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 June 2, 1996
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: 11,491,580 as of July 12, 1996.
2
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 2, 1996 (Unaudited) and
March 3, 1996 ...................................... 4
Consolidated Statements of Earnings
13 weeks ended June 2, 1996 and
May 28, 1995 (Unaudited)............................ 5
Condensed Consolidated Statements of Cash Flows
13 weeks ended June 2, 1996 and
May 28, 1995 (Unaudited)............................ 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) ............................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ......................................... 8
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings ................................... 11
Item 6. Exhibits and Reports on Form 8-K .................... 11
SIGNATURES ..................................................... 12
EXHIBIT INDEX.................................................... 13
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The Company's Financial Statements begin on the next page.
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PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 2, March 3,
1996 1996
ASSETS (Unaudited) *
Current assets:
Cash and cash equivalents $ 87,398 $ 75,970
Marketable securities 53,929 67,243
Accounts receivable, net 40,058 42,821
Inventories (Note 2) 31,269 27,712
Prepaid expenses and other current assets 4,733 4,026
-------- -------
Total current assets 217,387 217,772
Property, plant and equipment, net 77,341 76,439
Other assets 4,662 4,764
-------- --------
$299,390 $298,975
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,713 $ 35,924
Accrued liabilities 15,949 16,941
Income taxes payable 4,579 3,942
-------- --------
Total current liabilities 55,241 56,807
Long-term debt 100,000 100,000
Deferred income taxes 6,189 6,324
Deferred pension liability 1,417 1,417
Stockholders' equity:
Common stock 1,358 1,358
Other stockholders' equity 135,185 133,069
-------- --------
Total stockholders' equity 136,543 134,427
-------- --------
$299,390 $298,975
======== ========
<FN>
*The balance sheet at March 3, 1996 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 amounts)
13 Weeks Ended
-------------------------
June 2, May 28,
1996 1995
Net sales $75,406 $75,412
Cost of sales 63,574 57,695
-------- --------
Gross profit 11,832 17,717
Selling, general and administrative expenses 7,801 8,857
-------- --------
Profit from operations 4,031 8,860
-------- --------
Other income (expense):
Interest and other income, net 1,853 568
Interest expense (1,355) -
-------- --------
Total other income 498 568
-------- --------
Earnings before income taxes 4,529 9,428
Income tax provision 1,404 3,404
-------- --------
Net earnings $ 3,125 $ 6,024
======== ========
Earnings per share (Note 3):
Primary $ .26 $ .51
Fully diluted $ .26 $ .51
Weighted average number of common and
common equivalent shares outstanding:
Primary 11,829 11,708
Fully diluted 11,829 11,708
Dividends per share $ .08 $ .06
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PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited--in thousands)
13 weeks ended
----------------------
June 2, May 28,
1996 1995
Net cash provided by operating activities $ 2,712 $10,027
-------- --------
Cash flows from investing activities:
Purchases of property, plant and
equipment, net (3,584) (6,489)
Purchases of marketable securities (10,396) (2,968)
Proceeds from sales of marketable
securities 23,543 1,999
-------- --------
Net cash provided by (used in) investing
activities 9,563 (7,458)
-------- --------
Cash flows from financing activities:
Dividends paid (924) (688)
Proceeds from exercise of stock options 53 122
-------- --------
Net cash used in financing activities (871) (566)
-------- --------
Increase in cash and cash equivalents
before exchange rate changes 11,404 2,003
Effect of exchange rate changes on cash
and cash equivalents 24 43
-------- --------
Increase in cash and cash equivalents 11,428 2,046
Cash and cash equivalents, beginning of
period 75,970 30,803
-------- --------
Cash and cash equivalents, end of period $87,398 $32,849
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ 700 $ 421
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PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of June 2, 1996, the
consolidated statements of earnings for the 13 weeks ended June 2, 1996
and May 28, 1995, and the condensed consolidated statements of cash flows
for the 13 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 June 2, 1996, and the results of operations and cash
flows for all periods presented, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended March
3, 1996.
2. INVENTORIES
Inventories consist of the following:
(In thousands)
June 2, March 3,
1996 1996
------- --------
Raw materials $16,813 $13,040
Work-in-process 4,573 4,280
Finished goods 9,192 9,674
Manufacturing supplies 691 718
------- -------
$31,269 $27,712
======= =======
3. EARNINGS PER SHARE
Primary earnings per share are computed based on the weighted average
number of common and common equivalent shares outstanding during the
period. Fully diluted earnings per share reflects additional shares
assumed to be outstanding based upon (i) the exercise of stock options at
the period-end market price of the Company's common stock if such price
is higher than the average market price during the period, and (ii) the
assumed conversion of the Company's Convertible Subordinated Notes
("Notes"), if the effect is dilutive. For the period ended June 2, 1996,
the effect of the assumed conversion of the Notes was antidilutive and,
accordingly, the amount reported for fully diluted earnings per share was
equal to the amount reported for primary earnings per share.
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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, such as backplanes and
semiconductor packaging systems. The Company's customers for its advanced
printed circuit materials include leading independent circuit board
fabricators and large electronic equipment manufacturers in the computer,
telecommunications, transportation, aerospace and instrumentation indus-
tries. The Company's electronic materials operations accounted for more
than 86% of net sales worldwide and more than 91% of operating profit in
each of the last two fiscal years and in the three-month periods ended May
28, 1995 and June 2, 1996. The Company's foreign electronic materials
operations accounted for approximately 24% and 29% of net sales worldwide
for the 1995 and 1996 fiscal years, respectively, and approximately 28% for
each of the three-month periods ended May 28, 1995 and June 2, 1996.
The Company experienced strong sales and earnings growth during
the fiscal year ended March 3, 1996 and prior fiscal years, led by strong
growth in sales by the Company's United States and Singapore electronic
materials operations. However, in the first quarter of the 1997 fiscal
year, sales were unchanged from the first quarter of the last fiscal year
and earnings declined significantly from last fiscal year's comparable
period.
Three Months Ended June 2, 1996 Compared with Three Months Ended May 28,
1995:
The Company's electronic materials business was responsible for
the deterioration in the Company's results of operations for the three-month
period ended June 2, 1996. The United States, Asian and European markets
for sophisticated printed circuit materials experienced weakness during the
1997 fiscal year first quarter which the Company believes was principally
attributable to an industry-wide inventory correction.
During the three-month period ended June 2, 1996, the Company's
electronic materials business incurred increased costs associated with the
major production capacity expansions that the Company completed at the end
of the 1996 fiscal year in Newburgh, New York and Tempe, Arizona. The
electronic materials business also experienced inefficiencies caused by
operating its facilities at levels significantly lower than their designed
manufacturing capacity and faced price pressure from its customers. These
factors adversely affected the Company's gross margins. In addition, the
Company's largest customer suffered a strike which significantly reduced the
Company's sales of electronic materials to that customer during the quarter
and negatively affected the Company's margins.
The Company's plumbing and industrial components segment
consists of the Company's specialty adhesive tape business, its advanced
composites business and its plumbing hardware business, all of which operate
as independent business units. The Company's specialty adhesive tape
business performed very well in the current fiscal year's first quarter. The
Company's advanced composites business performed reasonably and in line with
expectations in the first quarter. The performance of the Company's
plumbing hardware business was disappointing in the first quarter, and the
Company continues to explore and pursue its options with respect to that
business.
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Results of Operations
Sales for the three-month period ended June 2, 1996 were $75.4
million compared with approximately the same amount for last fiscal year's
comparable period. Sales of the electronic materials business for the
three-month period ended June 2, 1996 were $65.4 million, or 87% of total
sales worldwide, compared with approximately the same amount and the same
percent of total sales worldwide for last fiscal year's comparable period.
Sales of the plumbing and industrial components business for the three-month
period ended June 2, 1996 were $10.0 million compared with approximately the
same amount for last fiscal year's comparable period.
The Company's foreign electronic materials operations accounted
for $21.0 million of sales, or 28% of the Company's total sales worldwide,
during the three-month period ended June 2, 1996 compared with $21.3 million
of sales, or 28% of total sales worldwide, during last fiscal year's
comparable period.
The gross margin for the Company's worldwide operations was
15.7% during the three-month period ended June 2, 1996 compared with 23.5%
for last fiscal year's comparable period. The deterioration in the gross
margin was attributable to increased costs associated with the new
facilities in Newburgh, New York and Tempe, Arizona, inefficiencies caused
by operating its facilities at levels significantly lower than their
designed capacity, price pressure exerted by customers and reduced sales
volumes with the Company's largest customer due to a strike which
interrupted that customer's operations.
Selling, general and administrative expenses, measured as a
percentage of sales, were 10.3% during the three-month period ended June 2,
1996 compared with 11.7% during last fiscal year's comparable period. This
reduction was a function of reduced general and administrative expenses,
resulting, in part, from lower employee bonus and profit sharing expenses
due to lower operating profits.
For the reasons set forth above, profit from operations for the
three-month period ended June 2, 1996 decreased 55% to $4.0 million from
$8.9 million for last fiscal year's comparable period.
Interest and other income, principally investment income,
increased 226% to $1.9 million for the three-month period ended June 2, 1996
from $0.6 million for last fiscal year's comparable period. The increase in
investment income was attributable to the substantial increase in cash
available for investment. The Company's investments were primarily short-
term taxable instruments and government securities. Interest expense for
the three-month period ended June 2, 1996 was $1.4 million compared with a
minimal amount during last fiscal year's comparable period. At the end of
the 1996 fiscal year, the Company issued $100 million principal amount of
5.5% Convertible Subordinated Notes due 2006 (the "Notes"); as a result, all
of such Notes were outstanding during the quarter ended June 2, 1996, which
resulted in the associated interest expense and cash available for
investment. The Company had no long-term debt outstanding during the first
quarter of the 1996 fiscal year.
The Company's effective income tax rate for the three-month
period ended June 2, 1996 was 31.0% compared with 36.1% for last fiscal
year's comparable period. This decrease in the effective tax rate was
primarily the result of favorable foreign tax rate differentials.
Net earnings for the three-month period ended June 2, 1996
decreased 48% to $3.1 million from $6.0 million for last fiscal year's
comparable period. Primary and fully diluted earnings per share decreased
to $0.26 for the three-month period ended June 2, 1996 from $0.51 for last
fiscal year's comparable period. This decrease in net earnings and earnings
per share was attributable to the Company's weakened operating results.
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Liquidity and Capital Resources:
At June 2, 1996, the Company's cash and temporary investments
were $141.3 million compared with $143.2 million at March 3, 1996, the end
of the Company's 1996 fiscal year. The decrease in the Company's cash and
investment position at June 2, 1996 was attributable to investments in
property, plant and equipment, as discussed below. The Company's working
capital was $162.1 million at June 2, 1996 compared with $161.0 million at
March 3, 1996. The increase at June 2, 1996 compared with March 3, 1996 was
due to the increase in inventories and decrease in payables, offset in part
by lower receivables and cash and temporary investments. The increase in
inventories at June 2, 1996 compared with March 3, 1996 was due principally
to higher purchases of raw materials to ensure adequate supply of such
materials. The Company's current ratio (the ratio of current assets to
current liabilities) was 3.9 to 1 at June 2, 1996 compared with 3.8 to 1 at
March 3, 1996.
During the three-months ended June 2, 1996, cash provided by net
earnings before depreciation and amortization of $5.8 million was reduced by
a net increase in working capital items, resulting in $2.7 million of cash
provided from operating activities, and the Company expended $3.6 million
for the purchase of property, plant and equipment. Expenditures for
property, plant and equipment were $24.5 million and $17.5 million in the
1996 and 1995 fiscal years, respectively. The Company currently expects the
level of capital expenditures in the 1997 fiscal year to be lower than in
the 1996 fiscal year. The Company is continuing to consider further
expansions of its electronic materials operations, particularly in the
United States and Asia.
At June 2, 1996, the Company's only long-term debt was the
Notes. The Company believes its financial resources will be sufficient, for
the foreseeable future, to provide for continued investment in property,
plant and equipment and for general corporate purposes. Such resources
would also be available for appropriate acquisitions and other expansions of
the Company's business.
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, Park's competitive position,
the status of customer orders, and the various factors set forth under the
caption "Factors That May Affect Future Results" in Item 7 of Park's Annual
Report on Form 10-K for the fiscal year ended March 3, 1996.
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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 June 2, 1996.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit
Number
11.01 Computation of fully diluted earnings per share
27.01 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the fiscal quarter
ended June 2, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Park Electrochemical Corp.
---------------------------
(Registrant)
Date: July 15, 1996 /s/Brian E. Shore
------------- ---------------------------
Brian E. Shore
President
Date: July 15, 1996 /s/Paul R. Shackford
------------- ---------------------------
Paul R. Shackford
Vice President and
Principal Financial Officer
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EXHIBIT INDEX
Exhibit No. Name Page
11.01 Computation of fully diluted
earnings per share............................ -
27.01 Financial Data Schedule (filed
only by electronic transmission
with EDGAR filing with the
Securities and Exchange Commission).......... -
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