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 November 26, 1995
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: 11,544,064 as of January 8,
1996.
2
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
November 26, 1995 (Unaudited) and
February 26, 1995.............................. 3
Consolidated Statements of Earnings
13 weeks and 39 weeks ended November 26, 1995
(Unaudited) and November 27, 1994 (Unaudited).. 4
Condensed Consolidated Statements of Cash Flows
39 weeks ended November 26, 1995 (Unaudited)
and November 27, 1994 (Unaudited) ............ 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) ....................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................... 7
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings .............................. 11
Item 6. Exhibits and Reports on Form 8-K ............... 11
SIGNATURES ................................................. 12
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PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
November 26, February 26,
1995 1995
ASSETS (Unaudited) *
Cash and cash equivalents $ 20,153 $ 30,803
Marketable securities 22,392 15,107
Accounts receivable, net 45,367 33,172
Inventories (Note 2) 24,770 16,181
Prepaid expenses & other current assets 3,844 3,057
-------- -------
Total current assets 116,526 98,320
Property, plant and equipment, net 74,187 61,427
Other assets 1,893 2,304
-------- --------
$192,606 $162,051
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 36,255 $ 24,616
Accrued liabilities 16,180 15,844
Income taxes payable 4,336 2,825
-------- --------
Total current liabilities 56,771 43,285
Long-term debt - 23
Deferred income taxes 5,773 5,243
Deferred pension liability 1,452 1,452
Stockholders' Equity: (Note 3)
Common stock 1,358 1,358
Other stockholders' equity 127,252 110,690
-------- --------
Total stockholders' equity 128,610 112,048
-------- --------
$192,606 $162,051
======== ========
<FN>
*The Balance Sheet at February 26, 1995 has been derived from the
audited financial statements at that date.
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PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited - in thousands, except per share data)
13 weeks ended 39 weeks ended
November 26, November 27, November 26, November 27,
1995 1994 1995 1994
Net sales $81,866 $64,834 $227,215 $186,398
Cost of sales 63,469 50,060 175,892 145,857
-------- -------- --------- ---------
Gross profit 18,397 14,774 51,323 40,541
Selling, general and
administrative 9,312 7,564 25,799 21,976
-------- -------- --------- ---------
Profit from operations 9,085 7,210 25,524 18,565
-------- -------- --------- ---------
Other income (expense):
Interest expense - (5) - (417)
Other income, net 564 381 1,683 1,225
-------- -------- --------- ---------
Total other income 564 376 1,683 808
-------- -------- --------- ---------
Earnings before income taxes 9,649 7,586 27,207 19,373
Income tax provision 3,182 2,807 9,350 7,168
-------- -------- --------- ---------
Net earnings $ 6,467 $ 4,779 $ 17,857 $ 12,205
======== ======== ========= =========
Net earnings per common
share (Note 3):
Primary $ .55 $ .42 $ 1.52 $ 1.14
Fully diluted $ .55 $ .41 $ 1.51 $ 1.08
Weighted average number of
common shares
outstanding (Note 3):
Primary 11,857 11,374 11,763 10,666
Fully diluted 11,857 11,658 11,801 11,560
Dividends per common share $ .08 $ .06 $ .20 $ .14
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PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
39 weeks ended
November 26, November 27,
1995 1994
----------- -----------
Net cash provided by operating activities $ 17,152 $ 20,151
--------- ---------
Cash flows from investing activities:
Purchases of property, plant and
equipment, net (19,029) (10,787)
Purchases of marketable securities (20,206) (11,018)
Proceeds from sales of marketable
securities 13,094 19,034
--------- ---------
Net cash used in investing activities (26,141) (2,771)
--------- ---------
Cash flows from financing activities:
Repayment of borrowings (3) (93)
Dividends paid (2,298) (1,541)
Proceeds from exercise of stock options 682 638
Debt conversion costs 2 (100)
--------- ---------
Net cash used in financing activities (1,617) (1,096)
--------- ---------
(Decrease) increase in cash and cash
equivalents before exchange rate changes (10,606) 16,284
Effect of exchange rate changes on cash
and cash equivalents (44) (58)
--------- ---------
(Decrease) increase in cash and cash
equivalents (10,650) 16,226
Cash and cash equivalents, beginning
of period 30,803 14,135
--------- ---------
Cash and cash equivalents, end of period $ 20,153 $ 30,361
========= =========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ 28
Income taxes $ 6,803 $ 6,992
Supplemental disclosure of non-cash financing activities:
The Company's Board of Directors voted a two-for-one stock split on July 12,
1995, which was distributed on August 15, 1995 to stockholders of record on July
24, 1995.
During the quarter ended May 29, 1994 the Company issued 3,172,368 shares of
Common Stock upon the conversion of $32,835,000 principal amount of 7-1/4%
Convertible Subordinated Debentures.
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6
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of November 26, 1995, the
consolidated statements of earnings for the 13 weeks and 39 weeks ended
November 26, 1995 and November 27, 1994, and the condensed consolidated
statements of cash flows for the 39 week periods 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 November 26, 1995,
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 26, 1995.
2. INVENTORIES
Inventories consist of the following:
November 26, February 26,
1995 1995
------------ ------------
Raw materials $11,025,000 $ 5,215,000
Work-in-process 4,854,000 2,997,000
Finished goods 8,145,000 7,446,000
Manufacturing supplies 746,000 523,000
----------- -----------
$24,770,000 $16,181,000
=========== ===========
3. STOCKHOLDERS' EQUITY
On July 12, 1995 the Company's Board of Directors voted a two-for-one
stock split in the form of a 100% common stock dividend. The stock
dividend was distributed on August 15, 1995 to stockholders of record on
July 24, 1995. All share and per share data for prior periods have been
retroactively restated to reflect the stock split. In addition, on July
12, 1995 the Company's shareholders approved an increase in the number of
authorized shares of common stock from 15,000,000 to 30,000,000.
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Overview
The Company's electronic materials business was responsible for
the improvement in the Company's results of operations for the nine-
month and three-month periods ended November 26, 1995. The United
States and Southeast Asian markets for sophisticated printed circuit
materials were strong during this period, and the Company's electronic
materials operations located in these regions performed well as a
result. While the market in Europe for sophisticated printed circuit
materials has not been as strong as in the United States or Southeast
Asia, it improved over the comparable periods of the prior fiscal
year, and the Company's European operations benefitted from this
improvement.
During the nine-month period ended November 26, 1995, the
Company's electronic materials business incurred raw material cost
increases and additional costs associated with the Company's ongoing
major expansion projects in Newburgh, New York and Tempe, Arizona. In
addition, the electronic materials business experienced temporary
inefficiencies caused by operating certain facilities at levels in
excess of their designed manufacturing capacity. These cost increases
and temporary operating inefficiencies adversely affected the
Company's gross margins. However, the Company was able to offset such
effects by improving its overall operating efficiencies, in part, by
consolidating functions, by continuing to reduce manufacturing waste
and improve yields, and by improving the overall productivity of its
workforce. In addition, the Company redesigned product in order to
reduce material costs. The Company was also able to offset these cost
increases and inefficiencies through its ongoing efforts to expand its
higher technology, higher margin product lines.
Operating results of the Company's plumbing and industrial
components business were not significant during the nine-month and
three-month periods ended November 26, 1995.
Results of Operations
Nine Months Ended November 26, 1995 Compared with Nine Months Ended
November 27, 1994
Sales for the nine-month period ended November 26, 1995
increased 22% to $227.2 million from $186.4 million for last fiscal
year's comparable period. Sales of the electronic materials business
for the nine-month period ended November 26, 1995 were $199.9 million,
or 88% of total sales worldwide, compared with $161.2 million, or 86%
of total sales worldwide, for the last fiscal year's comparable
period. This 24% 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 plumbing and industrial component business for the nine-month
period ended November 26, 1995 increased 8% to $27.4 million from
$25.2 million for last fiscal year's comparable period.
The Company's foreign electronic materials operations accounted
for $68.0 million of sales, or 30% of the Company's total sales
worldwide, during the nine-month period ended November 26, 1995
compared with $43.9 million of sales, or 24% of total sales worldwide,
during last fiscal year's comparable period. Sales by the Company's
foreign operations during the nine-month period ended November 26,
1995 increased 55% from last fiscal year's comparable period. While
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8
sales by each of the Company's foreign operations were higher in the
nine-month period ended November 26, 1995 compared with the comparable
period in the prior fiscal year, the increase in sales by foreign
operations was principally due to an increase in sales by the
Company's Singapore operations. The expansion of the Company's
Singapore manufacturing facility was completed at the end of the
Company's 1995 fiscal year.
The gross margin for the Company's worldwide operations was
22.6% during the nine-month period ended November 26, 1995 compared
with 21.7% for last fiscal year's comparable period. The
improvement in the gross margin was attributable to the increase in
sales volume over the prior fiscal year's comparable period, the
continuing growth in sales of higher technology, higher margin
products, and improved operating efficiencies. This improvement was
offset in part by higher raw material costs, costs associated with the
start-up of the new facilities in Newburgh, New York and Tempe,
Arizona, and inefficiencies caused by operating certain facilities at
levels in excess of their designed capacity.
Selling, general and administrative expenses, measured as a
percentage of sales, were 11.4% during the nine-month period ended
November 26, 1995 compared with 11.7% during last fiscal year's
comparable period. This reduction was a function of the partially
fixed nature of the selling, general and administrative expenses
relative to the increase in sales.
For the reasons set forth above, profit from operations for the
nine-month period ended November 26, 1995 increased 37% to $25.5
million from $18.6 million for last fiscal year's comparable period.
Interest expense for the nine-month period ended November 26,
1995 was minimal compared with $0.4 million during last fiscal year's
comparable period. During the first quarter of the prior fiscal year,
the Company called its 7-1/4% Convertible Subordinated Debentures for
redemption; as a result, nearly all of such Debentures outstanding at
the beginning of the prior fiscal year were converted into Common
Stock during that fiscal year's first quarter, which eliminated the
Company's long-term debt and the associated interest expense. Other
income, principally investment income, increased 37% to $1.7 million
for the nine-month period ended November 26, 1995 from $1.2 million
for last fiscal year's comparable period. The increase in investment
income, relative to the same period during the prior fiscal year, was
attributable to the increase in the prevailing interest rates during
the current period and to the increase in cash available for invest-
ment.
The Company's effective income tax rate for the nine-month
period ended November 26, 1995 was 34.4% compared with 37.0% for last
fiscal year's comparable period. This decrease in the effective tax
rate for the current fiscal year's first nine months was primarily the
result of favorable foreign tax rate differentials.
Net earnings for the nine-month period ended November 26, 1995
increased 47% to $17.9 million from $12.2 million for last fiscal
year's comparable period. Primary and fully diluted earnings per
share increased to $1.52 and $1.51, respectively, for the nine-month
period ended November 26, 1995 from $1.14 and $1.08, respectively, for
last fiscal year's comparable period. This increase in earnings and
earnings per share was primarily attributable to the increase in the
profit from operations, the effects of the conversion of the Deben-
tures, and the lower effective tax rate.
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9
Three Months Ended November 26, 1995 Compared with Three Months Ended
November 27, 1994
Sales for the third quarter of the 1996 fiscal year increased
26% to $81.9 million from $64.8 million for last fiscal year's
comparable period. Sales of the electronic materials business for the
third quarter of the 1996 fiscal year were $72.6 million, or 89% of
total sales worldwide, compared with $55.9 million, or 86% of total
sales worldwide, for the last fiscal year's comparable period. This
30% 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
plumbing and industrial component business for the third quarter of
the 1996 fiscal year increased 3% to $9.3 million from $9.0 million
for last fiscal year's comparable period.
The Company's foreign electronic materials operations accounted
for $24.1 million of sales, or 29% of the Company's total sales
worldwide, during the third quarter of the 1996 fiscal year compared
with $15.6 million of sales, or 24% of total sales worldwide, during
last fiscal year's comparable period. Sales by the Company's foreign
operations during the third quarter of the 1996 fiscal year increased
55% from last fiscal year's comparable period. While sales by each of
the Company's foreign operations were higher in the third quarter of
the 1996 fiscal year compared with the comparable period in the prior
fiscal year, the Company's Singapore operations had the largest
increase in sales.
The gross margin for the Company's worldwide operations was
22.5% during the third quarter of the 1996 fiscal year compared with
22.8% for last fiscal year's comparable period. The decline in the
gross margin was attributable to higher raw material costs, costs
associated with the start-up of the new facilities in Newburgh, New
York and Tempe, Arizona, and inefficiencies caused by operating
certain facilities at levels in excess of their designed capacity.
This temporary margin decline was offset in part by the increase in
sales volume over the prior fiscal year's comparable period, the
continuing growth in sales of higher technology, higher margin
products, and improved operating efficiencies.
Selling, general and administrative expenses, measured as a
percentage of sales, were 11.4% during the third quarter of the 1996
fiscal year compared with 11.7% during last fiscal year's comparable
period. This reduction was a function of the partially fixed nature
of the selling, general and administrative expenses relative to the
increase in sales.
For the reasons set forth above, profit from operations for the
third quarter of the 1996 fiscal year increased 26% to $9.1 million
from $7.2 million for last fiscal year's comparable period.
Interest expense was virtually eliminated for the third quarter
of the 1996 fiscal year and for last fiscal year's comparable period.
Other income, principally investment income, increased 48% to $0.6
million for the third quarter of the 1996 fiscal year from $0.4
million for last fiscal year's comparable period. The increase in
investment income, relative to the same period during the prior fiscal
year, was attributable to the increase in the prevailing interest
rates during the current period.
The Company's effective income tax rate for the third quarter of
the 1996 fiscal year was 33.0% compared with 37.0% for last fiscal
year's comparable period. This decrease in the effective tax rate for
the third quarter of the 1996 fiscal year was primarily the result of
favorable foreign tax rate differentials.
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PAGE <10>
Net earnings for the third quarter of the 1996 fiscal year
increased 35% to $6.5 million from $4.8 million for last fiscal year's
comparable period. Primary and fully diluted earnings per share
increased to $.55, for the third quarter of the 1996 fiscal year from
$.42 and $.41, respectively, for last fiscal year's comparable period.
This increase in earnings and earnings per share was primarily
attributable to the increase in the profit from operations and the
lower effective tax rate.
Liquidity and Capital Resources
At November 26, 1995, the Company's cash and temporary invest-
ments were $42.5 million compared with $45.9 million at February 26,
1995, the end of the Company's 1995 fiscal year. The decrease in the
Company's cash and investment position at November 26, 1995 was
attributable principally to investments in property, plant and
equipment, as discussed below. The Company's working capital was
$59.8 million at November 26, 1995 compared with $55.0 million at
February 26, 1995. The increase at November 26, 1995 compared with
February 26, 1995 was due to an increase in receivables and
inventories, offset in part by higher payables. The increase in
receivables at November 26, 1995 compared with February 26, 1995 was
due to increased sales; the increase in inventories for the same
period was due to increased sales and to higher purchases of raw
materials to ensure adequate supply of such material. The Company's
current ratio (the ratio of current assets to current liabilities) was
2.1 to 1 at November 26, 1995 compared with 2.3 to 1 at February 26,
1995.
During the nine months ended November 26, 1995, the Company
generated funds from operations of $17.2 million and expended $19.0
million for the purchase of property, plant and equipment. Cash
provided by net earnings before depreciation and amortization of $24.7
million was reduced by a net increase in non-cash working capital
items, resulting in $17.2 million of cash provided from operating
activities. A significant portion of the current fiscal year's
capital expenditures relate to the Company's installing additional
capacity at new electronic materials facilities in Newburgh, New York
and Tempe, Arizona. These expansions will increase the Company's
capacity and capability for the production of sophisticated printed
circuit materials. Expenditures for property, plant and equipment
were $10.3 million, $9.6 million, and $17.5 million in the 1993, 1994
and 1995 fiscal years, respectively. The Company expects the level of
capital expenditures in the 1997 fiscal year to be in the same range
as in the 1996 fiscal year. While the Company's capital budget for
the 1997 fiscal year has not yet been finalized, the Company is
currently considering further expansions of its electronic materials
operations, particularly in the United States and Southeast Asia.
At November 26, 1995 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.
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11
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
(a) There are no material pending legal proceedings to which the
Company is a party or to which any of its properties is
subject.
(b) No material pending legal proceeding was terminated during
the fiscal quarter ended November 26, 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
No. 11.01 Computation of Fully Diluted Earnings Per
Common Share.
No. 27.01 Summary financial information for the
nine-month period ended November 26, 1995.
(b) There were no reports on Form 8-K filed during the
fiscal quarter ended November 26, 1995.
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PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
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: January 9, 1996 /s/Jerry Shore
---------------- -------------------------
Jerry Shore
Chairman of the Board and
President
Date: January 9, 1996 /s/Paul R. Shackford
---------------- -------------------------
Paul R. Shackford
Vice President and
Principal Financial Officer
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PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
Quarterly Report on Form 10-Q
for the fiscal quarter ended November 26, 1995
Exhibit No. Name
11 Computation of fully diluted
earnings per common share
27 Financial Data Schedule - filed only by
electronic transmission with EDGAR filing
with the Securities and Exchange Commission
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