PARK ELECTROCHEMICAL CORP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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 29, 2004

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _______

Commission file number 1-4415

Park Electrochemical Corp.
(Exact Name of Registrant as Specified in Its Charter)

New York 11-1734643
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)

5 Dakota Drive, Lake Success, New York 11042
(Address of Principal Executive Offices) (Zip Code)

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

Indicate by check mark whether the registrant is an
accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes X No___

State the aggregate market value of the voting and non-
voting common equity held by non-affiliates 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 the last
business day of the registrant's most recently completed second
fiscal quarter.
As of Close of
Title of Class Aggregate Market Value Business On
Common Stock,
par value $.10 per share $457,489,328* August 29,2003

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 19,847,937 May 7, 2004

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for Annual Meeting of Shareholders to be held
July 14, 2004 incorporated by reference into Part III of this
Report.

*Included in such amount are 1,487,286 shares of common stock
valued at $23.15 per share and held as of such date by Jerry
Shore, the Registrant's Chairman of the Board and a member of the
Registrant's Board of Directors.

[cover page 2 of 2 pages]

TABLE OF CONTENTS

Page
PART I

Item 1. Business..................................... 3
Item 2. Properties................................... 14
Item 3. Legal Proceedings............................ 14
Item 4. Submission of Matters to a Vote of Security
Holders.................................... 15
Executive Officers of the Registrant......... 15

PART II

Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.................. 18
Item 6. Selected Financial Data...................... 18
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 20
Factors That May Affect Future Results....... 35
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk............................ 37
Item 8. Financial Statements and Supplementary Data.. 37
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....... 64
Item 9A Controls and Procedures...................... 64

PART III

Item 10. Directors and Executive Officers of the
Registrant................................... 65
Item 11. Executive Compensation....................... 65
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder
Matters...................................... 65
Item 13. Certain Relationships and Related Transactions 66
Item 14. Principal Accountant Fees and Services....... 66

PART IV

Item 15 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.......................... 67

SIGNATURES.............................................. 68

FINANCIAL STATEMENT SCHEDULES

Schedule II - Valuation and Qualifying
Accounts................................ 69

EXHIBIT INDEX........................................... 70

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 and radio frequency microwave electronic
systems and 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 electronic
materials manufacturing facilities are located in Singapore,
China, France, New York, Arizona and California.

The Company is also engaged in the design, production and
marketing of advanced composite materials through its FiberCote
Industries subsidiary in Waterbury, Connecticut.

Park was founded in 1954 by Jerry Shore, the Company's
Chairman of the Board and one of its largest shareholders.

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 17 of the Notes to Consolidated Financial Statements in
Item 8 of Part II of this Report. The Company's foreign
operations are conducted principally by the Company's
subsidiaries in Singapore, China and France. 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 Part II of this Report.

In February 2004, the Company discontinued its
financial support of Dielektra GmbH, the Company's wholly owned
subsidiary located in Cologne, Germany. Dielektra had required
substantial financial support from the Company, and the
discontinuation of the Company's financial support resulted in
the filing of an insolvency petition by Dielektra, which the
Company believes will result in the eventual reorganization, sale
or liquidation of Dielektra. In accordance with generally
accepted accounting principles, the Company is treating Dielektra
GmbH as a discontinued operation. Accordingly, the information in
this Report has been adjusted to give effect to the Company's
treatment of Dielektra GmbH as a discontinued operation. See Note
9 of the Notes to Consolidated Financial Statements in Item 8 of
Part II of this Report and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in Item 7 of
Part II of this Report.

The Company makes available free of charge on its Internet
website, www.parkelectro.com, its annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
all amendments to those reports as soon as reasonably practicable
after such material is electronically filed with or furnished to
the Securities and Exchange Commission. None of the information
on the Company's website shall be deemed to be a part 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
interconnection systems, such as multilayer back-planes, wireless
packages, high-speed/low-loss multilayers and high density
interconnects ("HDIs"). 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 major electronic original equipment
manufacturers ("OEMs"). 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 digital printed circuit
materials include high speed routers and servers, storage area
networks, supercomputers, laptops, satellite switching equipment,
cellular telephones and transceivers, wireless personal digital
assistants ("PDAs") and wireless local area networks ("LANs").
The Company's radio frequency ("RF") printed circuit materials
are used primarily for military avionics, antennas for cellular
telephone base stations, automotive adaptive cruise control
systems and avionic communications equipment. 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. 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 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 advanced multilayer printed circuit materials.
It also believes that it is one of only a few significant
independent manufacturers 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 primarily to construct and fabricate complex
multilayer printed circuit boards and other advanced electronic
interconnection systems. Multilayer printed circuit materials
consist of prepregs and copper-clad laminates. Prepregs are
chemically and electrically engineered thermosetting or
thermoplastic 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 generally is 0.030 inch to 0.002 inch in
thickness or less in some cases. While these resin systems
historically have been based on epoxy resin chemistry, in recent
years, increasingly demanding OEM requirements have driven the
industry to utilize proprietary enhanced epoxies as well as other
higher performance resins, such as bismalimide triazine ("BT"),
cyanate ester, polyimide, or polytetrafluoroethylene ("PTFE").
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 0.0030 inch to 0.0002 inch in thickness and normally
have a thickness of 0.0014 inch or 0.0007 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. In specialized
applications, an additional set of microvia layers (2 or 4,
typically) may be added through a secondary lamination process to
provide increased density and functionality to the design. 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 patterns, as well as the vertical
plane through the plated holes or vias.

In the years immediately preceding the severe correction and
downturn that occurred in the global electronics industry in the
Company's 2002 fiscal year first quarter, the global market for
advanced electronic products grew as a result of technological
change and frequent new product introductions. This growth was
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 the infrastructure equipment necessary to support the
use of these devices, and greater use of electronics in other
products, such as automobiles. Further, large, almost completely
untapped markets for advanced electronic equipment emerged in
such areas as India and China and other areas of the Pacific Rim.
During its 2002 fiscal year, the Company established a business
center in Wuxi, China, in the Shanghai Nanjing corridor, and in
March 2004, the Company announced that it is establishing a new
manufacturing facility in the Zhuhai Free Trade Zone
approximately 50 miles west of Hong Kong in the Guangdong
province in southern China. Both the Shanghai Nanjing corridor
and Guangdong province are emerging regions for advanced
multilayer printed circuit fabrication in China.

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.

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. In the years immediately preceding the
severe correction and downturn that occurred in the global
electronics industry in the Company's 2002 fiscal year first
quarter, the growth of the market for more advanced printed
circuit materials outpaced the market growth for standard printed
circuit materials. Printed circuit board fabricators and
electronic equipment manufacturers require advanced printed
circuit materials that have increasingly higher temperature
tolerances and more advanced and stable 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 0.002 inch or less) and the
circuit line and space geometries in the circuitry plane are very
narrow (0.002 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 and HDIs. 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 electronic materials products have been
developed internally and through long-term development projects
with its principal suppliers and, to a lesser extent, through
licensing arrangements. 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 polyimides, high performance epoxy
Thermountr materials ("Thermount" is a registered trademark of
E.I. duPont de Nemours & Co.), SIT (Signal Integrity) products,
cyanate esters and polytetrafluoroethylene ("PTFE") formulations
for radio frequency ("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 relationships
with its customers is reflected in its short lead times. The
Company has developed its manufacturing processes and customer
service organizations to provide its customers with printed
circuit materials products on a just-in-time basis. The Company
believes that its ability to meet its customers' customized
manufacturing and quick-turn-around ("QTA") requirements is one
of its unique strengths.

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 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. During the 2002 fiscal
year, the Company established a business center in Wuxi near
Shanghai in central China, and in March 2004, the Company
announced that it is establishing a new manufacturing facility in
the Zhuhai Free Trade Zone approximately 50 miles west of Hong
Kong in southern China to support the growing customer demand for
advanced multilayer printed circuitry materials in China.

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 major electronic original
equipment manufacturers ("OEMs") 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. In recent
years, the Company has augmented its traditional sales personnel
with an OEM marketing team and product technology specialists.
The Company's strategy emphasizes the use of multiple facilities
established in market areas in close proximity to its customers.

During the Company's 2004 fiscal year, approximately 16.3%
of the Company's total worldwide sales from its continuing
operations were to Sanmina Corporation, a leading electronics
contract manufacturer and manufacturer of printed circuit boards,
and approximately 12.2% of the Company's total worldwide sales
from its continuing operations were to Tyco Printed Circuit Group
L.P., a leading manufacturer of printed circuit boards. During
the Company's 2003 fiscal year, approximately 19.1% of the
Company's total worldwide sales from its continuing operations
were to Sanmina Corporation, approximately 11.1% of the Company's
total worldwide sales from its continuing operations were to
Multilayer Technology, Inc., a manufacturer of multilayer printed
circuit boards, and approximately 11.0% of the Company's total
worldwide sales from its continuing operations were to Tyco
Printed Circuit Group L.P. During the Company's 2004 and 2003
fiscal years, sales to no other customer of the Company equaled
or exceeded 10% of the Company's total worldwide sales from
continuing operations.

During the Company's 1998 fiscal year and for several years
prior thereto, more than 10% of the Company's total worldwide
sales were to Delco Electronics Corporation, a subsidiary of
General Motors Corp. However, in 1998 Delco closed its printed
circuit board fabrication plant, exited the printed circuit board
manufacturing business, and ceased being a customer of the
Company's. After 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. In the first
quarter of the fiscal year ended March 3, 2002, the Company sold
the assets and business of its subsidiary in Arizona that
conducted the mass lamination business and recorded pre-tax
charges of approximately $15.7 million in its 2002 fiscal year
first quarter ended 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 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 manufactures 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.

The Company manufactures multilayer printed circuit
materials at six fully integrated facilities located in the
United States, Europe and Southeast Asia. The Company opened its
California facility in 1965, its first Arizona and France
facilities in 1984, its Singapore facility in 1986 and its second
France facility in 1992. The Company services the North America
market principally through its United States manufacturing
facilities, the European market principally through its
manufacturing facilities in France, and the Asian market
principally through its Singapore manufacturing facility. During
its 2002 fiscal year, the Company established a business center
in central China, and in March 2004, the Company announced that
it is establishing a new manufacturing facility in the Zhuhai
Free Trade Zone approximately 50 miles west of Hong Kong in
southern China to supply the growing demand for advanced
multilayer printed circuitry materials in China. The Company has
located its manufacturing facilities in its important markets. By
maintaining 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 expanded 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. During the 2002
fiscal year, the Company completed a significant expansion of its
higher technology product line manufacturing facility in Arizona
and established the capability to manufacture PTFE materials for
RF/microwave applications at its Neltec high performance
materials facility in Tempe, Arizona, augmenting the Company's
PTFE manufacturing capability in Lannemezan, France. During the
2004 fiscal year, the Company completed the expansion of its
manufacturing facility in Singapore and began the process of
installing one of its latest generation high-technology treaters
in its newly expanded facility in Singapore and the Company
began utilization of its higher technology product line
manufacturing facility in Arizona. In addition, as state above,
the Company announced in March 2004 that it is establishing a new
manufacturing facility in the Zhuhai Free Trade Zone in southern
China, approximately 50 miles west of Hong Kong.

As a result of the persistent and pervasive depressed state
of the worldwide electronics manufacturing industry following the
severe downturn that occurred during the Company's 2002 fiscal
year first quarter, the Company closed its Nelco U.K.
manufacturing facility in Skelmersdale, England during its 2003
fiscal year third quarter, announced the closure of the mass
lamination operation of its Dielektra electronic materials
manufacturing business in Germany and the realignment of its
North American FR-4 electronic materials operations in New York
and California in its 2004 fiscal year first quarter, and
discontinued its financial support of its Dielektra GmbH
subsidiary located in Cologne, Germany in its fiscal year 2004
fourth quarter ended February 29, 2004, which resulted in the
insolvency of Dielektra GmbH. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in
Item 7 of Part II of this Report and Notes 9, 10 and 11 of the
Notes to Consolidated Financial Statements in Item 8 of Part II
of this Report for a discussion of the significant pre-tax
charges recorded by the Company in the 2003 and 2004 fiscal
years.

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 or 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 significant
presences in the three major global markets of North America,
Europe and Asia. The Company believes that the multilayer printed
circuit materials industry has become more global and that the
remaining smaller regional manufacturers are finding 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 one of only a few significant independent
manufacturers 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.

Advanced Composite Operations

FiberCote Industries, Inc., the Company's advanced composite
materials business, develops and produces engineered composite
materials for the aerospace, rocket motor, electronics, radio
frequency and specialty industrial markets.

Marketing and Customers

The Company's advanced composite materials customers,
substantially all of which are located in the United States,
include manufacturers in the automotive, graphic arts, aerospace,
rocket motor, electronics, RF and specialty 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 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 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.

The Company designs and manufactures its advanced composite
materials to its own specifications and to the specifications of
its customers. Product development efforts are devoted to
conforming the Company's advanced composites to the
specifications of, and obtaining approvals from, the Company's
customers. The materials used in the manufacture of these
engineered materials include graphite and carbon fibers and
fabrics, Kevlarr ("Kevlar" is a registered trademark of E.I. du
Pont de Nemours & Co.), quartz, fiberglass, polyester, chemicals,
resins, films, plastics, adhesives and certain other synthetic
materials. 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 advanced composite
materials business, 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 May 2, 2004, the unfilled portion of all purchase
orders received by the Company and believed by it to be firm was
approximately $8,111,000, compared to $3,966,000 at May 4, 2003.
The increase in backlog at May 2, 2004 compared to May 4, 2003
was due primarily to the upturn in the Company's business that
began during the second half of its 2004 fiscal year resulting
from the improvement 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 29, 2004.

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 29 2004, the Company had approximately 1,200
employees. Of these employees, 1,100 were engaged in the
Company's electronic materials operations, 50 in its advanced
composite materials operations and 50 consisted of executive
personnel and general administrative staff. 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 from
approximately 2,850 total employees to approximately 2,330 total
employees at April 30, 2001, and during the remainder of the 2002
fiscal year the Company's total number of employees declined to
approximately 1,700. The total number of employees further
declined to approximately 1,400 at the end of the 2003 fiscal
year. 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 eight
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 Part II of this Report and Note 15 of the
Notes to Consolidated Financial Statements included in Item 8 of
Part II of this Report.

Item 2. Properties.

Set forth below are the locations of the significant
properties owned and leased by the Company, the businesses which
use the properties, and the 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.

The Company believes its facilities and equipment to be in
good condition and reasonably suited and adequate for its current
needs. During the 2004 fiscal year, certain of the Company's
electronic manufacturing facilities were utilized at less than
50% of their capacity.

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.

In November 2000, after a trial in Phoenix, Arizona, a
jury awarded damages to NTI in the amount of $32.3 million, and
in December 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 $32.3 million. Both parties appealed the decision to
the United States Court of Appeals for the Ninth Circuit in San
Francisco, and in May 2003, a panel of three judges in the Court
of Appeals for the Ninth Circuit rendered a unanimous decision
affirming the jury verdict. In June 2003, the United States
District Court for the District of Arizona entered final judgment
in favor of NTI, and Delco paid NTI on July 1, 2003. NTI received
a net amount of $33.1 million. See Note 19 of the Notes to
Consolidated Financial Statements in Item 8 of Part II of this
Report.

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 and have been nil since that
time. During the Company's 1999 fiscal year first quarter and
during its 1998 fiscal year and for several years prior thereto,
more than 10% of the Company's total worldwide sales were to
Delco Electronics Corporation; and the Company had been Delco's
principal supplier of semi-finished multilayer printed circuit
board materials for more than ten years. These materials were
used by Delco to produce finished multilayer printed circuit
boards. See "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 and "Factors That May Affect
Future Results" after Item 7 of this Report.

In the first quarter of the fiscal year ended March 3, 2002,
the Company sold the assets and business of NTI and recorded pre-
tax charges of approximately $15.7 million in its 2002 fiscal
year first quarter in connection with the sale of NTI and the
closure of a related support facility also located in Arizona.
See Notes 10 and 13 of the Notes to Consolidated Financial
Statements in Item 8 of Part II 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 52

Stephen E. Senior Vice President,
Gilhuley Secretary and General Counsel 59

Emily J. Groehl Senior Vice President, Sales
and Marketing 57

John Jongebloed Senior Vice President, Global 47
Logistics

Steven P. Senior Vice President, 43
Schaefer Technology

Thomas T. Spooner Senior Vice President,
Corporate and Technology 67
Development

Murray O. Stamer Senior Vice President and
Chief Financial Officer 46

Gary M. Watson Senior Vice President,
Engineering and Technology
and Senior Vice President, 56
Asian Business Unit

Mr. Shore has served as a Director of the Company since
1983. He 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. Mr. Shore also
served as General Counsel of the Company from April 1988 until
April 1994.

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 was elected Senior Vice President of Park in May
1999. Prior to May 1999, she had been with one of Park's "Nelco"
business units for more than ten 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.

Mr. Jongebloed was elected Senior Vice President of Park in
July 2001. Prior to July 2001, he had been employed by one of
Park's "Nelco" business units for more than nine years. He was
Vice President and General Manager of New England Laminates Co.,
Inc. from January 1992 to May 1999, and President and General
Manager of New England Laminates Co., Inc. from May 1999 to
August 2002 and since April 28, 2003.

Mr. Schaefer has been employed by Park since January 15,
2001 when he became Product Director, High Volume Products of
Park. He was promoted to Senior Director of Product Technology in
March 2002 and appointed Vice President of Business Development
in February 2003. He was elected Senior Vice President,
Technology on July 17, 2003. Mr. Schaefer was Business Manager,
Electronic Chemicals of OM Group, Inc. from February 1999 to
January 2001; and prior to February 1999, Mr. Schaefer was
employed by LeaRonal, Inc. in various positions, including
National Sales Manager.

Mr. Spooner 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. Prior to May
1999, he had been employed by one of Park's "Nelco" business
units for more than 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. Mr. Spooner retired as Senior Vice
President, Corporate and Technology Development on March 21, 2004
and became a part-time employee of the Company providing advisory
services to the Company.

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 and Senior Vice President and
Chief Financial Officer on July 17, 2003.

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 and to Senior Vice
President, Engineering in July 2003. In addition, he became
Senior Vice President, Asian Business Unit in August 2002. 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 has been the Chairman of the Board
and a Director since the Company was founded in 1954, and who
also served as President of the Company for many years until
March 4, 1996 and as Chief Executive Officer of the Company for
forty-two years until November 19, 1996.

Each executive officer of the Company serves at the pleasure
of the Board of Directors of the Company.

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.

For the Fiscal Year Stock Price Dividends
Ended February 29, 2004 High Low Declared
First Quarter $19.67 $14.03 $.06
Second Quarter 23.35 17.91 $.06
Third Quarter 25.55 22.35 $.06
Fourth Quarter 30.18 23.39 $.06

For the Fiscal Year Stock Price Dividends
Ended March 2, 2003 High Low Declared
First Quarter $31.45 $26.76 $.06
Second Quarter 28.15 19.10 $.06
Third Quarter 21.70 14.00 $.06
Fourth Quarter 22.14 15.27 $.06

As of May 7, 2004, there were approximately 1,371 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 29, 2004 and is
as of the end of such periods, it is derived from the con
solidated financial statements for such periods and as of such
dates audited by Ernst & Young LLP, independent auditors. The
consolidated financial statements as of February 29, 2004 and
March 2, 2003 and for the three years ended February 29, 2004,
together with the independent auditors' report for the three
years ended February 29, 2004, appear in Item 8 of Part II of
this Report.

Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.

General:

Park is a leading global designer and producer of advanced
electronic materials used to fabricate complex multilayer printed
circuit boards and other electronic interconnect systems. The
Company's customers include leading independent printed circuit
board fabricators, electronic manufacturing service companies,
electronic contract manufacturers and major electronic original
equipment manufacturers in the computer, telecommunications,
transportation, aerospace and instrumentation industries.

The severe correction and downturn that occurred in the
global electronics industry early in the fiscal year ended March
3, 2002 and that dramatically affected the Company's financial
performance during that fiscal year and during the fiscal year
ended March 2, 2003, with declines in sales by the Company's
North American, European and Asian operations, abated during the
second half of the fiscal year ended February 29, 2004. And, in
the second half of the 2004 fiscal year, the electronic materials
market in Asia and the markets for the Company's higher
technology products strengthened. Nevertheless, the Company's
sales declined during the 2004 fiscal year, although not as
steeply as in the prior fiscal year, with decreased sales of
electronic materials in North America and Europe.

While the Company's FR-4 operations in North America and
Europe continued to be weak during the 2004 fiscal year as almost
all markets for sophisticated printed circuit materials continued
to experience depressed conditions, the Company's gross profit in
the 2004 fiscal year was significantly greater than its gross
profit in the 2003 fiscal year as a result of the Company's
reductions of its costs and expenses and higher percentages of
sales of higher technology, higher margin products.

Although the Company's sales increased slightly in the six-
month period ended February 29, 2004 compared with last fiscal
year's comparable period principally as a result of increases in
sales of the Company's advanced technology products, sales by the
Company's operations in Asia and sales by the Company's FiberCote
advanced composite materials business, the Company's sales for
the 2004 fiscal year were lower than its sales for the 2003
fiscal year as a result of declines in sales by the Company's
North American and European FR-4 operations.

The electronics industry began to improve slightly at the
end of the 2004 fiscal year second quarter and continued to
improve in the third and fourth quarters, and there exist some
indications that the improvement will continue. However, it is
not completely clear whether and to what degree the improvement
is sustainable. The Company's advanced electronic materials
business, its Asian business unit and its FiberCote advanced
composite materials business performed reasonably well during the
six-month and twelve-month periods ended February 29, 2004, while
the Company's higher-volume FR-4 business units in Europe and
North America performed poorly.

During the 2004 fiscal year, the Company opened a facility
at its advanced products business unit in Arizona that had been
completed in its 2002 fiscal year and that is now being well
utilized, completed the construction of its facility expansion in
Singapore and proceeded with its final planning for the
installation of a new manufacturing facility in China.

During the first half of the 2004 fiscal year, the Company
realigned its North American FR-4 business operations located in
New York and California. As part of the realignment, the New York
operation was scaled down to a smaller focused operation and the
California operation was scaled up to a larger volume operation,
and there were significant workforce reductions at the Company's
New York facility and significant workforce increases at the
Company's California facility, with the end result being a net
reduction in the Company's workforce in North America. A large
portion of the New York facility was mothballed. The Company has
the flexibility in the future to scale back up the Newburgh, New
York facility if the opportunity to do so presents itself. The
realignment was designed to help the Company achieve improved
operating and cost efficiencies in its North American FR-4
business and to help the Company best service all of its North
American customers.

As a result of the Company's realignment of its North
American FR-4 business operations and related workforce
reductions, the Company recorded pre-tax charges totaling $2.0
million in the Company's 2004 fiscal year first quarter, and the
Company recorded additional pre-tax charges of $6.5 million in
the 2004 fiscal year second quarter due to such realignment. The
Company also recorded a pre-tax gain of $0.4 million in the 2004
fiscal year third quarter resulting from the sale of real estate
previously used by its Nelco UK subsidiary, which ceased
operations after its closure in the 2003 fiscal year third
quarter. See Note 10 of the Notes to Consolidated Financial
Statements in Item 8 of Part II of this Report for additional
information regarding the realignment and closure.

In February 2004, the Company discontinued its financial
support of Dielektra GmbH, the Company's wholly owned subsidiary
located in Cologne, Germany ("Dielektra"), which supplied
electronic materials to European circuit board manufacturers. The
Company discontinued its support of Dielektra because the market
in Europe had eroded to the point where the Company believed it
would not be possible, at any time in the foreseeable future, for
the Dielektra business to be viable. Dielektra had required
substantial financial support from the Company. The
discontinuation of the Company's financial support resulted in
the filing of an insolvency petition by Dielektra. The Company
believes that the insolvency procedure in Germany will result in
the eventual reorganization, sale or liquidation of Dielektra.
The Company intends to continue to service the higher technology
European digital and RF circuit board markets through its Nelco,
SAS business located in Mirebeau, France, and its Neltec, SA
business located in Lannemezan, France.

In accordance with generally accepted accounting principles,
the Company is treating Dielektra as a discontinued operation.
Accordingly, the Company reclassified Dielektra's operating
losses and charges and recorded a net loss from discontinued
operations of $33.8 million in the 2004 fiscal year, comprised of
$5.6 million of operating losses incurred by Dielektra, $6.2
million related to the closure of Dielektra's mass lamination
operation and related workforce reductions in the 2004 fiscal
year first quarter and $22.0 million for the write-off of assets
of Dielektra and other costs, the Company recorded a net loss
from discontinued operations in the 2003 fiscal year of $6.9
million, comprised of $5.7 million of operating losses incurred
by Dielektra and $1.2 million for after-tax fixed asset
impairment charges, and the Company recorded a net loss from
discontinued operations in the 2002 fiscal year of $8.1 million,
comprised of $5.2 million of operating losses incurred by
Dielektra and $2.9 million related to the realignment of the
operations of Dielektra. Furthermore, the Company's sales from
its continuing operations did not include sales by Dielektra of
$14.4 million for the 2004 fiscal year, $21.2 million for the
2003 fiscal year and $28.4 million for the 2002 fiscal year. See
Note 9 of the Notes to Consolidated Financial Statements in Item
8 of Part II of this Report for additional information regarding
the discontinued operations.

During the 2003 fiscal year, the Company recorded pre-tax
charges totaling $53.8 million related to the write-downs of
fixed assets at its continuing operations in North America
resulting from the realignment of its North American FR-4
business operations in New York and California, workforce
reductions at a North American business unit, and the closure of
its Nelco U.K. manufacturing facility. These charges were only
slightly offset by the pre-tax gain of $3.2 million realized by
the Company during the 2003 fiscal year second quarter in
connection with the sale of its Dielectric Polymers, Inc. ("DPI")
subsidiary for $5.0 million cash. See Notes 10, 11 and 12 of the
Notes to Consolidated Financial Statements in Item 8 of Part II
of this Report for additional information regarding the asset
write-downs, workforce reductions and closure and the sale of
DPI.

The Company recorded a pre-tax charge of $4.7 million in its
2003 fiscal year third quarter for the cost of closing its Nelco
U.K. manufacturing facility located in Skelmersdale, England in
response to the almost complete collapse of the U.K. high
technology circuit board industry. For many years, Nelco U.K. was
one of the most vital parts of the Company's global high
technology circuit materials business, but the U.K. high
technology circuit board industry had been devastated, and the
closure of the Nelco U.K. facility was unavoidable, as there was
not enough business available in the entire U.K. market to
justify the Company's having an operation in the U.K. The Company
is supplying its few remaining customers in the U.K. with product
produced at its Nelco facility located in Mirebeau, France and
will continue to provide these U.K. customers with local account
management, technical service and materials and inventory
support. In addition, the Company recorded a pre-tax charge of
$0.1 million during the 2003 fiscal year third quarter for
severance payments for workforce reductions at a North American
business unit. See Note 10 of the Notes to Consolidated Financial
Statements in Item 8 of Part II of this Report for additional
information regarding the closure and severance payments.

During the fourth quarter of the 2003 fiscal year, the
Company reassessed the recoverability of the fixed assets of
those operations based on cash flow projections and determined
that such fixed assets were impaired, and the Company recorded
pre-tax impairment charges of $49.0 million in the Company's 2003
fiscal year fourth quarter to reduce the book values of such
fixed assets to their estimated fair values. See Note 11 of the
Notes to Consolidated Financial Statements in Item 8 of Part II
of this Report for additional information regarding the asset
impairment charges.

During the Company's 1998 fiscal year and for several years
prior thereto, more than 10% of the Company's total worldwide
sales were to Delco Electronics Corporation, a subsidiary of
General Motors Corp. ("Delco"), and the Company's wholly owned
subsidiary, Nelco Technology, Inc. ("NTI") located in Tempe,
Arizona, had been Delco's principal supplier of semi-finished
multilayer printed circuit board materials, commonly known as
mass lamination, which were used by Delco to produce finished
multilayer printed circuit boards. 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. As a result, the Company's
sales to Delco declined during the three-month period ended May
31, 1998, were negligible during the remainder of the 1999 fiscal
year and have been nil since that time.

In May 1998, the Company and NTI filed a complaint against
Delco 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. In November
2000, a jury awarded damages to NTI in the amount of $32.3
million, 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 $32.3 million.
Both parties appealed the decision to the United States Court of
Appeals for the Ninth Circuit in San Francisco; and in May 2003,
a panel of three judges in the Court of Appeals for the Ninth
Circuit rendered a unanimous decision affirming the jury verdict.
In June 2003, the United States District Court for the District
of Arizona entered final judgment in favor of NTI; and, on July
1, 2003, NTI received a net amount of $33.1 million in payment of
such judgment. The Company recorded a non-recurring, pre-tax gain
of $33.1 million in the 2004 fiscal year second quarter related
to such payment. See Notes 13 and 19 of the Notes to Consolidated
Financial Statements in Item 8 of Part II of this Report for
additional information regarding the sale of NTI and the gain on
the lawsuit against Delco and Item 3 of Part I of this Report for
additional information regarding the lawsuit against Delco.

The Company is not engaged in any related party transactions
involving relationships or transactions with persons or entities
that derive benefits from their non-independent relationship with
the Company or the Company's related parties, or in any
transactions with parties with whom the Company or its related
parties have a relationship that enables the parties to negotiate
terms of material transactions that may or would not be available
from other, more clearly independent parties on an arm's-length
basis, or in any trading activities involving non-exchange traded
commodity or other contracts that are accounted for at fair value
or otherwise or in any energy trading or risk management
activities, other than certain limited foreign currency contracts
intended to hedge the Company's contractual commitments to pay
certain obligations or to realize certain receipts in foreign
currencies and certain limited energy purchase contracts intended
to protect the Company from increased utilities costs.

The Company believes that an evaluation of its ongoing
operations would be difficult if the disclosure of its financial
results were limited to generally accepted accounting principles
("GAAP") financial measures. Accordingly, in addition to
disclosing its financial results determined in accordance with
GAAP, the Company discloses non-GAAP operating results that
exclude certain items in order to assist its shareholders and
other readers in assessing the Company's operating performance.
Such non-GAAP financial measures are provided to supplement the
results provided in accordance with GAAP.

Fiscal Year 2004 Compared with Fiscal Year 2003:

The Company's FR-4 operations in North America and Europe
continued to be weak during the fiscal year ended February 29,
2004 as the North American, European and, to a lesser extent,
Asian markets for sophisticated printed circuit materials
continued to experience depressed conditions.

Nevertheless, the Company's continuing operations generated
a profit during the 2004 fiscal year as a result of a significant
improvement in its gross profit.

The Company's gross profit in the 2004 fiscal year was
substantially higher than the gross profit in the prior fiscal
year and improved significantly in the six months ended February
29, 2004 as a result of the Company's reductions of its costs and
expenses and higher percentages of sales by the Company of its
higher margin, advanced technology products. These improvements
in gross profits occurred despite slightly lower levels of sales
of electronic materials in the 2004 fiscal year and only slightly
increased sales in the third and fourth quarters, operating
inefficiencies resulting from operating certain facilities at
levels far below their designed manufacturing capacities and from
the Company's realignment of its North American FR-4 business
operations, and competitive pressures.

The Company's financial results of operations were
substantially enhanced by the pre-tax gain of $33.1 million that
the Company recorded in the 2004 fiscal year second quarter
related to the payment by Delco Electronics Corporation of the
judgment against Delco in favor of the Company's subsidiary,
Nelco Technology, Inc., in its lawsuit against Delco, which more
than offset the pre-tax charges of $8.5 million that the Company
recorded in the 2004 fiscal year related to the Company's
realignment of its North American FR-4 business operations in the
first and second quarters.

In the 2004 fiscal year, the Company classified Dielektra's
operating losses and charges and accordingly recorded a net loss
from discontinued operations of $33.8 million as a result of the
Company's discontinuation of its financial support of Dielektra
in February 2004, the ensuing insolvency of Dielektra, and the
Company's treatment of Dielektra as a discontinued operation. The
net loss from discontinued operations was comprised of $5.6
million of operating losses incurred by Dielektra, $6.2 million
related to the closure of Dielektra's mass lamination operation
and related workforce reductions in the 2004 fiscal year first
quarter and $22.0 million for the write-off of assets of
Dielektra and other costs. In the 2003 fiscal year, the Company
recorded a net loss from discontinued operations of $6.9 million,
comprised of $5.7 million of operating losses incurred by
Dielektra and $1.2 million for after-tax fixed asset impairment
charges. In addition, the Company's sales from its continuing
operations excluded sales by Dielektra of $14.4 million for the
portion of the 2004 fiscal year during which the Company was
supporting Dielektra and $21.2 million for the 2003 fiscal year.

Operating results of the Company's advanced composite
materials business also improved significantly during the 2004
fiscal year primarily as a result of increased sales and higher
percentages of sales of higher margin products.

Results of Operations

Net sales from continuing operations for the fiscal year
ended February 29, 2004 declined less than 1% to $194.2 million
from $195.6 million for the fiscal year ended March 2, 2003. The
decrease in net sales from continuing operations was principally
the result of lower unit volumes of materials shipped by the
Company's FR-4 operations in North America and Europe, almost
entirely offset by higher unit volumes of materials shipped by
the Company's operations in Asia.

The Company's sales from continuing operations did not
include sales by Dielektra of $14.4 million for the 2004 fiscal
year and $21.2 million for the 2003 fiscal year.

The Company's foreign operations accounted for $88.2 million
of sales, or 45% of the Company's total sales worldwide from
continuing operations, during the 2004 fiscal year, compared with
$77.7 million of sales, or 40% of total sales worldwide from
continuing operations, during the 2003 fiscal year and 34% of
total sales worldwide from continuing operating during the 2002
fiscal year. Sales by the Company's foreign operations during the
2004 fiscal year increased from the 2003 fiscal year due to
increases in sales in Asia and France while sales by the
Company's operations in England were nil during the 2004 fiscal
year.

The overall gross profit as a percentage of net sales for
the Company's worldwide continuing operations improved to 16.8%
during the 2004 fiscal year compared with 13.6% during the 2003
fiscal year. The improvement in the gross profit margin was
attributable to higher percentages of sales of higher margin,
advanced technology products, as high performance materials
accounted for 89% of worldwide sales from continuing operations
for the 2004 fiscal year compared with 84% for the prior fiscal
year, and reductions in the Company's costs from the 2003 fiscal
year, which were only partially offset by lower sales volumes and
inefficiencies caused by operating certain facilities at levels
below their designed manufacturing capacities.

The Company's cost of sales decreased in the 2004 fiscal
year compared to the prior fiscal year due to personnel
reductions and cost savings resulting from the Company's
realignment of its North American FR-4 business, other cost
reduction measures implemented by the Company, including
workforce reductions and the reduction of overtime, and lower
production volumes during the first and second quarters of the
2004 fiscal year. In addition, the Company continued to implement
an annual salary freeze for significant numbers of salaried
employees, especially senior management employees, and paid no
performance bonuses or significantly reduced bonuses and other
incentives.

Selling, general and administrative expenses increased
slightly during the 2004 fiscal year compared with the 2003
fiscal year, and these expenses, measured as a percentage of
sales, were 14.4% during the 2004 fiscal year compared with 13.9%
during the 2003 fiscal year. The slight increase in selling,
general and administrative expenses in the 2004 fiscal year was a
result of increased shipping costs incurred by the Company to
meet its customers' customized manufacturing and quick-turn-
around requirements.

The Company recorded a pre-tax gain of $0.4 million in the
2004 fiscal year third quarter resulting from the sale of real
estate in Skelmersdale, England previously used by its Nelco UK
subsidiary, which ceased operations after its closure in the 2003
fiscal year third quarter, and a pre-tax gain of $33.1 million
during the 2004 fiscal year second quarter related to the payment
by Delco Electronics Corporation of the judgment against Delco in
favor of the Company's subsidiary, Nelco Technology, Inc., in its
lawsuit against Delco. The Company also recorded pre-tax charges
totaling $8.5 million in the 2004 fiscal year first and second
quarters in connection with the realignment of its North American
FR-4 business operations and related workforce reductions. The
net pre-tax gain for all these items for the 2004 fiscal year was
$25.0 million, and the net after-tax gain for the fiscal year was
$22.9 million.

In the 2003 fiscal year fourth quarter, the Company recorded
pre-tax, fixed asset impairment charges of $49.0 million related
to the write-downs of fixed assets at continuing operations in
North America, which the Company announced in its 2004 fiscal
year first quarter. The after-tax impact of these fixed asset
impairments was $44.6 million. In addition, the Company recorded
pre-tax charges totaling $4.8 million in the 2003 fiscal year
third quarter related to the closure of its Nelco U.K.
manufacturing facility and severance costs at a North American
business unit and a pre-tax gain of $3.2 million in the 2003
fiscal year second quarter in connection with the sale of DPI on
June 27, 2002 for $5.0 million in cash. The net pre-tax charge
for all these items for the 2003 fiscal year was $50.7 million,
and the net after-tax charge for the fiscal year was $47.5
million.

For the reasons set forth above, earnings from continuing
operations were $29.8 million for the 2004 fiscal year, including
the pre-tax gains described above resulting from the sale of real
estate in England and the payment by Delco Electronics
Corporation of the judgment against it in favor of the Company's
subsidiary, Nelco Technology, Inc., in Nelco's lawsuit against
Delco and the pre-tax charges described above related to the
realignment of the Company's North American FR-4 business
operations and related workforce reductions. This compares with a
loss from continuing operations of $51.2 million for the 2003
fiscal year, including the pre-tax charges described above
related to the write-downs of fixed assets at continuing
operations in North America, the closure of the Nelco U.K.
manufacturing facility and severance costs at a North American
business unit and the pre-tax gain described above related to the
sale of DPI. Excluding the pre-tax gains and the pre-tax charges
described above, the Company reported income from continuing
operations of $4.7 million for the 2004 fiscal year, compared
with a loss of $0.5 million for the 2003 fiscal year.

Interest and other income, net, principally investment
income, declined 9% to $3.0 million for the 2004 fiscal year from
$3.3 million for the 2003 fiscal year. The decrease in investment
income was attributable to lower prevailing interest rates during
the 2004 fiscal year. The Company's investments were primarily
short-term taxable instruments. The Company incurred no interest
expense during the 2004, 2003 or 2002 fiscal years. See
"Liquidity and Capital Resources" elsewhere in this Item 7.

The Company's effective income tax rate was 8.7% for the
2004 fiscal year compared to an income tax benefit of 8.4% for
the 2003 fiscal year. The Company's effective income tax rate for
continuing operations, excluding the pre-tax gains and the pre-
tax charges described above, for the 2004 fiscal year was 8.6%
compared with an income tax benefit of 30% for the 2003 fiscal
year.

The Company's net earnings from continuing operations for
the 2004 fiscal year were $29.9 million, including the gains
described above resulting from the sale of real estate in England
and the payment by Delco Electronics Corporation of the judgment
in favor of the Company's subsidiary, Nelco Technology, Inc., and
the charges described above related to the realignment of the
Company's North American FR-4 business operations and related
workforce reductions. This compares with a net loss of $43.9
million for the 2003 fiscal year, including the charges of $47.5
million described above related to the write-downs of fixed
assets at continuing operations in North America, the closure of
the Nelco U.K. manufacturing facility and severance costs at a
North American business unit and the gain described above related
to the sale of DPI. Excluding the gains and the charges described
above, the Company reported net earnings from continuing
operations of $7.0 million for the 2004 fiscal year, compared
with net earnings from continuing operations of $3.6 million for
the 2003 fiscal year.

For the reasons set forth above, the Company reported a net
loss of $3.9 million for the 2004 fiscal year, including the
gains and charges described above, and a net loss of $50.8
million for the 2003 fiscal year, including the gain and charges
described above.

Basic and diluted earnings per share from continuing
operations, including the gains and charges described above, were
$1.51 and $1.50 per share, respectively, for the 2004 fiscal year
compared to basic and diluted losses per share of $2.23,
including the gain and charges described above, for the 2003
fiscal year. Excluding such gains and charges, the basic and
diluted earnings per share were $0.36 and $0.35, respectively,
for the 2004 fiscal year compared to basic and diluted earnings
per share of $0.18 for the 2003 fiscal year.

The basic loss per share and the diluted loss per share were
$0.20 and $0.19, respectively, for the 2004 fiscal year,
including losses from the discontinued Dielektra operations of
$1.71 and $1.69 per share, respectively, and the pre-tax gains
and charges described above. This compares to basic and diluted
losses per share of $2.58 for the 2003 fiscal year, including the
basic and diluted loss from the discontinued Dielektra operations
of $0.35 per share and the pre-tax gains and charges described
above.

Fiscal Year 2003 Compared with Fiscal Year 2002:

The Company's continuing operations continued to be weak
during the fiscal year ended March 2, 2003 as the North American,
European and, to a lesser extent, Asian markets for sophisticated
printed circuit materials continued to experience severely
depressed conditions during the 2003 fiscal year.

Nevertheless, the Company's gross profit in the fiscal year
ended March 2, 2003 was significantly more than the gross profit
in the fiscal year ended March 3, 2002 as a result of the
company's reductions of its costs and expenses and higher
percentages of sales of higher technology, higher margin
products.

In addition to its depressed financial results of
operations, the Company recorded pre-tax, fixed asset impairment
charges of $49.0 million in the 2003 fiscal year fourth quarter
related to the writedowns of fixed assets at its continuing
operations in North America. The Company also recorded pre-tax
charges of $4.8 million in the 2003 fiscal year third quarter in
connection with the closure of its Nelco U.K. manufacturing
facility in Skelmersdale, England and severance costs at a North
American business unit and realized a pre-tax gain of $3.2
million in the 2003 fiscal year second quarter in connection with
the sale of its DPI subsidiary.

In the 2002 fiscal year, the Company recorded pre-tax
charges totaling $16.5 million related to the sale of the assets
and business of NTI, the Company's wholly owned subsidiary that
manufactured semi-finished printed circuit boards, commonly known
as mass lamination, in Tempe, Arizona, the closure of a related
support facility in Arizona and severance payments for workforce
reductions at the Company's continuing operations.

As a result of the Company's discontinuation of its
financial support of Dielektra in February 2004, the ensuing
insolvency of Dielektra and the Company's treatment of Dielektra
as a discontinued operation, the Company reclassified Dielektra's
operating losses and charges and accordingly recorded a net loss
from discontinued operations of $6.9 million in the 2003 fiscal
year, comprised of $5.7 million of operating losses incurred by
Dielektra and $1.2 million for after-tax fixed asset impairment
charges, and the Company recorded a net loss from discontinued
operations in the 2002 fiscal year of $8.1 million, comprised of
$5.2 million of operating losses incurred by Dielektra and $2.9
million related to the realignment of the operations of
Dielektra. In addition, the Company's sales from its continuing
operations do not include sales by Dielektra of $21.2 million for
the 2003 fiscal year and $28.4 million for the 2002 fiscal year.

The continuing low levels of sales of electronic materials
were largely responsible for the Company's results of continuing
operations for the fiscal year ended March 2, 2003. The North
American and European markets for sophisticated printed circuits
continued to be severely depressed during the 2003 fiscal year,
and the Company's electronic materials operations located in
those regions suffered as a result, although the Company believes
it gained market share with certain of its electronic materials
customers.

The Company's results of continuing operations and gross
profit improved in the 2003 fiscal year compared to the 2002
fiscal year principally as a result of the electronic material
business' reductions in costs and expenses despite the decrease
in sales and the concomitant operation of the Company's
facilities at levels far below their designed manufacturing
capacities.

Operating results of the Company's advanced composite
materials business also improved during the 2003 fiscal year
primarily as a result of higher percentages of sales of higher
margin products.

Results of Operations

Net sales from continuing operations for the fiscal year
ended March 2, 2003 declined 3% to $195.6 million from $201.7
million for the fiscal year ended March 3, 2002. The decrease in
net sales was principally the result of lower unit volumes of
materials shipped by the Company's operations in North America,
partially offset by higher unit volumes of materials shipped by
the Company's operations in Asia and Europe. The comparative
decrease in net sales was also influenced by the fact that the
Company's net sales in the fiscal year ended March 3, 2002
benefited from significantly higher sales in March 2001 than in
any subsequent month, as the downturn in the global electronics
industry and in the Company's sales occurred in the 2002 fiscal
year first quarter.

The Company's sales from continuing operations do not
include sales by Dielektra of $21.2 million for the 2003 fiscal
year and $28.4 million for the 2002 fiscal year.

The Company's foreign operations accounted for $77.7 million
of sales, or 40% of the Company's total sales worldwide from
continuing operations, during the 2003 fiscal year, compared with
$69.2 million of sales, or 34% of total sales worldwide from
continuing operations, during the 2002 fiscal year and 33% of
total sales worldwide from continuing operations during the 2001
fiscal year. Sales by the Company's foreign operations during the
2003 fiscal year increased slightly from the 2002 fiscal year due
to increases in sales in Asia while sales by the Company's
operations in England declined during the 2003 fiscal year
compared with the prior fiscal year.

The overall gross profit as a percentage of net sales for
the Company's worldwide continuing operations improved to 13.6%
during the 2003 fiscal year compared with 8.3% during the 2002
fiscal year. The improvement in the gross margin was attributable
to the significant declines in costs and expenses from the 2002
fiscal year, production efficiencies resulting from enhanced
manufacturing automation, and increases in market share with
certain key electronic materials customers, which were only
partially offset by lower sales volumes and inefficiencies caused
by operating certain facilities at levels below their designed
manufacturing capacities. Gross profit was also positively
impacted by higher percentages of sales of higher technology,
higher margin products, as high performance materials accounted
for 84% of worldwide sales from continuing operations for the
2003 fiscal year compared with 78% for the prior fiscal year. The
Company's cost of sales decreased significantly as a result of
lower production volumes and cost reduction measures implemented
by the Company, including significant workforce reductions and
the reduction of overtime, and the Company continued to implement
an annual salary freeze for significant numbers of salaried
employees, especially senior management employees, and paid no
performance bonuses or significantly reduced bonuses and other
incentives.

Selling, general and administrative expenses declined by
$6.5 million, or by 19%, during the 2003 fiscal year compared
with the 2002 fiscal year, and these expenses, measured as a
percentage of sales, were 13.9% during the 2003 fiscal year
compared with 16.7% during the 2002 fiscal year. The decrease in
selling, general and administrative expenses as a percentage of
sales in the 2003 fiscal year was due to the sale of DPI, the
closure of the Company's U.K. manufacturing facility in
Skelmersdale, England and expense reduction measures implemented
by the Company during the 2003 fiscal year.

In the 2003 fiscal year fourth quarter, the Company recorded
pre-tax, fixed asset impairment charges of $49.0 million related
to the writedowns of fixed assets at continuing operations in
North America. The after-tax impact of these fixed asset
impairments was $44.6 million. In addition, the Company recorded
pre-tax charges totaling $4.8 million in the 2003 fiscal year
third quarter related to the closure of its Nelco U.K.
manufacturing facility and severance costs at a North American
business unit and a pre-tax gain of $3.2 million in the 2003
fiscal year second quarter in connection with the sale of DPI on
June 27, 2002 for $5.0 million in cash. The net pre-tax charge
for all these items for the 2003 fiscal year was $50.7 million,
and the net after-tax charge for the fiscal year was $47.5
million.

For the reasons set forth above, the loss from continuing
operations was $51.2 million for the 2003 fiscal year, including
the pre-tax charges described above related to the writedowns of
fixed assets at continuing operations in North America, the
closure of the Nelco U.K. manufacturing facility and severance
costs at a North American business unit and the pre-tax gain
described above related to the sale of DPI, compared with a loss
from continuing operations of $33.5 million for the 2002 fiscal
year, including the pre-tax charges described above related to a
workforce reduction a business unit, the sale of NTI, the closure
of a related support facility and severance for the lay-off of
employees at the Company's continuing operations. The loss from
continuing operations for the 2003 fiscal year, before the pre-
tax items described above, was $0.5 million, compared with a loss
from continuing operations of $17.0 million before the pre-tax
charges described above for the 2002 fiscal year.

Interest and other income, net, principally investment
income, declined 39% to $3.3 million for the 2003 fiscal year
from $5.4 million for the 2002 fiscal year. The decrease in
investment income was attributable to lower prevailing interest
rates during the 2003 fiscal year. The Company's investments were
primarily short-term taxable instruments. The Company incurred no
interest expense during the 2003 or 2002 fiscal years. See
"Liquidity and Capital Resources" elsewhere in this Item 7.

The Company's effective income tax rate was a benefit of
8.4% for the 2003 fiscal year compared to a benefit of 38.1% for
the 2002 fiscal year. This decrease in the effective tax rate
benefit was the result of a valuation allowance on the tax
benefit from losses sustained in the 2003 fiscal year that will
be carried forward to future years for tax purposes. The
valuation allowance eliminated the current recognition of the tax
benefit from the tax loss carryforward due to the uncertainty of
the use of such benefit.

The loss from continuing operations for the 2003 fiscal
year, including the after-tax charges of $47.5 million described
above related to the write-downs of fixed assets at continuing
operations in North America, the closure of the Nelco U.K.
manufacturing facility and severance costs at a North American
business unit, was $43.9 million, compared to a loss from
continuing operations of $17.4 million for the 2002 fiscal year,
including the pre-tax charges described above related to a
workforce reduction at a business unit, the sale of NTI, the
closure of a related support facility and severance for the lay-
off of employees at the Company's continuing operations.

Basic and diluted losses per share for the 2003 fiscal year
were $2.58, including losses from the discontinued Dielektra
operations of $0.35 and the pre-tax charges and gain described
above, compared to losses per share of $1.31, including losses
from the discontinued Dielektra operations of $0.42 and the pre-
tax charges described above, for the 2002 fiscal year. Basic and
diluted losses per share from continuing operations for the 2003
fiscal year, including the pre-tax charges and gain described
above, were $2.23 compared to basic and diluted losses per share
from continuing operations for the 2002 fiscal year, including
the pre-tax charges described above, of $0.89, and basic and
diluted losses per share, excluding the pre-tax charges and gain
described above, were $0.18 for the 2003 fiscal year, compared to
losses of $0.35 for the 2002 fiscal year, excluding the pre-tax
charges described above.

Liquidity and Capital Resources:

At February 29, 2004, the Company's cash and temporary
investments were $189.2 million compared with $162.9 million at
March 2, 2003, the end of the Company's 2003 fiscal year. The
increase in the Company's cash and investment position at
February 29, 2004 was attributable to cash received from Delco
Electronics Corporation in payment of the judgment in favor of
the Company's subsidiary, Nelco Technology, Inc., in its lawsuit
against Delco, partially offset by purchases of property, plant
and equipment and the payment of dividends. The Company's working
capital (which includes cash and temporary investments) was
$197.5 million at February 29, 2004 compared with $170.3 million
at March 2, 2003. The increase in working capital at February 29,
2004 compared with March 2, 2003 was due principally to higher
cash and cash equivalents and higher accounts receivable, offset
in part by lower inventories and other current assets and higher
accrued liabilities. The increase in accounts receivable at
February 29, 2004 compared with March 2, 2003 was a result
principally of higher sales in the fiscal year 2004 fourth
quarter than in the fiscal year 2003 fourth quarter. The
Company's current ratio (the ratio of current assets to current
liabilities) was 5.6 to 1 at February 29, 2004 compared with 5.2
to 1 at March 2, 2003.

During the 2004 fiscal year, $32.3 million of cash provided
by the Company's operating activities included $6.9 million paid
as severance in connection with workforce reductions and $33.1
million that the Company received on July 1, 2003 from Delco
Electronics Corporation in settlement of the lawsuit by the
Company's subsidiary, Nelco Technology, Inc., against Delco. See
Notes 13 and 19 of the Notes to Consolidated Financial Statements
in Item 8 of Part II of this Report and Item 3 of Part I of this
Report for additional information regarding the lawsuit. Net
expenditures for property, plant and equipment were $2.4 million,
$6.4 million and $22.8 million in the 2004, 2003 and 2002 fiscal
years, respectively.

The Company sold its DPI subsidiary on June 27, 2002 for
$5.0 million in cash and recorded a pre-tax gain of $3.2 million
in the 2003 fiscal year second quarter in connection with the
sale.

At February 29, 2004 and March 2, 2003, the Company had no
long-term debt.

The Company believes its financial resources will be
sufficient, for the foreseeable future, to provide for continued
investment in working capital and property, plant and equipment
and for general corporate purposes. Such resources would also be
available for purchases of the Company's common stock,
appropriate acquisitions and other expansions of the Company's
business.

The Company is not aware of any circumstances or events that
are reasonably likely to occur that could materially affect its
liquidity.

The Company's contractual obligations and other commercial
commitments to make future payments under contracts, such as
lease agreements, consist only of the operating lease commitments
described in Note 15 of the Notes to Consolidated Financial
Statements included elsewhere in this Report. The Company has no
long-term debt, capital lease obligations, unconditional purchase
obligations or other long-term obligations, standby letters of
credit, guarantees, standby repurchase obligations or other
commercial commitments or contingent commitments, other than two
standby letters of credit in the total amount of $2.7 million to
secure the Company's obligations under its workers' compensation
insurance program.

As of February 29, 2004, the Company's significant
contractual obligations, including payments due by fiscal year,
were as follows:

Contractual Obligations
(Amounts in thousands) Total 2005 2006- 2008- 2010 and
2007 2009 thereafter

Operating lease
obligations $10,033 $2,097 $2,252 $1,530 $4,154

Purchase obligations 183 183 - - -

Total $10,216 $2,280 $2,252 $1,530 $4,154

Off-Balance Sheet Arrangements:

The Company's liquidity is not dependent on the use of, and
the Company is not engaged in, any off-balance sheet financing
arrangements, such as securitization of receivables or obtaining
access to assets through special purpose entities.

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 2004, 2003 and 2002 fiscal years, the Company charged
approximately $0.0 million, $0.1 million and $0.2 million,
respectively, against pre-tax 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 29,
2004, the recorded liability in liabilities from discontinued
operations for environmental matters related to Dielektra was
$2.1 million and the recorded liability in accrued liabilities
for environmental matters was $2.4 million compared with a total
record liability in accrued liabilities for environmental matters
of $4.2 million at March 2, 2003.

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 15 of the Notes to Consolidated Financial
Statements included in Item 8 of Part II of this Report for a
discussion of the Company's commitments and contingencies, includ
ing those related to environmental matters.

Critical Accounting Policies and Estimates:

In response to financial reporting release, FR-
60,"Cautionary Advice Regarding Disclosure About Critical
Accounting Policies", issued by the Securities and Exchange
Commission in December 2001, the following information is
provided regarding critical accounting policies that are
important to the Consolidated Financial Statements and that
entail, to a significant extent, the use of estimates,
assumptions and the application of management's judgment.

General

The Company's discussion and analysis of its financial
condition and results of operations are based upon the Company's
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements
requires the Company to make estimates, assumptions and judgments
that affect the reported amounts of assets, liabilities, revenues
and expenses and the related disclosure of contingent
liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to sales allowances, bad
debts, inventories, valuation of long-lived assets, income taxes,
restructuring, pensions and other employee benefit programs, and
contingencies and litigation. The Company bases its estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Company believes the following critical accounting
policies affect its more significant judgments and estimates used
in the preparation of its consolidated financial statements.

Sales Allowances

The Company provides for the estimated costs of sales
allowances at the time such costs can be reasonably estimated.
The Company is focused on manufacturing the highest quality
electronic materials and other products possible and employs
stringent manufacturing process controls and works with raw
material suppliers who have dedicated themselves to complying
with the Company's specifications and technical requirements.
However, if the quality of the Company's products declined, the
Company may incur higher sales allowances.

Bad Debt

The Company maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers to
make required payments. If the financial condition of the
Company's customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional
allowances may be required.

Inventory

The Company writes down its inventory for estimated
obsolescence or unmarketability based upon the age of the
inventory and assumptions about future demand for the Company's
products and market conditions.

Valuation of Long-lived Assets

The Company assesses the impairment of long-lived assets
whenever events or changes in circumstances indicate that the
carrying value of such assets may not be recoverable. Important
factors that could trigger an impairment review include, but are
not limited to, significant negative industry or economic trends
and significant changes in the use of the Company's assets or
strategy of the overall business.

Income Taxes

Carrying value of the Company's net deferred tax assets
assumes that the Company will be able to generate sufficient
future taxable income in certain tax jurisdictions, based on
estimates and assumptions. If these estimates and assumptions
change in the future, the Company may be required to record
additional valuation allowances against its deferred tax assets
resulting in additional income tax expense in the Company's
consolidated statement of operations. Management evaluates the
realizability of the deferred tax assets quarterly and assesses
the need for additional valuation allowances quarterly.

Restructuring

During the fiscal years ended February 29, 2004 and March 2,
2003, the Company recorded significant charges in connection with
the realignment of its North American FR-4 business operations,
the closures of the mass lamination operation of Dielektra GmbH
in Germany and the Company's manufacturing facility in England
and employee severance costs; and during the fiscal year ended
March 3, 2002, the Company recorded significant charges in
connection with the restructuring relating