Attached files
file | filename |
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EX-31.1 - PARK AEROSPACE CORP | v190104_ex31-1.htm |
EX-31.2 - PARK AEROSPACE CORP | v190104_ex31-2.htm |
EX-32.2 - PARK AEROSPACE CORP | v190104_ex32-2.htm |
EX-32.1 - PARK AEROSPACE CORP | v190104_ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 14(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended May 30, 2010
OR
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the transition period from ________ to__________
Commission
file number 1-4415
PARK
ELECTROCHEMICAL CORP.
(Exact
Name of Registrant as Specified in Its Charter)
New
York
|
11-1734643
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
48 South Service Road,
Melville, N.Y.
|
11747
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(631)
465-3600
|
(Registrant's
Telephone Number, Including Area Code)
|
Not
Applicable
|
(Former
Name, Former Address and Former Fiscal Year,
|
if
Changed Since Last Report)
|
Indicate by check
mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x
No ¨
Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files). Yes ¨
No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange
Act.
Large Accelerated Filer ¨
Accelerated Filer x
Non-Accelerated Filer ¨
Smaller Reporting Company ¨
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes ¨ No
x
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest practicable
date: 20,632,133 as of July 7, 2010.
PARK
ELECTROCHEMICAL CORP.
AND
SUBSIDIARIES
TABLE
OF CONTENTS
|
|
Page
Number
|
PART
I.
|
FINANCIAL
INFORMATION:
|
|
Item
1.
|
Financial
Statements
|
|
Condensed
Consolidated Balance Sheets May
30, 2010 (Unaudited) and February 28, 2010
|
3
|
|
Consolidated
Statements of Operations 13
weeks ended May 30, 2010 and May 31, 2009
(Unaudited)
|
4
|
|
Consolidated
Statements of Stockholders’ Equity 13
weeks ended May 30, 2010 and May 31, 2009
(Unaudited)
|
5
|
|
Condensed
Consolidated Statements of Cash Flows 13
weeks ended May 30, 2010 and May 31, 2009 (Unaudited)
|
6
|
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
7
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
15
|
Factors
That May Affect Future Results
|
23
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
23
|
Item
4.
|
Controls
and Procedures
|
23
|
PART
II.
|
OTHER
INFORMATION:
|
|
Item
1.
|
Legal
Proceedings
|
25
|
Item
1A.
|
Risk
Factors
|
25
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
25
|
Item
3.
|
Defaults
Upon Senior Securities
|
25
|
Item
4.
|
Reserved
|
25
|
Item
5.
|
Other
Information
|
25
|
Item
6.
|
Exhibits
|
26
|
SIGNATURES
|
27
|
|
EXHIBIT
INDEX
|
28
|
2
PART
I. FINANCIAL INFORMATION
PARK
ELECTROCHEMICAL CORP.
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Amounts
in thousands)
May 30, 2010
|
February 28,
|
|||||||
(Unaudited)
|
2010*
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 90,813 | $ | 134,030 | ||||
Marketable
securities (Note 3)
|
153,672 | 103,810 | ||||||
Accounts
receivable, net
|
36,055 | 31,698 | ||||||
Inventories
(Note 4)
|
14,053 | 11,973 | ||||||
Prepaid
expenses and other current assets
|
2,708 | 1,167 | ||||||
Total
current assets
|
297,301 | 282,678 | ||||||
Property,
plant and equipment, net
|
43,797 | 44,905 | ||||||
Goodwill
|
6,476 | 5,376 | ||||||
Other
assets
|
10,508 | 10,145 | ||||||
Total
assets
|
$ | 358,082 | $ | 343,104 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 11,922 | $ | 10,201 | ||||
Accrued
liabilities
|
8,999 | 7,301 | ||||||
Income
taxes payable
|
5,640 | 4,140 | ||||||
Total
current liabilities
|
26,561 | 21,642 | ||||||
Deferred
income taxes
|
1,398 | 1,398 | ||||||
Other
liabilities (Note 6)
|
3,911
|
3,966
|
||||||
Total
liabilities
|
31,870 | 27,006 | ||||||
Stockholders'
equity:
|
||||||||
Common
stock
|
2,063 | 2,054 | ||||||
Additional
paid-in capital
|
151,569 | 149,352 | ||||||
Retained
earnings
|
170,892 | 163,077 | ||||||
Treasury
stock, at cost
|
(1 | ) | (1 | ) | ||||
Accumulated
other comprehensive income
|
1,689 |
1,616
|
||||||
Total
stockholders' equity
|
326,212 |
316,098
|
||||||
Total
liabilities and stockholders’ equity
|
$ | 358,082 | $ | 343,104 |
*The
balance sheet at February 28, 2010 has been derived from the audited financial
statements at that date.
See
accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
3
PARK
ELECTROCHEMICAL CORP.
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Amounts
in thousands, except per share amounts)
13 weeks ended
|
||||||||
(Unaudited)
|
||||||||
May 30, 2010
|
May 31, 2009
|
|||||||
Net
sales
|
$ | 59,026 | $ | 36,697 | ||||
Cost
of sales
|
38,863 | 27,489 | ||||||
Gross
profit
|
20,163 | 9,208 | ||||||
Selling,
general and administrative expenses
|
7,762
|
5,917
|
||||||
Earnings
from operations
|
12,401 | 3,291 | ||||||
Interest
income and other income
|
|
76
|
688 | |||||
Earnings
from operations before income taxes
|
12,477 | 3,979 | ||||||
Income
tax provision
|
2,608 | 905 | ||||||
Net
earnings
|
$ | 9,869 | $ | 3,074 | ||||
Earnings
per share (Note 7)
|
||||||||
Basic
|
$ | 0.48 | $ | 0.15 | ||||
Diluted
|
$ | 0.48 | $ | 0.15 | ||||
Weighted
average number of common and common equivalent shares
outstanding:
|
||||||||
Basic
shares
|
20,561 | 20,471 | ||||||
Diluted
shares
|
20,608 | 20,482 | ||||||
Dividends
per share
|
$ | 0.10 | $ | 0.08 |
See
accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
4
PARK
ELECTROCHEMICAL CORP.
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts
in thousands)
13
weeks ended
|
||||||||
(Unaudited)
|
||||||||
May 30,
2010
|
May 31,
2009
|
|||||||
Common
stock and paid-in capital:
|
||||||||
Balance,
beginning of period
|
$ | 151,406 | $ | 148,981 | ||||
Stock-based
compensation
|
289 | 288 | ||||||
Stock
option activity
|
1,477 | 74 | ||||||
Tax
benefit on exercise of options
|
460
|
-
|
||||||
Balance,
end of period
|
153,632 | 149,343 | ||||||
Retained
earnings:
|
||||||||
Balance,
beginning of period
|
163,077 | 145,107 | ||||||
Net
earnings
|
9,869 | 3,074 | ||||||
Dividends
|
(2,054 | ) | (1,638 | ) | ||||
Balance,
end of period
|
170,892 | 146,543 | ||||||
Treasury
stock:
|
||||||||
Balance,
beginning of period
|
(1 | ) | (1 | ) | ||||
Stock
option activity
|
-
|
-
|
||||||
Balance,
end of period
|
(1
|
) |
(1
|
) | ||||
Accumulated
other comprehensive income (1):
|
||||||||
Balance,
beginning of period
|
1,616 | 1,622 | ||||||
Net
unrealized investment losses
|
(80 | ) | - | |||||
Translation
adjustments
|
153
|
188
|
||||||
Balance,
end of period
|
1,689 | 1,810 | ||||||
Total
stockholders' equity
|
$ | 326,212 | $ | 297,695 |
(1) Total comprehensive income for
the 13 weeks ended May 30, 2010 and May 31, 2009 was $9,942 and $3,262,
respectively.
See
accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
5
PARK
ELECTROCHEMICAL CORP.
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts
in thousands)
13
Weeks Ended
|
||||||||
(Unaudited)
|
||||||||
May
30,
2010 |
May
31,
2009 |
|||||||
Cash
flows from operating activities:
|
||||||||
Net
earnings
|
$ | 9,869 | $ | 3,074 | ||||
Depreciation
and amortization
|
1,746 | 1,680 | ||||||
Stock-based
compensation
|
289 | 288 | ||||||
Change
in operating assets and liabilities
|
(3,435 | ) | 1,960 | |||||
Net
cash provided by operating activities
|
8,469
|
7,002 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchases
of property, plant and equipment
|
(607 | ) | (838 | ) | ||||
Purchases
of marketable securities
|
(109,267 | ) | (4,073 | ) | ||||
Proceeds
from sales and maturities of marketable
securities
|
59,328 | 117,161 | ||||||
Business
acquisition
|
(1,100
|
) |
-
|
|||||
Net
cash (used in) provided by investing activities
|
(51,646 | ) | 112,250 | |||||
Cash
flows from financing activities:
|
||||||||
Dividends
paid
|
(2,054 | ) | (1,638 | ) | ||||
Proceeds
from exercise of stock options
|
1,477 | 74 | ||||||
Tax
benefits from stock-based compensation
|
460
|
-
|
||||||
Net
cash used in financing activities
|
(117
|
) | (1,564 | ) | ||||
Change
in cash and cash equivalents before exchange
rate changes
|
(43,294 | ) | 117,688 | |||||
Effect
of exchange rate changes on cash and
cash equivalents
|
77 | (68 | ) | |||||
Change
in cash and cash equivalents
|
(43,217 | ) | 117,620 | |||||
Cash
and cash equivalents, beginning of period
|
134,030 | 40,790 | ||||||
Cash
and cash equivalents, end of period
|
$ | 90,813 | $ | 158,410 | ||||
Supplemental
cash flow information:
|
||||||||
Cash
paid during the period for income taxes
|
$ | 632 | $ | 782 |
See
accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
6
PARK
ELECTROCHEMICAL CORP.
AND
SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts
in thousands, except per share and option amounts)
1.
|
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
The
condensed consolidated balance sheet as of May 30, 2010, the consolidated
statements of operations, stockholders’ equity and the condensed consolidated
statements of cash flows for the 13 weeks then ended have been prepared by Park
Electrochemical Corp. (the “Company”), without audit. In the opinion of
management, these unaudited consolidated financial statements contain all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position at May 30, 2010 and the results of
operations, stockholders’ equity and cash flows for all periods
presented.
Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company’s Annual Report
on Form 10-K for the fiscal year ended February 28, 2010.
2.
|
FAIR
VALUE MEASUREMENTS
|
The
Company adopted the accounting standard related to fair value measurements,
effective February 28, 2010. Under this standard, fair value is
defined as the price that would be received to sell an asset or paid to transfer
a liability (i.e., the “exit price”) in an orderly transaction between market
participants at the measurement date.
Fair
value measurements are broken down into three levels based on the reliability of
inputs as follows:
Level
1 inputs are quoted prices in active markets for identical assets or liabilities
that the Company has the ability to access at the measurement date. An active
market for the asset or liability is a market in which transactions for the
asset or liability occur with sufficient frequency and volume to provide pricing
information on an ongoing basis. The valuation under this approach does not
entail a significant degree of judgment.
Level
2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly. Level 2 inputs include quoted prices for similar assets
or liabilities in active markets, inputs other than quoted prices that are
observable for the asset or liability (e.g.,
interest rates and yield curves observable at commonly quoted intervals or
current market) and contractual prices for the underlying financial instrument,
as well as other relevant economic measures.
Level
3 inputs are unobservable inputs for the asset or
liability. Unobservable inputs are used to measure fair value to the
extent that observable inputs are not available, thereby allowing for situations
in which there is little, if any, market activity for the asset or liability at
the measurement date.
7
The
fair value of the Company’s cash and cash equivalents, accounts receivable,
accounts payable and current liabilities approximate their carrying values due
to their short-term nature. Certain assets and liabilities of the Company are
required to be recorded at fair value on either a recurring or non-recurring
basis. On a recurring basis, the Company records its marketable securities (see
Note 3) at fair value using Level 1 inputs.
The
Company’s non-financial assets measured at fair value on a non-recurring basis
include goodwill and any assets and liabilities acquired in a business
combination or any long-lived assets written down to fair value. To measure fair
value for such assets, the Company uses Level 3 inputs consisting of techniques
including an income and market approach. The income approach is based
on a discounted cash flow analysis and calculates the fair value by estimating
the after-tax cash flows attributable to a reporting unit and then discounting
the after-tax cash flows to a present value using a risk-adjusted discount
rate. Assumptions used in the discounted cash flow analysis require
the exercise of significant judgment, including judgment about appropriate
discount rates and terminal value, growth rates and the amount and timing of
expected future cash flows.
3.
|
MARKETABLE
SECURITIES
|
The
following is a summary of available-for-sale securities:
Gross
|
Gross
|
|||||||||||
Unrealized
|
Unrealized
|
Estimated
|
||||||||||
Gains
|
Losses
|
Fair Value
|
||||||||||
May
30, 2010:
|
||||||||||||
U.S.
Treasury and other government securities
|
$ | 16 | $ | 38 | $ | 124,050 | ||||||
U.S.
corporate debt securities
|
- | 41 | 13,382 | |||||||||
Certificates
of deposit
|
- | - | 16,240 | |||||||||
Total
debt securities
|
$ | 16 | $ | 79 | $ | 153,672 | ||||||
February
28, 2010:
|
||||||||||||
U.S.
Treasury and other government securities
|
$ | 33 | $ | 6 | $ | 56,279 | ||||||
U.S.
corporate debt securities
|
- | 12 | 5,209 | |||||||||
Certificates
of deposit
|
- | - | 42,322 | |||||||||
Total
debt securities
|
$ | 33 | $ | 18 | $ | 103,810 |
The
fair value of investments was determined based on observable inputs, which were
quoted market prices for identical assets in active markets. The estimated fair
values of the debt and marketable securities at May 30, 2010, by contractual
maturity, are shown below:
Due
in one year or less
|
$ | 141,432 | ||
Due
after one year through five years
|
12,240 | |||
$ | 153,672 |
8
4.
|
INVENTORIES
|
|
Inventories
are stated at the lower of cost (first-in, first-out method) or market.
Inventories consisted of the
following:
|
May
30,
|
February
28,
|
|||||||
2010
|
2010
|
|||||||
Raw
materials
|
$ | 6,252 | $ | 5,675 | ||||
Work-in-progress
|
3,940 | 2,975 | ||||||
Finished
goods
|
3,585 | 3,059 | ||||||
Manufacturing
supplies
|
276 | 264 | ||||||
$ | 14,053 | $ | 11,973 |
5.
|
STOCK-BASED
COMPENSATION
|
|
As
of May 30, 2010, the Company had a 1992 Stock Option Plan and a 2002 Stock
Option Plan, and no other stock-based compensation plan. Both Stock Option
Plans have been approved by the Company’s stockholders and provide for the
grant of stock options to directors and key employees of the Company. All
options granted under such Plans have exercise prices equal to the fair
market value of the underlying common stock of the Company at the time of
grant, which pursuant to the terms of the Plans, is the reported closing
price of the common stock on the New York Stock Exchange on the date
preceding the date the option is granted. Options granted under the Plans
become exercisable 25% one year from the date of grant, with an additional
25% exercisable each succeeding anniversary of the date of grant, and
expire 10 years from the date of grant. The authority to grant additional
options under the 1992 Stock Option Plan expired on March 24, 2002, and
options to purchase a total of 1,800,000 shares of common stock were
authorized for grant under the 2002 Stock Option Plan. At May 30, 2010,
1,859,145 shares of common stock of the Company were reserved for issuance
upon exercise of stock options under the 1992 Stock Option Plan and the
2002 Stock Option Plan and 935,681 options were available for future grant
under the 2002 Stock Option Plan. No options of common stock were granted
during the 13 week period ended May 30, 2010. Options to purchase 4,000
shares of common stock were granted during the 13 week period ended May
31, 2009.
|
|
The
Company records its stock-based compensation at fair
value.
|
The
future compensation expense affecting earnings from operations before income
taxes for options outstanding at May 30, 2010 will be $1,752 and will be
recognized over the next three fiscal years.
The
following is a summary of options for the 13 weeks ended May 30,
2010:
9
Weighted
Average
|
||||||||||||||||
Weighted
Average
|
Remaining
Contract
|
Aggregated
|
||||||||||||||
Options
|
Exercise
Price
|
Life in
Months
|
Intrinsic
Value
|
|||||||||||||
Outstanding
at February 28, 2010
|
1,018,095 | $ | 24.89 | 66.68 | $ | 2,901 | ||||||||||
Granted
|
- | - | ||||||||||||||
Exercised
|
(90,443 | ) | 16.33 | |||||||||||||
Terminated
or expired
|
(4,188 | ) | 23.05 | |||||||||||||
Outstanding
at May 30, 2010
|
923,464 | $ | 25.74 | 69.72 | $ | 1,124 | ||||||||||
Exercisable
at May 30, 2010
|
583,204 | $ | 25.32 | 51.76 | $ | 919 |
The
total intrinsic value of options exercised during the 13 weeks ended May 30,
2010 and May 31, 2009 was $1,233 and $14, respectively.
A
summary of the status of the Company’s nonvested options at May 30, 2010, and
changes during the 13 week period then ended, is presented below:
Shares Subject
to Options
|
Weighted Average
Grant Date Fair
Value
|
|||||||
Nonvested,
beginning of period
|
343,066 | $ | 7.44 | |||||
Granted
|
- | - | ||||||
Vested
|
(1,000 | ) | 4.43 | |||||
Terminated
|
(1,806 | ) | 7.99 | |||||
Nonvested,
end of period
|
340,260 | $ | 7.45 |
6.
|
RESTRUCTURINGS
AND SEVERANCE CHARGES
|
|
As
of February 28, 2010, the Company had remaining obligations of $112
related to the closure of the Company’s Neltec Europe SAS electronic
materials business unit located in Mirabeau, France. The Company paid $10
of these obligations in the 13 week period ended May 30, 2010 and expects
to pay the remaining $102 during the 2011 fiscal
year.
|
|
During
the 2004 fiscal year, the Company recorded charges related to the
realignment of its North American volume printed circuit materials
operations. The charges were for employment termination benefits of
$1,258, which were fully paid in fiscal year 2004, and lease and other
obligations of $7,292. All costs other than the lease obligations were
settled prior to fiscal year 2007. The future lease obligations are
payable through September 2013. The remaining balances on the lease
obligations relating to the realignment were $2,396 and $2,534 as of May
30, 2010 and February 28, 2010, respectively. For the 13 weeks ended May
30, 2010 and May 31, 2009, the Company applied $138 and $246,
respectively, of lease payments against such lease
obligations.
|
7.
|
EARNINGS
PER SHARE
|
Basic
earnings per share are computed by dividing net earnings by the weighted average
number of shares of common stock outstanding during the period. Diluted earnings
per share are computed by dividing net earnings
10
by the sum of
(a) the weighted average number of shares of common stock outstanding during the
period and (b) the potential common stock equivalents outstanding during the
period. Stock options are the only common stock equivalents, and the number of
dilutive options is computed using the treasury stock method.
The
following table sets forth the calculation of basic and diluted earnings per
share for the 13 weeks ended May 30, 2010 and May 31, 2009.
13 weeks
ended
|
||||||||
May 30,
2010
|
May 31,
2009
|
|||||||
Net
Earnings
|
$ | 9,869 | $ | 3,074 | ||||
Weighted
average common shares outstanding for basic EPS
|
20,561 | 20,471 | ||||||
Net
effect of dilutive options
|
47 |
11
|
||||||
Weighted
average shares outstanding for diluted EPS
|
20,608 | 20,482 | ||||||
Basic
earnings per share
|
$ | 0.48 | $ | 0.15 | ||||
Diluted
earnings per share
|
$ | 0.48 | $ | 0.15 |
Common
stock equivalents, which were not included in the computation of diluted
earnings per share because the effect would have been antidilutive as the
options’ exercise prices were greater than the average market price of the
common stock, were 206 and 159 for the 13 weeks ended May 30, 2010 and May 31,
2009, respectively.
8.
|
INCOME
TAXES
|
The
Company’s effective tax rate for the 13-week ended May 30, 2010 was 20.9%,
compared to 22.7% for the 13-week period ended May 31, 2009. The effective rates
varied from the U.S. Federal statutory rate primarily due to foreign income
taxed at lower rates. During the 13 weeks ended November 29, 2009, the Company
received a retroactive extension and amendment of a development and expansion
tax incentive in Singapore for the period July 1, 2007 through June 30, 2011.
The extension and amendment provides for reduced tax rates for taxable income in
excess of a stipulated base level of taxable income. The Company’s policy is to
include applicable interest and penalties related to unrecognized tax benefits
as a component of income tax expense.
9.
|
GEOGRAPHIC
REGIONS
|
The
Company is a global advanced materials company which develops, manufactures,
markets and sells high technology digital and RF/microwave printed circuit
materials principally for the telecommunications and internet infrastructure and
high-end computing markets and advanced composite materials, parts and
assemblies for the aerospace and specialty markets. The Company's printed
circuit materials products, the Company’s advanced composite materials products
and the Company’s composite parts and assemblies products are sold to customers
in North America, Europe and Asia.
11
Sales
are attributed to geographic region based upon the region in which the materials
were delivered to the customer.
Financial
information concerning the Company's operations by geographic region
follows:
13
weeks ended
|
||||||||
May
30,
|
May
31,
|
|||||||
2010
|
2009
|
|||||||
Sales:
|
||||||||
North
America
|
$ | 26,718 | $ | 19,861 | ||||
Europe
|
7,526 | 3,497 | ||||||
Asia
|
24,782 | 13,339 | ||||||
Total
sales
|
$ | 59,026 | $ | 36,697 |
May
30,
|
February
28,
|
|||||||
2010
|
2010
|
|||||||
Long-lived
assets:
|
||||||||
North
America
|
$ | 40,416 | $ | 40,021 | ||||
Europe
|
1,206 | 1,264 | ||||||
Asia
|
19,159 | 19,141 | ||||||
Total
long-lived assets
|
$ | 60,781 | $ | 60,426 |
10.
|
CONTINGENCIES
|
a.
|
Litigation
– The Company is subject to a small number of proceedings, lawsuits and
other claims related to environmental, employment, product and other
matters. The Company is required to assess the likelihood of any adverse
judgments or outcomes in these matters as well as potential ranges of
probable losses. A determination of the amount of reserves required, if
any, for these contingencies is made after careful analysis of each
individual issue. The required reserves may change in the future due to
new developments in each matter or changes in approach, such as a change
in settlement strategy in dealing with these
matters.
|
b.
|
Environmental
Contingencies - The Company and certain of its subsidiaries have
been named by the Environmental Protection Agency (the "EPA") or a
comparable state agency under the Comprehensive Environmental Response,
Compensation and Liability Act (the "Superfund Act") or similar state law
as potentially responsible parties in connection with alleged releases of
hazardous substances at eight sites. In addition, two subsidiaries of the
Company have received cost recovery claims under the Superfund Act or a
similar state law from other private parties involving two other sites,
and a subsidiary of the Company has received requests from the EPA under
the Superfund Act for information with respect to its involvement at three
other sites.
|
Under
the Superfund Act and similar state laws, all parties who may have contributed
any waste to a hazardous waste disposal site or contaminated area identified by
the EPA or comparable state agency may be jointly and severally liable for the
cost of cleanup. Generally, these sites are locations at which numerous persons
disposed of hazardous waste. In the
12
case
of the Company's subsidiaries, generally the waste was removed from their
manufacturing facilities and disposed at waste sites by various companies which
contracted with the subsidiaries to provide waste disposal services. Neither the
Company nor any of its subsidiaries have been accused of or charged with any
wrongdoing or illegal acts in connection with any such sites. The Company
believes it maintains an effective and comprehensive environmental compliance
program.
The
insurance carriers who provided general liability insurance coverage to the
Company and its subsidiaries for the years during which the Company's
subsidiaries' waste was disposed at these sites have agreed to pay, or reimburse
the Company and its subsidiaries for, 100% of their legal defense and
remediation costs associated with three of these sites and 25% of such costs
associated with another one of these sites.
The
total costs incurred by the Company and its subsidiaries in connection with
these sites, including legal fees incurred by the Company and its subsidiaries
and their assessed share of remediation costs and excluding amounts paid or
reimbursed by insurance carriers, were approximately $1 and $1 in the 13 weeks
ended May 30, 2010 and May 31, 2009, respectively. The recorded liabilities
included in accrued liabilities for environmental matters were $9 at both May
30, 2010 and February 28, 2010.
Such
recorded liabilities do not include environmental liabilities and related legal
expenses for which the Company has concluded indemnification agreements with the
insurance carriers who provided general liability insurance coverage to the
Company and its subsidiaries for the years during which the Company's
subsidiaries' waste was disposed at three sites for which certain subsidiaries
of the Company have been named as potentially responsible parties, pursuant to
which agreements such insurance carriers have been paying 100% of the legal
defense and remediation costs associated with such three sites since
1985.
Included
in selling, general and administrative expenses are charges for actual
expenditures and accruals, based on estimates, for certain environmental matters
described above. The Company accrues estimated costs associated with known
environmental matters, when such costs can be reasonably estimated and when the
outcome appears probable. The Company believes that the ultimate disposition of
known environmental matters will not have a material adverse effect on the
liquidity, capital resources, business or consolidated results of operations or
financial position of the Company. However, one or more of such environmental
matters could have a significant negative impact on the Company's consolidated
results of operations or financial position for a particular reporting
period.
c.
|
Acquisition
– The Company is obligated to pay up to an additional $3,300 over three
years depending on the achievement of specified earn-out objectives in
connection with the acquisition by the Company’s wholly owned subsidiary,
Park Aerospace Structures Corp., of substantially all the assets and
business of Nova Composites, Inc., located in Lynnwood, Washington, in
addition to a cash purchase price of $4,500 paid at the closing of the
acquisition on April 1, 2008 and additional payments of $1,100 in the
first quarter of the 2011 fiscal year and $1,025 in the second quarter of
the 2010 fiscal year pursuant to the earn-out provision. Both payments
were recorded as additional goodwill, and any additional amount paid will
be recorded as goodwill.
|
13
11.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
In
January 2010, the Financial Accounting Standards Board issued an accounting
pronouncement that improves disclosures around fair value measurements. This
pronouncement requires additional disclosures regarding transfers between Levels
1, 2 and 3 of the fair value hierarchy of this pronouncement as well as a more
detailed reconciliation of recurring Level 3 measurements. Certain disclosure
requirements of this pronouncement were effective and adopted by the Company in
the first quarter of its 2011 fiscal year. The remaining disclosure requirements
of this pronouncement will be effective for the Company’s 2012 fiscal year first
quarter. The adoption of this pronouncement did not have an impact on the
Company’s Consolidated Financial Statements.
14
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
|
General:
Park
Electrochemical Corp. (“Park” or the “Company”) is a global advanced materials
company which develops, manufactures, markets and sells high technology digital
and RF/microwave printed circuit materials principally for the
telecommunications and internet infrastructure and high-end computing markets
and advanced composite materials, parts and assemblies for the aerospace and
specialty markets. The Company’s core capabilities are in the areas of polymer
chemistry formulation and coating technology. The Company also specializes in
the design and manufacture of complex composite aircraft and space vehicle
parts. The Company’s manufacturing facilities are located in Singapore, China,
France, Connecticut, Kansas, Arizona, California and
Washington.
The
Company's total net sales increased in the three-month period ended May 30, 2010
compared with last year's comparable period principally as a result of increases
in sales of the Company’s printed circuit materials products in North America,
Asia and Europe.
As a result of the increase in the Company’s total
net sales and the higher percentage of sales of higher margin, high performance
printed circuit materials products in the 2011 fiscal year first quarter
compared to the 2010 fiscal year first quarter, the Company’s earnings from
operations and net earnings were higher in the 2011 fiscal year first quarter
than in the 2010 fiscal year first quarter, although the Company’s net earnings
in the 2011 fiscal year first quarter were negatively impacted by the lower
interest income earned by the Company in such quarter compared to the interest
income earned by the Company in the 2010 fiscal year first
quarter.
The significant increase in sales of printed circuit
materials products and the higher percentage of sales of higher margin, high
performance printed circuit materials products resulted in higher gross profits
and higher earnings from operations in the 2011 fiscal year first quarter
compared to the 2010 fiscal year first quarter. The Company’s gross profit
margin, measured as a percentage of sales, improved to 34.2% in the 2011 fiscal
year first quarter compared to 25.1% in the 2010 fiscal year first quarter.
However, the gross profit margin improvement during the three-month period ended
May 30, 2010 was partially offset by losses incurred at the Company’s recently
established Park Aircraft Technologies Corp. business unit in Newton,
Kansas.
The
markets in North America, Europe and Asia for the Company’s printed circuit
materials products strengthened in the 2010 fiscal year third and fourth
quarters after prevailing weakness in the 2010 fiscal year first and second
quarters, and such strength continued in the 2011 fiscal year first
quarter. The markets for the Company’s advanced composite materials,
parts and assemblies products weakened during the 2009 fiscal year third and
fourth quarters, and such weakness continued during the 2010 fiscal year.
However, such markets for the Company’s advanced composite materials, parts and
assemblies showed some small signs of improvement during the 2011 fiscal year
first quarter.
The global markets for the Company’s printed
circuit materials products continue to be very difficult to forecast, and it is
not clear to the Company what the condition of the global markets for the
Company’s printed circuit
15
materials
products will be in the 2011 fiscal year second quarter. Further, the Company is
not able to predict the impact the current global economic and financial
conditions will have on the markets for its advanced composite materials, parts
and assemblies products in the 2011 fiscal year second quarter or
beyond.
In
the fourth quarter of the Company’s 2009 fiscal year, the Company completed the
construction of a new development and manufacturing facility in Newton, Kansas
to produce advanced composite materials principally for the aircraft and space
vehicle industries. The Company spent approximately $15 million on the facility
and equipment in Kansas. In the second quarter of the Company’s 2010 fiscal
year, the Company announced plans for the major expansion of its facility in
Kansas in order to manufacture composite parts and assemblies for the aircraft
and space vehicle industries. The expansion includes approximately
37,000 square feet of manufacturing and storage space, and the Company plans to
spend approximately $5 million on the expansion.
Three
Months Ended May 30, 2010 Compared with Three Months Ended May 31,
2009:
The
Company’s total net sales and its net sales of both its printed circuit
materials products and its advanced composite materials, parts and assemblies
products increased during the three-month period ended May 30, 2010 compared to
the three-month period ended May 31, 2009. Sales of the Company’s advanced
composite materials, parts and assemblies products were $6.5 million, or 11% of
the Company’s total net sales worldwide, in the 2011 fiscal year first quarter
compared to $6.2 million, or 17%, in the 2010 fiscal year first quarter and $6.6
million, or 11%, in the 2009 fiscal year first quarter.
The
increased sales, combined with an increase in the percentage of sales higher
margin, high performance electronic printed circuit materials products, in the
three months ended May 30, 2010 resulted in higher earnings from operations and
higher net earnings compared to the three months ended May 31,
2009.
Results of Operations
The
Company’s total net sales worldwide for the three-month period ended May 30,
2010 increased 61% to $59.0 million from $36.7 million for last fiscal year's
comparable period. The increase in net sales was principally the result of
higher sales of printed circuit materials products in North America, Europe and
Asia. Sales volumes increased 35% in North America, 115% in Europe and 86% in
Asia during the 2011 fiscal year first quarter compared to the first quarter in
the prior year.
The Company's foreign sales were $32.3 million, or
55% of the Company's total net sales worldwide, during the three-month period
ended May 30, 2010 compared with $16.8 million of sales, or 46% of total net
sales worldwide, during last fiscal year's comparable period. The Company's
foreign sales during the 2011 fiscal year first quarter increased by 92% from
the 2010 fiscal year comparable period as the result of higher sales in Asia and
Europe.
For the three-month period ended May 30, 2010, the
Company’s sales in North America, Asia and Europe were 45%, 42% and 13%
respectively, of the Company’s total net sales worldwide compared with 54%, 36%
and 10%, respectively, for the three-month period ended May 31,
2009.
16
The Company’s gross profit in the three months ended
May 30, 2010 was higher than the gross profit in the prior year’s comparable
period and the gross profit as a percentage of sales in the three months ended
May 30, 2010 improved to 34.2% compared to 25.1% in the three months ended May
31, 2009 principally due to higher total net sales and the higher percentage of
sales of higher margin, high performance printed circuit materials products, as
well as efficiencies derived from increased production levels. However, the
gross profit margin improvement during the three-month period ended May 30, 2010
was partially offset by losses incurred at the Company’s recently established
Park Aircraft Technologies Corp. business unit in Newton, Kansas in connection
with the start-up of its operation.
During
both the three-month periods ended May 30, 2010 and May 31, 2009, the Company’s
total net sales worldwide of high temperature printed circuit materials, which
included high performance materials (non-FR4 printed circuit materials), were
100% of the Company’s total net sales worldwide of printed circuit
materials.
The
Company’s high temperature printed circuit materials include its high
performance materials (non-FR4 printed circuit materials), which consist of
high-speed, low-loss materials for digital and RF/microwave applications
requiring lead-free compatibility and high bandwidth signal integrity,
bismalimide triazine (“BT”) materials, polyimides for applications that demand
extremely high thermal performance, cyanate esters, quartz reinforced materials,
and polytetrafluoroethylene (“PTFE”) and modified epoxy materials for
RF/microwave systems that operate at frequencies up to 77GHz.
During
the three-month period ended May 30, 2010, the Company’s total net sales
worldwide of high performance printed circuit materials (non-FR4 printed circuit
materials) were 73% of the Company’s total net sales worldwide of printed
circuit materials, compared to 67% for last fiscal year’s comparable
period.
Selling,
general and administrative expenses increased by $1.8 million, or by 31%, during
the three months ended May 30, 2010 compared with last fiscal year's comparable
period, but these expenses, measured as a percentage of sales, were 13.2% during
the three months ended May 30, 2010 compared with 16.1% during last fiscal
year's comparable period. Stock option expense was $289,000 for the three months
ended May 30, 2010 compared to $288,000 for last year’s comparable
period.
For
the reasons set forth above, the Company's earnings from operations were $12.4
million for the three months ended May 30, 2010, compared to $3.3 million for
the three months ended May 31, 2009.
Interest
income was $76,000 for the three-month period ended May 30, 2010 compared to
$688,000 for last fiscal year's comparable period. The decrease in interest
income was attributable to lower prevailing interest rates, during the 2011
fiscal year first quarter than during the 2010 fiscal year first quarter. The
Company's investments were primarily in short-term instruments and money market
funds.
17
The
Company's effective income tax rate for the three-month period ended May 30,
2010 was 20.9%, compared to 22.7% for last fiscal year's comparable period. The
lower tax provision for the 2011 fiscal year first quarter was attributable
principally to higher taxable income in jurisdictions with lower effective
income tax rates.
The
Company's net earnings for the three months ended May 30, 2010 were $9.9
million, compared to net earnings of $3.1 million for the three months ended May
31, 2009.
Basic
and diluted earnings per share were $0.48 for the three-month period ended May
30, 2010 compared to $0.15 for the three-month period ended May 31,
2009.
Liquidity
and Capital Resources:
At
May 30, 2010, the Company's cash and marketable securities were $244.5 million
compared with $237.8 million at February 28, 2010, the end of the Company's 2010
fiscal year. The Company's working capital (which includes cash and marketable
securities) was $270.7 million at May 30, 2010 compared with $261.0 million at
February 28, 2010. The increase in working capital at May 30, 2010 compared with
February 28, 2010 was due principally to the increase in cash and marketable
securities and increases in accounts receivable, inventories and other current
assets slightly offset by increases in accounts payable, accrued liabilities and
income taxes payable. Accounts receivable at May 30, 2010 were 14% higher than
at February 28, 2010 as a result of higher sales during the three months ended
May 30, 2010 than during the three months ended February 28, 2010. Inventories
were 17% higher at May 30, 2010 than at February 28, 2010 primarily as a result
of higher work-in-process and finished goods. At May 30, 2010, prepaid expenses
and other current assets were 132% higher than at February 28, 2010 as a result
of increases in prepaid insurance and value added tax receivable. At May 30,
2010, accounts payable were 17% higher than at February 28, 2010 principally as
a result of higher purchases of raw materials during the period ended May 30,
2010 than during the period ended February 28, 2010, and accrued liabilities
were 23% higher than at February 28, 2010 principally as a result of increases
in employee benefits. Income taxes payable were 36% higher at May 30,
2010 than at February 28, 2010 primarily as a result of recorded tax on income
in excess of tax payments.
The
Company's current ratio (the ratio of current assets to current liabilities) was
11.2 to 1 at May 30, 2010 compared to 13.1 to 1 at February 28,
2010.
During
the three months ended May 30, 2010, net earnings from the Company's operations,
before depreciation and amortization, of $11.6 million reduced by a net decrease
in working capital items, resulted in $8.5 million of cash provided by operating
activities. During the same three-month period, the Company expended $0.6
million for the purchase of property, plant and equipment, primarily for the
Company’s new development and manufacturing facility in Newton, Kansas, compared
with $0.8 million for the three-month period ended May 31, 2009, and paid $2.1
million and $1.6 million, respectively, in dividends on its common stock in such
three-month periods. Net expenditures for property, plant and equipment were
$3.4 million in the 2010 fiscal year and $12.2 million in the 2009 fiscal
year.
18
In
the first quarter of the Company’s 2009 fiscal year, the Company’s wholly owned
subsidiary, Park Aerospace Structures Corp., acquired substantially all the
assets and business of Nova Composites, Inc., a manufacturer of aircraft
composite parts and assemblies and the tooling for such parts and assemblies,
located in Lynnwood, Washington, for a cash purchase price of $4.5 million paid
at the closing of the acquisition and up to an additional $5.5 million payable
over five years depending on the achievement of specified
earn-out objectives. The Company paid an additional $1.0 million in
the 2010 fiscal year second quarter and an additional $1.1 million in the 2011
fiscal year first quarter, leaving up to an additional $3.3 million payable over
three years depending on the achievement of the earn-out
objectives.
During
the 2009 fiscal year, the Company expended approximately $10.2 million for the
construction of its new development and manufacturing facility in Newton, Kansas
to produce advanced composite materials and for equipment for such facility.
During the 2010 fiscal year, the Company expended approximately $1.1 million for
equipment for such facility and approximately $1.1 million for the construction
of an expansion of such facility to produce advanced composite parts and
assemblies.
At
May 30, 2010 and at May 31, 2009, the Company had no long-term
debt.
The
Company believes its financial resources will be sufficient, for the foreseeable
future, to provide for continued investment in working capital and property,
plant and equipment and for general corporate purposes. Such resources would
also be available for purchases of the Company's common stock, appropriate
acquisitions and other expansions of the Company's business.
The
Company is not aware of any circumstances or events that are reasonably likely
to occur that could materially affect its liquidity.
The
Company's contractual obligations and other commercial commitments to make
future payments under contracts, such as lease agreements, consist only of
operating lease commitments, commitments to purchase equipment for the Company’s
new development and manufacturing facility in Newton, Kansas and commitments to
purchase plant for the expansion of such facility and the Company’s obligation
to pay up to an additional $3.3 million over three years in connection with the
acquisition of the assets and business of Nova Composites, Inc., described
above. The Company has no long-term debt, capital lease obligations,
unconditional purchase obligations or other long-term obligations, standby
letters of credit, guarantees, standby repurchase obligations or other
commercial commitments or contingent commitments, other than two standby letters
of credit in the total amount of $1.38 million to secure the Company's
obligations under its workers' compensation insurance program.
As of
May 30, 2010, there were no material changes outside the ordinary course of the
Company’s business in the Company’s contractual obligations disclosed in Item 7
of Part II of its Form 10-K Annual Report for the fiscal year ended February 28,
2010.
Off-Balance
Sheet Arrangements:
The
Company's liquidity is not dependent on the use of, and the Company is not
engaged in, any off-balance sheet financing arrangements, such as securitization
of receivables or obtaining access to assets through special purpose
entities.
19
Environmental
Matters:
In
the three-month periods ended May 30, 2010 and May 31, 2009, the Company charged
approximately $0.001 million and $0.001 million, respectively, against pretax
income for environmental remedial response and voluntary cleanup costs
(including legal fees). While annual expenditures have generally been constant
from year to year and may increase over time, the Company expects it will be
able to fund such expenditures from cash flow from operations. The timing of
expenditures depends on a number of factors, including regulatory approval of
cleanup projects, remedial techniques to be utilized and agreements with other
parties. At May 30, 2010 and February 28, 2010, the amount recorded in accrued
liabilities for environmental matters was $9,000.
Management
does not expect that environmental matters will have a material adverse effect
on the liquidity, capital resources, business, consolidated results of
operations or consolidated financial position of the Company.
Critical
Accounting Policies and Estimates:
In
response to financial reporting release, FR-60, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies", issued by the Securities and
Exchange Commission in December 2001, the following information is provided
regarding critical accounting policies that are important to the Consolidated
Financial Statements and that entail, to a significant extent, the use of
estimates, assumptions and the application of management's
judgment.
General
The
Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's Consolidated Financial Statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these Financial Statements requires the
Company to make estimates, assumptions and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and the related disclosure
of contingent liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to sales allowances, allowances for doubtful
accounts, inventories, valuation of long-lived assets, income taxes,
contingencies and litigation, and employee benefit programs. The Company bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
The
Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.
Revenue Recognition
The
Company recognizes revenues when products are shipped and title has been
transferred to a customer, the sales price is fixed and determinable, and
collection is reasonably assured. All material sales transactions are
for the shipment of manufactured prepreg and laminate products and advanced
composite materials, parts and assemblies.
20
Sales
Allowances
The
Company provides for the estimated costs of sales allowances at the time such
costs can be reasonably estimated. The Company’s products are made to customer
specifications and tested for adherence to such specifications before shipment
to customers. Composite parts and assemblies may be subject to “airworthiness”
acceptance by customers after receipt at the customers’ locations. There are no
future performance requirements other than the products’ meeting the agreed
specifications. The Company’s bases for providing sales allowances for returns
are known situations in which products may have failed due to manufacturing
defects in the products supplied by the Company. The Company is focused on
manufacturing the highest quality printed circuit materials and advanced
composite materials, parts and assemblies possible and employs stringent
manufacturing process controls and works with raw material suppliers who have
dedicated themselves to complying with the Company’s specifications and
technical requirements. The amounts of returns and allowances resulting from
defective or damaged products have been approximately 1.0% of sales for each of
the Company’s last three fiscal years.
Allowances
for Doubtful Accounts
Accounts receivable are due within
established payment terms and are stated at amounts due from customers net of an
allowance for doubtful accounts. Accounts outstanding longer than established
payment terms are considered past due. The Company maintains allowances for
doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. The Company determines its
allowance by considering a number of factors, including the length of time
accounts receivable are past due, the Company’s previous loss history, the
customer’s current ability to pay its obligation to the Company, and the
condition of the general economy and the industry as a whole. If the financial
condition of the Company's customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required. The Company writes off accounts receivable when they become
uncollectible, and payments subsequently received on such receivables are
credited to the allowance for doubtful accounts.
Inventories
Inventories
are stated at the lower of cost (first-in, first-out method) or market. The
Company writes down its inventory for estimated obsolescence or unmarketability
based upon the age of the inventory and assumptions about future demand for the
Company's products and market conditions.
Valuation
of Long-lived Assets
The
Company assesses the impairment of long-lived assets whenever events or changes
in circumstances indicate that the carrying value of such assets may not be
recoverable. In addition, the Company assesses the impairment of goodwill at
least annually. Important factors that could trigger an impairment review
include, but are not limited to, significant negative industry or economic
trends and significant changes in the use of the Company’s assets or strategy of
the overall business.
21
Income
Taxes
As
part of the processes of preparing its consolidated financial statements, the
Company is required to estimate the income taxes in each of the jurisdictions in
which it operates. This process involves estimating the actual
current tax expense together with assessing temporary differences resulting from
differing treatment of items for tax and accounting purposes. These
differences result in deferred tax assets and liabilities, which are included in
the Company’s Consolidated Balance Sheets. The carrying value of the
Company's net deferred tax assets assumes that the Company will be able to
generate sufficient future taxable income in certain tax jurisdictions, based on
estimates and assumptions. If these estimates and assumptions change in the
future, the Company may be required to record additional valuation allowances
against its deferred tax assets resulting in additional income tax expense in
the Company's consolidated statement of operations, or conversely to further
reduce the existing valuation allowance resulting in less income tax expense.
The Company evaluates the realizability of the deferred tax assets quarterly and
assesses the need for additional valuation allowances quarterly.
Tax
benefits are recognized for an uncertain tax position when, in the Company’s
judgment, it is more likely than not that the position will be sustained upon
examination by a taxing authority. For a tax position that meets the
more-likely-than-not recognition threshold, the tax benefit is measured as the
largest amount that is judged to have a greater than 50% likelihood of being
realized upon ultimate settlement with a taxing authority. The liability
associated with unrecognized tax benefits is adjusted periodically due to
changing circumstances and when new information becomes available. Such
adjustments are recognized entirely in the period in which they are identified.
The effective tax rate includes the net impact of changes in the liability for
unrecognized tax benefits and subsequent adjustments as considered appropriate
by the Company. While it is often difficult to predict the final outcome or the
timing of resolution of any particular tax matter, the Company believes its
liability for unrecognized tax benefits is adequate. Interest and
penalties recognized on the liability for unrecognized tax benefits are recorded
as income tax expense.
Contingencies
The
Company is subject to a small number of proceedings, lawsuits and other claims
related to environmental, employment, product and other matters. The Company is
required to assess the likelihood of any adverse judgments or outcomes in these
matters as well as potential ranges of probable losses. A determination of the
amount of reserves required, if any, for these contingencies is made after
careful analysis of each individual issue. The required reserves may change in
the future due to new developments in each matter or changes in approach, such
as a change in settlement strategy in dealing with these matters.
The
Company is obligated to pay up to an additional $3.3 million over three years
depending on the achievement of specified earn-out objectives in connection with
the acquisition by the Company’s wholly owned subsidiary, Park Aerospace
Structures Corp., of substantially all the assets and business of Nova
Composites, Inc., a manufacturer of composite parts and assemblies and the
tooling for such parts and assemblies, located in Lynnwood, Washington, in
addition to a cash purchase price of $4.5 million paid at the closing of the
acquisition on April 1, 2008 and payments of $1.0 million in the 2010 fiscal
year second quarter and $1.1 million in the 2011 fiscal year first
quarter.
22
Employee
Benefit Programs
The
Company's obligations for workers' compensation claims are effectively
self-insured, although the Company maintains individual and aggregate stop-loss
insurance coverage for such claims. The Company accrues its workers’
compensation liability based on estimates of the total exposure of known claims
using historical experience and projected loss development factors less amounts
previously paid.
The
Company and certain of its subsidiaries have a non-contributory profit sharing
retirement plan covering their regular full-time employees. In addition, the
Company's subsidiaries have various bonus and incentive compensation programs,
most of which are determined at management's discretion.
The
Company's reserves associated with these self-insured liabilities and benefit
programs are reviewed by management for adequacy at the end of each reporting
period.
Factors That May Affect
Future Results.
Certain
portions of this Report which do not relate to historical financial information
may be deemed to constitute forward-looking statements that are subject to
various factors which could cause actual results to differ materially from
Park's expectations or from results which might be projected, forecast,
estimated or budgeted by the Company in forward-looking statements. Such factors
include, but are not limited to, general conditions in the electronics and
aerospace industries, the Company's competitive position, the status of the
Company's relationships with its customers, economic conditions in international
markets, the cost and availability of raw materials, transportation and
utilities, and the various factors set forth in Item 1A “Risk Factors” and under
the caption "Factors That May Affect Future Results" after Item 7 of Park's
Annual Report on Form 10-K for the fiscal year ended February 28,
2010.
Item
3. Quantitative and Qualitative
Disclosure About Market Risk.
The
Company's market risk exposure at May 30, 2010 is consistent with, and not
greater than, the types of market risk and amount of exposures presented in the
Annual Report on Form 10-K for the fiscal year ended February 28,
2010.
Item
4. Controls and
Procedures.
(a) Disclosure
Controls and Procedures.
The
Company's management, with the participation of the Company's Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) as of May 30, 2010, the end of the quarterly fiscal period
covered by this quarterly report. Based on such evaluation, the Company's Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end
of such period, the Company's disclosure controls and procedures are effective
in recording, processing, summarizing and reporting, on a timely basis,
information required to be disclosed by the
23
Company in the reports that it
files or submits under the Exchange Act and are effective in ensuring that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is accumulated and communicated to the
Company’s management, including the Company’s Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
(b) Changes
in Internal Control Over Financial Reporting.
There has
not been any change in the Company's internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) during the fiscal quarter to which this report relates that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
24
PART
II. OTHER INFORMATION
Item
1. Legal
Proceedings.
None.
Item 1A.
Risk
Factors.
There have been no material changes
from the risk factors as previously disclosed in the Company’s Form 10-K Annual
Report for the fiscal year ended February 28, 2010.
Item
2.
|
Unregistered Sales of
Equity Securities and Use of
Proceeds.
|
The following table provides
information with respect to shares of the Company's Common Stock acquired by the
Company during each month included in the Company’s 2011 fiscal year first
quarter ended May 30, 2010.
Period
|
Total
Number of
Shares
(or
Units)
Purchased
|
Average
Price Paid
per Share
(or Unit)
|
Total Number of
Shares (or
Units) Purchased
as Part of
Publicly
Announced Plans
or Programs
|
Maximum Number (or
Approximate Dollar
Value) of Shares
(or Units) that May
Yet Be Purchased
Under the Plans or
Programs
|
||||||||||
March
1-March 30
|
0 | $ | - | 0 | ||||||||||
March
31-April 30
|
0 | - | 0 | |||||||||||
May
1-May 30
|
0 |
-
|
0
|
|||||||||||
Total
|
0 | $ | - | 0 |
2,000,000
|
(a)
|
(a)
|
Aggregate
number of shares available to be purchased by the Company pursuant to a
previous share purchase authorization announced on October 20, 2004.
Pursuant to such authorization, the Company is authorized to purchase its
shares from time to time on the open market or in privately negotiated
transactions.
|
Item
3. Defaults Upon Senior
Securities.
None.
Item
4. Reserved.
None.
Item
5. Other
Information.
None.
25
Item
6. Exhibits.
|
31.1
|
Certification
of principal executive officer pursuant to Exchange Act Rule 13a-14(a) or
15d-14(a).
|
|
31.2
|
Certification
of principal financial officer pursuant to Exchange Act Rule 13a-14(a) or
15d-14(a).
|
|
32.1
|
Certification
of principal executive officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2
|
Certification
of principal financial officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
26
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Park
Electrochemical Corp.
|
|
(Registrant)
|
|
Date: July
8, 2010
|
/s/
Brian E. Shore
|
Brian
E. Shore
|
|
President
and Chief Executive Officer
|
|
(principal
executive officer)
|
|
Date: July
8, 2010
|
/s/
David R. Dahlquist
|
David
R. Dahlquist
|
|
Vice
President and Chief Financial
|
|
Officer
|
|
(principal
financial
officer)
|
27
EXHIBIT
INDEX
Exhibit No.
|
Name
|
Page
|
||
31.1
|
Certification
of principal executive officer pursuant to Exchange Act Rule 13a-14(a) or
15d-14(a)
|
29
|
||
31.2
|
Certification
of principal financial officer pursuant to Exchange Act Rule 13a-14(a) or
15d-14(a)
|
31
|
||
32.1
|
Certification
of principal executive officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
33
|
||
32.2
|
|
Certification
of principal financial officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
34
|
28