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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 25, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 of Organization) Identification No.)
5 Dakota Drive, Lake Success, New York 11042
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code
(516) 354-4100
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange
on Which Registered
Common Stock, par value $.10 per share New York Stock
Exchange
Preferred Stock Purchase Rights New York Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ]
[cover page 1 of 2 pages]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X}
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant. The aggregate market value
shall be computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity, as of a
specified date within 60 days prior to the date of filing.
Aggregate Market As of Close of
Title of Class Value Business On
Common Stock,par value
$.10 per share $453,729,580* May 18, 2001
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Shares As of Close of
Title of Class Outstanding Business On
Common Stock,par value
$.10 per share 19,390,153 May 18, 2001
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held July 18, 2001
incorporated by reference into Part III of this Report.
*Included in such amount are 1,463,353 shares of common stock valued at $23.40
per share and held by Jerry Shore, the Registrant's Chairman of the Board and
a member of the Registrant's Board of Directors.
(page>
TABLE OF CONTENTS
Page
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security
Holders
Executive Officers of the Registrant
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Factors That May Affect Future Results
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the
Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
SIGNATURES
FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts
EXHIBIT INDEX
PART I
Item 1. Business.
General
Park Electrochemical Corp. ("Park"), through its subsidiaries (unless the
context otherwise requires, Park and its subsidiaries are hereinafter called
the "Company"), is primarily engaged in the design, production and marketing
of advanced electronic materials used to fabricate complex multilayer printed
circuit boards and other electronic interconnection systems. Park specializes
in advanced materials for high layer count circuit boards and high speed
digital broadband telecommunications, internet and networking applications.
Park's electronic materials business operates under the "Nelco" name through
fully integrated business units in Asia, Europe and North America. The
Company's major electronic materials manufacturing facilities are located in
Singapore, England, France, Germany, New York, Arizona and California.
The Company is also engaged in the design, production and marketing of
specialty adhesive tapes and films through its Dielectric Polymers subsidiary
in Holyoke, Massachusetts and advanced composite materials through its
FiberCote Industries subsidiary in Waterbury, Connecticut for the electronics,
aerospace and industrial markets.
Park was founded in 1954 by Jerry Shore, the Company's Chairman of the
Board and largest shareholder.
Unless otherwise indicated, all information in this Report has been
adjusted to give effect to the Company's three-for-two stock split in the form
of a stock dividend, which was distributed November 8, 2000 to shareholders of
record at the close of business on October 20, 2000.
In the fiscal years ended February 28, 1999 and February 27, 2000, the
Company's business was divided into two industry segments: (1) electronic mate
rials and (2) engineered materials and plumbing hardware. However, during the
fourth quarter of the 2000 fiscal year, the Company decided to close and
liquidate the plumbing hardware portion of its engineered materials and
plumbing hardware business segment. See Notes 14 and 15 of the Notes to
Consolidated Financial Statements in Item 8 of this Report for information
concerning the closure of the plumbing hardware business. In addition, in the
fiscal year ended February 25, 2001, the engineered materials and plumbing
hardware businesses comprised less than 10% of the Company's consolidated
revenues, earnings and assets, and the Company considered itself to operate in
one business segment. See Note 12 of the Notes to Consolidated Financial
Statements in Item 8 of this Report for information concerning the Company's
business segments.
The sales and long-lived assets of the Company's operations by geographic
area for the last three fiscal years are set forth in Note 12 of the Notes to
Consolidated Financial Statements in Item 8 of this Report. The Company's
foreign operations are conducted principally by the Company's subsidiaries in
England, France, Germany and Singapore. The Company's foreign operations are
subject to the impact of foreign currency fluctuations. See Note 1 of the
Notes to Consolidated Financial Statements in Item 8 of this Report.
Electronic Materials Operations
The Company 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 multilayer back-
planes, wireless packages, high speed/low loss multilayers, high density
interconnects ("HDIs") and semiconductor packaging systems. The Company's
multilayer printed circuit materials include copper-clad laminates and
prepregs. The Company has long-term relationships with its major customers,
which include leading independent printed circuit board fabricators,
electronic manufacturing service companies, electronic contract manufacturers
and, to a lesser extent, major electronic equipment manufacturers. Multilayer
printed circuit boards and interconnect systems are used in virtually all
advanced electronic equipment to direct, sequence and control electronic
signals between semiconductor devices (such as microprocessors and memory and
logic devices), passive components (such as resistors and capacitors) and
connection devices (such as infra-red couplings, fiber optics and surface
mount connectors). Examples of end uses of the Company's printed circuit
materials include high speed routers and servers, supercomputers, laptops,
satellite switching equipment, cellular telephones and transceivers and
wireless personal digital assistants ("PDAs"). The Company has developed long-
term relationships with major customers as a result of its leading edge
products, extensive technical and engineering service support and responsive
manufacturing capabilities.
Park believes it founded the modern day printed circuit industry in 1957
by inventing a composite material consisting of an epoxy resin substrate
reinforced with fiberglass cloth which was laminated together with sheets of
thin copper foil. This epoxy-glass copper-clad laminate system is still used
to construct the large majority of today's advanced printed circuit products.
The Company also believes that in 1962 it invented the first multilayer
printed circuit materials system used to construct multilayer printed circuit
boards. The Company also pioneered vacuum lamination and many other
manufacturing technologies used in the industry today. In addition, the
Company's subsidiary, Dielektra GmbH in Germany, which the Company acquired in
1997, owns a patented process for continuously producing thin copper-clad
laminates for printed circuit board applications. The Company believes it is
one of the industry's technological leaders.
As a result of its leading edge products, extensive technical and
engineering service support and responsive manufacturing capabilities, the
Company expects to continue to take advantage of several industry trends.
These trends include the increasing global demand for electronic products and
technology, the increasingly advanced electronic materials required for
interconnect performance and manufacturability, the increasing miniaturization
and portability of advanced electronic equipment, the consolidation of the
printed circuit board fabrication industry and the time-to-market and time-to-
volume pressures requiring closer collaboration with materials suppliers.
The Company believes that it is one of the world's largest manufacturers
of multilayer printed circuit materials and the market leader in North
American and Southeast Asia. It also believes that it is the only significant
independent manufacturer of multilayer printed circuit materials in the world.
The Company was the first manufacturer in the printed circuit materials
industry to establish manufacturing presences in the three major global
markets of North America, Europe and Asia, with facilities established in
Europe in 1969 and Asia in 1986.
Industry Background
The electronic materials manufactured by the Company and its competitors
are used to construct and fabricate complex multilayer printed circuit boards
and other advanced electronic interconnect systems. Multilayer printed circuit
materials consist of prepregs and copper-clad laminates, as well as semi-
finished multilayer printed circuit board panels. Prepregs are chemically and
electrically engineered plastic resin systems which are impregnated into and
reinforced by a specially manufactured fiberglass cloth product or other woven
or non-woven reinforcing fiber. This insulating dielectric substrate is .030
inch to .002 inch in thickness or less in some cases. These resin systems are
usually based upon an epoxy chemistry. One or more plies of prepreg are
laminated together to form an insulating dielectric substrate to support the
copper circuitry patterns of a multilayer printed circuit board. Copper-clad
laminates consist of one or more plies of prepreg laminated together with
specialty thin copper foil laminated on the top and bottom. Copper foil is
specially formed in thin sheets which may vary from .0030 inch to .0002 inch
in thickness and normally have a thickness of .0014 inch or .0007 inch. The
Company supplies both copper-clad laminates and prepregs to its customers,
which use these products as a system to construct multilayer printed circuit
boards.
The printed circuit board fabricator processes copper-clad laminates to
form the inner layers of a multilayer printed circuit board. The fabricator
photoimages these laminates with a dry film or liquid photoresist. After
development of the photoresist, the copper surfaces of the laminate are etched
to form the circuit pattern. The fabricator then assembles these etched
laminates by inserting one or more plies of dielectric prepreg between each of
the inner layer etched laminates and also between an inner layer etched
laminate and the outer layer copper plane, and then laminating the entire
assembly in a press. Prepreg serves as the insulator between the multiple
layers of copper circuitry patterns found in the multilayer circuit board.
When the multilayer configuration is laminated, these plies of prepreg form an
insulating dielectric substrate supporting and separating the multiple inner
and outer planes of copper circuitry. The fabricator drills vertical through-
holes or vias in the multilayer assembly and then plates the through-holes or
vias to form vertical conductors between the multiple layers of circuitry
patterns. These through holes or vias combine with the conductor paths on the
horizontal circuitry planes to create a three-dimensional electronic
interconnect system. The outer two layers of copper foil are then imaged and
etched to form the finished multilayer printed circuit board. The completed
multilayer board is a three-dimensional interconnect system with electronic
signals traveling in the horizontal planes of multiple layers of copper
circuitry patters, as well as the vertical plane through the plated holes or
vias.
The global market for advanced electronic products is growing as a result
of technological change and frequent new product introductions. This growth is
principally attributable to increased sales and more complex electronic
content of newer products, such as cellular telephones, pagers, personal
computers and portable computing devices, and greater use of electronics in
other products, such as automobiles. Further, large, almost completely
untapped markets for advanced electronic equipment have emerged in such areas
as India and China and other areas of the Pacific Rim.
Semiconductor manufacturers have introduced successive generations of
more powerful microprocessors and memory and logic devices. Electronic
equipment manufacturers have designed these advanced semiconductors into more
compact and often portable products. High performance computing devices in
these smaller portable platforms require greater reliability, closer
tolerances, higher component and circuit density and increased overall
complexity. As a result, the interconnect industry has developed smaller,
lighter, faster and more cost-effective interconnect systems, including
advanced multilayer printed circuit boards and new types of semiconductor
packaging systems such as ball-grid arrays and multi-chip modules.
Advanced interconnect systems require higher technology printed circuit
materials to insure the performance of the electronic system and to improve
the manufacturability of the interconnect platform. The growth of the market
for more advanced printed circuit materials has outpaced the market growth for
standard printed circuit materials in recent years. Printed circuit board
fabricators and electronic equipment manufacturers require advanced printed
circuit materials that have increasingly higher temperature tolerances and
more advanced electrical properties in order to support high speed computing
in a miniaturized and often portable environment.
With the very high density circuit demands of miniaturized high
performance interconnect systems, the uniformity, purity, consistency,
performance predictability, dimensional stability and production tolerances of
printed circuit materials have become successively more critical. High density
printed circuit boards and interconnect systems often involve higher layer
count multilayer circuit boards where the multiple planes of circuitry and
dielectric insulating substrates are very thin (dielectric insulating
substrate layers may be .002 inch or less) and the circuit line and space
geometries in the circuitry plane are very narrow (.002 inch or less). In
addition, advanced surface mount interconnect systems are typically designed
with very small pad sizes and very narrow plated through holes or vias which
electrically connect the multiple layers of circuitry planes. High density
interconnect systems must utilize printed circuit materials whose dimensional
characteristics and purity are consistently manufactured to very high
tolerance levels in order for the printed circuit board fabricator to attain
and sustain acceptable product yields.
Shorter product life cycles and competitive pressures have induced
electronic equipment manufacturers to bring new products to market and
increase production volume to commercial levels more quickly. These trends
have highlighted the importance of front-end engineering of electronic
products and have increased the level of collaboration among system designers,
fabricators and printed circuit materials suppliers. As the complexity of
electronic products increases, materials suppliers must provide greater
technical support to interconnect systems fabricators on a timely basis
regarding manufacturability and performance of new materials systems.
Products and Services
The Company produces a broad line of advanced printed circuit materials
used to fabricate complex multilayer printed circuit boards and other
electronic interconnect systems, including backplanes, wireless packages, high
speed/low loss multilayers, high density interconnects ("HDIs") and
semiconductor packaging systems. The Company's subsidiary, Dielektra GmbH in
Germany, also manufactures semi-finished multilayer printed circuit board
panels for a select group of customers. The Company's diverse advanced printed
circuit materials product line is designed to address a wide array of end-use
applications and performance requirements.
The Company's product line has been developed internally and through long-
term development projects with its principal suppliers. The Company focuses
its research and development efforts on developing industry leading product
technology to meet the most demanding product requirements and has designed
its product line with a focus on the higher performance, higher technology end
of the materials spectrum. All of the Company's existing electronic materials
products have been introduced since 1990.
Most of the Company's research and development expenditures are
attributable to the efforts of its electronic materials operations. In
response to the rapid technological changes in the electronic materials
business, these expenditures on research and product development have
increased over the past several years.
The Company's products include high-speed, low-loss, digital broadband
engineered formulations, high-temperature modified epoxies, bismaleimide
triazine epoxies ("BT epoxy"), non-MDA polyimides, enhanced polimides, high
performance epoxy Thermount materials ("Thermount" is a registered trademark
of E.I. duPont de Nemours & Co.), APPE resin technology (a licensed product of
Asahi Chemical Industry Co., Ltd.), SI (Signal Integrity) products, cyanate
esters and polytetrafluoroethylene ("PTFE") formulations for RF/microwave
applications.
The Company has developed long-term relationships with select customers
through broad-based technical support and service, as well as manufacturing
proximity and responsiveness at multiple levels of the customer's
organization. The Company focuses on developing a thorough understanding of
its customer's business, product lines, processes and technological
challenges. The Company seeks customers which are industry leaders committed
to maintaining and improving their industry leadership positions and which are
committed to long-term relationships with their suppliers. The Company also
seeks business opportunities with the more advanced printed circuit
fabricators and electronic equipment manufacturers which are interested in the
full value of products and services provided by their suppliers. The Company
believes its proactive and timely support in assisting its customers with the
integration of advanced materials technology into new product designs further
strengthens its relationships with its customers.
The Company's emphasis on service and close relationship with its
customers is reflected in its relatively short lead times. The Company has
designed its manufacturing processes and service organizations to provide the
customer with its printed circuit materials products on a just-in-time basis.
The Company has located its advanced printed circuit materials
manufacturing operations in strategic locations intended to serve specific
regional markets. By situating its facilities in close geographical proximity
to its customers, the Company is able to rapidly adjust its manufacturing
processes to meet customers' new requirements and respond quickly to
customers' technical needs. The Company has full technical staffs based at
each of its manufacturing locations, which allows the rapid dispatch of
technical personnel to a customer's facility to assist the customer in quickly
solving design, process, production or manufacturing problems.
Customers and End Markets
The Company's customers for its advanced electronic materials include the
leading independent printed circuit board fabricators, electronic
manufacturing service companies, electronic contract manufacturers and, to a
lesser extent, major electronic equipment manufacturers in the computer,
networking, telecommunications, transportation, aerospace and instrumentation
industries located throughout North America, Europe and Asia. The Company
seeks to align itself with the larger, more technologically-advanced and
better capitalized independent printed circuit board fabricators and major
electronic equipment manufacturers which are industry leaders committed to
maintaining and improving their industry leadership positions and to building
long-term relationships with their suppliers. The Company's selling effort
typically involves several stages and relies on the talents of Company
personnel at different levels, from management to sales personnel and quality
engineers. The Company's strategy emphasizes the use of multiple facilities
established in market areas in close proximity to its customers.
During the Company's 2001 fiscal year, approximately 25.1% of the
Company's sales were to Sanmina Corporation, a leading electronics contract
manufacturer and manufacturer of printed circuit boards. During the Company's
2000 fiscal year, approximately 13.6% of the Company's sales were to Hadco
Corporation, a large manufacturer of printed circuit boards, and a significant
amount, but less than 10%, of Park's sales were to Sanmina Corporation. Hadco
Corporation merged into Sanmina Corporation in June 2000.
During the Company's 1998 fiscal year, 15.8% of the Company's sales were
to Delco Electronics Corporation, a subsidiary of General Motors Corp. Delco
Electronics had purchased significant amounts of product from the Company for
more than three years. However, in March 1998 the Company was informed by
Delco that Delco planned to close its printed circuit board fabrication plant
and exit the printed circuit board manufacturing business. After the plant
closure, Delco purchased all of its printed circuit boards from outside
suppliers and Delco was no longer a customer of the Company's. Since that
time, the Company marketed its semi-finished multilayer circuit board material
manufacturing capability to leading printed circuit board fabricators,
contract assemblers and electronic original equipment manufacturers in North
America. The Company had not previously marketed this capability as its semi-
finished multilayer capacity had been largely committed to supplying Delco
Electronics. Although the Company's electronic materials business was not
dependent on this single customer, the loss of this customer had a material
adverse effect on the business in the fiscal years ended February 28, 1999,
February 27, 2000 and February 25, 2001. In the first quarter of the fiscal
year ending March 3, 2002, the Company announced that it was selling the
assets and business of its subsidiary in Arizona that conducted the mass
lamination business and announced that it expects to record a charge of
approximately $15 million in its 2002 fiscal year first quarter ending May 27,
2001 in connection with the sale and the closure of a related support facility
to the mass lamination business also located in Arizona. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7 of this Report for a discussion of the significant pre-tax losses
incurred during the 2000 fiscal year by the Company's Arizona based business
unit which formerly supplied Delco Electronics Corporation with semi-finished
circuit boards; and see Item 3 of this Report for a discussion of legal
proceedings initiated by the Company against Delco Electronics Corporation.
Although the electronic materials business is not dependent on any single
customer, the loss of a major customer or of a group of customers could have a
material adverse effect on the electronic materials business.
The Company's electronic materials products are marketed by sales
personnel in industrial centers in North America, Europe and Asia. Such
personnel include both salaried employees and independent sales
representatives who work on a commission basis.
Manufacturing
The process for manufacturing multilayer printed circuit materials is
capital intensive and requires sophisticated equipment as well as clean-room
environments. The key steps in the Company's manufacturing process include:
the impregnation of specially designed fiberglass cloth with a resin system
and the partial curing of that resin system; the assembling of laminates
consisting of single or multiple plies of prepreg and copper foil in a clean-
room environment; the vacuum lamination of the copper-clad assemblies under
simultaneous exposure to heat, pressure and vacuum; and the finishing of the
laminates to customer specifications.
Prepreg is manufactured in a treater. A treater is a roll-to-roll
continuous machine which sequences specially designed fiberglass cloth or
other reinforcement fabric into a resin tank and then sequences the resin-
coated cloth through a series of ovens which partially cure the resin system
into the cloth. This partially cured product or prepreg is then sheeted or
paneled and packaged by the Company for sale to customers, or used by the
Company to construct its copper-clad laminates.
The Company manufacturers copper-clad laminates by first setting up in a
clean room an assembly of one or more plies of prepreg stacked together with a
sheet of specially manufactured copper foil on the top and bottom of the
assembly. This assembly, together with a large quantity of other laminate
assemblies, is then inserted into a large, multiple opening vacuum lamination
press. The laminate assemblies are then laminated under simultaneous exposure
to heat, pressure and vacuum. After the press cycle is complete, the laminates
are removed from the press and sheeted, paneled and finished to customer
specifications. The product is then inspected and packaged for shipment to the
customer. In addition, the Company manufactures very thin copper-clad
laminates utilizing Dielektra's unique, patented continuous lamination
technology.
The Company manufactures multilayer printed circuit materials at eight
fully integrated facilities located in the United States, Europe and Southeast
Asia. The Company opened its California facility in 1965, its England facility
in 1969, its first Arizona and France facilities in 1984, its Singapore
facility in 1986 and its second Arizona and France facilities in 1992, and in
1997, the Company acquired Dielektra GmbH with a fully integrated facility in
Cologne, Germany. The Company services the North America market principally
through its United States manufacturing facilities, the European market
principally through its manufacturing facilities in England, France and
Germany, and the Asian market principally through its Singapore manufacturing
facility. In the first quarter of its 2002 fiscal year, the Company announced
that it was establishing a business center in China to supply the demand for
advanced multilayer printed circuitry materials in China. The Company has
located its manufacturing facilities in its important markets. By maintaining
full technical and engineering staffs at each of its manufacturing facilities,
the Company is able to deliver fully-integrated products and services on a
timely basis.
The Company has been expanding the manufacturing capacity of its
electronic materials facilities in recent years. During the 2000 fiscal year,
the Company completed expansions of its electronic materials operations in
Singapore and France, acquired additional manufacturing capacity in
California, and commenced significant additional expansions of its electronic
materials operations in California and New York, which it expects to complete
in its 2002 fiscal year. During the 2001 fiscal year, the Company commenced a
significant expansion of its higher technology product line manufacturing
facility in Arizona, which the Company completed during the first quarter of
its 2002 fiscal year. In the first quarter of its 2002 fiscal year, the
Company announced a significant expansion of its electronic materials
manufacturing facility in Singapore and the establishment of a business center
in China.
All of the Company's multilayer printed circuit materials manufacturing
facilities are used for manufacturing, engineering and product development.
All of the Company's Nelco and Dielektra printed circuit materials
manufacturing facilities are ISO 9002 certified.
Materials and Sources of Supply
The principal materials used in the manufacture of the Company's
electronic products are specially manufactured copper foil, fiberglass cloth
and synthetic reinforcements, and specially formulated resins and chemicals.
The Company attempts to develop and maintain close working relationships with
suppliers of those materials who have dedicated themselves to complying with
the Company's stringent specifications and technical requirements. While the
Company's philosophy is to work with a limited number of suppliers, the
Company has identified alternate sources of supply for each of these
materials. However, there are a limited number of qualified suppliers of these
materials, substitutes for these materials are not readily available, and, in
the recent past, the industry has experienced shortages in the market for
certain of these materials. While the Company has not experienced significant
problems in the delivery of these materials and considers its relationships
with its suppliers to be strong, a disruption of the supply of materials could
materially adversely affect the business, financial condition and results of
operations of the Company. Significant increases in the cost of materials
purchased by the Company could also have a material adverse effect on the
Company's business, financial condition and results of operations if the
Company were unable to pass such price increases through to its customers.
Competition
The multilayer printed circuit materials industry is characterized by
intense competition and ongoing consolidation. The Company's competitors are
primarily divisions of subsidiaries of very large, diversified multinational
manufacturers which are substantially larger and have greater financial
resources than the Company and, to a lesser degree, smaller regional
producers. Because the Company focuses on the higher technology segment of the
electronic materials market, technological innovation, quality and service, as
well as price, are significant competitive factors.
The Company believes that there are approximately ten significant
multilayer printed circuit materials manufacturers in the world and many of
these competitors have or are developing significant presences in the three
major global markets of North America, Europe and Asia. The Company believes
that the multilayer printed circuit materials industry is rapidly becoming
more global and that the remaining smaller regional manufacturers will find it
increasingly difficult to remain competitive. The Company believes that it is
currently one of the world's largest multilayer printed circuit materials
manufacturers. The Company further believes it is the only significant
independent manufacturer of multilayer printed circuit materials in the world
today.
The markets in which the Company's electronic materials operations
compete are characterized by rapid technological advances, and the Company's
position in these markets depends largely on its continued ability to develop
technologically advanced and highly specialized products. Although the Company
believes it is an industry technology leader and directs a significant amount
of its time and resources toward maintaining its technological competitive
advantage, there is no assurance that the Company will be technologically
competitive in the future, or that the Company will continue to develop new
products that are technologically competitive.
Specialty Tape and Advanced Composites Operations
For many years, the Company was also engaged in the specialty adhesive
tape and film and advanced composite materials businesses and the plumbing
hardware business. However, during the fourth quarter of the 2000 fiscal year,
the Company decided to close and liquidate its plumbing hardware business. See
Note 14 of the Notes to Consolidated Financial Statements in Item 8 of this
Report for information concerning the closure of the plumbing hardware
business.
Dielectric Polymers, Inc., the Company's specialty adhesive tape and film
business, produces tapes and bonding films for a variety of applications
including joining industrial components together. FiberCote Industries, Inc.,
the Company's composites business, designs and produces engineered advanced
composite materials for the electronics, aerospace and industrial markets.
Marketing and Customers
The Company's specialty adhesive tape and advanced composite materials
customers, substantially all of which are located in the United States,
include manufacturers in the electronics, aerospace and industrial industries.
Such materials are marketed by sales personnel including both salaried
employees and independent sales representatives who work on a commission
basis.
While no single specialty adhesive tape or advanced composite materials
customer accounted for 10% or more of the Company's total sales during the
last fiscal year, the loss of a major customer or of a group of some of the
largest customers of the specialty adhesive tape and advanced composite
materials business could have a material adverse effect upon the business.
Manufacturing and Sources of Supply
The Company's advanced composite materials manufacturing facility is
located in Waterbury, Connecticut, and its specialty adhesive tape and film
business is located in Holyoke, Massachusetts.
The Company designs and manufactures its advanced composite materials and
industrial tapes and films to its own specifications and to the specifications
of its customers. Product development efforts are devoted toward the
conforming of the Company's advanced composites to the specifications of, and
the obtaining of approvals from, the Company's customers. The materials used
in the manufacture of these engineered materials include chemicals, films,
resins, fiberglass, plastics, and other fabricated materials and adhesives.
The Company purchases these materials from several suppliers. Although
satisfactory substitutes for many of these materials are not readily
available, the Company has experienced no difficulties in obtaining such
materials.
Competition
The Company has many competitors in the specialty adhesive tape and
advanced composite materials businesses, including some major corporations
which have substantially greater financial resources than the Company. The
Company competes for business on the basis of product performance and
development, product qualification and approval, the ability to manufacture
and deliver products in accordance with customers' needs and requirements, and
price.
Backlog
The Company records an item as backlog when it receives a purchase order
specifying the number of units to be purchased, the purchase price,
specifications and other customary terms and conditions. At April 30, 2001,
the unfilled portion of all purchase orders received by the Company and
believed by it to be firm was approximately $9,696,000, compared to
$30,484,000 at April 28, 2000. The decline in backlog at April 30, 2001
compared to April 28, 2000 was due primarily to the downturn in the Company's
business during the first two months of its 2002 fiscal year resulting from
the severe downturn and correction in the global electronics industry.
Various factors contribute to the size of the Company's backlog.
Accordingly, the foregoing information may not be indicative of the Company's
results of operations for any period subsequent to the fiscal year ended
February 25, 2001.
Patents and Trademarks
The Company holds several patents and trademarks or licenses thereto. In
the Company's opinion, some of these patents and trademarks are important to
its products. Generally, however, the Company does not believe that an
inability to obtain new, or to defend existing, patents and trademarks would
have a material adverse effect on the Company.
Employees
At February 25, 2001, the Company had approximately 3,010 employees. Of
these employees, 2,850 were engaged in the Company's electronic materials
operations, 105 in its specialty adhesive tape and advanced composite
materials operations and 55 consisted of executive personnel and general
administrative staff. However, as a result of a severe correction and downturn
in the global electronics industry and, consequently, in the Company's
electronic materials business, the Company reduced its total number of
employees during the first two months of its 2002 fiscal year to approximately
2,330 total employees at April 30, 2001. None of the Company's employees are
subject to a collective bargaining agreement. Management considers its
employee relations to be good.
Environmental Matters
The Company is subject to stringent environmental regulation of its use,
storage, treatment and disposal of hazardous materials and the release of
emissions into the environment. The Company believes that it currently is in
substantial compliance with the applicable federal, state and local
environmental laws and regulations to which it is subject and that continuing
compliance therewith will not have a material effect on its capital
expenditures, earnings or competitive position. The Company does not currently
anticipate making material capital expenditures for environmental control
facilities for its existing manufacturing operations during the remainder of
its current fiscal year or its succeeding fiscal year. However, developments,
such as the enactment or adoption of even more stringent environmental laws
and regulations, could conceivably result in substantial additional costs to
the Company.
The Company and certain of its subsidiaries have been named by the
Environmental protection Agency (the "EPA") or a comparable state agency under
the Comprehensive Environmental Response, Compensation and Liability Act (the
"Superfund Act") or similar state law as potentially responsible parties in
connection with alleged releases of hazardous substances at nine sites. In
addition, a subsidiary of the Company has received cost recovery claims under
the Superfund Act from other private parties involving two other sites and has
received requests from the EPA under the Superfund Act for information with
respect to its involvement at three other sites. Under the Superfund Act and
similar state laws, all parties who may have contributed any waste to a
hazardous waste disposal site or contaminated area identified by the EPA or
comparable state agency may be jointly and severally liable for the cost of
cleanup. Generally, these sites are locations at which numerous persons
disposed of hazardous waste. In the case of the Company's subsidiaries,
generally the waste was removed from their manufacturing facilities and
disposed at the waste sites by various companies which contracted with the
subsidiaries to provide waste disposal services. Neither the Company nor any
of its subsidiaries have been accused of or charged with any wrongdoing or
illegal acts in connection with any such sites. The Company believes it
maintains an effective and comprehensive environmental compliance program.
Management believes the ultimate disposition of known environmental matters
will not have a material adverse effect upon the Company.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Environmental Matters" included in Item 7 of this
Report and Note 11 of the Notes to Consolidated Financial Statements included
in Item 8 of this Report.
Item 2. Properties.
The following chart indicates the significant properties owned and leased
by the Company, the business which uses the properties, and the location and
size of each such property. All of such properties, except for the Lake
Success, New York property, are used principally as manufacturing, warehouse
and assembly facilities.
Location Owned or Use Size
Leased (Square
Footage)
Lake Success, NY Leased Executive Offices 7,000
Walden, NY Owned Electronic Materials 51,000
Newburgh, NY Leased Electronic Materials 171,000
Fullerton, CA Leased Electronic Materials 95,000
Anaheim, CA Leased Electronic Materials 26,000
Anaheim, CA Leased Electronic Materials 41,000
Tempe, AZ Leased Electronic Materials 29,000
Tempe, AZ Leased Electronic Materials 81,000
Tempe, AZ Leased Electronic Materials 6,000
Mirebeau, France Owned Electronic Materials 81,000
Lannemezan, Owned Electronic Materials 29,000
France
Cologne, Germany Owned Electronic Materials 193,000
Sindelfingen, Leased
Germany
Skelmersdale, Owned Electronic Materials 54,000
England
Singapore Leased Electronic Materials 48,000
Singapore Leased Electronic Materials 10,000
Holyoke, MA Leased Specialty 46,000
AdhesiveTapes and
Films
Waterbury, CT Leased Advanced Composites 100,000
The Company believes its facilities and equipment to be in good
condition and reasonably suited and adequate for its current needs.
Item 3. 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.
Park announced in March 1998 that it 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. After the
plant closure, Delco purchased all of its printed circuit boards from outside
suppliers and Delco was no longer a customer of the Company's. 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. 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. Sales to Delco Electronics represented 15.8% of the Company's
total worldwide sales for the 1998 fiscal year. See "Business-Electronic
Materials Operations-Customers and End Markets" in Item 1 of this Report,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7 of this Report, "Factors That May Affect Future Results"
after Item 7 of this Report and Note 13 of the Notes to Consolidated Financial
Statements in Item 8 of this Report.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Executive Officers of the Registrant.
Name Title Age
Brian E. Shore Chief Executive Officer,
President and a Director 49
Robert A. Forcier Senior Vice President, OEM
Marketing and Technology 51
George L. Frantz Senior Vice President and Chief
Information Officer 53
Stephen E. Gilhuley Senior Vice President,
Secretary and General Counsel 56
Emily J. Groehl Senior Vice President, Sales
and Marketing 54
Thomas T. Spooner Senior Vice President,
Corporate and Technology 64
Development
Murray O. Stamer Senior Vice President, Finance 43
Gary M. Watson Senior Vice President,
Engineering and Technology 53
Brian Shore has served as a Director of the Company for more than the
past five years. Brian Shore was elected a Vice President of the Company in
January 1993, Executive Vice President in May 1994, President effective March
4, 1996, the first day of the Company's 1997 fiscal year, and Chief Executive
Officer in November 1996. Brian Shore also served as General Counsel of the
Company from April 1988 until April 1994.
Mr. Forcier has been employed by one of Park's "Nelco" business units for
more than the past five years. He was president of Nelco Technology, Inc. from
December 1987 to August 1992 and was Vice President, New Product Marketing of
Nelco International Corporation from 1993 until June 1999, when Nelco
International Corporation merged into Park Electrochemical Corp. He was
elected Senior Vice President of Park in May 1999. He also has been President
of Neltec, Inc. since July 1999.
Mr. Frantz was elected Senior Vice President of the Company in December
1999. Prior thereto, he was employed by the Atlantic Richfield Company since
1974 as an information technology executive in a number of capacities and
positions at both the parent company and division levels.
Mr. Gilhuley has been General Counsel of the Company since April 1994 and
Secretary since July 1996. He was elected a Senior Vice President in March
2001.
Ms. Groehl has been with one of Park's "Nelco" business units for more
than the past five years. She was elected Vice President of New England
Laminates Co., Inc. in 1988 and was Vice President, Marketing and Sales of
Nelco International Corporation from 1993 until June 1999, when Nelco
International Corporation merged into Park Electrochemical Corp. She was
elected Senior Vice President of Park in May 1999.
Mr. Spooner has been employed by one of Park's "Nelco" business units for
more than the past five years. He was Vice President, Technology of Nelco
International Corporation from 1993 until June 1999, when Nelco International
Corporation merged into Park Electrochemical Corp. He was elected Senior Vice
President, Technology of Park in May 1999. His title was changed to Senior
Vice President, Corporate and Technology Development in May 2001.
Mr. Stamer has been employed by the Company since 1989 and served as the
Company's Corporate Controller from 1993 to May 1999, when he was elected
Treasurer. He was elected Senior Vice President, Finance in March 2001.
Mr. Watson was elected Senior Vice President, Engineering in June 2000.
His title was changed to Senior Vice President, Engineering and Technology in
May 2001. Prior to June 2000, Mr. Watson was Senior Director, Manufacturing
Process Technology of Fort James Corporation since March 1999; Vice President,
Research and Development of Boise Cascade Corporation from 1992 to March 1999;
and Business Division Technology Manager of Weyerhauser Company from 1986 to
1992.
There are no family relationships between the directors or executive
officers of the Company, except that Brian Shore is the son of Jerry Shore,
who is the Chairman of the Board and a Director of the Company and who also
served as President of the Company for more than five years until March 4,
1996 and as Chief Executive Officer of the Company for more than five years
until November 19, 1996.
The term of office of each executive officer of the Company expires upon
the election and qualification of his successor.
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters.
The Company's Common Stock is listed and trades on the New York Stock
Exchange (trading symbol PKE). (The Common Stock also trades on the Midwest
Stock Exchange.) The following table sets forth, for each of the quarterly
periods indicated, the high and low sales prices for the Common Stock as
reported on the New York Stock Exchange Composite Tape and dividends declared
on the Common Stock, all as adjusted for the three-for-two stock split in the
form of a stock dividend distributed November 8, 2000 to stockholders of
record at the close of business on October 20, 2000.
For the Fiscal Year Stock Price Dividends
Ended February 25, 2001 High Low Declared
First Quarter $18.01 $14.41 $.053
Second Quarter 27.41 15.41 $.053
Third Quarter 50.06 26.21 $.060
Fourth Quarter 42.93 20.41 $.060
For the Fiscal Year Stock Price Dividends
Ended February 27, 2000 High Low Declared
First Quarter $18.50 $15.42 $.053
Second Quarter 21.08 15.42 $.053
Third Quarter 25.71 18.50 $.053
Fourth Quarter 23.96 12.08 $.053
As of May 22, 2001, there were approximately 2,070 holders of record of
Common Stock.
The Company expects, for the immediate future, to continue to pay regular
cash dividends.
Item 6. Selected Financial Data.
The following selected consolidated financial data of Park and its
subsidiaries is qualified by reference to, and should be read in conjunction
with, the consolidated financial statements, related notes, and Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained elsewhere herein. Insofar as such consolidated financial information
relates to the five fiscal years ended February 25, 2001 and is as of the end
of such periods, it is derived from the consolidated financial statements for
such periods and as of such dates audited by Ernst & Young LLP, independent
auditors. The Consolidated financial statements as of February 25, 2001 and
February 27, 2000 and for the three years ended February 25, 2001, together
with the independent auditors' report for the three years ended February 25,
2001, appear in Item 8 of this Report.
Fiscal Year Ended
(In thousands, except per share amounts)
Feb. 25, Feb. 27, Feb. 28, Mar. 1, Mar. 2,
2001 2000 1999 1998 1997
STATEMENT OF EARNINGS
INFORMATION:
Net sales $522,197 $425,261 $387,634 $376,158 $334,490
Cost of sales 404,527 351,841 328,884 301,968 275,372
Gross profit 117,670 73,420 58,750 74,190 59,118
Selling, general and
administrative expenses 49,897 45,508 41,279 39,418 34,366
Closure of plumbing
hardware business(1) - 4,464 - - -
Profit from operations 67,773 23,448 17,471 34,772 24,752
Other income:
Interest and other 8,419 6,654 7,642 8,382 7,653
income, net
Interest expense 5,593 5,720 5,400 5,468 5,508
Total other income 2,826 934 2,242 2,914 2,145
Earnings before income 70,599 24,382 19,713 37,686 26,897
taxes
Income tax provision 21,180 6,085 4,337 12,436 8,338
Net earnings $ 49,419 $ 18,297 $ 15,376 $ 25,250 $ 18,559
Earnings per share:
Basic $ 3.10 $ 1.16 $ .93 $ 1.48 $ 1.09
Diluted $ 2.65 $ 1.12 $ .92 $ 1.38 $ 1.05
Weighted average number
of common Shares
outstanding:
Basic 15,932 15,761 16,470 17,030 17,023
Diluted 20,002 19,643 16,707 20,922 20,898
Cash dividends per $ .23 $ .21 $ .21 $ .21 $ .21
common share
BALANCE SHEET
INFORMATION:
Working capital $188,511 $176,113 $166,840 $176,553 $165,004
Total assets 430,581 365,252 351,698 359,329 307,862
Long-term debt 97,672 100,000 100,000 100,000 100,000
Stockholders' equity 228,906 179,118 164,646 166,404 143,355
See Note 14 of the Notes to Consolidated Financial Statements in Item 8 of
this Report.
Item 7. 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
electronic interconnection systems. The Company's customers for its advanced
printed circuit materials include leading independent circuit board
fabricators, electronic manufacturing service companies and large electronic
equipment manufacturers in the computer, telecommunications, transportation,
aerospace and instrumentation industries. The Company's electronic materials
operations accounted for approximately 95% of the Company's total net sales
worldwide in the 2001 fiscal year and approximately 92% and 90% of net sales
worldwide in the 2000 and 1999 fiscal years, respectively. The Company's
foreign operations accounted for approximately 40% of the Company's total net
sales worldwide in the 2001 fiscal year and approximately 37% and 39% of net
sales worldwide in the 2000 and 1999 fiscal years, respectively.
Park is also engaged in the specialty adhesive tape business and advanced
composite business, both of which operate as independent business units. In
addition, Park operated a plumbing hardware business, which it decided to
close and liquidate in the 2000 fiscal year fourth quarter. The Company's
specialty adhesive tape, advanced composite and plumbing hardware businesses
accounted for approximately 5% of the Company's total net sales worldwide in
the 2001 fiscal year and approximately 8% and 10% of net sales worldwide in
the 2000 and 1999 fiscal years, respectively.
The Company's sales growth during the last three fiscal years is
attributable to strong growth in sales by its electronic materials operations
in North America, excluding the loss of sales to Delco Electronics, discussed
below, and its electronic materials operations in Europe and Asia. The
Company's ongoing efforts to expand its higher technology, higher margin
product lines have been significant factors in the growth of the Company's
sales of electronic materials, and the Company introduced several new
electronic materials products during the past three fiscal years.
While the Company's sales increased during each of the last three fiscal
years, the earnings growth that the Company achieved during its 1998 fiscal
year did not continue in the 1999 fiscal year, primarily as a result of an
earnings decline in the Company's North American electronic materials
operations, which was caused by the loss of sales to Delco Electronics.
Nevertheless, the Company's earnings growth resumed in the 2000 fiscal year,
despite the significant losses incurred by the Company's mass lamination busi
ness in Arizona which formerly supplied Delco Electronics and despite the
significant charges related to the closure and the write-down of the assets of
the plumbing hardware business and the 2000 fiscal year operating loss of that
business. In the 2001 fiscal year, the Company's earnings reached record
levels as a result of the surge in demand for the Company's electronic
materials products throughout the global electronics markets served by the
Company and the Company's continuing emphasis on its higher technology product
lines.
Growth of the Company's electronic materials business was constrained in
various geographic regions during the last three fiscal years by the Company's
available manufacturing capacity, although the Company has been expanding the
manufacturing capacity of its electronic materials facilities in recent years.
Nevertheless, all the Company's electronic materials facilities were operating
at full capacity during the 2001 fiscal year. During the 2000 fiscal year, the
Company completed expansions of its electronic materials operations in
Singapore and France, acquired additional manufacturing capacity in
California, and commenced significant additional expansions of its electronic
materials operations in California and New York, which it expects to complete
in its 2002 fiscal year. During the 2001 fiscal year, the Company commenced a
significant expansion of its higher technology product line manufacturing
facility in Arizona, which was recently completed.
During the Company's 1998 fiscal year and for several years prior
thereto, more than 10% of the Company's total sales were to Delco Electronics
Corporation, a subsidiary of General Motors Corp. However, in March 1998, the
Company was informed by Delco that Delco planned to close its printed circuit
board fabrication plant and completely exit the printed circuit board
manufacturing business. As a result, the Company's sales to Delco declined
during the three-month period ended May 31, 1998, were negligible during the
three-month period ended August 30, 1998, were nil during the remainder of the
1999 fiscal year and during the 2000 and 2001 fiscal years and are expected to
be nil in future years.
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. In November 2000, a jury awarded damages to NTI in the amount of
$32,280,000, and in December 2000 the judge in the United States District
Court for the District of Arizona 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.
Although the Company's electronic materials business was not dependent on
this single customer, the loss of this customer had a material adverse effect
on this business in the last three fiscal years and may have a material
adverse effect on this business in the fiscal year ending March 3, 2002 and in
subsequent fiscal years.
On April 26, 2001, the Company announced that it was selling the assets
and business of NTI and announced that it expects to record a charge of
approximately $15 million in its 2002 fiscal year first quarter ending May 27,
2001 in connection with the sale of NTI and the closure of a related support
facility also located in Arizona.
The Company also announced in late April 2001 that as a result of a
severe correction and downturn in the global electronics industry, the
Company's electronic materials sales volumes during the first two months of
the 2002 fiscal year are running at approximately one half of the sales levels
during the 2001 fiscal year and that the Company expects to report a loss in
its 2002 fiscal year first quarter.
Fiscal Year 2001 Compared with Fiscal Year 2000:
The Company's electronic materials business was largely responsible for
the dramatic improvement in the Company's results of operations for the fiscal
year ended February 25, 2001. The North American, Asian and European markets
for sophisticated printed circuit materials were extremely strong during the
2001 fiscal year, and the Company's electronic materials operations located in
all three geographic areas performed well as a result.
The Company's results of operations and margins improved in the 2001
fiscal year principally as a result of the optimal utilization of the
electronic materials business' manufacturing resources and the business'
increase in its market share with certain key customers and increase in its
sales of higher technology, higher margin products.
Results of Operations
Sales for the fiscal year ended February 25, 2001 increased 23% to $522.2
million from $425.3 million for the fiscal year ended February 27, 2000. Sales
of the electronic materials business for the 2001 fiscal year were $496.1
million, or 95% of total sales worldwide, compared with $392.3 million, or 92%
of total sales worldwide, for the 2000 fiscal year. This 26% 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 specialty adhesive tape and advanced composite
businesses increased during the 2001 fiscal year as the result of higher
volume of materials shipped. Sales by the specialty adhesive tape and advanced
composite businesses increased 24% to $24.2 million in the 2001 fiscal year
from $19.5 million in the 2000 fiscal year. Sales of the plumbing hardware
business, which the Company closed and liquidated in the first half of the
2001 fiscal year, declined from $13.5 million in the 2000 fiscal year to $1.9
million in the 2001 fiscal year.
The Company's foreign operations accounted for $209.3 million of sales,
or 40% of the Company's total sales worldwide, during the 2001 fiscal year
compared with $159.1 million of sales, or 37% of total sales worldwide, during
the 2000 fiscal year. Sales by the Company's foreign operations during the
2001 fiscal year increased 32% from the 2000 fiscal year. The increase in
sales by the Company's foreign operations in the 2001 fiscal year was due to
increases in sales by both the Asian and European operations of the Company.
The gross margin for the Company's continuing worldwide operations was
22.5% during the 2001 fiscal year compared with 17.3% for the 2000 fiscal
year. The increase in the gross margin was attributable to efficiencies
achieved by operating facilities at levels close to their designed capacity in
the 2001 fiscal year, the continuing growth in sales of higher technology,
higher margin products as a percentage of total sales and increases in market
share with certain key electronic materials customers.
Selling, general and administrative expenses, measured as a percentage of
sales, were 9.5% during the 2001 fiscal year compared with 10.7% during the
2000 fiscal year. This decrease was a result of the partially fixed nature of
these expenses and the Company's increased sales in the 2001 fiscal year.
For the reasons set forth above, profit from operations for the 2001
fiscal year increased 190% to $67.8 million from $23.4 million for the 2000
fiscal year.
Interest and other income, principally investment income, increased 25%
to $8.4 million for the 2001 fiscal year from $6.7 million for the 2000 fiscal
year. The increase in investment income was attributable to increased cash
available for investment and higher prevailing interest rates during the 2001
fiscal year. The Company's investments were primarily short-term taxable
instruments and government securities. Interest expense for the 2001 fiscal
year was $5.6 million compared with $5.7 million during the 2000 fiscal year.
The Company's interest expense was related primarily to its $100 million
principal amount of 5.5% Convertible Subordinated Notes due 2006 issued in
February 1996. See "Liquidity and Capital Resources" elsewhere in this Item 7.
The Company's effective income tax rate for the 2001 fiscal year was
30.0% compared with 25.0% for the 2000 fiscal year. This increase in the
effective tax rate was primarily the result of a change in the Company's
income mix among the tax jurisdictions in which the Company does business.
Net earnings for the 2001 fiscal year increased 170% to $49.4 million
from $18.3 million for the 2000 fiscal year. Basic and diluted earnings per
share increased to $3.10 and $2.65, respectively, for the 2001 fiscal year
from $1.16 and $1.12, respectively, for the 2000 fiscal year. This increase in
net earnings and earnings per share was primarily attributable to the increase
in the profit from operations offset, in part, by the higher effective tax
rate.
Fiscal Year 2000 Compared with Fiscal Year 1999:
The Company's electronic materials business was largely responsible for
the improvement in the Company's results of operations for the fiscal year
ended February 27, 2000. The North American, European and Asian markets for
sophisticated printed circuit materials strengthened during the 2000 fiscal
year, and the Company's electronic materials operations located in each region
performed well as a result. However, the absence of business with Delco
Electronics during the 2000 fiscal year adversely affected the Company's sales
volume in North America and negatively affected the Company's margins.
The Company's results of operations and margins improved in the 2000
fiscal year principally as a result of the electronic material business'
enhanced capacity utilization and the business' increase in its market share
with certain key customers and increase in its sales of higher technology,
higher margin products. However, the Company's electronic materials business
also experienced inefficiencies resulting from the operation of certain of its
facilities at levels in excess of their designed manufacturing capacity,
difficulty associated with the integration of a small acquisition which was
consummated in the 2000 fiscal year second quarter, price pressure exerted by
customers, and, most important, significant pre-tax losses at its Arizona
based business unit which formerly supplied Delco Electronics Corporation with
semi-finished circuit boards, or mass lamination product, all of which
negatively affected the Company's margins during the year.
Operating results of the Company's specialty adhesive tape, advanced
composite materials and plumbing hardware businesses declined severely during
the 2000 fiscal year. This decline was attributable to a $4.5 million pre-tax
charge for the closure of the plumbing hardware business and the related write-
down of the assets of that business and to the $0.6 million operating loss of
the plumbing hardware business during the year.
Results of Operations
Sales for the fiscal year ended February 27, 2000 increased 10% to $425.3
million from $387.6 million for the fiscal year ended February 28, 1999. Sales
of the electronic materials business for the 2000 fiscal year were $392.3
million, or 92% of total sales worldwide, compared with $350.3 million, or 90%
of total sales worldwide, for the 1999 fiscal year. This 12% 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 specialty adhesive tape, advanced composite materials
and plumbing hardware businesses declined during the 2000 fiscal year due to
reduced volume of plumbing hardware products shipped, which more than offset
the sales increases by the specialty adhesive tape and advanced composite
businesses. This resulted in an overall decline of 12% in the specialty
adhesive tape, advanced composite materials and plumbing hardware businesses'
sales to $33.0 million in the 2000 fiscal year from $37.3 million in the 1999
fiscal year.
For the fiscal year ended February 27, 2000, sales of the Company's
continuing operations, excluding the plumbing hardware business which the
Company decided to close during the fourth quarter of the 2000 fiscal year,
increased 11% to $411.9 million from $369.4 million for the fiscal year ended
February 28, 1999.
The Company's foreign operations accounted for $159.1 million of sales,
or 37% of the Company's total sales worldwide, during the 2000 fiscal year,
compared with $151.9 million of sales, or 39% of total sales worldwide, during
the 1999 fiscal year. Sales by the Company's foreign operations during the
2000 fiscal year increased 5% from the 1999 fiscal year. The increase in sales
by the Company's foreign operations in the 2000 fiscal year was principally
due to an increase in sales by the Company's European electronic materials
operations.
The gross margin for the Company's worldwide operations was 16.2% during
the 2000 fiscal year compared with 15.2% for the 1999 fiscal year. The gross
margin for the Company's continuing worldwide operations, excluding the
plumbing hardware business, was 17.3% during the 2000 fiscal year compared
with 15.1% for the 1999 fiscal year. The improvement in the gross margin was
attributable to the increases in sales volumes over the 1999 fiscal year, the
continuing growth in sales of higher technology, higher margin products and
increases in market share with certain key electronic materials customers.
However, the favorable impact of these factors was partially offset by the
absence of sales volumes with Delco Electronics, inefficiencies caused by
operating certain facilities at levels in excess of their designed
manufacturing capacity, difficulty associated with the integration of a small
acquisition which was consummated in the 2000 fiscal year second quarter,
price pressure exerted by customers and the significant losses incurred by the
Company's mass lamination business in Arizona which formerly supplied Delco
Electronics.
Selling, general and administrative expenses, measured as a percentage of
sales, were 10.7% during the 2000 fiscal year and the 1999 fiscal year and,
excluding the plumbing hardware business closure and asset write-down charge
and operating loss, were 10.4% during the 2000 fiscal year and 10.5% during
the 1999 fiscal year. The decline resulted from proportionately greater sales
compared to the 1999 fiscal year.
For the reasons set forth above, profit from operations for the 2000
fiscal year increased 34% to $23.4 million from $17.5 million for the 1999
fiscal year, while profit from the Company's continuing operations, excluding
the plumbing hardware business, for the 2000 fiscal year increased 68% to
$28.5 million from $17.0 million for the 1999 fiscal year.
Interest and other income, principally investment income, declined 13% to
$6.7 million for the 2000 fiscal year from $7.6 million for the 1999 fiscal
year. The decrease in investment income was attributable to the reduction in
cash available for investment and a decline in the prevailing interest rates
during the 2000 fiscal year. The Company's investments were primarily short-
term taxable instruments and government securities. Interest expense for the
2000 fiscal year was $5.7 million compared with $5.4 million during the 1999
fiscal year. The increase in interest expense was attributable to the
reduction in interest capitalized to fixed assets. The Company's interest
expense was related primarily to its $100 million principal amount of 5.5%
Convertible Subordinated Notes due 2006 issued in February 1996. See
"Liquidity and Capital Resources" elsewhere in this Item 7.
The Company's effective income tax rate for the 2000 fiscal year was
25.0% compared with 22.0% for the 1999 fiscal year. This increase in the
effective tax rate was primarily the result of a change in the Company's
income mix among the tax jurisdictions in which the Company does business.
Net earnings for the 2000 fiscal year increased 19% to $18.3 million from
$15.4 million for the 1999 fiscal year. Basic and diluted earnings per share
increased to $1.16 and $1.12, respectively, for the 2000 fiscal year from
$0.93 and $0.92, respectively, for the 1999 fiscal year. This increase in net
earnings and earnings per share was primarily attributable to the increase in
the profit from operations, which was constricted by the higher effective tax
rate, the charge for the closure and the related write-down of the assets of
the plumbing hardware business, the operating loss of the plumbing hardware
business and the loss incurred in the 2000 fiscal year by the business unit in
Arizona which formerly supplied Delco Electronics Corporation with semi-
finished multilayer circuit boards.
Without the plumbing hardware business closure and asset write-down
charge and operating loss, net earnings for the 2000 fiscal year would have
increased 40% to $21.6 million from $15.4 million for the 1999 fiscal year,
and basic and diluted earnings per share would have increased by $0.21 and
$0.17, respectively, for the 2000 fiscal year.
Liquidity and Capital Resources:
At February 25, 2001, the Company's cash and temporary investments were
$155.7 million compared with $131.5 million at February 27, 2000, the end of
the Company's 2000 fiscal year. The increase in the Company's cash and
investment position at February 25, 2001 was attributable to increased cash
provided from operating activities, as discussed below. The Company's working
capital was $188.5 million at February 25, 2001 compared with $176.1 million
at February 27, 2000. The increase at February 25, 2001 compared with February
27, 2000 was due principally to higher cash and temporary investments and
inventories, offset in part by higher current liabilities. The increase in
inventories and current liabilities at February 25, 2001 compared with
February 27, 2000 was a result principally of increased operating activity in
support of higher sales volumes. The Company's current ratio (the ratio of
current assets to current liabilities) was 3.4 to 1 at February 25, 2001
compared with 3.9 to 1 at February 27, 2000.
During the 2001 fiscal year, the Company generated funds from operations
of $77.4 million and expended $51.8 million for the net purchase of property,
plant and equipment. Cash provided by net earnings, before depreciation and
amortization, of $66.1 million combined with a net decrease in non-cash
working capital items resulted in $77.4 million of cash provided from
operating activities. A major portion of the 2001 fiscal year's capital
expenditures related to the expansions of the Company's electronic materials
facilities in Arizona, California and New York. These expansions will increase
the Company's capacity and capability for the production of sophisticated
printed circuit materials. Net expenditures for property, plant and equipment
were $51.8 million, $27.7 million and $24.4 million in the 2001, 2000 and 1999
fiscal years, respectively. The Company expects the capital expenditures in
the 2002 fiscal year to be less than the expenditures in the 2001 fiscal year
but greater than the expenditures in the 2000 fiscal year.
At February 25, 2001, the Company's only long-term debt was the 5.5%
Convertible Subordinated Notes due 2006 (the "Notes") issued at the end of the
1996 fiscal year. During the Company's 2001 fiscal year, $2,328,000 principal
amount of Notes was converted into 82,750 shares of the Company's Common
Stock, and immediately after the end of the 2001 fiscal year, $95,934,000
principal amount of Notes was converted into 3,410,908 shares of the Company's
Common Stock, all at a conversion price of $28.125 per share. On March 2,
2001, the Company redeemed $1,738,000 principal amount of Notes for a
redemption price of $1,000.15 (including accrued interest) for each $1,000
principal amount Note pursuant to a previous announcement that on March 2,
2001 it would redeem all of the outstanding Notes that were not converted on
or before March 1, 2001. See Notes 6 and 16 of the Notes to Consolidated
Financial Statements in Item 8 of this Report.
The Company believes its financial resources will be sufficient, for the
foreseeable future, to provide for continued investment in working capital and
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:
The Company is subject to various federal, state and local government
requirements relating to the protection of the environment. The Company
believes that, as a general matter, its policies, practices and procedures are
properly designed to prevent unreasonable risk of environmental damage and
that its handling, manufacture, use and disposal of hazardous or toxic
substances are in accord with environmental laws and regulations. However,
mainly because of past operations and operations of predecessor companies,
which were generally in compliance with applicable laws at the time of the
operations in question, the Company, like other companies engaged in similar
businesses, is a party to claims by government agencies and third parties and
has incurred remedial response and voluntary cleanup costs associated with
environmental matters. Additional claims and costs involving past
environmental matters may continue to arise in the future. It is the Company's
policy to record appropriate liabilities for such matters when remedial
efforts are probable and the costs can be reasonably estimated.
In the 2001, 2000 and 1999 fiscal years, the Company charged
approximately $0.3 million, $0.2 million and $0.2 million, respectively,
against pretax income for 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 February 25, 2001 and February 27, 2000, the recorded liability in
accrued liabilities for environmental matters was $4.4 million.
Management does not expect that environmental matters will have a
material adverse effect on the liquidity, capital resources, business or
consolidated financial position of the Company. See Note 11 of the Notes to
Consolidated Financial Statements included in Item 8 of this Report for a
discussion of the Company's commitments and contingencies, including those
related to environmental matters.
Factors That May Affect Future Results.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies without fear of litigation so
long as those statements are identified as forward-looking and are accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those projected in the
statement. 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,
forecasted, estimated or budgeted by the Company in forward-looking
statements. Accordingly, the Company hereby identifies the following important
factors which could cause the Company's actual results to differ materially
from any such results which might be projected, forecast, estimated or
budgeted by the Company in forward-looking statements.
. The Company's customer base is concentrated, in part, because
the Company's business strategy has been to develop long-term
relationships with a select group of customers. During the Company's
fiscal year ended February 25, 2001, the Company's ten largest
customers accounted for approximately 66.5% of net sales. The
Company expects that sales to a relatively small number of customers
will continue to account for a significant portion of its net sales
for the foreseeable future. A loss of one or more of such key
customers could affect the Company's profitability. See "Business-
Electronic Materials Operations-Customers and End Markets" in Item 1
of this Report, "Legal Proceedings" in Item 3 of this Report and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 7 of this Report for discussions of
the loss of a key customer early in the 1999 fiscal year.
. The Company's business is dependent on certain aspects of the
electronics industry, which is a cyclical industry and which has
experienced recurring downturns. The downturns, such as occurred in
the first quarter of the Company's fiscal year ended March 2, 1997
and in the first quarter of the Company's fiscal year ending March
3, 2002, can be unexpected and have often reduced demand for, and
prices of, electronic materials.
. The Company's operating results are affected by a number of
factors, including various factors beyond the Company's control.
Such factors include economic conditions in the electronics
industry, the timing of customer orders, product prices, process
yields, the mix of products sold and maintenance-related shutdowns
of facilities. Operating results also can be influenced by
development and introduction of new products and the costs
associated with the start-up of new facilities.
. The Company's production processes require the use of
substantial amounts of gas and electricity, the cost and available
supply of which are beyond the control of the Company. Changes in
the cost or availability of gas or electricity could materially
increase the Company's cost of operations.
. Rapid technological advances in semiconductors and electronic
equipment have placed rigorous demands on the electronic materials
manufactured by the Company and used in printed circuit board
production. The Company's operating results will be affected by the
Company's ability to maintain and increase its technological and
manufacturing capability and expertise in this rapidly changing
industry.
. The electronic materials industry is intensely competitive and
the Company competes worldwide in the market for materials used in
the production of complex multilayer printed circuit boards. The
Company's principal competitors are substantially larger and have
greater financial resources than the Company, and the Company's
operating results will be affected by its ability to maintain its
competitive position in the industry.
. There are a limited number of qualified suppliers of the prin
cipal materials used by the Company in its manufacture of electronic
materials products. Substitutes for these products are not readily
available, and in the recent past there have been shortages in the
market for certain of these materials.
. The Company typically does not obtain long-term purchase orders
or commitments. Instead, it relies primarily on continual
communication with its customers to anticipate the future volume of
purchase orders. A variety of conditions, both specific to the
individual customer and generally affecting the customer's industry,
can cause a customer to reduce or delay orders previously
anticipated by the Company.
. The Company, from time to time, is engaged in the expansion of
certain of its manufacturing facilities for electronic materials.
The anticipated costs of such expansions cannot be determined with
precision and may vary materially from those budgeted. In addition,
such expansions will increase the Company's fixed costs. The
Company's future profitability depends upon its ability to utilize
its manufacturing capacity in an effective manner.
. The Company's business is capital intensive and, in addition,
the introduction of new technologies could substantially increase
the Company's capital expenditures. In order to remain competitive
the Company must continue to make significant investments in capital
equipment and expansion of operations. This may require that the
Company continue to be able to access capital on terms acceptable to
the Company.
. The Company may acquire businesses, product lines or
technologies that expand or complement those of the Company. The
integration and management of an acquired company or business may
strain the Company's management resources and technical, financial
and operating systems. In addition, implementation of acquisitions
can result in large one-time charges and costs. A given acquisition,
if consummated, may materially affect the Company's business,
financial condition and results of operations.
. The Company's international operations are subject to risks,
including unexpected changes in regulatory requirements, exchange
rates, tariffs and other barriers, political and economic
instability and potentially adverse tax consequences.
. A portion of the sales and costs of the Company's international
operations are denominated in currencies other than the U.S. dollar
and may be affected by fluctuations in currency exchange rates.
. The Company's success is dependent upon its relationship with
key management and technical personnel.
. The Company's future success depends in part upon its intel
lectual property which the Company seeks to protect through a
combination of contract provisions, trade secret protections,
copyrights and patents.
. The Company's production processes require the use, storage,
treatment and disposal of certain materials which are considered
hazardous under applicable environmental laws and the Company is
subject to a variety of regulatory requirements relating to the
handling of such materials and the release of emissions and
effluents into the environment. Other possible developments, such as
the enactment or adoption of additional environmental laws, could
result in substantial costs to the Company.
. The market price of the Company's securities can be subject to
fluctuations in response to quarter to quarter variations in
operating results, changes in analysts' earnings estimates, market
conditions in the electronic materials industry, as well as general
economic conditions and other factors external to the Company.
. The Company's results could be affected by changes in the
Company's accounting policies and practices or changes in the
Company's organization, compensation and benefit plans, or changes
in the Company's material agreements or understandings with third
parties.
Item 7A. 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 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 man
agers 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 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 a 10% increase in short term
interest rates would not have had a material impact on the consolidated
results of operations or financial position of the Company.
Item 8. Financial Statements and Supplementary Data.
The Company's Financial Statements begin on the next page.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Park Electrochemical Corp.
Lake Success, New York
We have audited the accompanying consolidated balance sheets of Park
Electrochemical Corp. and subsidiaries as of February 25, 2001 and February
27, 2000 and the related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the three years in the period ended
February 25, 2001. Our audits also included the financial statement schedule
listed in the Index at Item 14(a)(2). These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Park Electrochemical Corp. and subsidiaries as of February 25, 2001 and
February 27, 2000 and the consolidated results of their operations and their
cash flows for each of the three years in the period ended February 25, 2001,
in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
New York, New York
April 27, 2001
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Proforma
(In thousands, except share (See Note 6)
and per share amounts) February 25, February 25, February 27,
2001 2001 2000
ASSETS Unaudited
Current assets:
Cash and cash equivalents $121,988 $123,726 $ 53,153
Marketable securities
(Note 2) 32,017 32,017 78,309
Accounts receivable, less
allowance for doubtful
accounts of $2,074 and
$2,388, respectively 71,105 71,105 68,335
Inventories (Note 3) 32,307 32,307 27,368
Prepaid expenses and other 9,456 9,456 9,614
(Note 7)
Total current assets 266,873 268,611 236,779
Property, plant and
equipment, net of
accumulated depreciation
and amortization (Note 4) 159,309 159,309 125,977
Other assets (Note 7) 748 2,661 2,496
Total $426,930 $430,581 $365,252
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,481 $ 29,481 $ 24,964
Accrued liabilities (Notes 39,052 39,052 28,973
5 and 11)
Income taxes payable 11,567 11,567 6,729
Total current 80,100 80,100 60,666
liabilities
Long-term debt (Note 6) - 97,672 100,000
Deferred income taxes (Note 12,679 12,679 11,933
7)
Deferred pension liability
and other (Note 10) 11,224 11,224 13,535
Commitments and
contingencies (Notes
10 and 11)
Stockholders' equity (Notes
6, 8, 9 and 10):
Preferred stock, $1 par
value per share-authorized,
500,000 shares; issued,
none - - -
Common stock, $.10 par
value per share-authorized,
60,000,000 and 30,000,000
shares, respectively;
issued, 20,369,986 shares 2,037 2,037 2,037
Additional paid-in capital 129,959 57,318 54,115
Retained earnings 203,150 203,150 157,308
Accumulated other non-
owner changes (5,764) (5,764) (5,291)
329,382 256,741 208,169
Less treasury stock, at
cost, 1,030,451, 4,441,359
and 4,672,230 shares,
respectively (6,455) (27,835) (29,051)
Total stockholders'
equity 322,927 228,906 179,118
Total $426,930 $430,581 $365,252
See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share amounts)
52 Weeks Ended
February 25, February 27, February 28,
2001 2000 1999
Net sales $522,197 $425,261 $387,634
Cost of sales 404,527 351,841 328,884
Gross profit 117,670 73,420 58,750
Selling, general and
administrative expenses 49,897 45,508 41,279
Closure of plumbing hardware
business (Note 14) - 4,464 -
Profit from operations 67,773 23,448 17,471
Other income:
Interest and other income, 8,419 6,654 7,642
net
Interest expense (Note 6) 5,593 5,720 5,400
Total other income 2,826 934 2,242
Earnings before income taxes 70,599 24,382 19,713
Income taxes (Note 7) 21,180 6,085 4,337
Net earnings $ 49,419 $ 18,297 $ 15,376
Earnings per share (Note 9):
Basic $3.10 $1.16 $ .93
Diluted $2.65 $1.12 $ .92
See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share amounts)
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings
Balance, March 1, 1998 20,369,986 $2,037 $52,311 $130,435
Net earnings 15,376
Exchange rate changes
Change in pension liability
adjustment
Stock options exercised 118
Cash dividends ($.21 per share) (3,475)
Purchase of treasury stock
Comprehensive income
Balance, February 28, 1999 20,369,986 2,037 52,429 142,336
Net earnings 18,297
Exchange rate changes
Change in pension liability
adjustment
Market revaluation
Stock options exercised 1,686
Cash dividends ($.21 per share)
(3,325)
Comprehensive income
Balance, February 27, 2000 20,369,986 2,037 54,115 157,308
Net earnings 49,419
Exchange rate changes
Change in pension liability
adjustment
Market revaluation
Conversion of long-term debt 1,810
Stock options exercised 1,393
Purchase of treasury stock
Cash dividends ($.23 per share)
(3,577)
Comprehensive income
Balance, February 25, 2001 20,369,986 $2,037 $57,318 $203,150
See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share amounts)
Accumulated
Other Non- Comprehen-
Owner Treasury Stock sive
Changes Shares Amount Income
Balance, March 1, 1998 $(1,266) 3,271,871 $(17,113)
Net earnings $15,376
Exchange rate changes 98 98
Change in pension liability
adjustment (634) (634)
Stock options exercised (39,120) 211
Cash dividends ($.21 per share)
Purchase of treasury stock 1,654,818 (13,452)
Comprehensive income $14,840
Balance, February 28, 1999 (1,802) 4,887,569 (30,354)
Net earnings $18,297
Exchange rate changes (3,407) (3,407)
Change in pension liability
adjustment 149 149
Market revaluation (231) (231)
Stock options exercised (215,339) 1,303
Cash dividends ($.21 per share)
Comprehensive income $14,808
Balance, February 27, 2000 (5,291) 4,672,230 (29,051)
Net earnings $49,419
Exchange rate changes (2,255) (2,255)
Change in pension liability
adjustment 1,481 1,481
Market revaluation 301 301
Conversion of long-term debt (82,750) 519
Stock options exercised (156,666) 978
Purchase of treasury stock 8,545 (281)
Cash dividends ($.23 per share)
Comprehensive income $48,946
Balance, February 25, 2001 $(5,764) 4,441,359 $(27,835)
See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
52 Weeks Ended
February 25, February 27, February 28,
2001 2000 1999
Cash flows from operating
activities:
Net earnings $ 49,419 $ 18,297 $ 15,376
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 16,724 16,264 14,291
Provision for plumbing business
closure costs - 3,230 -
Provision for write-down of fixed
assets 1,146 1,234 -
Provision for doubtful accounts
receivable 228 725 237
Provision for deferred income
taxes 2,781 600 828
Other, net (1,026) 107 (165)
Changes in operating assets and
liabilities:
Accounts receivable (4,324) (13,722) (3,624)
Inventories (5,410) (2,831) 1,298
Prepaid expenses and other current
assets (3,404) 292 333
Other assets (476) 1,281 579
Accounts payable 5,004 (5,140) (6,481)
Accrued liabilities 10,599 3,922 (1,627)
Income taxes payable 6,141 (2,777) 1,137
Net cash provided by operating
activities 77,402 21,482 22,182
Cash flows from investing
activities:
Purchases of property, plant and (55,011) (27,846) (24,760)
equipment
Proceeds from sales of property,
plant and equipment 3,250 117 385
Purchases of marketable securities (70,144) (127,677) (129,693)
Proceeds from sales and maturities
of marketable securities 117,245 152,388 140,031
Net cash used in investing (4,660) (3,018) (14,037)
activities
Cash flows from financing activities:
Dividends paid (3,577) (3,325) (3,475)
Proceeds from exercise of stock
options 1,722 2,478 232
Purchase of treasury stock - - (13,452)
Net cash used in financing
activities (1,855) (847) (16,695)
Increase (decrease) in cash and cash
equivalents before effect of
exchange rate changes 70,887 17,617 (8,550)
Effect of exchange rate changes on
cash and cash equivalents (314) (1,146) 130
Increase (decrease) in cash and cash
equivalents 70,573 16,471 (8,420)
Cash and cash equivalents, beginning 53,153 36,682 45,102
of year
Cash and cash equivalents, end of
year $123,726 $ 53,153 $ 36,682
See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended February 25, 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Park Electrochemical Corp. ("Park"), through its subsidiaries
(collectively, the "Company"), is a leading global designer and producer of
advanced electronic materials used to fabricate complex multilayer printed
circuit boards and other electronic interconnection systems. The Company's
multilayer printed circuit board materials include copper-clad laminates and
prepregs. Multilayer printed circuit boards and interconnection systems are
used in virtually all advanced electronic equipment to direct, sequence and
control electronic signals between semiconductor devices and passive
components. The Company also designs and manufactures specialty adhesive tapes
and advanced composite materials for the electronics, aerospace and industrial
markets. During the 2001 fiscal year, the Company closed and liquidated its
plumbing hardware business.
a. Principles of Consolidation - The consolidated financial statements
include the accounts of Park and its subsidiaries. All significant
intercompany balances and transactions have been eliminated.
b. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results may differ from those estimates.
c. Accounting Period - The Company's fiscal year is the 52 or 53 week
period ending the Sunday nearest to the last day of February. The
2001, 2000 and 1999 fiscal years ended on February 25, 2001,
February 27, 2000 and February 28, 1999, respectively. Fiscal 2001,
2000 and 1999 each consisted of 52 weeks.
d. Marketable Securities - All marketable securities are classified as
available-for-sale and are carried at fair value, with the
unrealized gains and losses, net of tax, included in comprehensive
income. Realized gains and losses, amortization of premiums and
discounts, and interest and dividend income are included in other
income. The cost of securities sold is based on the specific
identification method.
e. Inventories - Inventories are stated at the lower of cost (first-in,
first-out method) or market.
f. Revenue Recognition - Revenues are recognized at the time product is
shipped to the customer.
g. Shipping Costs - The amounts paid to third-party shippers for
transporting products to customers is classified as a selling expense. The
amounts included in selling, general and administrative expenses were
approximately $6,485,000, $6,483,000 and $6,704,000 for fiscal years 2001,
2000 and 1999, respectively.
h. Depreciation and Amortization - Depreciation and amortization are
computed principally by the straight-line method over the estimated
useful lives of the related assets or, with respect to leasehold
improvements, the term of the lease, if shorter.
i. Deferred Charges - Costs incurred in connection with the issuance of
debt are deferred and included in other assets and amortized, using
the effective interest method, over the debt repayment period.
j. Income Taxes - Deferred income taxes are provided for temporary
differences in the reporting of certain items, primarily
depreciation, for income tax purposes as compared with financial
accounting purposes.
United States ("U.S.") Federal income taxes have not been provided
on the undistributed earnings (approximately $86,400,000 at February
25, 2001) of the Company's foreign subsidiaries, because it is
management's practice and intent to reinvest such earnings in the
operations of such subsidiaries.
k. Foreign Currency Translation - Assets and liabilities of foreign
subsidiaries using currencies other than the U.S. dollar as their
functional currency are translated into U.S. dollars at fiscal year-
end exchange rates, and income and expense items are translated at
average exchange rates for the period. Gains and losses resulting
from translation are recorded as currency translation adjustments in
comprehensive income.
l. Consolidated Statements of Cash Flows - The Company considers all
money market securities and investments with maturities at the date
of purchase of 90 days or less to be cash equivalents.
Supplemental cash flow information:
Fiscal Year
2001 2000 1999
Cash paid during the
year for:
Interest $ 5,593,000 $5,524,000 $5,500,000
Income taxes 12,281,000 7,976,000 2,159,000
m. Financial Instruments - In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No. 133 (SFAS 133), "Accounting for Derivative Instruments and
Hedging Activities". SFAS 133 establishes standards for the
recognition and measurement of derivatives and hedging activities
and requires all derivative instruments to be recorded on the
balance sheet at fair value. This statement is effective for fiscal
years beginning after June 15, 2000. The Company's policy is to
enter into forward foreign currency contracts only to hedge specific
transactions in order to reduce exposure to foreign exchange risks.
The Company believes the adoption of these standards will not have a
material effect on the Company's consolidated results of operations
or financial position.
2. MARKETABLE SECURITIES
The following is a summary of available-for-sale securities:
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
February 25, 2001:
U.S. Treasury and
other government $ 1,007,000 $ 11,000 $ - $ 1,018,000
securities
U.S. corporate debt
securities 30,800,000 231,000 102,000 30,929,000
Total debt 31,807,000 242,000 102,000 31,947,000
securities
Equity securities 5,000 65,000 - 70,000
$ 31,812,000 $307,000 $102,000 $ 32,017,000
February 27, 2000:
U.S. Treasury and
other government $ 17,491,000 $ - $ 42,000 $ 17,449,000
securities
U.S. corporate debt
securities 61,070,000 3,000 259,000 60,814,000
Total debt 78,561,000 3,000 301,000 78,263,000
securities
Equity securities 5,000 41,000 - 46,000
$ 78,566,000 $ 44,000 $301,000 $ 78,309,000
The gross realized gains on sales of available-for-sale securities
totaled $26,000, $9,000 and $39,000 for fiscal 2001, 2000 and 1999,
respectively, and the gross realized losses totaled $0, $11,000 and
$9,000 for fiscal 2001, 2000 and 1999, respectively.
The amortized cost and estimated fair value of the debt and marketable
equity securities at February 25, 2001, by contractual maturity, are
shown below:
Estimated
Cost Fair
Value
Due in one year or less $26,069,000 $26,197,000
Due after one year through
five years 5,738,000 5,750,000
31,807,000 31,947,000
Equity securities 5,000 70,000
$31,812,000 $32,017,000
3. INVENTORIES
February 25, February 27,
2001 2000
Raw materials $14,988,000 $10,870,000
Work-in-process 5,075,000 5,249,000
Finished goods 11,319,000 10,323,000
Manufacturing supplies 925,000 926,000
$32,307,000 $27,368,000
4. PROPERTY, PLANT AND EQUIPMENT
February 25, February 27,
2001 2000
Land, buildings and improvements $ 48,501,000 $ 44,606,000
Machinery, equipment, furniture and
fixtures 233,078,000 190,656,000
281,579,000 235,262,000
Less accumulated depreciation and
amortization 122,270,000 109,285,000
$159,309,000 $125,977,000
Depreciation and amortization expense relating to property, plant and
equipment amounted to $16,724,000, $16,200,000 and $14,255,000 for fiscal
2001, 2000 and 1999, respectively. Pretax charges of $1,146,000 and
$1,234,000 were recorded in fiscal 2001 and fiscal 2000, respectively,
for the write-down of operating equipment that will no longer be
utilized, to its estimated net realizable value. Interest expense
capitalized to property, plant and equipment amounts to $239,000, $93,000
and $395,000 for fiscal 2001, 2000 and 1999, respectively.
5. ACCRUED LIABILITIES
February 25, February 27,
2001 2000
Payroll and payroll related $12,067,000 $ 8,991,000
Taxes, other than income
taxes 1,139,000 1,884,000
Interest 2,700,000 2,750,000
Employee benefits 7,275,000 3,437,000
Environmental reserve 4,431,000 4,400,000
Other 11,440,000 7,511,000
$39,052,000 $28,973,000
6. LONG-TERM DEBT
On February 28, 1996, the Company issued $100,000,000 principal amount of
5.5% Convertible Subordinated Notes due 2006 (the "Notes") with interest
payable semiannually on March 1 and September 1 of each year, commencing
September 1, 1996. The Notes were unsecured and subordinated to other
long-term debt and were convertible at the option of the holder at any
time prior to maturity, unless previously redeemed or repurchased, into
shares of the Company's common stock at $28.125 per share, subject to
adjustment under certain conditions. The Notes were not redeemable at the
option of the Company prior to March 1, 1999; at any time on or after
such date, the Notes were redeemable at the option of the Company, in
whole or in part, initially at 102.75% of the principal amount of such
Notes redeemed and thereafter at prices declining to 100% on March 1,
2001, together with accrued interest. Prior to February 25, 2001,
$2,328,000 principal amount of the Notes were converted into 82,750
shares of the Company's common stock. At February 25, 2001 and February
27, 2000, the fair value of the Notes approximated $109,220,000 and
$84,750,000, respectively.
On March 1, 2001, subsequent to the Company's 2001 fiscal year end,
$95,934,000 principal amount of Notes were converted into 3,410,908
shares of the Company's common stock, and the remaining $1,738,000
principal amount of Notes were redeemed by the Company for cash. The
accompanying proforma balance sheet is adjusted as of February 25, 2001
to reflect the changes in long-term debt other assets and stockholders'
equity as a result of the aforementioned transactions.
Foreign lines of credit totaled $4,100,000 at February 25, 2001, all of
which remains available to the Company's foreign subsidiaries.
7. INCOME TAXES
The income tax provision includes the following:
Fiscal Year
2001 2000 1999
Current:
Federal $ 8,367,000 $2,445,000 $ 724,000
State and local 1,509,000 339,000 608,000
Foreign 8,523,000 2,587,000 2,177,000
18,399,000 5,371,000 3,509,000
Deferred:
Federal 1,722,000 (869,000) 31,000
State and local 259,000 (46,000) 62,000
Foreign 800,000 1,629,000 735,000
2,781,000 714,000 828,000
$21,180,000 $6,085,000 $4,337,000
The Company's effective income tax rate differs from the statutory
U.S. Federal income tax rate as a result of the following:
Fiscal Year
2001 2000 1999
Statutory U.S. Federal tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
Federal benefit 1.6 0.8 2.0
Foreign tax rate differentials (8.3) (9.3) (13.7)
Reversal of reserves no longer
required - (3.1) (3.5)
Other, net 1.7 1.6 2.2
30.0% 25.0% 22.0%
The Company had foreign net operating loss carryforwards of approximately
$31,600,000 and $39,500,000 in fiscal 2001 and 2000, respectively. Most
of the net operating loss carryforwards were acquired in fiscal 1998 when
the Company purchased the capital stock of Dielektra GmbH ("Dielektra"),
a German corporation located in Cologne, Germany. Long-term deferred tax
assets arising from these net operating loss carryforwards were valued at
$0 at both February 25, 2001 and February 27, 2000, net of valuation
reserves of approximately $11,400,000 and $19,500,000, respectively. None
of the acquired net operating loss carryforwards relate to goodwill or
other intangible assets.
Approximately $1,100,000 of the foreign net operating loss carryforwards
expire in varying amounts from fiscal 2002 through fiscal 2006, and the
remainder have an indefinite expiration.
At February 25, 2001 and February 27, 2000, current deferred tax
assets of $1,844,000 and $3,879,000, respectively, which were
primarily attributable to expenses not currently deductible, were
included in other current assets. The long-term deferred tax liabilities
consisted primarily of timing differences relating to depreciation.
8. STOCKHOLDERS' EQUITY
a. Stock Split and Number of Authorized Shares - On October 10, 2000, the
Company's Board of Directors approved a three-for-two stock split in the
form of a stock dividend. The stock dividend was distributed November 8,
2000 to stockholders of record on October 20, 2000. All share and per
share data for prior periods has been retroactively restated to reflect
the stock split. In addition, on October 10, 2000, the Company's
stockholders approved an increase in the number of authorized shares
of common stock from 30,000,000 to 60,000,000 shares.
b. Stock Options - Under the 1992 Stock Option Plan (the "Plan") approved by
the Company's stockholders, directors and key employees may be granted
options to purchase shares of common stock of the Company exercisable at
prices not less than the fair market value at the date of grant. Options
become exercisable 25% one year from the date of grant, with an additional
25% exercisable each succeeding anniversary of the date of grant.
On July 12, 2000, the Company's stockholders approved an amendment to the
Plan to increase the aggregate number of shares of Common Stock authorized
for issuance under the Plan by 450,000 shares. Options to purchase a total
of 2,625,000 shares of common stock are authorized for grant under such
Plan. The Plan will expire in March 2002.
The Company has elected the disclosure provision of Statement of
Financial Standards No. 123, "Accounting for Stock-Based
Compensation", and continues to apply Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25),
and related interpretations in accounting for the Plan. Under APB 25,
because the exercise price of the granted options is not less than the
market price at the date of the grant, no compensation expense is
recognized.
The weighted averaged fair value for options was estimated at the date
of grant using the Black-Scholes option-pricing model to be $8.40 for
fiscal 2001, $5.77 for fiscal 2000 and $4.92 for fiscal 1999, with the
following weighted average assumptions: risk free interest rate of
5.0% for fiscal 2001 and 5.5% for fiscal 2000 and 1999; expected
volatility factors of 39%, 40% and 41% for fiscal 2001, 2000 and 1999,
respectively; expected dividend yield of 1.5% for fiscal 2001 and 2%
for fiscal 2000 and 1999; and estimated option lives of 4.0 years for
fiscal 2001, 3.6 years for fiscal 2000 and 4.1 years for fiscal 1999.
For the purpose of pro forma disclosures, the effect of applying SFAS
123 on net income and earnings per share for fiscal 2001, 2000 and
1999 would approximate the amounts shown below (in thousands, except
EPS data):
2001 2000 1999
As Pro As Pro As Pro
Reported forma Reported forma Reported forma
Net income $49,419 $47,935 $18,297 $17,303 $15,376 $14,692
EPS-basic $ 3.10 $ 3.01 $ 1.16 $ 1.10 $ .93 $ .89
EPS-diluted $ 2.65 $ 2.58 $ 1.12 $ 1.07 $ .92 $ .89
Information with respect to the Plan follows:
Weighted
Average
Range of Outstanding Exercise
Exercise Prices Options Price
Balance, March 1, 1998 $ 3.67 -$18.42 937,088 $11.62
Granted 12.59 - 15.83 269,400 15.56
Exercised 3.67 - 16.42 (39,120) 5.93
Cancelled 8.75 - 16.42 (26,130) 14.87
Balance, February 28, 1999 $ 3.67 -$18.42 1,141,238 $12.67
Granted 16.37 - 23.96 346,350 16.71
Exercised 3.67 - 16.42 (217,589) 11.61
Cancelled 8.75 - 16.54 (54,205) 15.91
Balance, February 27, 2000 $ 3.67 -$23.96 1,215,794 $13.87
Granted 15.92 - 43.63 360,075 23.71
Exercised 3.67 - 18.42 (156,667) 12.79
Cancelled 4.54 - 16.54 (61,050) 16.16
Balance, February 25,2001 $ 3.67 -$43.63 1,358,152 $16.50
Exercisable, February 25, $ 3.67 -$23.96 611,174 $10.68
2001
The following table summarizes information concerning currently
outstanding and exercisable options.
Options Outstanding Options Exercisable
Weighted
Average
Remaining Weighted Weighted
Contractual Average Number Average
Range of Number of Life Exercise Exercis- Exercise
Exercise Prices Outstanding (Years) Price able Price
$ 3.67 -$ 9.99 210,450 2.27 $ 6.17 210,450 $ 6.17
10.00 - 19.99 1,008,202 6.66 15.89 398,474 15.54
20.00 - 43.63 139,500 9.54 36.43 2,250 23.96
1,358,152 611,174
Stock options available for future grant under the Plan at February 25,
2001 and February 27, 2000 were 737,096 and 586,421, respectively.
c. Stockholders' Rights Plan - On February 2, 1989, the Company
adopted a stockholders' rights plan designed to protect stockholder
interests in the event the Company is confronted with coercive or
unfair takeover tactics. Under the terms of the plan, as amended on
July 12, 1995, each share of the Company's common stock held of
record on February 15, 1989 or issued thereafter received one
right. In the event that a person has acquired, or has the right to
acquire, 15% (25% in certain cases) or more of the then outstanding
common stock of the Company (an "Acquiring Person") or tenders for
15% or more of the then outstanding common stock of the Company,
such rights will become exercisable, unless the Board of Directors
otherwise determines. Upon becoming exercisable as aforesaid, each
right will entitle the holder thereof to purchase one one-hundredth
of a share of Series A Preferred Stock for $75, subject to
adjustment (the "Purchase Price"). In the event that any person
becomes an Acquiring Person, each holder of an unexercised
exercisable right, other than an Acquiring Person, shall have the
right to purchase, at a price equal to the then current Purchase
Price, such number of shares of the Company's common stock as shall
equal the then current Purchase Price divided by 50% of the then
market price per share of the Company's common stock. In addition,
if after a person becomes an Acquiring Person, the Company engages
in any of certain business combination transactions as specified in
the plan, the Company will take all action to ensure that, and will
not consummate any such business combination unless, each holder of
an unexercised exercisable right, other than an Acquiring Person,
shall have the right to purchase, at a price equal to the then
current Purchase Price, such number of shares of common stock of
the other party to the transaction for each right held by such
holder as shall equal the then current Purchase Price divided by
50% of the then market price per share of such other party's common
stock. The Company may redeem the rights for a nominal
consideration at any time, and after any person becomes an
Acquiring Person, but before any person becomes the beneficial
owner of 50% or more of the outstanding common stock of the
Company, the Company may exchange all or part of the rights for
shares of the Company's common stock at a one-for-one exchange
ratio. Unless redeemed, exchanged or exercised earlier, all rights
expire on July 12, 2005.
d. Reserved Common Shares - At February 25, 2001, 3,472,763 shares of
common stock were reserved for issuance upon conversion of the
Notes and 2,095,248 shares were reserved for issuance upon exercise
of stock options.
e. Accumulated Other Non-Owner Changes - Accumulated balances related
to each component of other comprehensive income (loss) were as
follows:
February 25, February 27,
2001 2000
Currency translation $(5,855) $(3,600)
adjustment
Pension liability (43) (1,524)
adjustment
Unrealized gains/(losses)
on investments 134 (167)
Accumulated balance $(5,764) $(5,291)
9. EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted
earnings per share for the fiscal years:
2001 2000 1999
Net income for basic EPS $49,419,000 $18,297,000 $15,376,000
Add interest on 5.5%
Convertible Subordinated
Notes, net of taxes 3,585,000 3,702,000 -
Net income for diluted EPS $53,004,000 $21,999,000 $15,376,000
Weighted average common
shares outstanding for 15,932,000 15,761,000 16,470,000
basic EPS
Net effect of dilutive
options 548,000 327,000 237,000
Assumed conversion of 5.5%
Convertible Subordinated
Notes 3,522,000 3,555,000 -
Weighted average shares
outstanding for diluted
EPS 20,002,000 19,643,000 16,707,000
EPS-basic $3.10 $1.16 $ .93
EPS-diluted $2.65 $1.12 $ .92
During the first half of the 2001 fiscal year, the Company closed and
liquidated its plumbing hardware business. The net income shown above
includes losses of $25,000 and $5,022,000 for the 2001 and 2000 fiscal
years, respectively, and profits of $476,000 for the 1999 fiscal year for
the discontinued plumbing hardware business. The weighted average number of
shares outstanding and the earnings per share for each year have been
adjusted to give retroactive effect to the three-for-two split of the
Company's common stock declared October 10, 2000 payable November 8, 2000
to stockholders of record on October 20, 2000.
10. EMPLOYEE BENEFIT PLANS
a. Profit Sharing Plan - Park and certain of its subsidiaries have a non-
contributory profit sharing retirement plan covering their regular
full-time employees. The plan may be modified or terminated at any time,
but in no event may any portion of the contributions revert back to
the Company. The Company's contributions under the plan amounted to
$4,597,000, $2,269,000 and $1,641,000 for fiscal 2001, 2000 and 1999,
respectively. Contributions are discretionary and may not exceed the
amount allowable as a tax deduction under the Internal Revenue Code.
In addition, the Company sponsors a 401(k) savings plan, pursuant to
which the contributions of employees of certain subsidiaries were
partially matched by the Company in the amounts of $751,000, $848,000
and $789,000 in fiscal 2001, 2000 and 1999, respectively.
b. Pension Plans - The domestic subsidiary of the Company which conducted
the plumbing hardware business had two pension plans, neither of which
are active, covering its union employees. On February 27, 2000, the two
plans were merged in order to simplify the administration of the plans.
The Company's funding policy is to contribute annually the amounts
necessary to satisfy applicable funding standards. There were no changes
made to funding levels or retiree benefits as a result of the merger of
the two plans. In connection with the closure of the plumbing hardware
business, the Company terminated the plan and purchased annuity contracts
to fund the pension liability. A foreign subsidiary of the Company has a
non-contributory defined benefit plan which covers certain employees.
Under the terms of the plan, participants may not accrue additional
service time after December 31, 1987. The Company's policy with respect
to this plan is to contribute annually the amounts necessary to meet
current payment obligations of the plan.
The Company records its deferred pension liability related to its two
defined benefit pension plans in accordance with SFAS 87 which amounted
to $8,451,000 and $9,773,000 at February 25, 2001 and February 27, 2000,
respectively. The effect on the Company's consolidated financial
statements in recording the liability was to record a corresponding
reduction to accumulated non-owner changes of $43,000 and $1,524,000 at
those same dates.
Net pension costs include the following components:
Fiscal Year
Changes in Benefit Obligation 2001 2000
Benefit obligation at beginning $14,130,000 $ 14,601,000
of year
Service cost 96,000 97,000
Interest cost 839,000 953,000
Actuarial loss 148,000 513,000
Currency translation (gain)/loss (633,000) (1,189,000)
Benefits paid (871,000) (845,000)
Payment for annuities (4,301,000) -
Benefit obligation at end of $ 9,408,000 $ 14,130,000
year
Changes in Plan Assets
Fair value of plan assets at
beginning of year $ 3,213,000 $ 3,261,000
Actual return on plan assets 169,000 (38,000)
Employer contributions 1,831,000 835,000
Benefits paid (871,000) (845,000)
Payment for annuities (4,301,000) -
Administrative expenses paid (41,000) -
Fair value of plan assets $ - $ 3,213,000
Underfunded status $(9,408,000) $(10,917,000)
Unrecognized net transition
obligation - (1,000)
Unrecognized net loss 1,000,000 2,669,000
Net accrued pension cost $(8,408,000) $ (8,249,000)
Fiscal Year
Components of Net Periodic Benefit 2001 2000 1999
Cost
Service cost - benefits earned
during the period $ 96,000 $ 97,000 $ 131,000
Interest cost on projected benefit 839,000 953,000 949,000
obligation
Expected return on plan assets (252,000) (262,000) (250,000)
Amortization of unrecognized
transition obligation - 17,000 29,000
Amortization of prior service cost - 14,000 24,000
Recognized net actuarial loss 38,000 58,000 53,000
Effect of curtailment 1,761,000 144,000 -
Net periodic pension cost $2,482,000 $1,021,000 $ 936,000
The projected benefit obligation for the domestic plan was determined
using an assumed discount rate of 7.50% for fiscal 2000 and the assumed
long-term rate of return on plan assets was 8%. Projected wage increases
are not applicable as benefits pursuant to the plan are based upon years
of service without regard to levels of compensation.
The projected benefit obligation for the foreign plan was determined
using an assumed discount rate of 6% for fiscal years 2001 and 2000.
Projected wage increases of 2.1% and 3% and inflation factors of 1.5% and
2% were also assumed for fiscal years 2001 and 2000, respectively. As
previously stated, the Company's funding policy with respect to this plan
is to contribute annually the amounts necessary to meet current payment
obligations of the plan.
11. COMMITMENTS AND CONTINGENCIES
a. Lease Commitments - The Company conducts certain of its operations in
leased facilities, which include several manufacturing plants, warehouses
and offices, and land leases. The leases on facilities are for terms of
up to 10 years, the latest of which expires in 2008. Many of the leases
contain renewal options for periods ranging from one to ten years and
require the Company to pay real estate taxes and other operating costs.
The latest land lease expiration is 2013 and this land lease contains
renewal options of up to 35 years.
These non-cancelable operating leases have the following payment
schedule.
Fiscal Amount
Year
2002 $ 2,452,000
2003 1,640,000
2004 962,000
2005 477,000
2006 342,000
Thereafter 700,000
$6,573,000
Rental expense, inclusive of real estate taxes and other costs, amounted
to $3,710,542, $3,424,000 and $2,861,000 for fiscal 2001, 2000 and 1999,
respectively
b. Environmental Contingencies - The Company and certain of its subsidiaries
have been named by the Environmental Protection Agency (the "EPA") or a
comparable state agency under the Comprehensive Environmental Response,
Compensation and Liability Act (the "Superfund Act") or similar state law
as potentially responsible parties in connection with alleged releases of
hazardous substances at nine sites. In addition, a subsidiary of the
Company has received cost recovery claims under the Superfund Act from
other private parties involving two other sites, and has received
requests from the EPA under the Superfund Act for information with
respect to its involvement at three other sites.
Under the Superfund Act and similar state laws, all parties who may have
contributed any waste to a hazardous waste disposal site or contaminated
area identified by the EPA or comparable state agency may be jointly and
severally liable for the cost of cleanup. Generally, these sites are
locations at which numerous persons disposed of hazardous waste. In the
case of the Company's subsidiaries, generally the waste was removed from
their manufacturing facilities and disposed at waste sites by various
companies which contracted with the subsidiaries to provide waste
disposal services. Neither the Company nor any of its subsidiaries have
been accused of or charged with any wrongdoing or illegal acts in
connection with any such sites. The Company believes it maintains an
effective and comprehensive environmental compliance program.
The insurance carriers that provided general liability insurance coverage
to the Company and its subsidiaries for the years during which the
Company's subsidiaries' waste was disposed at these sites have agreed to
pay, or reimburse the Company and its subsidiaries for, 100% of their
legal defense and remediation costs associated with three of these sites
and 25% of such costs associated with another three of these sites.
The total costs incurred by the Company and its subsidiaries in
connection with these sites, including legal fees incurred by the Company
and its subsidiaries and their assessed share of remediation costs and
excluding amounts paid or reimbursed by insurance carriers, were
approximately $300,000, $200,000 and $200,000 in fiscal 2001, 2000 and
1999, respectively. The recorded liabilities included in accrued
liabilities for environmental matters were $4,431,000 at February 25,
2001, $4,350,000 at February 27, 2000 and $3,500,000 at February 28,
1999.
Included in cost of sales are charges for actual expenditures and
accruals, based on estimates, for certain environmental matters described
above. The Company accrues estimated costs associated with known
environmental matters, when such costs can be reasonably estimated and
when the outcome appears probable. Management believes the ultimate
disposition of known environmental matters will not have a material
adverse effect on the liquidity, capital resources, business or
consolidated financial position of the Company. However, one or more of
such environmental matters could have a significant negative impact on
the Company's consolidated financial results for a particular reporting
period.
12. BUSINESS SEGMENTS
The Company's specialty adhesive tape and film business, advanced
composite 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 (See Note 14). In fiscal 2001, 2000 and 1999, the
specialty adhesive tape, advanced composite and plumbing hardware
businesses comprised less than 10% of the Company's consolidated revenues
and assets, and the Company considered itself to operate in one business
segment. The Company's electronic materials products are marketed
primarily to major independent printed circuit board fabricators,
contract manufacturers and, to a lesser extent, large electronic original
equipment manufacturers ("OEMs") located throughout North America, Europe
and Asia. The Company's specialty adhesive tape and advanced composite
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. Intersegment sales and
sales between geographic areas were not significant.
Financial information regarding the Company's operations by geographic
area follows (in thousands):
Fiscal Year
2001 2000 1999
United States $312,851 $266,158 $235,699
Europe 121,329 95,812 90,112
Asia 88,017 63,291 61,823
Total sales $522,197 $425,261 $387,634
United States $108,804 $ 74,846 $ 65,231
Europe 24,657 27,484 30,948
Asia 26,596 24,092 22,814
Total long-lived assets $160,057 $126,422 $118,993
13. CUSTOMER AND SUPPLIER CONCENTRATIONS
a. Customers - Sales to Sanmina Corporation were 25.1% and 23.4% of the
Company's total worldwide sales for fiscal years 2001 and 2000,
respectively. The fiscal year 2000 percentage has been adjusted to
reflect the combined sales to Sanmina Corporation and Hadco
Corporation, which merged into Sanmina Corporation in June 2000.
While no other customer accounted for 10% or more of the total sales
of the Company in fiscal 2001, and the Company is not dependent on
any single customer, the loss of a major electronic materials customer
or of a group of customers could have a material adverse effect on the
Company's business.
b. Sources of Supply - The principal materials used in the manufacture of
the Company's electronic materials products are specially manufactured
copper foil, fiberglass cloth and synthetic reinforcements, and specially
formulated resins and chemicals. Although there are a limited number of
qualified suppliers of these materials, the Company has nevertheless
identified alternate sources of supply for each of the aforementioned
materials. While the Company has not experienced significant problems in
the delivery of these materials and considers its relationships with its
suppliers to be strong, a disruption of the supply of material from a
principal supplier could adversely affect the Company's electronic
materials business. Furthermore, substitutes for the aforesaid materials
are not readily available and an inability to obtain essential materials,
if prolonged, could materially adversely affect the Company's electronic
materials business.
14. CLOSURE OF THE PLUMBING HARDWARE BUSINESS
In the fourth quarter of the 2000 fiscal year, the Company decided to
close and liquidate its plumbing hardware business. The pre-tax charges to
earnings for the 2000 fiscal year related to the closure of the plumbing
hardware business totaled $4,464,000, including $1,234,000 for the
impairment of long-lived assets, $1,111,000 for other asset write-offs,
and $2,119,000 for facility and other costs related to the closure.
During the 2001 fiscal year, the Company closed and liquidated its
plumbing hardware business. In the fourth quarter of the 2001 fiscal year,
the Company realized $1,262,000 in gains from the sale of real estate and
other plumbing hardware business assets, collected $290,000 more of
accounts receivable than originally anticipated, and reversed $600,000 of
liabilities accrued in fiscal year 2000 for other costs to close the
business, which were no longer required. At February 25, 2001, there are
$875,000 of accrued liabilities remaining related to the closure of the
plumbing hardware business. In the fourth quarter of the 2001 fiscal year,
an expense of $1,149,000 was incurred for the purchase of annuity
contracts to fund the liability of the pension plan that was terminated.
The operating results of the plumbing hardware business included in the
Consolidated Statement of Earnings are as follows (in thousands):
52 Weeks Ended
February 25, February 27, February 28,
2001 2000 1999
Net sales $1,883 $13,491 $18,197
Cost of sales 1,001 11,486 15,080
Gross profit 882 2,005 3,117
Selling, general and 907 2,563 2,641
administrative
expenses
(Loss) profit from $ (25) $ (558) $ 476
operations
15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter
First Second Third Fourth
(In thousands, except per share
amounts)
Fiscal 2001:
Net sales $120,159 $129,902 $142,608 $129,528
Gross profit 23,695 28,393 34,116 31,466
Net earnings 8,829 11,655 14,827 14,108
Earnings per share:
Basic $.56 $.73 $.93 $.88
Diluted $.50 $.63 $.78 $.74
Weighted average common
shares outstanding:
Basic 15,858 15,882 15,940 16,047
Diluted 19,602 19,939 20,217 20,249
Fiscal 2000:
Net sales $104,454 $107,729 $108,183 $104,895
Gross profit 19,030 19,418 18,704 16,268
Net earnings 5,698 6,047 5,790 762
Earnings per share:
Basic $.37 $.39 $.37 $.05
Diluted $.34 $.35 $.34 $.05
Weighted average common
shares outstanding:
Basic 15,645 15,734 15,819 15,848
Diluted 19,458 19,644 19,832 16,085
During the fourth quarter of the 2000 fiscal year, the Company decided to
close and liquidate its plumbing hardware business. The pre-tax charges
to earnings for the fourth quarter of the 2000 fiscal year related to the
discontinued plumbing hardware business totaled $5,022,000, including
$1,234,000 related to the impairment of long-lived assets, $1,111,000 for
other asset write-offs, $2,119,000 for other facility and costs related
to the plumbing hardware business closure, and $520,000 of operating
losses. Without the plumbing hardware business charges and operating loss
in the fourth quarter of the 2000 fiscal year, the net earnings for the
quarter would have been $4,002,000 and the basic and diluted earnings per
share for the quarter would have increased by $.21 and $.20,
respectively.
Earnings per share is computed separately for each quarter. Therefore,
the sum of such quarterly per share amounts may differ from the total for
the years. The weighted average number of shares outstanding and the
earnings per share for each period, have been adjusted to give
retroactive effect to the three-for-two split of the Company's common
atock declared October 10, 2000 payable November 8, 2000 to stockholders
of record on October 20, 2000.
16. SUBSEQUENT EVENTS
On March 1, 2001, $95,934,000 principal amount of the Company's 5.5%
Convertible Subordinated Notes due March 1, 2006 were converted into
3,410,908 shares of the Company's common stock, and the remaining
$1,738,000 principal amount of the Notes were redeemed by the Company on
March 2, 2001 for cash.
On April 27, 2001, the Company sold the assets and business of its wholly
owned subsidiary, Nelco Technology, Inc. ("NTI"), to Dynamic Details
Incorporated, Arizona, a wholly owned subsidiary of DDi Corp. NTI was a
manufacturer of semi-finished printed circuit boards, commonly known as
mass lamination. The Company expects to record a charge of approximately
$15 million in its fiscal 2002 first quarter in connection with this sale
and the closure of a related support facility. For the fiscal year ended
February 25, 2001, NTI had net sales of approximately $39 million of mass
lamination products.
*******
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information called for by this item (except for information as to the
Company's executive officers, which information appears elsewhere in this
Report) is incorporated by reference to the Company's definitive proxy
statement for the 2001 Annual Meeting of Shareholders to be filed pursuant
to Regulation 14A.
Item 11. Executive Compensation.
The information called for by this Item is incorporated by reference to
the Company's definitive proxy statement for the 2001 Annual Meeting of
Shareholders to be filed pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for by this Item is incorporated by reference to
the Company's definitive proxy statement for the 2001 Annual Meeting of
Shareholders to be filed pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions.
The information called for by this Item is incorporated by reference to
the Company's definitive proxy statement for the 2001 Annual Meeting of
Shareholders to be filed pursuant to Regulation 14A.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Page
Reports on Form 8-K.
(a) Documents filed as a part of this Report
(1) Financial Statements:
The following Consolidated Financial
Statement of the Company are included in
Part II, Item 8:
Report of Ernst & Young LLP, independent
auditors
Balance Sheets
Statement of Earnings
Statement of Stockholders' Equity
Statement of Cash Flows
Notes to Consolidated Financial Statement
(1-16)
(2) Financial Statement Schedules:
The following additional information should
be read in conjunction with the
Consolidated Financial Statements of the
Registrant described in item 14(a)(1)
above:
Schedule II - Valuation and Qualifying
Accounts
All other schedules have been omitted
because they are not applicable or not
required, or the information is included
elsewhere in the financial statements or
notes thereto.
(3) Exhibits:
The information required by this Item relating to Exhibits
to this Report is included in the Exhibit Index on pages 54 to
59 hereof.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the fiscal
quarter ended February 25, 2001.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: May 23, 2001 PARK ELECTROCHEMICAL CORP.
By:/s/Brian E. Shore
Brian E. Shore,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/Brian E. Shore President and Chief
Brian E. Shore Executive Officer and
Director May 23, 2000
(principal executive
officer)
/s/Murray O. Stamer Senior Vice President,
Murray O. Stamer Finance
(principal financial and May 23, 2000
accounting officer)
/s/Jerry Shore Chairman of the Board and
Jerry Shore Director May 23, 2000
/s/Mark S. Ain
Mark S. Ain Director May 23, 2000
/s/Anthony Chiesa
Anthony Chiesa Director May 23, 2000
/s/Lloyd Frank
Lloyd Frank Director May 23, 2000
/s/Ronald F. Ostrow
Ronald F. Ostrow Director May 23, 2000
Schedule II
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C
Balance at Charged to
Beginning Cost and
Description of Period Expenses
ALLOWANCE FOR
DOUBTFUL ACCOUNTS:
52 weeks ended
February 25, 2001 $2,388,000 $ 228,000
52 weeks ended
February 27, 2000 $2,030,000 $ 725,000
52 weeks ended
February 28, 1999 $1,858,000 $ 238,000
Schedule II (continued)
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column D Column E
Other
Balance at
Accounts Translation End of
Written Adjustment Period
Off
(A)
$(477,000) $ (65,000) $2,074,000
$(332,000) $ (35,000) $2,388,000
$ $ (3,000) $2,030,000
(63,000)
(A) Uncollectable accounts, net of recoveries.
EXHIBIT INDEX
Exhibit
Numbers Description Page
3.01 Restated Certificate of Incorporation, dated March 28,
1989, filed with the Secretary of State of the State of
New York on April 10, 1989, as amended by Certificate
of Amendment of the Certificate of Incorporation,
increasing the number of authorized shares of Common
stock from 15,000,000 to 30,000,000 shares, dated July
12, 1995, filed with the Secretary of State of the
State of New York on July 17, 1995, and by Certificate
of Amendment of the Certificate of Incorporation,
amending certain provisions relating to the rights,
preferences and limitations of the shares of a series
of Preferred Stock, date August 7, 1995, filed with the
Secretary of State of the State of New York on August
16, 1995 (Reference is made to Exhibit 3.01 of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 27, 1995, Commission File No. 1-
4415, which is incorporated herein by reference.) -
3.02 By-Laws, as amended March 15, 1999. (Reference is made
to Exhibit 3(i) the Company's Current Report on Form 8-
K dated March 15, 1999, Commission File No. 1-4415,
which is incorporated herein by reference.) -
4.01 Amended and Restated Rights Agreement, dated as of July
12, 1995, between the Company and Registrar and
Transfer Company, as Rights Agent, relating to the
Company's Preferred Stock Purchase Rights. (Reference
is made to Exhibit 1 to Amendment No. 1 on Form 8-A/A
filed on August 10, 1995, Commission File No. 1-4415,
which is incorporated herein by reference.) -
10.01 Lease dated December 12, 1989 between Nelco Products,
Inc. and James Emmi regarding real property located at
1100 East Kimberly Avenue, Anaheim, California and
letter dated December 29, 1994 from Nelco Products,
Inc. to James Emmi exercising its option to extend such
Lease. (Reference is made to Exhibit 10.01 of the
Company's Annual Report on Form 10-K for the fiscal
year ended March 3, 1996, Commission File No. 1-4415,
which is incorporated herein by reference.) -
10.02 Lease dated December 12, 1989 between Nelco Products,
Inc. and James Emmi regarding real property located at
1107 East Kimberly Avenue, Anaheim, California and
letter dated December 29, 1994 from Nelco Products,
Inc. to James Emmi exercising its option to extend such
Lease. (Reference is made to Exhibit 10.02 of the
Company's Annual Report on Form 10-K for the fiscal
year ended March 3, 1996, Commission File No. 1-4415,
which is incorporated herein by reference.) -
10.03 Lease Agreement dated August 16, 1983 and Exhibit C,
First Addendum to Lease, between Nelco Products, Inc.
and TCLW/Fullerton regarding real property located at
1411 E. Orangethorpe Avenue, Fullerton, California.
(Reference is made to Exhibit 10.03 of the Company's
Annual Report on Form 10-K for the fiscal year ended
March 3, 1996, Commission File No. 1-4415, which is
incorporated herein by reference.) -
10.03(a) Second Addendum to Lease dated January 26, 1987 to
Lease Agreement dated August 16, 1983 (see Exhibit
10.03 hereto) between Nelco Products, Inc. and
TCLW/Fullerton regarding real property located at 1421
E. Orangethorpe Avenue, Fullerton, California.
(Reference is made to Exhibit 10.03(a) of the Company's
Annual Report on Form 10-K for the fiscal year ended
February 26, 1995, Commission File No. 1-4415, which is
incorporated herein by reference.) -
10.03(b) Third Addendum to Lease dated January 7, 1991 and
Fourth Addendum to Lease dated January 7, 1991 to Lease
Agreement dated August 16, 1983 (see Exhibit 10.03
hereto) between Nelco Products, Inc. and TCLW/Fullerton
regarding real property located at 1411, 1421 and 1431
E. Orangethorpe Avenue, Fullerton, California.
(Reference is made to Exhibit 10.03(b) of the Company's
Annual Report on Form 10-K for the fiscal year ended
March 2, 1997, Commission File No. 1-4415, which is
incorporated herein by reference.) -
10.03(c) Fifth Addendum to Lease dated July 5, 1995 to Lease
dated August 16, 1983 (see Exhibit 10.03 hereto)
between Nelco Products, Inc. and TCLW/Fullerton
regarding real property located at 1411 E. Orangethorpe
Avenue, Fullerton, California. (Reference is made to
Exhibit 10.03(c) of the Company's Annual Report on Form
10-K for the fiscal year ended March 3, 1996,
Commission File No. 1-4415, which is incorporated
herein by reference.) -
10.04 Lease Agreement dated May 26, 1982 between Nelco
Products Pte. Ltd. (lease was originally entered into
by Kiln Technique (Private) Limited, which subsequently
assigned this lease to Nelco Products Pte. Ltd.) and
the Jurong Town Corporation regarding real property
located at 4 Gul Crescent, Jurong, Singapore.
(Reference is made to Exhibit 10.05 of the Company's
Annual Report on Form 10-K for the fiscal year ended
February 28, 1993, Commission File No. 1-4415, which is
incorporated herein by reference.) -
10.04(a) Deed of Assignment, dated April 17, 1986 between Nelco
Products Pte. Ltd., Kiln Technique (Private) Limited
and Paul Ma, Richard Law, and Michael Ng, all of Peat
Marwick & Co., of the Lease Agreement dated May 26,
1982 (see Exhibit 10.04 hereto) between Kiln Technique
(Private) Limited and the Jurong Town Corporation
regarding real property located at 4 Gul Crescent,
Jurong, Singapore. (Reference is made to Exhibit
10.05(a) of the Company's Annual Report on Form 10-K
for the fiscal year ended February 28, 1993, Commission
File No. 1-4415, which is incorporated herein by
reference.) -
10.05(a) Amended and Restated 1982 Stock Option Plan of the
Company. (Reference is made to Exhibit 10.06(a) of the
Company's Annual Report on Form 10-K for the fiscal
year ended March 1, 1992, Commission File No. 1-4415,
which is incorporated herein by reference. This exhibit
is a management contract or compensatory plan or
arrangement.) -
10.05(b) 1992 Stock Option Plan of the Company, as amended by
First Amendment thereto. (Reference is made to Exhibit
10.06(b) of the Company's Annual Report on Form 10-K
for the fiscal year ended March 1, 1998, Commission
File No. 1-4415, which is incorporated herein by
reference. This exhibit is a management contract or
compensatory plan or arrangement.) -
10.06 Amended and Restated Employment Agreement dated
February 28, 1994 between the Company and Jerry Shore.
(Reference is made to Exhibit 10.07(c) of the Company's
Annual Report on Form 10-K for the fiscal year ended
February 27, 1994, Commission File No. 1-4415, which is
incorporated herein by reference. This exhibit is a
management contract or compensatory plan or
arrangement.) -
10.06(a) Amendment No. 1 dated March 1, 1995 to the Amended and
Restated Employment Agreement dated February 28, 1994
(see Exhibit 10.06 hereto) between the Company and
Jerry Shore. (Reference is made to Exhibit 10.07(c) of
the Company's Annual Report on Form 10-K for the fiscal
year ended February 26, 1995, Commission File No. 1-
4415, which exhibit is incorporated herein by
reference. This exhibit is a management contract or
compensatory plan or arrangement.) -
10.06(b) Amendment No. 2 dated December 5, 1996 to the Amended
and Restated Employment Agreement dated February 28,
1994 (see Exhibit 10.06 hereto) between the Company and
Jerry Shore. (Reference is made to Exhibit 10.07(b) of
the Company's Annual Report on Form 10-K for the fiscal
year ended March 2, 1997, Commission File No. 1-4415,
which is incorporated herein by reference. This exhibit
is a management contract or compensatory plan or
arrangement.) -
10.06(c) Amendment No. 3 dated October 14, 1997 to the Amended
and Restated Employment Agreement dated February 28,
1994 (see Exhibit 10.06 hereto) between the Company and
Jerry Shore. (Reference is made to Exhibit 10.07(c) of
the Company's Annual Report on Form 10-K for the fiscal
year ended March 1, 1998, Commission File No. 1-4415,
which is incorporated herein by reference. This exhibit
is a management contract or compensatory plan or
arrangement.) -
10.07 Lease dated April 15, 1988 between FiberCote
Industries, Inc. (lease was initially entered into by
USP Composites, Inc., which subsequently changed its
name to FiberCote Industries, Inc.) and Geoffrey
Etherington, II regarding real property located at 172
East Aurora Street, Waterbury, Connecticut. (Reference
is made to Exhibit 10.08 of the Company's Annual Report
on Form 10-K for the fiscal year ended February 26,
1995, Commission File No. 1-4415, which is incorporated
herein by reference.) -
10.07(a) Amendment to Lease dated December 21, 1992 to Lease
dated April 15, 1988 (see Exhibit 10.07 hereto) between
FiberCote Industries, Inc. and Geoffrey Etherington II
regarding real property located at 172 East Aurora
Street, Waterbury, Connecticut. (Reference is made to
Exhibit 10.08(a) of the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1993,
Commission File No. 1-4415, which is incorporated
herein by reference.) -
10.07(b) Letter dated June 30, 1997 from FiberCote Industries,
Inc. to Geoffrey Etherington II extending the Lease
dated April 15, 1988 (see Exhibit 10.07 hereto) between
FiberCote Industries, Inc. and Geoffrey Etherington II
regarding real property located at 172 East Aurora
Street, Waterbury Connecticut. (Reference is made to
Exhibit 10.08(b) of the Company's Annual Report on Form
10-K for the fiscal year ended March 1, 1998,
Commission File No. 1-4415, which is incorporated
herein by reference.) -
10.08 Lease dated August 31, 1989 between Nelco Technology,
Inc. and Cemanudi Associates regarding real property
located at 1104 West Geneva Drive, Tempe, Arizona.
(Reference is made to Exhibit 10.11 of the Company's
Annual Report on Form 10-K for the fiscal year ended
March 3, 1996, Commission File No. 1-4415, which is
incorporated herein by reference.) -
10.08(a) First Amendment to Lease dated October 21, 1994 to
Lease dated August 31, 1989 (see Exhibit 10.08 hereto)
between Nelco Technology, Inc. and Cemanudi Associates
regarding real property located at 1104 West Geneva
Drive, Tempe, Arizona. (Reference is made to Exhibit
10.11(a) of the Company's Annual Report on Form 10-K
for the fiscal year ended February 26, 1995, Commission
File No. 1-4415, which is incorporated herein by
reference.) -
10.09 Lease dated March 24, 1995 between Nelco Technology,
Inc. and CMD Southwest Inc. regarding real property
located at 1131 West Fairmont, Tempe, Arizona.
(Reference is made to Exhibit 10.12 of the Company's
Annual Report on Form 10-K for the fiscal year ended
March 3, 1996, Commission File No. 1-4415, which is
incorporated herein by reference.) -
10.09(a) First Amendment to Lease dated January 18, 1996 to
Lease dated March 24, 1995 (see Exhibit 10.09 hereto)
between Nelco Technology, Inc. and CMD Southwest Inc.
regarding real property located at 1131 West Fairmont,
Tempe, Arizona. (Reference is made to Exhibit 10.12(a)
of the Company's Annual Report on Form 10-K for the
fiscal year ended March 3, 1996, Commission File No. 1-
4415, which is incorporated herein by reference.) -
10.10 Lease dated December 12, 1990 between Neltec, Inc. and
NZ Properties, Inc. regarding real property located at
1420 W. 12th Place, Tempe, Arizona. (Reference is made
to Exhibit 10.13 of the Company's Annual Report on Form
10-K for the fiscal year ended March 2, 1997,
Commission File No. 1-4415, which is incorporated
herein by reference.) -
10.10(a) Letter dated January 8, 1996 from Neltec, Inc. to NZ
Properties, Inc. exercising its option to extend the
Lease dated December 12, 1990 (see Exhibit 10.10
hereto) between Neltec, Inc. and NZ Properties, Inc.
regarding real property located at 1420 W. 12th Place,
Tempe, Arizona. (Reference is made to Exhibit 10.13(a)
of the Company's Annual Report on Form 10-K for the
fiscal year ended March 2, 1997, Commission File No. 1-
4415, which is incorporated herein by reference.) -
10.11 Lease dated January 8, 1992 between Nelco Technology,
Inc. and CMD Southwest, Inc. regarding real property
located at 1135 West Geneva Drive, Tempe, Arizona.
(Reference is made to Exhibit 10.15 of the Company's
Annual Report on Form 10-K for the fiscal year ended
March 1, 1992, Commission File No. 1-4415, which is
incorporated herein by reference.) -
10.11(a) First Amendment dated July 8, 1996 to Lease dated
January 8, 1992 (see Exhibit 10.11 hereto) between
Nelco Technology, Inc. and CMD Southwest, Inc.
regarding real property located at 1135 West Geneva
Drive, Tempe, Arizona. (Reference is made to Exhibit
10.15(a) of the Company's Annual Report on Form 10-K
for the fiscal year ended March 2, 1997, Commission
File No. 1-4415, which is incorporated herein by
reference.) -
10.12 Tenancy Agreement dated October 8, 1992 between Nelco
Products Pte. Ltd. and Jurong Town Corporation
regarding real property located at 36 Gul Lane, Jurong
Town, Singapore. (Reference is made to Exhibit 10.18 of
the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1993, Commission File No. 1-
4415, which is incorporated herein by reference.) -
10.12(a) Tenancy Agreement dated November 3, 1995 between Nelco
Products Pte. Ltd. and Jurong Town Corporation
regarding real property located at 36 Gul Lane, Jurong
Town, Singapore. (Reference is made to Exhibit 10.16(a)
of the Company's Annual Report on Form 10-K for the
fiscal year ended March 2, 1997, Commission File No. 1-
4415, which is incorporated herein by reference.) -
10.13 Lease Contract dated February 26, 1988 between the New
York State Department of Transportation and the
Edgewater Stewart Company regarding real property
located at 15 Governor Drive in the Stewart
International Airport Industrial Park, New Windsor, New
York. (Reference is made to Exhibit 10.19 of the
Company's Annual Report on Form 10-K for the fiscal
year ended February 26, 1995, Commission File No. 1-
4415, which is incorporated herein by reference.) -
10.13(a) Assignment and Assumption of Lease dated February 16,
1995 between New England Laminates Co., Inc. and the
Edgewater Stewart Company regarding the assignment of
the Lease Contract (see Exhibit 10.13 hereto) for the
real property located at 15 Governor Drive in the
Stewart International Airport Industrial Park, New
Windsor, New York. (Reference is made to Exhibit
10.19(a) of the Company's Annual Report on Form 10-K
for the fiscal year ended February 26, 1995, Commission
File No. 1-4415, which is incorporated herein by
reference.) -
10.13(b) Lease Amendment No. 1 dated February 17, 1995 between
New England Laminates Co., Inc. and the New York State
Department of Transportation to Lease Contract dated
February 26, 1988 (see Exhibit 10.13 hereto) regarding
the real property located at 15 Governor Drive in the
Stewart International Airport Industrial Park, New
Windsor, New York. (Reference is made to Exhibit
10.19(b) of the Company's Annual Report on Form 10-K
for the fiscal year ended February 26, 1995, Commission
File No. 1-4415, which is incorporated herein by -
reference.)
10.14 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. (Reference is made to
Exhibit 10.01 of the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 1997,
Commission File No. 1-4415, which is incorporated
herein by reference.) -
21.01 Subsidiaries of the Company 60
23.01 Consent of Ernst & Young LLP 61
EXHIBIT 21.01
SUBSIDIARIES OF PARK ELECTROCHEMICAL CORP.
The following table lists Park's subsidiaries and the jurisdiction in
which each such subsidiary is organized.
Name Jurisdiction of
Incorporation
Dielectric Polymers, Inc. Massachusetts
Dielektra GmbH Germany
FiberCote Industries, Inc. Connecticut
Nelco GmbH West Germany
Nelco Products, Inc. Delaware
Nelco Products Pte. Ltd. Singapore
Nelco Products Snd. Bhd. Malaysia
Nelco S.A. France
Nelco STS, Inc. Delaware
Nelco Technology, Inc. Delaware
Neltec, Inc. Delaware
Neltec S.A. France
Neluk, Inc. Delaware
New England Laminates Co., Inc. New York
New England Laminates (U.K.) Ltd. England
Park Advanced product Development Delaware
Corp.
ParkNelco SNC France
Technocharge Limited England
Exhibit 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
Nos. 33-3777, 33-16650, 33-55383, 33-63956 and 333-12463 on Form S-8 of our
report, dated April 27, 2001, with respect to the consolidated financial
statements and schedule of Park Electrochemical Corp. included in the Annual
Report on Form 10-K of Park Electrochemical Corp. for the fiscal year ended
February 25, 2001.
ERNST & YOUNG LLP
New York, New York
May 23, 2001