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 30, 1997
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: 11,384,798 as of January 9,
1998.
2
PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
November 30, 1997 (Unaudited) and
March 2, 1997 ...................................... 4
Consolidated Statements of Earnings
13 weeks and 39 weeks ended November 30, 1997 and
December 1, 1996 (Unaudited)........................ 5
Condensed Consolidated Statements of Cash Flows
39 weeks ended November 30, 1997 and
December 1, 1996 (Unaudited)........................ 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) ............................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ......................................... 9
Factors That May Affect Future Results........................ 12
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings ................................... 13
Item 6. Exhibits and Reports on Form 8-K .................... 13
SIGNATURES ..................................................... 14
EXHIBIT INDEX.................................................... 15
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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)
November 30, March 2,
1997 1997
----------- --------
ASSETS (Unaudited) *
Current assets:
Cash and cash equivalents $ 27,203 $ 42,321
Marketable securities 125,035 102,232
Accounts receivable, net 53,242 50,314
Inventories (Note 2) 30,432 20,458
Prepaid expenses and other current assets 8,291 5,089
-------- --------
Total current assets 244,203 220,414
Property, plant and equipment, net 100,470 83,391
Other assets 3,920 4,057
-------- --------
$348,593 $307,862
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,640 $ 32,892
Accrued liabilities 19,752 18,565
Income taxes payable 5,679 3,953
-------- --------
Total current liabilities 67,071 55,410
Long-term debt 100,000 100,000
Deferred income taxes 8,421 7,963
Deferred pension & other liabilities 12,256 1,134
Stockholders' equity:
Common stock 1,358 1,358
Other stockholders' equity 159,487 141,997
-------- --------
Total stockholders' equity 160,845 143,355
-------- --------
$348,593 $307,862
======== ========
<FN>
*The balance sheet at March 2, 1997 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 30, December 1, November 30, December 1,
1997 1996 1997 1996
--------- ----------- ---------- ------------
Net sales $97,625 $88,972 $272,344 $246,352
Cost of sales 77,774 73,587 219,512 204,281
-------- -------- --------- ---------
Gross profit 19,851 15,385 52,832 42,071
Selling, general and
administrative expenses 10,115 8,810 28,106 24,986
-------- -------- --------- ---------
Profit from operations 9,736 6,575 24,726 17,085
-------- -------- --------- ---------
Other income (expense):
Interest and other
income, net 2,086 1,846 6,250 5,374
Interest expense (1,374) (1,337) (4,084) (4,062)
-------- -------- --------- ---------
Total other income 712 509 2,166 1,312
-------- -------- --------- ---------
Earnings before income taxes 10,448 7,084 26,892 18,397
Income tax provision 3,452 2,196 8,879 5,703
-------- -------- --------- ---------
Net earnings $ 6,996 $ 4,888 $18,013 $ 12,694
======== ======== ========= =========
Earnings per share (Note 3):
Primary $ .60 $ .43 $ 1.56 $ 1.09
Fully diluted $ .57 $ .42 $ 1.49 $ 1.09
Weighted average number of
common and common equivalent
shares outstanding:
Primary 11,585 11,444 11,530 11,617
Fully diluted 13,955 13,835 13,900 11,617
Dividends per share $ .08 $ .08 $ .24 $ .24
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PARK ELECTROCHEMICAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited--in thousands)
39 Weeks Ended
-------------------------
November 30, December 1,
1997 1996
---------- ------------
Net cash provided by operating activities $26,200 $22,530
-------- --------
Cash flows from investing activities:
Purchases of property, plant and
equipment, net (10,958) (13,826)
Purchases of marketable securities (98,446) (82,708)
Proceeds from sales of marketable
securities 75,651 69,319
Acquisition of business, net of cash acquired (5,178) -
-------- --------
Net cash used in investing activities (38,931) (27,215)
-------- --------
Cash flows from financing activities:
Dividends paid (2,708) (2,746)
Proceeds from exercise of stock options 297 229
Purchase of treasury stock - (6,293)
Other - 1
-------- --------
Net cash used in financing activities (2,411) (8,809)
-------- --------
Decrease in cash and cash equivalents
before effect of exchange rate changes (15,142) (13,494)
Effect of exchange rate changes on cash
and cash equivalents 24 155
-------- --------
Decrease in cash and cash equivalents (15,118) (13,339)
Cash and cash equivalents, beginning of period 42,321 75,970
-------- --------
Cash and cash equivalents, end of period $27,203 $62,631
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 5,500 $ 2,781
Income taxes $ 6,747 $ 5,238
Non-cash investing activities:
Stock issued in connection with acquisition $ 2,074 $ -
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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 November 30, 1997, the
consolidated statements of earnings for the 13 weeks and 39 weeks ended
November 30, 1997 and December 1, 1996, 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 Novemer 30, 1997, 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 consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year
ended March 2, 1997.
2. INVENTORIES
Inventories consist of the following:
(In thousands)
November 30, March 2,
1997 1997
---------- ----------
Raw materials $12,315 $ 8,459
Work-in-process 6,474 4,037
Finished goods 10,770 7,173
Manufacturing supplies 873 789
------- -------
$30,432 $20,458
======= =======
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 reflect additional shares
assumed to be outstanding based upon (i) the assumed 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 5.5% Convertible Subordinated
Notes due 2006 (the "Notes"), if the effect would be dilutive. For the
39 weeks ended December 1, 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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4. ACQUISITION
On October 29, 1997, the Company acquired 80% of the capital stock of
Dielektra GmbH ("Dielektra") for $8.8 million in cash and 77,000
shares of Park common stock. The Company has an option to purchase,
and the 20% owner has an option to sell, the remaining portion of
Dielektra's capital stock in five years for an additional 103,000
shares of Park common stock. Dielektra, located in Cologne, Germany,
is a manufacturer of advanced electronic materials used to produce
sophisticated multilayer printed circuit boards. Dielektra's advanced
circuit materials product line includes continuously produced
multilayer laminates and very high layer count semi-finished
multilayer circuit board panels. The acquisition of Dielektra is
being accounted for as a purchase, and the Company is in the process
of finalizing the fair value of the assets and liabilities acquired.
Pro forma operating results are not presented because Dielektra's
impact on the Company's consolidated operating results is not
significant.
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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, semiconductor packages and other electronic interconnect systems.
In October 1997, the Company acquired Dielektra GmbH, a manufacturer of
advanced electronic materials, including continuously produced copper-clad
laminates and mass-laminated multilayer panels, located in Cologne, Germany.
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 industries.
The Company's electronic materials operations accounted for 87%
or more of net sales worldwide in each of the last two fiscal years and in
the three-month and nine-month periods ended December 1, 1996 and November
30, 1997. The Company's foreign electronic materials operations accounted
for approximately 29% of net sales worldwide in the 1996 and 1997 fiscal
years and approximately 32% in each of the three-month periods and
approximately 30% in each of the nine-month periods ended December 1, 1996
and November 30, 1997. The Company's electronic materials operations
accounted for approximately 96% and 89% of operating profit in the 1996 and
1997 fiscal years, respectively, approximately 93% of operating profit in
the three-month and nine-month periods ended December 1, 1996, and
approximately 90% of operating profit in the three-month and nine-month
periods ended November 30, 1997.
Park is also engaged in the engineered materials and plumbing
hardware businesses, which consist of the Company's specialty adhesive tape
and film business, its advanced composite materials business and its
plumbing hardware business, all of which operate as independent business
units. This segment accounted for approximately 13% of the Company's total
net sales worldwide in each of the last two fiscal years, approximately 12%
in the three-month and nine-month periods ended December 1, 1996 and
approximately 11% of total net sales worldwide in the three-month and nine-
month periods ended November 30, 1997. Furthermore, this segment accounted
for approximately 4% and 11% of operating profit in the 1996 and 1997 fiscal
years, respectively, approximately 7% of operating profit in the three-month
and nine-month periods ended December 1, 1996, and approximately 10% of
operating profit in the three-month and nine-month periods ended November
30, 1997.
Three and Nine Months Ended November 30, 1997 Compared with Three and Nine
Months Ended December 1, 1996:
The Company's electronic materials business was principally
responsible for the improvement in the Company's results of operations for
the three-month and nine-month periods ended November 30, 1997. The North
American and Asian markets, and to a lesser extent the European market, for
sophisticated printed circuit materials were strong during the 1998 fiscal
year first and third quarters, and the Company's electronic materials
operations located in these regions performed well as a result.
During the first and third quarters, the Company's electronic
materials business experienced improved efficiencies resulting from the
operation of its facilities at levels close to their designed manufacturing
capacity, which favorably impacted the Company's margins in the three-month
and nine-month periods ended November 30, 1997 over last fiscal year's
comparable periods.
Operating results of the Company's engineered materials and
plumbing hardware business improved substantially during the three-month and
nine-month periods ended November 30, 1997.
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Results of Operations
Sales for the three-month and nine-month periods ended November
30, 1997 increased 10% to $97.6 million and 11% to $272.3 million,
respectively, from $89.0 million and $246.4 million for last fiscal year's
comparable periods. Sales of the electronic materials business for the
three-month and nine-month periods ended November 30, 1997 were $87.5
million and $241.6 million, respectively, or approximately 89% of total
sales worldwide, compared with $78.2 million and $214.8 million,
respectively, or 88% of total sales worldwide for last fiscal year's
comparable periods. The increases in sales of electronic materials were
principally the result of higher volumes of electronic materials shipped, an
increase in sales of higher technology products and the inclusion of
Dielektra in the Company's sales. Sales of the engineered materials and
plumbing hardware segment for the three-month and nine-month periods ended
November 30, 1997 were $10.1 million and $30.7 million, respectively,
compared with slightly higher amounts for last fiscal year's comparable
periods. Increased sales in the specialty adhesive tape and film business
and in the advanced composite materials business resulting from higher
volumes were offset by lower sales in the plumbing hardware business.
The Company's foreign electronic materials operations accounted
for $31.7 million and $80.3 million, respectively, of sales, or 32% and 30%
of the Company's total sales worldwide, during the three-month and nine-
month periods ended November 30, 1997 compared with $28.1 million and $73.6
million, respectively, of sales, or 32% and 30% of total sales worldwide,
during last fiscal year's comparable periods. Sales by the Company's
foreign electronic materials operations during the 1998 fiscal year first
three quarters increased 9% from the 1997 fiscal year comparable period
principally due to the inclusion of Dielektra in the Company's sales and an
increase in sales by the Company's Asian operations. The Company expanded
the manufacturing capacity of its facility in Singapore during the latter
part of the 1997 fiscal year and is engaged in further expansions of the
Singapore manufacturing facility during the Company's 1998 fiscal year.
The gross margins for the Company's worldwide operations were
20.3% and 19.4%, respectively, during the three-month and nine-month periods
ended November 30, 1997 compared with 17.3% and 17.1%, respectively, for
last fiscal year's comparable periods. The improvement in the gross margin
in the 1998 fiscal year was attributable to efficiencies resulting from
operating the Company's facilities at levels close to their designed
capacity during the first and third quarters and the continuing growth in
sales of higher technology, higher margin products.
Selling, general and administrative expenses, measured as a
percentage of sales, were 10.3% during the three-month and nine-month
periods ended November 30, 1997 compared with 9.9% and 10.2%, respectively,
during last fiscal year's comparable periods.
For the reasons set forth above, profit from operations for the
three-month period ended November 30, 1997 increased 48% to $9.7 million
from $6.6 million for last fiscal year's comparable period, and profit from
operations for the nine-month period ended November 30, 1997 increased 45%
to $24.7 million from $17.1 million for last fiscal year's comparable
period.
Interest and other income, principally investment income,
increased 13% to $2.1 million and 16% to $6.3 million, respectively, for the
three-month and nine-month periods ended November 30, 1997 from $1.8 million
and $5.4 million, respectively, for last fiscal year's comparable periods.
The increases in investment income were attributable to increases in cash
available for investment and an increase in prevailing interest rates. The
Company's investments were primarily short-term taxable instruments and
government securities. Interest expense for the three-month and nine-month
periods ended November 30, 1997 was $1.4 million and $4.1 million,
respectively, compared with approximately the same amounts during last
fiscal year's comparable periods. At the end of the 1996 fiscal year, the
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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 November 30, 1997 and the last
fiscal year, which resulted in the associated interest expense and
contributed to the cash available for investment.
The Company's effective income tax rate for the three-month and
nine-month periods ended November 30, 1997 was 33.0% compared with 31.0% for
last fiscal year's comparable periods. This increase in the effective tax
rate was primarily the result of less favorable foreign tax rate
differentials.
Net earnings for the three-month and nine-month periods ended
November 30, 1997 increased 43% to $7.0 million and 42% to $18.0 million,
respectively, from $4.9 million and $12.7 million, respectively, for last
fiscal year's comparable periods. Primary and fully diluted earnings per
share increased to $0.60 and $0.57, respectively, for the three-month period
ended November 30, 1997 from $0.43 and $0.42, respectively, for last fiscal
year's comparable period, and primary and fully diluted earnings per share
increased to $1.56 and $1.49, respectively, for the nine-month period ended
November 30, 1997 from $1.09 for last fiscal year's comparable period.
These increases in net earnings and earnings per share were attributable to
the Company's improved operating results and other income.
Liquidity and Capital Resources:
At November 30, 1997, the Company's cash and temporary
investments were $152.2 million compared with $144.6 million at March 2,
1997, the end of the Company's 1997 fiscal year. The increase in the
Company's cash and investment position at November 30, 1997 was attributable
to cash provided from operating activities in excess of investments in
property, plant and equipment and in Dielektra, as discussed below. The
Company's working capital was $177.1 million at November 30, 1997 compared
with $165.0 million at March 2, 1997. The increase at November 30, 1997
compared with March 2, 1997 was due principally to the increases in cash and
temporary investments, inventories and other current assets, partially due
to the acquisition of Dielektra, offset in part by higher payables. The
Company's current ratio (the ratio of current assets to current liabilities)
was 3.6 to 1 at November 30, 1997 compared with 4.0 to 1 at March 2, 1997.
During the nine-months ended November 30, 1997, cash provided by
net earnings before depreciation and amortization of $27.3 million was
reduced by a net increase in working capital items, resulting in $26.2
million of cash provided from operating activities, and the Company expended
$16.2 million for the purchase of property, plant and equipment and for its
net cash investment in Dielektra. Expenditures for property, plant and
equipment were $18.7 million and $24.5 million in the 1997 and 1996 fiscal
years, respectively. The Company is planning further expansions of its
electronic materials operations, particularly in the United States and Asia.
At November 30, 1997, 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.
In the nine month periods ended November 30, 1997 and
December 1, 1996, 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 cash flow 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 November 30, 1997 and March 2, 1997,
the recorded liability in accrued liabilities for environmental matters was
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$1.2 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 the Company'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, 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
March 2, 1997.
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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 November 30, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number
10.01 Sale and Purchase Agreement dated 29 October 1997 between
Dieter G. Weiss, Lothar Hubert Reinartz, Nelco
International Corporation and Park Electrochemical Corp.
relating to the sale and purchase of shares of capital in
Dielektra GmbH.
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 November 30, 1997.
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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: January 13, 1998 /s/Brian E. Shore
---------------- ---------------------------
Brian E. Shore
President and
Chief Executive Officer
Date: January 13, 1998 /s/Alan M. Aronovitz
---------------- ---------------------------
Alan M. Aronovitz
Senior Vice President and
Principal Financial Officer
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EXHIBIT INDEX
Exhibit No. Name Page
10.01 Sale and Purchase Agreement dated 29 October
1997 between Dieter G. Weiss, Lothar Hubert
Reinartz, Nelco International Corporation and
Park Electrochemical Corp. relating to the sale
and purchase of shares of capital in Dielektra
GmbH.......................................... 16
11.01 Computation of fully diluted
earnings per share........................... 40
27.01 Financial data schedule (filed
only by electronic transmission
with EDGAR filing with the
Securities and Exchange Commission).......... -
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