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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended February 27, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to________
Commission file number 1-4415
Park Electrochemical Corp.
(Exact name of registrant as specified in its charter)
New York 11-1734643
State or other jurisdiction of (I.R.S. Employer
incorporation or 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:
Name of each exchange
Title of each class on which registered
Common Stock, $.10 par value 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 [ ]
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.
[Not Applicable]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date
within 60 days prior to the date of filing.
As of close
Title of Class Aggregate market value of business on
Common Stock, $149,213,259* May 9, 1994
$.10 par value
[cover page 1 of 2 pages]
Page 1 of 141; Exhibit index appears on page 51
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
Title of Class outstanding of business on
Common Stock, 5,101,308 May 9, 1994
$.10 par value
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for 1994 Annual Meeting of Shareholders--
Incorporated by reference into Part III of this Form 10-K.
=====================================================================
*Included in such amount are 856,086 shares of common stock valued at
$29.250 per share and held by Jerry Shore, the Registrant's Chief
Executive Officer and Chairman of the Board and a member of the
Registrant's Board of Directors.
[cover page 2 of 2 pages]
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,
manufacture and marketing of advanced electronic materials used in the
production of sophisticated, multilayer printed circuit boards. The Company
is a leading supplier of high performance laminates, prepregs and semi-
finished circuit boards to computer and electronics original equipment
manufacturers ("OEMs") and to major independent printed circuit board
manufacturers. The Company's advanced electronic materials are used in
computer, telecommunication, transportation, aerospace, military electronics
and other sophisticated electronic equipment applications. The Company is
also engaged in the design, manufacture and marketing of plumbing hardware
and industrial components.
The Company's business is divided into three industry segments:
electronics, plumbing hardware and industrial components. See Note 13 of
the Notes to Consolidated Financial Statements included in Item 8 of this
Report for information concerning the amounts of sales to unaffiliated cus-
tomers, operating profit, identifiable assets, depreciation and
amortization, and capital expenditures attributable to each of the Company's
industry segments during its last three fiscal years.
The sales, operating profit and identifiable assets of the Company's
foreign operations for the last three fiscal years are also set forth in
Note 13 of the Notes to Consolidated Financial Statements included in Item
8 of this Report. Such operations primarily consist of the operations of
the Company's subsidiaries in the United Kingdom, France and Singapore. The
Company's foreign operations are subject to the impact of foreign currency
fluctuations. See Note 1 of the Notes to Consolidated Financial Statements
contained in Item 8 of this Report.
Electronic Operations
The Company produces high technology laminates which are
manufactured primarily to customer specifications and are used principally
in the production of sophisticated multilayer printed circuit boards. These
laminates are made of conductive metals attached to insulating materials and
require rigorous process and quality control during production. The process
of converting the composite laminates into a printed circuit board involves
the transfer of the graphics of the printed wiring pattern to the sheet to
be processed, etching off that part of the conductive sheet that is not
required, and leaving the printed wiring conductors on the insulating
materials. The predominant composite used in the manufacture of advanced
electronic materials consists of the combination of copper conductive
material and insulation made up of epoxy and other resins reinforced with
woven fiberglass or prepreg. The Company produces prepreg both for use in
the production of high technology laminates and for direct sale to its
customers. These customers would normally perform the process of assembling
the prepreg and the copper conductive material to the core printed circuit
board. These customers would then complete the multilayer printed circuit
board by transferring and etching the printed wiring pattern to the outside
layers as described above. The Company also produces sophisticated semi-
finished multilayer printed circuit boards and panels. The production of
this product requires additional processing, by the Company, of its laminate
and prepreg products.
Industry Background
Printed circuit boards are widely used in the manufacture of
electronic equipment as the foundation for, and the interconnection between,
various integrated circuits and electronic components. Printed circuit
boards consist of metallic traces which conduct electrical current and which
are on or bonded within laminates. Initially, most boards produced were
double-sided printed circuit boards, with a different pattern of metallic
traces printed on each side of the printed circuit boards. Rapid techno-
logical advances in both semiconductor design and fabrication techniques
have placed significant demands on the performance of printed circuit boards
and have served as the impetus for development of new electronic materials,
including increasingly more advanced laminates. Greater density, complexity
and miniaturization of electronic circuitry have resulted in the development
of increasingly sophisticated electronic equipment which combines higher
performance and reliability with reduced size and cost. This has created
increased demand for more sophisticated printed circuit boards and, in
response to this demand, multilayer printed circuit boards were developed
which incorporate multiple layers of metallic traces and expand the amount
of circuitry available on the board. In addition, innovative electronic
manufacturing techniques, such as the direct surface mounting of components
to the printed circuit boards, have been developed in order to achieve
higher density circuitry and lower cost per circuit interconnection.
These trends in the printed circuit board industry have placed
increasingly rigorous demands on the electrical, thermal, chemical and
mechanical properties of the electronic materials used in printed circuit
board production. For example, electrical properties of laminates must be
highly consistent and predictable in order to avoid circuit timing mal-
functions. Likewise, mechanical properties must be tightly controlled so
that the various layers used in a multilayer printed circuit board can be
properly aligned. Thermal stability is also critical, particularly for
dense, high speed systems, because of the heat generated on the printed
circuit board.
Products and Services
The Company's high technology laminates are produced to customer
specifications using varying concentrations of insulating materials and
conducting materials. The Company's high technology prepreg and semi-
finished multilayer products are also manufactured to customer specifica-
tions. The Company specializes in creating electrically, mechanically,
chemically and thermally predictable materials which consistently meet the
special requirements of its customers. Because product requirements vary
from customer to customer, the Company's electronics circuitry business
requires a significant degree of customer service. The Company must be
capable of simultaneously filling many diverse customer orders on a timely
basis. The Company believes that its success in meeting these requirements
is based in large part on its ability to work with its customers in
developing product specifications, its willingness to allocate research and
development resources to meet new product requirements and its application
of stringent quality control to its technologically advanced production
process. The quality control program employed by the Company involves
monitoring each product and the materials used in its manufacture for purity
and uniformity, and maintaining highly disciplined process control
throughout the manufacturing cycle to assure uniformity and conformity with
each customer's specifications. The Company also offers incentive programs
to employees for their contribution to meeting product specifications on a
consistent basis.
Due to its emphasis on service and its desire to remain close to its
markets and customers, the Company has established multiple electronic
circuitry facilities in the Northeast United States, the Southwest United
States (California and Arizona), the United Kingdom, France and Singapore.
During the fiscal year ended February 28, 1993, the Company added two new
facilities dedicated to the manufacture of very high performance leading
edge printed circuitry materials, one in Arizona, USA and one in Lannemezan,
France.
Marketing and Customers
The Company's electronic materials and circuitry products are
marketed primarily to large computer and electronics OEMs and to major
independent printed circuit board manufacturers who are located throughout
the United States, Canada, Europe and the Far East. 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. Accordingly, the Company's strategy emphasizes the
use of multiple facilities established in market areas in close proximity to
its customers. After securing an order, Company personnel work closely with
the customer in developing the specifications needed for that customer's
product. The development work done with one customer, nevertheless, is
often applicable to the needs of other customers.
During the Company's 1994 fiscal year, more than 10% of the
Company's sales were made to a major domestic manufacturing concern. This
concern purchased electronic circuitry product manufactured by the Company.
The Company believes its relations with this customer to be very
satisfactory and further believes this customer will continue to make
significant purchases during the immediate future. Although the Company's
electronics segment is not dependent on this single customer, the loss of
this customer could have a material adverse effect on the business of this
segment. Although no other single customer accounted for 10% or more of
total sales of the Company for the 1994 fiscal year and the electronics
segment is not dependent on any other single customer, the loss of a major
customer or of a group of this segment's customers could have a material
adverse effect upon the business of this segment.
The Company's electronics segment's products are marketed by sales
personnel in industrial centers in the United States, Europe and the Far
East. Such personnel include both salaried employees and independent sales
representatives who work on a commission basis.
Materials and Sources of Supply
The principal materials used in the manufacture of the Company's
electronics products consist of copper foil, fiberglass cloth and synthetic
reinforcements, and specially formulated resins and chemicals. It is the
Company's philosophy to identify and concentrate on a limited number of
chosen suppliers of copper foil, resins and chemicals, and fiberglass cloth
and reinforcements. The Company attempts to develop and maintain close
working relationships with these chosen suppliers who have dedicated
themselves to complying with the Company's stringent specifications and
technical requirements. Although, as stated, the Company attempts to
concentrate on a limited number of suppliers for these materials, the
Company has nevertheless identified alternate sources of supply for each of
the aforesaid materials. However, there exists a limited number of
qualified suppliers of these materials. Therefore, although the Company
considers its relationships with its suppliers to be satisfactory, a
disruption of the supply of material from one of the Company's principal
suppliers could adversely affect the electronics segment's business.
Substitutes for the aforesaid materials are not readily available and an
inability to obtain essential materials, if prolonged, could materially
adversely affect the business of the Company's electronics segment.
Competition
The Company's electronics business is highly competitive. The
Company has many competitors of varying sizes and financial resources in the
electronic materials business located in the United States, Western Europe
and the Far East. Since the Company attempts to focus its efforts toward
the more sophisticated and "high-tech" end of the electronic materials
markets, quality and service, as well as price, are very significant
competitive factors. The Company's competitors in the high performance
electronic materials market consist of companies dedicated to particular
specialty areas as well as divisions and subsidiaries of some of the world's
major electronics and manufacturing concerns. These major concerns are
substantially larger and have significantly greater financial resources than
the Company. The principal competitive factors in the electronic materials
market are quality, customer service and price. The Company believes that
its competitive advantage is based on its ability to deliver, on a timely
basis, quality products that consistently meet customers' specifications.
The markets in which the Company's electronics 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's products are currently technologically competitive and the
Company directs a significant amount of its time and resources toward
maintaining its technological competitive advantage, there is no assurance
that the Company's products will be technologically competitive in the
future, or that the Company will continue to develop new products that are
technologically competitive.
Plumbing Hardware Operations
The Company markets plumbing hardware products which it designs and
manufactures typically from chrome and brass plated zinc and plastic. The
Company also markets brass cast and plastic plumbing hardware products and
components. These products are sold to OEMs, hardware and plumbing
wholesalers and home improvement centers. The Company's plumbing hardware
products are designed for low cost and ease of installation and repair and
also for water and energy conservation.
Marketing and Customers
Zinc and plastic plumbing hardware products are manufactured and
assembled at the Company's facilities in Grand Rapids and Comstock Park,
Michigan. The Company's brass cast plumbing hardware products are designed
by the Company and manufactured by a prominent Mexican faucet manufacturer
under a long term contract between the Company and this manufacturer. All
of such products are marketed by sales personnel including both salaried
employees and independent sales representatives who work on a commission
basis. The Company's plumbing hardware customers, substantially all of
which are located in the United States, include OEMs, hardware and plumbing
wholesalers and home improvement centers. The Company has entered into an
exclusive contract with a major U.S. faucet manufacturer to supply them with
a key group of plastic assembled products. No single plumbing hardware
customer accounted for 10% or more of the Company's total sales during the
last fiscal year. However, the loss of a major customer or of a group of
some of the largest customers of the plumbing hardware operations could have
a material adverse effect upon this segment.
Manufacturing and Sources of Supply
The Company designs and manufactures its plumbing hardware to its
own specifications and to the specifications of OEMs, using combinations of
materials and product designs that are developed by its personnel. The
Company usually combines chrome-plated zinc and plastic moldings for its
products.
The principal materials used in the manufacture of the Company's
plumbing hardware products consist of zinc, plastics, plating materials, and
other component parts. The Company purchases these materials from several
suppliers. Although satisfactory substitutes for these materials are not
readily available, the Company has experienced no difficulties in obtaining
such materials. The Company purchases brass castings from one supplier and
the Company has a long-term contract with this supplier.
Competition
The Company has many competitors in the plumbing hardware business,
including some major corporations which manufacture their own plumbing
hardware products and which have substantially greater financial resources
than the Company. The Company competes for plumbing hardware business
principally in terms of product performance, the ability to manufacture and
deliver products in accordance with a customer's needs, and price. The
Company's plumbing hardware business can be affected by fluctuations in the
housing industry.
Industrial Components Operations
The Company's industrial components operations are comprised of
manufacturing advanced composites utilized primarily by the defense and
aerospace industries and special purpose industrial adhesive tapes and
bonding films used to join industrial components together.
Marketing and Customers
The Company's industrial components products are manufactured (and
in some cases assembled) at the Company's facilities located in Waterbury,
Connecticut and Holyoke, Massachusetts. These products are marketed by
sales personnel including both salaried employees and independent sales
representatives who work on a commission basis. The Company's industrial
components customers, the majority of which are located in the United
States, are fairly diverse and include OEM's in, and suppliers to, the
aerospace and defense industry, the automotive industry and other manufac-
turing industries. No single industrial components customer accounted for
10% or more of the Company's total sales during the last fiscal year.
However, the loss of a major customer or of a group of some of the largest
customers of the industrial components operations could have a material
adverse effect upon this segment.
Manufacturing, Materials and Sources of Supply
The Company designs and manufactures its industrial components to
its own specifications and to the specifications of its customers. The
materials used in the manufacture of the Company's industrial components
include chemicals, films, resins, fiberglass, plastics, and other fabricated
materials and adhesives. The Company purchases these materials from several
suppliers. Although satisfactory substitutes for many of these materials
are not readily available, the Company has experienced no difficulties in
obtaining such materials.
Competition
The Company has many competitors in the industrial components
segment, including some major manufacturing concerns which have substantial-
ly greater financial resources than the Company. The Company competes for
industrial components 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.
Product Development
The Company's high performance laminates, prepregs and semi-finished
multilayer printed circuit boards are produced to customer specifications,
which are typically developed with the Company's assistance. Generally, the
Company utilizes funds first to develop a product or process in concept, and
later to refine and shape the product or process to fit the specifications
of a particular customer. The development work performed for one customer
is also often applicable to the needs of other customers.
Most of the Company's product development expenditures are
attributable to the efforts of the Company's electronics operations to
develop products that will be technologically competitive. The product
development work of the Company's electronic materials business is focused
on development of new and improved materials, products and processes to meet
the changing performance, signal transmission speed, density and reliability
requirements of the electronics industry. In response to rapid changes in
the electronic materials business, these expenditures on product development
have increased over the past several years.
The advanced composites manufactured by the Company are also
produced to customer specifications. Product development efforts are
devoted toward the conforming of the Company's advanced composites to the
specifications of, and the obtaining of approvals from, the Company's
customers.
The Company's product development efforts relating to its plumbing
hardware business operations are directed toward the development of new
decorative plumbing hardware product designs and new materials to be used in
the manufacture of plumbing products. This requires market research,
industrial design, engineering and testing for ease of installation and
durability.
Backlog
The Company records an item as backlog when it receives a purchase
order specifying the number of units to be purchased, the purchase price,
specifications and other customary terms and conditions. At April 29, 1994,
the unfilled portion of all purchase orders believed to be firm was
approximately $15,959,000, as compared to $15,692,000 at April 30, 1993.
Backlog of the Company's three industry segments at April 29, 1994, as
compared to April 30, 1993, was as follows:
April 29, 1994 April 30, 1993
Electronics $11,518,000 $10,279,000
Plumbing Hardware 2,605,000 1,899,000
Industrial Components 1,836,000 3,514,000
Total $15,959,000 $15,692,000
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 27, 1994.
Patents and Trademarks
The Company holds several patents and trademarks or licenses thereto.
In the Company's opinion, some of these patents and trademarks, particularly
those related to certain of its electronics and plumbing hardware products,
are important to such products. Generally, however, the Company does not
believe that its inability to obtain new, or to defend existing, patents and
trademarks would have a material adverse effect on the Company's business.
Employees
At February 27, 1994, the Company had approximately 1,540 employees.
Of these employees, 1,270 are engaged in the Company's electronics
operations, 210 in its plumbing hardware operations, 40 in its industrial
components operations and 20 consisted of executive personnel and general
administrative staff. Approximately 11% of the Company's employees, most of
whom are engaged in the industrial components, plumbing hardware and foreign
electronics operations, are subject to collective bargaining agreements.
Management considers its labor relations to be satisfactory.
Environmental Matters
The Company is subject to stringent environmental regulation. 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 during the remainder of
its current fiscal year or its succeeding fiscal year. However, other
possible 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 for a number of hazardous waste disposal sites or other potentially
contaminated areas. 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
are jointly and severally liable for the cost of cleanup unless the EPA or
such agency agrees otherwise. Generally, these sites are locations at which
numerous persons dispose 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 a very 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's business.
Item 2. Properties.
The following chart indicates the significant properties owned and
leased by the Company, the industry segment(s) which use the properties, and
the location and size of each such property. (All of such properties,
except for the Lake Success, New York property, are used principally as
manufacturing, warehouse and assembly facilities.)
Size
Owned or (Square
Location Leased Use Footage)
Lake Success, NY Leased Executive Offices 7,000
Walden, NY Owned Electronics 51,000
New Windsor, NY Leased Electronics 11,000
Fullerton, CA Leased Electronics 72,000
Anaheim, CA Leased Electronics 26,000
Tempe, AZ Leased Electronics 52,000
Tempe, AZ Leased Electronics 38,000
Tempe, AZ Leased Electronics 15,000
Mirebeau, France Owned Electronics 81,000
Lannemezan, France Owned Electronics 29,000
Skelmersdale, England Owned Electronics 54,000
Galashiels, Scotland Leased Electronics 13,000
Chippenham, England Leased Electronics 5,000
Singapore Owned Electronics 40,000
Singapore Leased Electronics 18,000
Grand Rapids, MI Owned Plumbing Hardware/ 165,000
Industrial Components
Comstock Park, MI Leased Plumbing Hardware 39,000
Holyoke, MA Leased Industrial Components/ 17,000
Electronics
Waterbury, CT Leased Industrial Components/ 100,000
Electronics
The Company believes its facilities and equipment to be in good
condition and reasonably suited and adequate for its current needs.
Item 3. Legal Proceedings.
(a) There are no material pending legal proceedings to which the
Company is a party or to which any of its properties is subject.
(b) No material pending legal proceeding was terminated during the
fiscal quarter ended February 27, 1994.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Executive Officers of the Registrant:
Name Title Age
Jerry Shore Chairman of the Board, Chief 68
Executive Officer, President and
a Director
E. Philip Smoot Executive Vice President and a 56
Director
Brian E. Shore Executive Vice President and a 42
Director
Allen Levine Vice President and Chief 64
Financial Officer, Secretary and
Treasurer
Jerry Shore has served the Company in the capacities stated above
for more than the past five years.
Mr. Smoot has served the Company in the capacities stated above for
more than the past five years.
Brian Shore has served as a Director of the Company for more than
the past five years. Brian Shore was elected a Vice President of the
Company in January 1993 and was elected Executive Vice President of the
Company in May of 1994. Brian Shore also served as General Counsel of the
Company from April, 1988 until April, 1994.
Mr. Levine has served the Company as Vice President for more than
the past five years and became the Chief Financial Officer of the Company in
March 1990. Mr. Levine was elected to the additional offices of Secretary
and Treasurer of the Company in May of 1991.
There are no family relationships between the directors or executive
officers of the Company, except that Brian Shore is the son of Jerry Shore.
The term of office of each executive officer of the Company expires
upon the election and qualification of his successor.
PART II
Item 5. Market for the Registrant's Common
Stock 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 sale prices for the Common
Stock as reported on the New York Stock Exchange and dividends declared on
the Common Stock.
For the Fiscal Year Stock Price Dividends
Ended February 27, 1994 High Low Declared
First Quarter 16 1/2 11 1/2 $.08
Second Quarter 15 7/8 14 5/8 $.08
Third Quarter 18 14 3/4 $.08
Fourth Quarter 27 16 5/8 $.08
For the Fiscal Year Stock Price Dividends
Ended February 28, 1993 High Low Declared
First Quarter 14 1/8 13 $.08
Second Quarter 13 3/4 12 7/8 $.08
Third Quarter 13 1/2 12 5/8 $.08
Fourth Quarter 13 11 5/8 $.08
As of May 9, 1994, there were 2,407 holders of record of Common
Stock.
The Indenture relating to the Company's 7 1/4% Convertible
Subordinated Debentures due June 15, 2006 prohibits the payment of dividends
on, or repurchase of, shares of the Company's Common Stock, if the aggregate
expenditures therefor subsequent to March 2, 1986 exceed the sum of (i) 60%
of Consolidated Net Earnings, as defined in such Indenture, since March 2,
1986, less 100% of any net losses since that date, plus (ii) the net
proceeds from certain issuances of shares since March 2, 1986, plus (iii)
$5,000,000. On April 5, 1994, the Company announced that, on May 31, 1994,
it will redeem all of the outstanding 7 1/4% Convertible Subordinated
Debentures. The redemption price will be $1,021.75, plus accrued interest
through the redemption date, for each $1,000 principal amount of debentures.
A $1,000 principal amount debenture is convertible into 48.31 shares of the
Company's common stock at a conversion price of $20.70 per share at any time
prior to the close of business on May 27, 1994. As of May 5, 1994,
$21,917,000 of principal amount debentures had been converted into 1,058,755
shares of the Company's common stock. The aforesaid restrictions and
prohibitions contained in the Indenture will be eliminated at the close of
business on May 31, 1994, the redemption date for the debentures.
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 27, 1994 and is
as of the end of such periods, it is derived from the consolidated financial
statements for such periods and as of such dates audited by Ernst & Young,
independent Certified Public Accountants, for the fiscal year ended February
27, 1994 and Deloitte & Touche, independent Certified Public Accountants for
all prior periods presented. The consolidated financial statements as of
February 27, 1994 and February 28, 1993 and for the three years ended
February 27, 1994, together with the auditors' report for the year ended
February 27, 1994, appear elsewhere in this Report.
Item 6
Fiscal Year Ended
Feb 27, Feb 28, Mar 1, Mar 3, Feb 25,
1994 1993 1992 1991 1990
(In Thousands, Except Per Share Amounts)
STATEMENT OF EARNINGS INFORMATION:
NET SALES $208,410 $175,176 $165,287 $163,982 $148,231
COSTS AND EXPENSES:
Cost of sales 168,175 149,145 141,717 141,278 124,753
Selling, general and administrative 25,930 22,865 21,250 21,385 18,682
Total costs and expenses 194,105 172,010 162,967 162,663 143,435
Operating profit 14,305 3,166 2,320 1,319 4,796
OTHER INCOME (EXPENSE):
Interest expense (2,407) (2,058) (2,649) (2,735) (2,816)
Other income, net 947 1,967 2,252 4,323 4,998
Total other income (expense) (1,460) (91) (397) 1,588 2,182
EARNINGS BEFORE INCOME TAXES 12,845 3,075 1,923 2,907 6,978
INCOME TAX PROVISION 4,783 810 608 1,018 2,840
EARNINGS BEFORE EXTRAORDINARY GAIN 8,062 2,265 1,315 1,889 4,138
EXTRAORDINARY GAIN - Net of taxes 290
NET EARNINGS $ 8,062 $ 2,265 $ 1,315 $ 2,179 $ 4,138
PRIMARY EARNINGS PER COMMON SHARE:
Earnings before extraordinary gain $ 2.02 $ .50 $ .29 $ .38 $ .80
Extraordinary gain .06
NET EARNINGS $ 2.02 $ .50 $ .29 $ .44 $ .80
FULLY DILUTED EARNINGS PER COMMON
SHARE:
Earnings before extraordinary gain $ 1.69 $ .50 $ .29 $ .38 $ .80
Extraordinary gain .06
NET EARNINGS $ 1.69 $ .50 $ .29 $ .44 $ .80
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Primary 3,993 4,534 4,528 4,923 5,147
Fully diluted 5,727 4,534 4,528 4,923 5,147
DIVIDENDS PER COMMON SHARE $ .32 $ .32 $ .32 $ .32 $ .32
BALANCE SHEET INFORMATION:
Working capital $ 45,867 $ 45,811 $ 51,737 $ 56,790 $ 70,529
Total assets 140,750 129,009 130,734 135,759 135,043
Long-term debt 32,861 33,957 33,439 33,420 35,104
Stockholders' equity 61,454 60,700 62,275 63,676 66,923
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Results of Operations
Fiscal 1994 Compared with Fiscal 1993
During the Company's fiscal year ended February 27, 1994, sales in-
creased 19% to $208,410,000 from $175,176,000 during the fiscal year ended
February 28, 1993. Operating profit for the 1994 fiscal year increased 352%
to $14,305,000 from $3,166,000 for the prior fiscal year. During the 1994
fiscal year, the Company continued its emphasis on its electronics segment,
which accounted for $182,559,000 in sales or 88% of the Company's total
sales worldwide, compared to $147,419,000, or 84% of the Company's total
worldwide sales during fiscal year 1993. The Company's foreign operations,
which are dedicated almost exclusively to the electronics segment, accounted
for $46,491,000 in sales or 22% of total sales worldwide during the 1994
fiscal year. Foreign sales during this fiscal year were virtually flat
compared to the prior fiscal year's foreign sales of $46,347,000. During
fiscal 1994, sales by the plumbing hardware segment increased 1% to
$18,210,000 from $18,086,000 during the prior fiscal year. Fiscal 1994
sales by the industrial components segment decreased 21% to $7,641,000 from
$9,671,000 during the prior fiscal year.
The gross profit percentage for the Company's worldwide operations
was 19.3% for the 1994 fiscal year, as compared to 14.9% for the prior
fiscal year.
The Company's overall improvement in profitability during the 1994
fiscal year was predominantly due to increased sales volume and a fairly
significant increase in the operating profits of the Company's United States
based electronics operations.
As mentioned above, the performance of the electronics segment, and
particularly the United States based electronics operations, improved during
the 1994 fiscal year. This improvement came in spite of continuing price
pressure on the sophisticated printed circuitry materials produced by this
segment, even in the Unites States. The negative impact of this price
pressure was offset by increased market share and sales volume, improved
yields and more effective and efficient resource utilization, particularly
at the United States based electronics operations. The European sophisti-
cated printed circuit materials industry continued to operate at depressed
levels during the 1994 fiscal year. The decline in the market for products
which support the manufacture of sophisticated electronic gear in Europe has
resulted in significant overcapacity in the printed circuit materials
industry, which in turn has lead to fierce price cutting for the products
manufactured by the Company's European electronics operations. This market
shrinkage and severe price pressure has very adversely effected the
Company's European electronics operations. The Company's Far East based
electronics operations continue to perform reasonably well, but were also
affected by price pressure.
The Company has continued its significant investment in the
machinery and equipment of its electronics business for the purpose of
enhancing capability and expanding capacity. The Company has also continued
to invest in the electronics businesses' leading edge technology and product
development efforts. The Company is currently expanding its electronics
manufacturing facilities in Arizona and Singapore, and plans to expand the
capacity of its New York facility during the year. In addition, the Company
continues to actively evaluate other strategic acquisition opportunities for
its electronics business. The Company believes that its ongoing commitment
to its electronic businesses' manufacturing capability and leading edge
technology has enabled, and will continue to enable, the Company's electron-
ics business to compete very effectively in the worldwide sophisticated
printed circuitry materials markets.
During the 1994 fiscal year, the Company's plumbing hardware segment
continued to underperform. Nevertheless, the Company's plumbing hardware
business very recently entered into an exclusive, long-term contract with a
very significant U.S. faucet manufacturer, and this agreement is expected to
greatly enhance the Company's market presence in a key target product area.
The Company also very recently entered into a long-term manufacturing,
marketing and product development contract with Mexico's largest faucet
manufacturer. Through this agreement, high quality decorative brass
plumbing products have been added to the existing plated zinc and plastic
plumbing hardware product lines carried by the Company's plumbing business,
and this addition has very substantially increased the potential market for
this businesses' products.
The Company's industrial components segment consists of the
Company's advanced composite and industrial adhesive tape businesses. The
performance of the industrial adhesive tape business improved significantly
during the 1994 fiscal year. Unfortunately, this improvement was overshad-
owed by the poor performance of FiberCote, the Company's 80% owned advanced
composite business. As previously reported, during the 1994 fiscal year,
the Company's internal accounting staff discovered financial and accounting
errors and irregularities at FiberCote. A thorough internal investigation
revealed that the FiberCote problems were caused, at least in part, by the
collusive conduct of certain members of FiberCote's senior management. As
a result of this investigation, the Company restated its previously reported
financial statements due to overstatements of net earnings arising from
these errors and irregularities including the following amounts: 1993
fiscal year - $195,000; and 1992 fiscal year - $406,000. The Company took
corrective action to address the financial and accounting problems at
FiberCote, including the dismissal of FiberCote's chief executive officer
and chief financial officer. The Company is in the process of resetting
FiberCote's business and operations. The FiberCote business accounts for
less than 5% of the Company's sales and net worth. In addition to these
problems, FiberCote has suffered as a result of reductions in the military
and aerospace markets which it serves.
Selling, general and administrative expenses, measured as a percent-
age of sales, were 12.4% during the 1994 fiscal year, as compared to 13.1%
during the prior fiscal year. This reduction in percentage is a function of
the partially fixed nature of the selling, general and administrative
expenses, relative to the increase in sales.
During the 1994 fiscal year, interest expense increased 17% to
$2,407,000 from $2,058,000 during the prior fiscal year. These expenses are
attributable to the interest payments made by the Company on its Convertible
Debentures and, to a lesser extent, on loans carried by certain of the
Company's foreign subsidiaries. The increase in this expense was attribut-
able to the reduction in interest capitalized to property, plant and
equipment during fiscal 1994 compared to fiscal 1993. Other income
decreased 52% to $947,000 during the 1994 fiscal year from $1,967,000 during
the 1993 fiscal year. Investment income, which is the principal component
of other income, decreased 42% to $947,000 during fiscal year 1994, as
compared to $1,619,000 during the prior fiscal year. This reduction in
investment income occurred because the average rate of interest earned by
the Company during the 1994 fiscal year was lower than that in effect during
the 1993 fiscal year. Also included in other income for the 1993 fiscal
year was a $348,000 gain derived from foreign currency transactions. The
Company's cash reserves continued to be invested primarily in short term
taxable instruments and government securities.
The Company's effective income tax rate for fiscal 1994 was 37.2%,
as compared to 26.3% for fiscal 1993. The effective tax rate for fiscal
1994 increased due to the reductions in general business credits, the
reduced impact of favorable foreign tax rate differentials, and the
adjustment in the prior year of Federal and state income tax accruals.
These increases were partially offset by the reduced impact of state and
local taxes, and foreign net operating losses without tax benefit, on the
1994 effective tax rate.
The Company's net earnings increased 256% in fiscal 1994 to
$8,062,000 from $2,265,000 during fiscal 1993. The increase in net profit
was attributable to the increase in operating profit. Primary and fully
diluted earnings per share increased to $2.02 and $1.69, respectively, for
the 1994 fiscal year compared to $.50 for both primary and fully diluted
earnings per share for the 1993 fiscal year.
The impact of inflation on the Company's operations was not consid-
ered to be significant during these periods.
Fiscal 1993 Compared with Fiscal 1992
During the Company's fiscal year ended February 28, 1993, sales in-
creased 6% to $175,176,000 from $165,287,000 during the fiscal year ended
March 1, 1992. Operating profit for the 1993 fiscal year increased 36% to
$3,166,000 from $2,320,000 for the prior fiscal year. During the 1993
fiscal year, the Company continued its emphasis on its electronics segment,
which accounted for $147,419,000 in sales or 84% of the Company's total
sales worldwide, compared to $137,707,000, or 83% of the Company's total
worldwide sales during fiscal year 1992. The Company's foreign operations,
which are dedicated almost exclusively to the electronics segment, accounted
for $46,347,000 in sales or 26% of total sales worldwide during the 1993
fiscal year. Foreign sales during the 1993 fiscal year decreased 1% from
the prior fiscal year's foreign sales of $46,675,000 due to the reduced
sales volume of the Company's European operations. During fiscal 1993,
sales by the plumbing hardware segment decreased 2% to $18,086,000 from
$18,394,000 during the prior fiscal year. Fiscal 1993 sales by the
industrial components segment increased 5% to $9,671,000 from $9,186,000
during the prior fiscal year.
The gross profit percentage for the Company's worldwide operations
was 14.9% for the 1993 fiscal year, as compared to 14.3% for the prior
fiscal year.
The depressed results for the 1993 fiscal year were largely
attributable to the ongoing weakness of all business segments and particu-
larly the serious difficulties experienced by the Company's European based
electronics operations.
The performance of the electronics segment during the 1993 fiscal
year was relatively weak. The United States electronics markets showed
signs of beginning a modest recovery and, in response, the Company's
domestic electronics operations began to improve during the latter half of
the 1993 year. However, these improvements were seen almost exclusively in
sales volumes, rather than in pricing, for the Company's electronics
products. Further, these improvements were nearly completely overshadowed
by the serious difficulties encountered by the Company's European electron-
ics operations during the 1993 year. The European sophisticated printed
circuit materials industry continued to operate under extreme pressure
during the 1993 year. This pressure had very adversely affected the pricing
for the Company's European electronics products and therefore the operating
margins of the Company's European electronics operations. The Company
adjusted the operating levels of its European operations in response to this
depressed market environment during the 1993 fiscal year in an attempt to
remove as much cost from these operations as possible while maintaining its
relatively significant business presence in that region. The Company's Far
East based electronics operations performed reasonably well during fiscal
1993.
During the 1993 fiscal year the Company acquired a French concern
which specializes in the manufacture of new, ultra-thin laminates for very
advanced printed circuitry applications, as well as the development of other
leading technologies and products for the printed circuitry industry. The
Company's new high-tech manufacturing facility in Tempe, Arizona also came
on-line during fiscal 1993. To the Company's knowledge, this facility is
the only facility in the world which is dedicated exclusively to the
development and manufacture of advanced high performance printed circuitry
material products which are used in the most sophisticated electronics
applications.
The Company's plumbing hardware segment continued to be adversely
affected by the ongoing domestic economic downturn, weak housing starts in
the United States and competitive pressure from the Far East during the 1993
year. During the 1993 fiscal year, the Company focused on improving the
production yields of its plumbing hardware operations. However, outside
market pressures continued to adversely affect this business.
While the sales of the industrial adhesive tape business grew
reasonably well during the 1993 fiscal year as compared to the prior year,
the operating margins of that business were somewhat disappointing. As
discussed above, the Company's financial statements were restated to reverse
certain accounting errors and irregularities discovered at the Company's 80%
owned advanced composite subsidiary, FiberCote, the other principal business
in the Company's industrial component segment. This advanced composite
business had come under pressure as the result of slow-downs and cut-backs
in the military and aerospace markets it serves.
Selling, general and administrative expenses, measured as a percent-
age of sales, were 13.1% during the 1993 fiscal year, as compared to 12.9%
during the prior fiscal year. Included in fiscal year 1993 selling, general
and administrative expenses were provisions for doubtful accounts of
$1,904,000 compared to $1,350,000 in the 1992 fiscal year. This increase
was a reflection of the general weakness in the electronics markets in which
the Company operates.
During the 1993 fiscal year, interest expense decreased 22% to
$2,058,000 from $2,649,000 during the prior fiscal year. These expenses
were attributable to the interest payments made by the Company on its
Convertible Debentures and, to a lesser extent, on loans carried by certain
of the Company's foreign subsidiaries. The majority of the reduction in
this expense was attributable to the repayment of virtually all of the
foreign loans by the Company during the 1993 fiscal year. Due to the
increasing spread between the interest earned on its cash reserves and the
interest charged on borrowings, the Company chose to eliminate nearly all
foreign bank borrowings. Other income decreased 13% to $1,967,000 during
the 1993 fiscal year from $2,252,000 during the 1992 fiscal year.
Investment income, which was the principal component of other income,
decreased 28% to $1,619,000 during fiscal year 1993, as compared to
$2,252,000 during the prior fiscal year. This significant reduction in
investment income occurred because the Company had a lesser amount of
available funds for investment during the 1993 fiscal year, and because the
prevailing interest rates during the 1993 fiscal year were lower than those
in effect during the 1992 fiscal year. Also included in other income for
the 1993 fiscal year was a $348,000 gain derived from foreign currency
transactions. This foreign currency gain partially offset the reduction in
investment income. The Company's cash reserves were invested primarily in
short term taxable instruments and government securities.
The Company's effective income tax rate for fiscal 1993 was 26.3%,
as compared to 31.6% for fiscal 1992. The lower effective tax rate for
fiscal 1993 was influenced by the adjustment of Federal and state income tax
accruals, the lower provision for state taxes and the increase in general
business credits. These reductions were partially offset by the net impact
of the higher foreign effective tax rate, which resulted from the increase
in foreign losses without tax benefit.
The Company's net earnings increased 72% in fiscal 1993 to
$2,265,000 from $1,315,000 during fiscal 1992. The increase in the 1993 net
profit was largely attributable to the increase in operating profit.
Primary and fully diluted earnings per share increased to $.50 for the 1993
fiscal year from $.29 for the 1992 fiscal year.
The impact of inflation on the Company's operations was not consid-
ered to be significant during these periods.
Liquidity and Capital Resources
At February 27, 1994, the Company's cash and temporary investments
amounted to $38,053,000, as compared to $32,768,000 at February 28, 1993.
This increase in the Company's cash and investment position was attributable
to several factors, including cash generated from operations. The Company's
working capital position was $45,867,000 at February 27, 1994, as compared
to $45,811,000 at February 28, 1993. The Company's current ratio, or the
ratio of current assets to current liabilities, was 2.1 to 1 at February 27,
1994, compared to 2.6 to 1 at February 28, 1993.
During the three year period ended February 27, 1994, the Company
generated $40,760,000 of funds from operations and expended $30,844,000 for
the purchase of property, plant and equipment.
On April 5, 1994, the Company announced that it had elected to
redeem its 7 1/4% Convertible Subordinated Debentures on May 31, 1994. The
redemption price is $1,021.75, plus accrued interest through the redemption
date, for each $1,000 principal amount. A $1,000 principal amount debenture
is convertible into 48.31 shares of the Company's common stock at any time
prior to the close of business on May 27, 1994. As of May 5, 1994,
$21,917,000 of principal amount debentures were converted into 1,058,755
shares of the Company's common stock. The Company believes that a
significant portion of the remaining outstanding debentures will be
converted into the Company's common stock prior to May 31, 1994. In any
event, effective May 31, 1994, substantially all of the Company's long-term
debt will have been eliminated, along with the debt service costs associated
therewith.
The Company believes its financial resources will be sufficient, for
the foreseeable future, to provide for continued investment in property,
plant and equipment and for general corporate purposes. Such resources are
also available for appropriate acquisitions and other expansions of the
Company's business.
Item 8. Financial Statements and Supplementary Data.
[The Company's Financial Statements begin on the next page.]
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Park Electrochemical Corp.
Lake Success, New York
We have audited the accompanying consolidated balance sheet of Park
Electrochemical Corp. and subsidiaries as of February 27, 1994 and the
related consolidated statements of earnings, stockholders' equity, and
cash flows for the year then ended. Our audit also included the financial
statement schedules listed in the Index at Item 14(a)(2). These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedules based on our
audit. The financial statements and financial statement schedules of Park
Electrochemical Corp. for the two years in the period ended February 28,
1993, were audited by other auditors whose report dated May 7, 1993,
except as to Note 16 as to which the date is October 8, 1993, expressed an
unqualified opinion on those statements and schedules.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements for the year ended
February 27, 1994 present fairly, in all material respects, the financial
position of Park Electrochemical Corp. and subsidiaries as of February 27,
1994, and the results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
ERNST & YOUNG
New York, New York
May 6, 1994
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares and Per Share Amounts)
February 27, February 28,
1994 1993
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,135 $ 9,006
Marketable securities (Note 2) 23,918 23,762
Accounts receivable, less allowance for
doubtful accounts of $2,673 and $2,977,
respectively 28,904 26,114
Inventories (Note 3) 16,144 14,233
Prepaid expenses and other current
assets (Note 8) 2,738 1,853
Total current assets 85,839 74,968
PROPERTY, PLANT AND EQUIPMENT - At cost, less
accumulated depreciation and amortization
(Note 4) 51,398 50,478
OTHER ASSETS 3,513 3,563
TOTAL $140,750 $129,009
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank loans payable (Note 5) $ 78 $ 120
Accounts payable 24,443 19,226
Accrued liabilities (Note 6) 12,487 8,735
Income taxes payable 2,964 1,076
Total current liabilities 39,972 29,157
LONG-TERM DEBT (Note 7) 32,861 33,957
DEFERRED INCOME TAXES (Note 8) 4,772 4,395
DEFERRED PENSION LIABILITY (Note 11) 1,691 800
COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)
STOCKHOLDERS' EQUITY (Notes 9, 10 and 11):
Preferred stock, $1 par value per share -
authorized, 500,000 shares; issued, none - -
Common stock, $.10 par value per share -
authorized, 15,000,000 shares; issued,
5,203,825 and 5,177,451 shares, respectively 520 518
Additional paid-in capital 17,965 17,250
Retained earnings 57,098 50,312
Currency translation adjustments 177 109
Pension liability adjustment (1,148) (398)
74,612 67,791
Less treasury stock, at cost, 1,150,642 and
635,461 shares, respectively (13,158) (7,091)
Total stockholders' equity 61,454 60,700
TOTAL $140,750 $129,009
See notes to consolidated financial statements
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except Per Share Amounts)
52 Weeks Ended
February 27, February 28, March 1,
1994 1993 1992
NET SALES $208,410 $175,176 $165,287
COSTS AND EXPENSES:
Cost of sales 168,175 149,145 141,717
Selling, general and administrative 25,930 22,865 21,250
Total costs and expenses 194,105 172,010 162,967
Operating profit 14,305 3,166 2,320
OTHER INCOME (EXPENSE):
Interest expense (2,407) (2,058) (2,649)
Other income, net (Notes 2 and 14) 947 1,967 2,252
Total other income (expense) (1,460) (91) (397)
EARNINGS BEFORE INCOME TAXES 12,845 3,075 1,923
INCOME TAX PROVISION (Note 8) 4,783 810 608
NET EARNINGS $ 8,062 $ 2,265 $ 1,315
EARNINGS PER COMMON SHARE (Note 10):
Primary $2.02 $ .50 $ .29
Fully diluted $1.69 $ .50 $ .29
See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Shares and Per Share Amounts)
Additional Currency Pension
Common Stock Paid-in Retained Translation Liability Treasury Stock
Shares Amount Capital Earnings Adjustments Adjustment Shares Amount
BALANCE, MARCH 3, 1991 5,177,451 $518 $17,313 $49,632 $3,770 $ (336) 647,273 $ (7,221)
Net earnings 1,315
Exchange rate changes (1,180)
Change in pension liability
adjustment (29)
Cash dividends,
$.32 per share (1,449)
Purchase of treasury stock 5,062 (58)
BALANCE, MARCH 1, 1992 5,177,451 518 17,313 49,498 2,590 (365) 652,335 (7,279)
Net earnings 2,265
Exchange rate changes (2,481)
Change in pension
liability adjustment (33)
Stock options exercised (63) (16,875) 188
Cash dividends,
$.32 per share (1,451)
Purchase of treasury stock 1
BALANCE, FEBRUARY 28, 1993 5,177,451 518 17,250 50,312 109 (398) 635,461 (7,091)
Net earnings 8,062
Exchange rate changes 68
Change in pension
liability adjustment (750)
Stock options exercised 184 (43,625) 499
Conversion of debentures 26,374 2 531
Cash dividends,
$.32 per share (1,276)
Purchase of treasury stock 558,806 (6,566)
BALANCE, FEBRUARY 27, 1994 5,203,825 $520 $17,965 $57,098 $ 177 $(1,148) 1,150,642 $(13,158)
See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
52 Weeks Ended
February 27, February 28, March 1,
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 8,062 $ 2,265 $ 1,315
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 8,733 7,840 7,196
Provision for doubtful accounts receivable (3) 1,904 1,350
Gain on sale of marketable securities (61) (180) (157)
Provision for deferred income taxes (52) (1,025) (294)
Other, net 282 220 119
Changes in operating assets and liabilities:
(Increase) in accounts receivable (2,773) (1,154) (3,700)
(Increase) decrease in inventories (1,908) (1,100) 3,895
Decrease (increase) in prepaid expenses
and other current assets 89 784 (371)
Decrease (increase) in other assets 164 (2,138) (552)
Increase (decrease) in accounts payable 5,265 544 (1,022)
Increase in accrued liabilities 3,247 810 1,162
Increase in income taxes payable 1,007 633 364
Net cash provided by operating activities 22,052 9,403 9,305
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net (9,627) (10,307) (10,910)
Purchases of marketable securities (200,404) (288,213) (376,800)
Proceeds from sales of marketable securities 200,309 293,584 377,048
Cash acquired in acquisition, net of cash paid - 6 -
Net cash used in investing activities (9,722) (4,930) (10,662)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of borrowings (64) (1,402) (2,741)
Dividends paid (1,276) (1,451) (1,449)
Proceeds from exercise of stock options 683 - -
Purchase of treasury stock (6,566) - (58)
Other - 3 (21)
Net cash used in financing activities (7,223) (2,850) (4,269)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
BEFORE EFFECT OF EXCHANGE RATE CHANGES 5,107 1,623 ( 5,626)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS 22 (544) (205)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,129 1,079 ( 5,831)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,006 7,927 13,758
CASH AND CASH EQUIVALENTS, END OF YEAR $ 14,135 $ 9,006 $ 7,927
See notes to consolidated financial statements.
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED FEBRUARY 27, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation - The consolidated financial statements
include the accounts of Park Electrochemical Corp. ("Park") and its
subsidiaries (collectively, the "Company"), substantially all of which
are wholly owned. All significant intercompany balances and
transactions have been eliminated.
b. Accounting Period - The Company's fiscal year is the 52 or 53 week
period ending the Sunday nearest to the last day of February. Fiscal
years 1994, 1993 and 1992 ended on February 27, 1994, February 28,
1993 and March 1, 1992, respectively. Each fiscal year presented
included 52 weeks.
c. Marketable Securities - Marketable securities are stated at the lower
of aggregate cost or market.
d. Inventories - Inventories are stated at the lower of cost (first-in,
first-out method) or market.
e. Depreciation and Amortization - Depreciation and amortization are
computed principally by the straight-line method over the estimated
useful lives of the related assets or, with respect to leasehold
improvements, the term of the lease, if shorter.
f. Income Taxes - Deferred income taxes are provided for temporary
differences in the reporting of certain items, primarily depreciation,
for income tax purposes as compared to financial accounting purposes.
United States ("U.S.") Federal income taxes have not been provided on
the undistributed earnings (approximately $7,100,000 at February 27,
1994) of the Company's foreign subsidiaries, since it is management's
practice and intent to reinvest such earnings in the operations of
these subsidiaries.
g. Foreign Currency Translation - Assets and liabilities of foreign
subsidiaries using currencies other than the U.S. dollar as their
functional currency are translated into U.S. dollars at year-end
exchange rates and income and expense items are translated at average
exchange rates for the period. Gains and losses resulting from
translation are recorded as currency translation adjustments in
stockholders' equity.
h. Deferred Charges - Preoperating and start-up costs incurred in
connection with new manufacturing facilities are deferred and included
in other assets and amortized on a straight-line basis over five
years.
Costs incurred in connection with the issuance of debt financing are
deferred and included in other assets and amortized on a straight-line
basis over the respective debt repayment period.
i. Consolidated Statements of Cash Flows - The Company considers all
money market securities and investments with maturities at the date of
purchase of 90 days or less to be cash equivalents.
Supplemental cash flow information:
Fiscal Year
1994 1993 1992
Cash paid during the year for:
Interest $2,352,000 $2,002,000 $2,592,000
Income taxes 3,960,000 1,072,000 899,000
j. Accounting for Certain Investments in Debt and Equity Securities - The
Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". SFAS No. 115 will
require investments in marketable equity securities and debt
securities to be presented at fair value. Implementation of SFAS No.
115 will not be required until fiscal 1995. The impact, if any, of
SFAS No. 115 on the consolidated financial statement is not expected
to be significant.
2. MARKETABLE SECURITIES
February 27, February 28,
1994 1993
Certificates of deposit $ - $ 2,000,000
Floating rate and medium term notes 6,000,000 2,000,000
Deposit notes - 3,999,000
U.S. Treasury bills and other
government securities 17,782,000 15,754,000
Other 136,000 9,000
$23,918,000 $23,762,000
Included in other income are realized gains on marketable securities
transactions of $61,000, $180,000 and $157,000 for fiscal 1994, 1993 and
1992, respectively.
3. INVENTORIES
February 27, February 28,
1994 1993
Raw materials $ 4,727,000 $ 4,580,000
Work-in-process 3,479,000 2,331,000
Finished goods 7,581,000 6,835,000
Manufacturing supplies 357,000 487,000
$16,144,000 $14,233,000
4. PROPERTY, PLANT AND EQUIPMENT
February 27, February 28,
1994 1993
Land, buildings and improvements $17,460,000 $15,546,000
Machinery, equipment, furniture
and fixtures 88,463,000 81,764,000
105,923,000 97,310,000
Less accumulated depreciation
and amortization 54,525,000 46,832,000
$51,398,000 $50,478,000
Depreciation and amortization expense relating to property, plant and
equipment amounted to $8,188,000, $7,148,000 and $6,842,000 for fiscal
1994, 1993 and 1992, respectively. Interest expense capitalized to
property, plant and equipment amounted to $109,000, $508,000 and $206,000
for fiscal 1994, 1993 and 1992, respectively.
5. BANK LOANS PAYABLE
Bank loans payable consist of $78,000 of unsecured demand loans relating
to foreign subsidiaries. Related foreign lines of credit totalled
$6,100,000 at February 27, 1994, of which $6,022,000 remains available
to the subsidiaries. The weighted average interest rate applicable to
such loans outstanding at February 27, 1994 approximated 8%.
6. ACCRUED LIABILITIES
February 27, February 28,
1994 1993
Payroll and commissions $ 3,112,000 $ 1,868,000
Taxes, other than income taxes 1,191,000 1,140,000
Other 8,184,000 5,727,000
$12,487,000 $ 8,735,000
7. LONG-TERM DEBT
February 27, February 28,
1994 1993
7.25% convertible subordinated
debentures $32,852,000 $33,398,000
Other 71,000 572,000
32,923,000 33,970,000
Less current portion (included
in accrued liabilities) 62,000 13,000
$32,861,000 $33,957,000
On June 12, 1986, the Company issued $35,000,000 of principal amount
7.25% convertible subordinated debentures which mature on June 15, 2006
with interest payable semiannually on June 15 and December 15 of each
year. The debentures are unsecured, subordinated to bank loans payable
(Note 5) and other long-term debt and are convertible at any time prior
to maturity into shares of the Company's common stock at $20.70 per
share. The Company may redeem the debentures at specified prices, plus
accrued interest, currently at 102.175% of principal value and declining
to 100% on June 15, 1996. Beginning June 15, 1996, and on each June 15
through 2005, the Company is required to redeem 7.5% of the original
principal amount, adjusted for any earlier redemptions, conversions or
open market purchases, to retire 75% of the debentures prior to maturity.
The indenture contains a minimum net worth requirement and certain
limitations regarding the payment of dividends and acquisitions of
treasury shares. Underwriting discount and related costs incurred in
connection with this financing amounted to $1,240,000.
On April 5, 1994, the Company announced that it had elected to redeem the
7.25% convertible subordinated debentures on May 31, 1994. The
redemption price will be $1,021.75, plus accrued interest through the
redemption date, for each $1,000 principal amount. A $1,000 principal
amount debenture is convertible into 48.31 shares of the Company's common
stock at any time prior to the close of business on May 27, 1994. As of
May 5, 1994, $21,917,000 of principal amount debentures were converted
into 1,058,755 shares of the Company's common stock. The Company
believes that a substantial portion of the $11,481,000 balance of
debentures still outstanding as of May 5, 1994 will convert into the
Company's common stock prior to May 31, 1994. If the conversion of
substantially all the debentures had occurred as of the beginning of the
1994 fiscal year, the primary earnings per share for fiscal 1994 would
have closely approximated the fully diluted earnings per share for fiscal
1994.
8. INCOME TAXES
The income tax provision includes the following:
Fiscal Year
1994 1993 1992
Current:
Federal $4,300,000 $1,650,000 $ 841,000
State and local 535,000 185,000 455,000
Foreign - - (394,000)
4,835,000 1,835,000 902,000
Deferred:
Federal 396,000 (475,000) (10,000)
State and local (145,000) (160,000) (5,000)
Foreign (303,000) (390,000) (279,000)
(52,000) (1,025,000) (294,000)
$4,783,000 $ 810,000 $ 608,000
The Company's effective income tax rate differs from the statutory U.S.
Federal income tax rate as a result of the following:
Fiscal Year
1994 1993 1992
Statutory U.S. Federal tax rate 35.0% 34.0% 34.0%
Tax accruals no longer required - (16.3) -
Foreign net operating losses
without tax benefit 4.6 34.1 5.2
Foreign tax rate differentials (.9) (21.9) (22.1)
State and local taxes, net of
Federal benefit 2.0 8.0 15.4
General business credits (2.8) (11.0) (6.4)
Other, net (.7) (.6) 5.5
37.2% 26.3% 31.6%
The Company adopted SFAS No. 109 effective March 1, 1993. SFAS No. 109
supersedes SFAS No. 96, "Accounting for Income Taxes" which the Company
had adopted in fiscal 1989. The cumulative effect of the adoption of
SFAS No. 109 was not significant.
The Company has foreign net operating loss carryforwards of approximately
$20,700,000, of which $16,700,000 was acquired through a business
combination. Approximately, $11,700,000 of the foreign tax net operating
loss carryforwards expire in varying amounts from 1995 through 1999; the
remainder have an indefinite expiration.
At February 27, 1994, a current deferred tax asset of $962,000, primarily
attributable to reserves not currently deductible for tax purposes, is
included in other current assets. A long-term deferred tax asset of
$339,000, primarily attributable to foreign net operating loss
carryforwards, is included in other assets. This long-term deferred tax
asset is net of a valuation reserve of approximately $8,300,000. The
majority of the valuation reserve relates to foreign net operating loss
carryforwards acquired through a business combination. The deferred tax
liabilities consist primarily of timing differences relating to
depreciation.
9. STOCKHOLDERS' EQUITY
a. Stock Options - Under the stock option plans approved by the Company's
stockholders, key employees may be granted options to purchase shares of
common stock exercisable at prices not less than the fair market value
at the date of grant. Options become exercisable 25% one year from the
date of grant, with an additional 25% exercisable each succeeding year.
The options expire 10 years from the date of grant.
On July 14, 1992, the Company's stockholders approved the adoption of a
1992 stock option plan (the "1992 Plan") pursuant to which options to
acquire 300,000 shares of the Company's common stock are available for
grant to key employees. The purchase price for common stock to be
acquired, upon the exercise of options, will be no less than 100% of the
fair market value of such stock at the date the options are granted. The
1992 Plan will expire in March 2002.
Information with respect to the Company's stock option plans follows:
Range of Outstanding Options
Exercise Prices Granted Exercisable
Balance, March 3, 1991 $ 7.41 - $17.75 138,825 101,862
Options becoming exercisable 12.00 - 17.75 - 15,964
Granted 11.00 - 12.10 83,900 -
Cancelled 11.50 - 17.75 (32,800) (29,900)
Balance, March 1, 1992 7.41 - 17.17 189,925 87,926
Options becoming exercisable 11.00 - 13.63 - 27,100
Granted 13.25 - 14.85 39,009 -
Exercised 7.41 (16,875) (16,875)
Cancelled 11.00 - 13.63 (1,350) (476)
Balance, February 28, 1993 11.00 - 17.17 210,709 97,675
Options becoming exercisable 11.00 - 14.85 - 36,552
Granted 14.75 - 14.88 90,650 -
Exercised 11.00 - 17.17 (43,625) (43,625)
Cancelled 11.00 - 14.85 (12,000) (3,800)
Balance, February 27, 1994 $11.00 - $17.17 245,734 86,802
At February 27, 1994, 192,341 stock options were available for future
grant under the plans.
On July 24, 1985, the Company's stockholders approved the grant of a
nonqualified stock option to an officer of the Company to purchase 50,000
shares of the Company's common stock at an exercise price of $15 per
share, the fair market value of the Company's common stock on November
27, 1984, the date of the grant. The option is exercisable in whole or
in part through November 27, 1994.
b. Dividends - During fiscal 1994, the Company declared and paid cash
dividends of $.32 per share, aggregating $1,276,000. A cash dividend of
$.08 per share was declared on March 18, 1994 payable on May 10, 1994 to
stockholders of record on April 12, 1994.
c. Treasury Stock - The Company repurchased six shares and one share of its
common stock under authorizations of the Board of Directors during fiscal
1994 and 1993, respectively.
On March 9, 1993, in a privately negotiated transaction with an
unaffiliated third party, the Company repurchased 558,800 shares of its
common stock for $6,566,000. The purchase was made outside the Company's
stock repurchase program.
d. Stockholders' Rights Plan - On February 2, 1989, the Company adopted a
stockholders' rights plan designed to protect stockholder interests in
the event the Company is confronted with coercive or unfair takeover
tactics. Under the terms of the plan, each stockholder of record on
February 15, 1989 received one right for each share of common stock owned
at that date. In the event that a person has acquired, or has the right
to acquire, 30% or more of the then outstanding common stock of the
Company or tenders for 20% of more of the outstanding common stock of the
Company (in either event, an "acquiring person"), such rights will become
exercisable, unless the Board of Directors otherwise determines. Upon
becoming exercisable as aforesaid, each right will entitle the holder
thereof to purchase one one-hundredth of a share of Series A Preferred
Stock for $60. In addition, each holder of an unexercised exercisable
right, other than an acquiring person, shall have the right to purchase
one share of the principal voting security of the acquiring person for
each right held by such holder at a purchase price per share equal to 50%
of the then market price per share of such acquiring person's securities.
Under certain circumstances, each unexercised exercisable right may
instead entitle the holder thereof to purchase one or fewer shares of the
Company's common stock at a 50% discount of the then market price. The
Company may redeem the rights for a nominal consideration at any time.
Unless redeemed or exercised earlier, all rights expire on February 15,
1999.
e. Reserved Common Shares - At February 27, 1994, 2,075,128 shares of common
stock were reserved for issuance upon exercise of stock options and
conversions of the 7.25% convertible subordinated debentures.
10. EARNINGS PER COMMON SHARE
Primary earnings per common share are computed based on the weighted
average number of common shares outstanding during the period. For
fiscal years 1993 and 1992, the assumed conversion of the Company's 7.25%
convertible subordinated debentures (after elimination of related
interest expense and amortization of deferred debt issuance costs, net
of income tax effect) was not considered in the calculation of the fully
diluted earnings per share, as the effect was antidilutive.
The weighted average number of common shares used to compute earnings per
share are as follows:
Fiscal Year
1994 1993 1992
Primary 3,993,000 4,534,000 4,528,000
Fully diluted 5,727,000 4,534,000 4,528,000
11. EMPLOYEE BENEFIT PLANS
a. Profit Sharing Plan - Park and certain of its subsidiaries have a
noncontributory profit sharing retirement plan covering their regular
full-time employees. The plan may be modified or terminated at any
time, but in no event may any portion of the contributions revert to
the Company. The Company's contributions under the plan amounted to
$1,513,000, $708,000 and $661,000 for fiscal 1994, 1993 and 1992,
respectively. Contributions are discretionary and may not exceed the
amount allowable as a tax deduction under the Internal Revenue Code.
During fiscal 1992, the Board of Directors of the Company approved the
incorporation of 401(k) retirement savings provisions into the
existing profit sharing retirement plan.
b. Pension Plans - A subsidiary of the Company has two pension plans
covering its union employees. The pension plans are noncontributory
defined benefit plans. The Company's funding policy is to contribute
annually the amounts necessary to satisfy the Internal Revenue
Service's funding standards.
In accordance with SFAS No. 87, the Company records its unfunded
pension liability related to its two defined benefit pension plans,
which amounted to $1,691,000 and $800,000 at February 27, 1994 and
February 28, 1993, respectively. The effect on the Company's
consolidated financial statements in recording the liability is to
recognize an asset (included in "Other Assets") of $543,000 and
$402,000 representing the deferred unrecognized prior service costs of
the plans at February 27, 1994 and February 28, 1993, respectively,
and to record a reduction of stockholders' equity of $1,148,000 and
$398,000 representing the excess of the liability over the
unrecognized prior service cost at February 27, 1994 and February 28,
1993, respectively.
Pension cost includes the following components:
Fiscal Year
1994 1993 1992
Service cost - benefits earned
during the period $ 48,000 $ 41,000 $ 43,000
Interest cost on projected benefit
obligation 276,000 247,000 242,000
Return on plan assets - actual (40,000) (94,000) (82,000)
Net amortization and deferral (39,000) (5,000) (13,000)
Net periodic pension cost $245,000 $189,000 $190,000
The funded status of the pension plan follows:
February 27, February 28,
1994 1993
Accumulated benefit obligation (including
vested benefit obligation of $3,816,000
and $2,874,000, respectively) $3,816,000 $2,879,000
Projected benefit obligation $3,816,000 $2,879,000
Plan assets at fair value 1,983,000 1,974,000
Excess of projected benefit obligation
over plan assets 1,833,000 905,000
Unrecognized net loss (1,152,000) (402,000)
Unrecognized prior service cost (301,000) (130,000)
Unrecognized net assets being amortized
over 15 years (238,000) (268,000)
Accrued pension liability $ 142,000 $ 105,000
The projected benefit obligation was determined using an assumed
discount rate of 7% and 9% for fiscal years 1994 and 1993,
respectively, and the assumed long-term rate of return on plan assets
was 8% for both fiscal years. Projected wage increases are not
applicable as benefits pursuant to the plans are based upon years of
service without regard to levels of compensation.
At February 27, 1994, plan assets were invested in U.S. government
securities, discounted bank notes and equity securities.
12. COMMITMENTS AND CONTINGENCIES
a. Lease Commitments - The Company conducts certain of its operations
from leased facilities which include several manufacturing plants,
warehouses and offices, and a land lease. The leases on facilities
are for terms of up to 10 years, the latest of which expires in 1998,
and the land lease expires in 2011. Many of the leases contain
renewal options for periods ranging from 1 to 15 years and require the
Company to pay real estate taxes and other operating costs.
These noncancelable operating leases have the following payment
schedule:
Fiscal Year Amount
1995 $1,815,000
1996 1,296,000
1997 909,000
1998 899,000
1999 307,000
Thereafter 645,000
$5,871,000
Rental expense, inclusive of real estate taxes and other costs,
amounted to $2,142,000, $1,755,000 and $1,463,000 for fiscal 1994,
1993 and 1992, respectively.
b. Environmental Contingencies - The Company and certain of its
subsidiaries have been named by the Environmental Protection Agency
(the "EPA") or a comparable state agency under the Comprehensive
Environmental Response, Compensation and Liability Act (the "Superfund
Act") or a similar state law as potentially responsible parties for a
number of hazardous waste disposal sites or other potentially
contaminated areas. 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 a
comparable state agency are jointly and severally liable for the cost
of cleanup unless the EPA or such agency agrees otherwise. Generally,
these sites are locations at which numerous persons dispose hazardous
waste. In the case of the Company's subsidiaries, generally the waste
was removed from their manufacturing facilities and disposed at waste
sites by various companies which contracted with the subsidiaries to
provide waste disposal services. Neither the Company nor any of its
subsidiaries have been accused of or charged with any wrongdoing or
illegal acts in connection with any such sites. The Company believes
it maintains a very effective and comprehensive environmental
compliance program.
Included in cost of sales are charges for actual expenditures and
accruals, based on estimates, for certain environmental matters
described above. The Company accrues estimated costs associated with
known environmental matters, when such costs can be estimated.
Management believes the ultimate disposition of known environmental
matters will not have a material adverse effect upon the liquidity,
capital resources, business or consolidated financial position of the
Company. However, one or more of such environmental matters could
have a significant negative impact on the Company's consolidated
financial results for a particular reporting period.
13. BUSINESS SEGMENTS
The Company has three major business segments: electronics, plumbing
hardware and industrial components. The Company's electronic materials
and circuitry products are marketed primarily to large computer and
electronics original equipment manufacturers ("OEMs") and to major
independent printed circuit board manufacturers that are located
throughout the United States, Canada, Europe and the Far East. The
Company's plumbing hardware customers, substantially all of which are
located in the United States, include OEMs, hardware and plumbing
wholesalers and home improvement centers. The Company's industrial
components customers, the majority of which are located in the United
States, include OEMs, aerospace and defense manufacturers.
Financial information concerning the Company's business segments follows
(all amounts stated in thousands of dollars):
Fiscal Year
1994 1993 1992
Sales to unaffiliated customers:
Electronics $182,559 $147,419 $137,707
Plumbing hardware 18,210 18,086 18,394
Industrial components 7,641 9,671 9,186
Net sales $208,410 $175,176 $165,287
Operating profit (1):
Electronics $ 18,597 $ 6,292 $ 6,091
Plumbing hardware (442) (635) (919)
Industrial components (802) 80 (511)
Total operating profit 17,353 5,737 4,661
General corporate expense (3,048) (2,571) (2,341)
Interest expense (2,407) (2,058) (2,649)
Other income, net 947 1,967 2,252
Total other income (expense) (1,460) (91) (397)
Earnings before income taxes $ 12,845 $ 3,075 $ 1,923
Identifiable assets (2):
Electronics $ 91,786 $ 85,880 $ 81,498
Plumbing hardware 6,293 7,291 7,353
Industrial components 3,223 4,027 3,966
101,302 97,198 92,817
Corporate assets 39,448 31,811 37,917
Total assets $140,750 $129,009 $130,734
Depreciation and amortization:
Electronics $ 7,910 $ 6,955 $ 6,306
Plumbing hardware 507 528 547
Industrial components 230 254 243
8,647 7,737 7,096
Corporate depreciation 86 103 100
Total depreciation and
amortization $ 8,733 $ 7,840 $ 7,196
Capital expenditures:
Electronics $ 9,193 $ 9,758 $ 10,138
Plumbing hardware 227 537 529
Industrial components 39 81 412
9,459 10,376 11,079
Corporate capital expenditures 23 17 24
Total capital expenditures $ 9,482 $ 10,393 $ 11,103
(1) Operating profit is comprised of total operating revenues, less costs
and expenses other than interest expense, general corporate expense
and income taxes.
(2) Identifiable assets consist of those assets which are used by the
segments. Corporate identifiable assets consist primarily of cash,
cash equivalents and marketable securities.
Sales to customers under common control, which were mostly attributed
to the electronics segment, were 25.3%, 15.6% and 17.4% of the
Company's consolidated sales for fiscal 1994, 1993 and 1992,
respectively. Intersegment sales and sales between geographic areas
were not significant.
Financial information regarding the Company's foreign operations,
which are conducted substantially in the United Kingdom, France and
Singapore, follows:
Fiscal Year
1994 1993 1992
Sales to unaffiliated customers $46,491 $46,347 $46,675
Sales to U.S. affiliates (1) - - 248
$46,491 $46,347 $46,923
Operating loss $(3,252) $(2,942) $(1,227)
Loss before income taxes $(3,242) $(2,989) $(1,578)
Identifiable assets $38,477 $37,031 $36,182
(1) Sales to U.S. affiliates are accounted for at cost and are eliminated
in consolidation.
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter
First Second Third Fourth
(Amounts in Thousands, Except Per Share Amounts)
Fiscal 1994:
Net sales $49,229 $47,318 $54,063 $57,800
Gross profit 8,031 8,902 10,378 12,924
Net earnings 892 1,588 2,177 3,405
Earnings per common share:
Primary $.22 $.40 $.55 $.85
Fully diluted $.22 $.35 $.45 $.66
Weighted average common
shares outstanding:
Primary 4,002 3,983 3,983 4,005
Fully diluted 4,002 5,728 5,728 5,728
Fiscal 1993:
Net sales $43,093 $44,176 $43,801 $44,106
Gross profit 6,462 6,516 6,271 6,782
Net earnings 643 702 232 688
Earnings per common share:
Primary and fully diluted $.14 $.16 $.05 $.15
Weighted average common
shares outstanding:
Primary and full diluted 4,525 4,526 4,542 4,542
Net earnings for the second quarter of fiscal 1993, includes $348,000
derived from currency exchange gains realized during such quarter, which
are included in other income on the consolidated statement of earnings.
Earnings per common share is computed separately for each quarter.
Therefore, the sum of such quarterly per share amounts may differ from
the total for the years.
15. ACQUISITION
In April 1992, the Company acquired 100% of the capital stock of Metclad
S.A. ("Metclad"), a French corporation located in Lannemezan, France, for
$429,000 in cash, plus the assumption of liabilities in the amount of
$1,421,000. This acquisition has been accounted for as a purchase and,
accordingly, the purchase price has been allocated to the acquired assets
and liabilities based on their estimated fair value at the date of
acquisition. The operating results of this acquisition are included in
the Company's consolidated statements of earnings from the date of
acquisition. Pro forma consolidated results are not presented because
Metclad was not an operating company at the time of acquisition.
16. RESTATEMENT
On September 20, 1993, the Company announced that its internal accounting
staff had recently uncovered financial and accounting errors and
irregularities at FiberCote Industries, Inc. ("FiberCote"), its 80% owned
advanced composites subsidiary. On the basis of the Company's
investigation of such financial and accounting errors and irregularities,
the Company had determined to restate the audited consolidated financial
statements. The adjustments involved the write-off of certain improperly
recorded receivables and the recognition of previously unrecorded
liabilities at FiberCote. The consolidated financial statements have
been restated to reverse the overstatements of net earnings in the
following amounts:
Fiscal Year
1993 1992
(Amounts in Thousands,
Except Per Share Amounts)
Earnings before income taxes,
as previously reported $3,370 $2,513
Adjustments (295) (590)
Earnings before income taxes,
as restated $3,075 $1,923
Net earnings, as previously reported $2,460 $1,721
Adjustments (195) (406)
Net earnings, as restated $2,265 $1,315
Earnings per common share
primary and fully diluted,
as previously reported $ 0.54 $ 0.38
Adjustments to earnings (0.04) (0.09)
Earnings per common share
primary and fully diluted,
as restated $ 0.50 $ 0.29
*******
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not applicable because previously reported.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information called for by this Item (except for information as
to the Company's executive officers, which information appears elsewhere in
this Report) is incorporated by reference to the Company's definitive proxy
statement for the 1994 Annual Meeting of Shareholders to be filed pursuant
to Regulation 14A.
Item 11. Executive Compensation.
The information called for by this Item is incorporated by
reference to the Company's definitive proxy statement for the 1994 Annual
Meeting of Shareholders to be filed pursuant to Regulation 14A.
Item 12. Security Ownership of Certain
Beneficial Owners and Management.
The information called for by this Item is incorporated by
reference to the Company's definitive proxy statement for the 1994 Annual
Meeting of Shareholders to be filed pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions.
The information called for by this Item is incorporated by
reference to the Company's definitive proxy statement for the 1994 Annual
Meeting of Shareholders to be filed pursuant to Regulation 14A.
PART IV
Item 14. Exhibits, Financial Statement Page
Schedules, and Reports on Form 8-K.
(a) Documents filed as a part of this report
(1) Financial Statements:
The following Consolidated Financial
Statements of the Company are
included in Part II, Item 8:
Report of Ernst & Young,
independent auditors 19
Balance sheets 20
Statements of earnings 21
Statements of stockholders' equity 22
Statements of cash flows 23
Notes to consolidated financial
statements (1-16) 24
(2) Financial Statement Schedules:
Schedule I - Marketable securities 44
Schedule V - Property, plant and equipment 45
Schedule VI - Accumulated depreciation and
amortization of property, plant and equipment 46
Schedule VIII - Valuation and qualifying
accounts 47
Schedule IX - Short-term borrowings 48
Schedule X - Supplementary income
statement information 49
All other schedules have been omitted because they are inapplicable
or not required, or the information is included elsewhere in the financial
statements or notes thereto.
(3)Exhibits:
Exhibit
Number Description
3.01 Restated Certificate of Incorporation filed with the Secretary
of State of the State of New York on April 10, 1989. (Reference
is made to Exhibit 3.01(g) of the Company's Annual Report on
Form 10-K for the fiscal year ended February 26, 1989, Commis-
sion File No. 1-4415, which is incorporated herein by refer-
ence.)
3.02 By-Laws of the Company, as amended to date. (Reference is made
to Exhibit 3.02 of the Company's Annual Report on Form 10-K for
the fiscal year ended March 1, 1992, Commission File No. 1-4415,
which exhibit is incorporated herein by reference.)
4.01 Indenture dated as of June 15, 1986 by and between the Company
and The Bank of New York, as Trustee, relating to the Company's
7-1/4% Convertible Subordinated Debentures due June 15, 2006.
(Reference is made to Exhibit 4.01(a) of the Company's Registra-
tion Statement on Form S-2, Commission File No. 33-6029, which
exhibit is incorporated herein by reference.)
Additional information concerning Registrant's long-term debt is
set forth in Note 7 of the Notes to Consolidated Financial
Statements included in Item 8 of this Report. Other than the
Indenture referred to above, no instrument defining the rights
of holders of such long-term debt relates to securities having
an aggregate principal amount in excess of 10% of the
consolidated assets of Registrant and its subsidiaries;
therefore, in accordance with paragraph (iii) of Item 4 of Item
601(b) of Regulation S-K, the other instruments defining the
rights of holders of long-term debt are not filed herewith.
Registrant hereby agrees to furnish a copy of any such other
instrument to the Securities and Exchange Commission upon
request.
4.02 Summary of Rights to Purchase Series A Preferred Stock of the
Company.
4.03 Rights Agreement, dated as of February 15, 1989, by and between
the Company and Registrar and Transfer Company, relating to the
Compan