuing operations,
declined to a loss of $39.5 million and income from operations,
before the non-recurring, pre-tax charges, declined to a loss of
$20.1 million, in both cases compared to a profit of $48.7 million
for last year's comparable period.
Interest and other income, net, principally investment
income, declined 46% to $1.1 million and 25% to $4.5 million,
respectively, for the three-month and nine-month periods ended
November 25, 2001 from $2.1 million and $6.0 million,
respectively, for last fiscal year's comparable periods. The
decreases were attributable to lower prevailing interest rates.
The Company's investments were primarily short-term taxable
instruments. The Company incurred no interest expense for the
three-month and nine-month periods ended November 25, 2001
compared with $1.4 million and $4.2 million, respectively, during
last fiscal year's comparable periods. 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 was 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
was converted into 3,410,908 shares of the Company's common stock
on March 1, 2001, and $1,738,000 of which was redeemed by the
Company for cash on March 2, 2001.
The Company's effective income tax rate for the three-month
period ended November 25, 2001 was 30% compared with 32% for last
fiscal year's comparable period, and the Company's effective
income tax rate for the nine-month period ended November 25, 2001
was 30% compared with the same rate for last fiscal year's
comparable period. The decrease in the effective tax rate for the
three-month period was primarily the result of a change in the
Company's income mix among the tax jurisdictions in which the
Company does business.
Net earnings for the three-month period ended November 25,
2001, including the non-recurring, pre-tax charges, described
above, related to the realignment of the operations of the
Company's German business unit and a workforce reduction at
another business unit, declined to a net loss of $6.1 million and
net earnings for such period, before the non-recurring, pre-tax
charges, declined to a net loss of $4.0 million, in both cases
from a profit of $14.8 million for last fiscal year's comparable
period. For the nine-month period ended November 25, 2001, net
earnings, including the non-recurring, pre-tax charges, described
above, related to the realignment of the German business unit and
a workforce reduction at another business unit and related to the
sale of NTI and the closure of a related support facility and
severance for workforce reductions at the Company's continuing
operations, declined to a net loss of $24.5 million and net
earnings, before the non-recurring, pre-tax charges, declined to a
net loss of $10.9 million, in both cases from a profit of $35.3
million for last fiscal year's comparable period.
Basic and diluted earnings per share decreased from $0.93 and
$0.78, respectively, for the three-month period ended November 26,
2000 to a loss of $0.31 including the non-recurring, pre-tax
charges and to a loss of $0.20 before the non-recurring, pre-tax
charges for the three-month period ended November 25, 2001; and
basic and diluted earnings per share decreased from $2.22 and
$1.91, respectively, for the nine-month period ended November 26,
2000 to a loss of $1.26 including the non-recurring, pre-tax
charges and to a loss of $0.56 before the non-recurring, pre-tax
charges for the nine-month period ended November 25, 2001.
Liquidity and Capital Resources:
At November 25, 2001, the Company's cash and temporary
investments were $154.4 million compared with $155.7 million at
February 25, 2001, the end of the Company's 2001 fiscal year. The
Company's working capital (which includes cash and temporary
investments) was $166.3 million at November 25, 2001 compared with
$188.5 million at February 25, 2001. The decrease in working
capital at November 25, 2001 compared with February 25, 2001 was
due principally to significantly lower accounts receivable and
inventories, offset in part by lower current liabilities. The
lower accounts receivable, inventories and current liabilities
were the result of the contractions in the Company's business and
operations during the 2002 fiscal year first three quarters. The
Company's current ratio (the rate of current assets to current
liabilities) was 4.7 to 1 at November 25, 2001 and 3.4 to 1 at
February 25, 2001.
During the nine-months ended November 25, 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 $1.4 million was enhanced by a
significant net reduction in working capital items, resulting in
$24.4 million of cash provided from operating activities. During
the same nine-month period, the Company had net expenditures of
$20.9 million for 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.
At November 25, 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 expansions of the Company's business.
Environmental Matters:
In the nine-month periods ended November 25, 2001 and
November 26, 2000, the Company charged less than $0.2 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 25, 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, consolidated results of operations 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 the Company's Annual Report on Form 10-K for the fiscal
year ended February 25, 2001.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
The Company is exposed to market risks for changes in
foreign currency exchange rates and interest rates. The Company's
primary foreign currency exchange exposure relates to the
translation of the financial statements of foreign subsidiaries
using currencies other than the U.S. dollar as their functional
currency. The Company does not believe that a 10% fluctuation in
foreign exchange rates would have had a material impact on its
consolidated results of operations or consolidated 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 November 25, 2001, a 10% increase in short term
interest rates would not have had a material impact on the
consolidated results of operations or consolidated financial
position of the Company.
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. The Company
and NTI sought substantial compensatory and punitive damages.
On November 29, 2000, after a five day trial in Phoenix,
Arizona, a jury awarded damages to NTI in the amount of
$32,280,000, and on December 12, 2000 the judge in the United
States District Court entered judgment for NTI on its claim of
breach of the implied covenant of good faith and fair dealing with
damages in the amount of $32,280,000. Both parties filed motions
for post-judgment relief and a new trial, all of which the judge
denied, and both parties have filed notices to appeal the decision
to the United States Court of Appeals for the Ninth Circuit in San
Francisco.
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) Reports on Form 8-K filed during the fiscal quarter ended
November 25, 2001:
Report on Form 8-K dated October 15, 2001, Commission File
No. 1-4415, reporting in Item 5 that on October 15, 2001,
Park announced that Dielektra GmbH, Park's advanced
electronic materials business located in Cologne, Germany,
is realigning its operations to better position itself for
success in the future, including closing down its
conventional lamination line and focusing its efforts and
capabilities in the future on its unique DatlamT automated
continuous lamination and paneling manufacturing technology
and reducing the size of its mass lamination operations in
order to focus on the marketing and manufacturing of high
technology, higher layer count mass lamination product.
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 7, 2002 --------------------------
Brian E. Shore
President and
Chief Executive Officer
/s/Murray O. Stamer
Date: January 7, 2002 --------------------------
Murray O. Stamer
Senior Vice President, Finance
Principal Financial Officer