PARK AEROSPACE CORP - Annual Report: 2009 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
ANNUAL
REPORT
PURSUANT
TO SECTIONS 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark
One)
| x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the fiscal year ended March 1, 2009
|
|
|
OR
|
| o |
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
of Organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
48
South Service Road, Melville, New York
(Address
of Principal Executive Offices)
|
11747
(Zip
Code)
|
|
|
Registrant’s
telephone number, including area code (631)
465-3600
|
|
|
Securities
registered pursuant to Section 12(b) of the
Act:
|
|
Title of Each Class
|
Name of Each Exchange on Which
Registered
|
|
Common
Stock, par value $.10 per share
|
New
York Stock Exchange
|
|
Preferred
Stock Purchase Rights
|
New
York Stock Exchange
|
|
Securities
registered pursuant to Section 12(g) of the Act:
|
None
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No
x
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 o
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 x No
o
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. o
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
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer o Accelerated
Filer x Non-Accelerated
Filer o Smaller
Reporting Company o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No
x
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity, as of the last
business day of the registrant's most recently completed second fiscal
quarter.
|
Title of Class
|
Aggregate Market Value
|
As of Close of Business
On
|
|
Common
Stock, par value $.10 per share
|
$573,582,121
|
August
29, 2008
|
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.
|
Title of Class
|
Shares Outstanding
|
As of Close of Business
On
|
|
Common
Stock, par value $.10 per share
|
20,470,516
|
May
11, 2009
|
DOCUMENTS
INCORPORATED BY REFERENCE
Proxy
Statement for Annual Meeting of Shareholders to be held July 21, 2009
incorporated by reference into Part III of this Report.
2
TABLE OF
CONTENTS
3
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 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 and parts principally for the aerospace
markets. Park’s core capabilities are in the areas of polymer chemistry
formulation and coating technology. Park also specializes in the manufacture of
complex composite aircraft and space vehicle parts.
Park operates through fully integrated
business units in Asia, Europe and North America. The Company's manufacturing
facilities are located in Singapore, China, France, Connecticut, Kansas,
Arizona, California and Washington.
The
Company’s products are marketed and sold under the Nelco®,
Nelcote® and
Nova™ names.
Sales of Park’s printed circuit
materials were 87% and 91% of the Company’s total net sales worldwide in the
2009 and 2008 fiscal years, respectively, and sales of Park’s advanced composite
materials and parts were 13% and 9% of the Company’s total net sales worldwide
in the 2009 and 2008 fiscal years, respectively.
Park was
founded in 1954 by Jerry Shore, who was the Company’s Chairman of the Board
until July 14, 2004 and who is one of the Company’s largest
shareholders.
The sales and long-lived assets of the
Company’s operations by geographic area for the last three fiscal years are set
forth in Note 17 of the Notes to Consolidated Financial Statements in Item 8 of
Part II of this Report. The Company’s foreign operations are conducted
principally by the Company’s subsidiaries in Singapore, China and France. The
Company’s foreign operations are subject to the impact of foreign currency
fluctuations. See Note 1 of the Notes to Consolidated Financial Statements in
Item 8 of Part II of this Report.
The Company makes available free of
charge on its Internet website, www.parkelectro.com, its annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all
amendments to those reports as soon as reasonably practicable after such
material is electronically filed with or furnished to the Securities and
Exchange Commission. None of the information on the Company's website shall be
deemed to be a part of this Report.
COREFIX,
EF, INNERLAM, LD, NELCO, NELCOTE, PARKNELCO, RTFOIL and SI are registered
trademarks of Park Electrochemical Corp., and ELECTROVUE, EP, PEELCOTE, NOVA,
POWERBOND and NELTEC are common law trademarks of Park Electrochemical
Corp.
4
Printed Circuit
Materials
Printed Circuit Materials
Operations
The Company is a leading global
designer and producer of advanced printed circuit materials used to fabricate
complex multilayer printed circuit boards and other electronic interconnection
systems, such as multilayer back-planes, wireless packages, high-speed/low-loss
multilayers and high density interconnects (“HDIs”). The Company’s multilayer
printed circuit materials consist of copper-clad laminates and prepregs. The
Company has long-term relationships with its major customers, which include
leading independent printed circuit board fabricators, electronic manufacturing
service companies, electronic contract manufacturers and major electronic
original equipment manufacturers ("OEMs"). Multilayer printed circuit boards and
interconnect systems are used in virtually all advanced electronic equipment to
direct, sequence and control electronic signals between semiconductor devices
(such as microprocessors and memory and logic devices), passive components (such
as resistors and capacitors) and connection devices (such as infra-red
couplings, fiber optics and surface mount connectors). Examples of end uses of
the Company’s digital printed circuit materials include high speed routers and
servers, storage area networks, supercomputers, laptops, satellite switching
equipment, cellular telephones and transceivers, wireless personal digital
assistants (“PDAs”) and wireless local area networks ("LANs"). The
Company's radio frequency ("RF") printed circuit materials are used primarily
for military avionics, antennas for cellular telephone base stations, automotive
adaptive cruise control systems and avionic communications equipment. The
Company has developed long-term relationships with major customers as a result
of its leading edge products, extensive technical and engineering service
support and responsive manufacturing capabilities.
Park believes it founded the modern day
printed circuit industry in 1957 by inventing a composite material consisting of
an epoxy resin substrate reinforced with fiberglass cloth which was laminated
together with sheets of thin copper foil. This epoxy-glass copper-clad laminate
system is still used to construct the large majority of today’s advanced
printed circuit products. The Company also believes that in 1962 it invented the
first multilayer printed circuit materials system used to construct multilayer
printed circuit boards. The Company also pioneered vacuum lamination and many
other manufacturing technologies used in the industry today. The Company
believes it is one of the industry’s technological leaders.
The Company believes that it is one of
the world’s largest manufacturers of advanced multilayer printed circuit
materials. It also believes that it is one of only a few significant independent
manufacturers of multilayer printed circuit materials in the world. The Company
was the first manufacturer in the printed circuit materials industry to
establish manufacturing presences in the three major global markets of North
America, Europe and Asia, with facilities established in Europe in 1969 and Asia
in 1986.
Printed Circuit Materials –
Industry Background
The printed circuit materials
manufactured by the Company and its competitors are used primarily to construct
and fabricate complex multilayer printed circuit boards and other advanced
electronic interconnection systems. Multilayer printed circuit materials
consist of prepregs and copper-clad
5
laminates.
Prepregs are chemically and electrically engineered thermosetting or
thermoplastic resin systems which are impregnated into and reinforced by a
specially manufactured fiberglass cloth product or other woven or non-woven
reinforcing fiber. This insulating dielectric substrate generally is 0.030 inch
to 0.002 inch in thickness or less in some cases. While these resin systems
historically have been based on epoxy resin chemistry, in recent years,
increasingly demanding OEM requirements have driven the industry to utilize
proprietary enhanced epoxies as well as other higher performance resins, such as
phenolic, bismalimide triazine ("BT"), cyanate ester, polyimide, or
polytetrafluoroethylene ("PTFE"). One or more plies of prepreg are laminated
together to form an insulating dielectric substrate to support the copper
circuitry patterns of a multilayer printed circuit board. Copper-clad laminates
consist of one or more plies of prepreg laminated together with specialty thin
copper foil laminated on the top and bottom. Copper foil is specially formed in
thin sheets which may vary from 0.0030 inch to 0.0002 inch in thickness and
normally have a thickness of 0.0014 inch or 0.0007 inch. The Company supplies
both copper-clad laminates and prepregs to its customers, which use these
products as a system to construct multilayer printed circuit
boards.
The printed circuit board fabricator
processes copper-clad laminates to form the inner layers of a multilayer
printed circuit board. The fabricator photo images these laminates with a dry
film or liquid photoresist. After development of the photoresist, the copper
surfaces of the laminate are etched to form the circuit pattern. The fabricator
then assembles these etched laminates by inserting one or more plies of
dielectric prepreg between each of the inner layer etched laminates and also
between an inner layer etched laminate and the outer layer copper plane, and
then laminating the entire assembly in a press. Prepreg serves as the insulator
between the multiple layers of copper circuitry patterns found in the multilayer
circuit board. When the multilayer configuration is laminated, these plies of
prepreg form an insulating dielectric substrate supporting and separating the
multiple inner and outer planes of copper circuitry. The fabricator drills
vertical through-holes or vias in the multilayer assembly and then plates
the through-holes or vias to form vertical conductors between the multiple
layers of circuitry patterns. These through-holes or vias combine with the
conductor paths on the horizontal circuitry planes to create a three-dimensional
electronic interconnect system. In specialized applications, an additional set
of microvia layers (2 or 4, typically) may be added through a secondary
lamination process to provide increased density and functionality to the design.
The outer two layers of copper foil are then imaged and etched to form the
finished multilayer printed circuit board. The completed multilayer board is a
three-dimensional interconnect system with electronic signals traveling in
the horizontal planes of multiple layers of copper circuitry patterns, as well
as the vertical plane through the plated holes or vias.
Semiconductor manufacturers have
introduced successive generations of more powerful microprocessors and
memory and logic devices. Electronic equipment manufacturers have designed these
advanced semiconductors into more compact and often portable products. High
performance computing devices in these smaller portable platforms require
greater reliability, closer tolerances, higher component and circuit density and
increased overall complexity. As a result, the interconnect industry has
developed smaller, lighter, faster and more cost-effective interconnect systems,
including advanced multilayer printed circuit boards.
6
Advanced interconnect systems require
higher technology printed circuit materials to insure the performance of the
electronic system and to improve the manufacturability of the interconnect
platform. Printed circuit board fabricators and electronic equipment
manufacturers require advanced printed circuit materials that have increasingly
higher temperature tolerances and more advanced and stable electrical properties
in order to support high-speed computing in a miniaturized and often portable
environment. Temperature tolerance has been further emphasized by the advent of
lead-free assemblies.
With the very high density circuit
demands of miniaturized high performance interconnect systems, the uniformity,
purity, consistency, performance predictability, dimensional stability and
production tolerances of printed circuit materials have become successively
more critical. High density printed circuit boards and interconnect systems
often involve higher layer count multilayer circuit boards where the multiple
planes of circuitry and dielectric insulating substrates are very thin
(dielectric insulating substrate layers may be 0.002 inch or less) and the
circuit line and space geometries in the circuitry plane are very narrow (0.002
inch or less). In addition, advanced surface mount interconnect systems are
typically designed with very small pad sizes and very small plated through-holes
or vias which electrically connect the multiple layers of circuitry planes, and
these interconnect systems frequently make use of multiple lamination cycles
and/or laser drilled vias. High density interconnect systems must utilize
printed circuit materials whose dimensional characteristics and purity are
consistently manufactured to very high tolerance levels in order for the printed
circuit board fabricator to attain and sustain acceptable product
yields.
Shorter
product life cycles and competitive pressures have induced electronic equipment
manufacturers to bring new products to market and increase production volume to
commercial levels more quickly. These trends have highlighted the importance of
front-end engineering of electronic products and have increased the level of
collaboration among system designers, fabricators and printed circuit materials
suppliers. As the complexity of electronic products increases, materials
suppliers must provide greater technical support to interconnect systems
fabricators on a timely basis regarding manufacturability and performance of new
materials systems.
Printed Circuit Materials –
Products and Services
The Company produces a broad line of
advanced printed circuit materials (the Nelco® product line) used to fabricate
complex multilayer printed circuit boards and other electronic interconnect
systems, including backplanes, wireless packages, high speed/low loss
multilayers and high density interconnects (“HDIs”). The Company’s diverse
advanced printed circuit materials product line is designed to address a wide
array of end-use applications and performance requirements.
The Company’s electronic materials
products have been developed internally and through long-term development
projects with its principal suppliers and, to a lesser extent, through licensing
arrangements. The Company focuses its research and development efforts on
developing industry leading product technology to meet the most demanding
product requirements and has designed its product line with a focus on the
higher performance, higher technology end of the materials
spectrum.
7
The Company’s products include
high-speed, low-loss, digital broadband engineered formulations,
high-temperature modified epoxies, phenolics, bismalimide triazine (“BT”)
epoxies, non-MDA polyimides, enhanced polyimides, SI® (Signal Integrity)
products, cyanate esters and PTFE formulations for radio frequency
("RF")/microwave applications.
The Company’s high performance printed
circuit materials consist of high-speed, low-loss materials for digital and
RF/microwave applications requiring lead-free compatibility and high bandwidth
signal integrity, BT materials, polyimides for applications that demand
extremely high thermal performance, cyanate esters, quartz reinforced materials,
and PTFE materials for RF/microwave systems that operate at frequencies up to 77
GHz.
The Company has developed long-term
relationships with select customers through broad-based technical support and
service, as well as manufacturing proximity and responsiveness at multiple
levels of the customer’s organization. The Company focuses on developing a
thorough understanding of its customer’s business, product lines, processes and
technological challenges. The Company seeks customers which are industry leaders
committed to maintaining and improving their industry leadership positions and
which are committed to long-term relationships with their suppliers. The Company
also seeks business opportunities with the more advanced printed circuit
fabricators and electronic equipment manufacturers which are interested in the
full value of products and services provided by their suppliers. The Company
believes its proactive and timely support in assisting its customers with the
integration of advanced materials technology into new product designs further
strengthens its relationships with its customers.
The Company’s emphasis on service and
close relationships with its customers is reflected in its short lead times. The
Company has developed its manufacturing processes and customer service
organizations to provide its customers with printed circuit materials products
on a just-in-time basis. The Company believes that its ability to meet its
customers' customized manufacturing and quick-turn-around ("QTA") requirements
is one of its unique strengths.
Printed Circuit Materials –
Customers and End Markets
The Company’s customers for its
advanced printed circuit materials include the leading independent printed
circuit board fabricators, electronic manufacturing service (“EMS”) companies,
electronic contract manufacturers (“ECMs”) and major electronic original
equipment manufacturers ("OEMs") in the computer, networking,
telecommunications, transportation, aerospace and instrumentation industries
located throughout North America, Europe and Asia. The Company seeks to align
itself with the larger, more technologically-advanced and better capitalized
independent printed circuit board fabricators and major electronic equipment
manufacturers which are industry leaders committed to maintaining and improving
their industry leadership positions and to building long-term relationships with
their suppliers. The Company has also aligned itself with a national distributor
of printed circuit materials, Tapco Associates, Inc., which supports smaller,
but technologically advanced, customers in the United States. The Company’s
selling effort typically involves several stages and relies on the talents of
Company personnel at different levels, from management to sales personnel and
quality engineers. In recent years, the Company has augmented its traditional
sales personnel with an OEM marketing team and product technology
specialists.
8
During
the Company's 2009 fiscal year, approximately 13.6% of the Company's total
worldwide sales were to Sanmina-SCI Corporation, a leading electronics contract
manufacturer and manufacturer of printed circuit boards, and approximately 12.1%
of the Company's total worldwide sales were to TTM Technologies, Inc., a leading
manufacturer of printed circuit boards. During the Company’s 2008 fiscal year,
approximately 13.4% of the Company’s total worldwide sales were to Sanmina-SCI
Corporation, and approximately 10.8% of the Company's total worldwide sales were
to TTM Technologies, Inc. During the Company’s 2009 and 2008 fiscal years, sales
to no other customer of the Company equaled or exceeded 10% of the Company’s
total worldwide sales.
Although the printed circuit materials
business is not dependent on any single customer, the loss of a major customer
or of a group of customers could have a material adverse effect on the printed
circuit materials business.
The Company’s printed circuit materials
products are marketed primarily by sales personnel and, to a lesser extent, by
independent distributors and manufacturers’ representatives in industrial
centers in North America, Europe and Asia.
Printed Circuit Materials –
Manufacturing
The process for manufacturing
multilayer printed circuit materials is capital intensive and requires
sophisticated equipment as well as clean-room environments. The key steps in the
Company’s manufacturing process include: the impregnation of specially designed
fiberglass cloth with a specially designed resin system and the partial curing
of that resin system; the assembling of laminates consisting of single or
multiple plies of prepreg and copper foil in a clean-room environment; the
vacuum lamination of the copper-clad assemblies under simultaneous exposure to
heat, pressure and vacuum; and the finishing of the laminates to customer
specifications.
Prepreg is manufactured in a treater. A
treater is a roll-to-roll continuous machine which sequences specially designed
fiberglass cloth or other reinforcement fabric into a resin tank and then
sequences the resin-coated cloth through a series of ovens which partially cure
the resin system into the cloth. This partially cured product or prepreg is then
sheeted or paneled and packaged by the Company for sale to customers, or used by
the Company to construct its copper-clad laminates.
The Company manufactures copper-clad
laminates by first setting up in a clean room an assembly of one or more plies
of prepreg stacked together with a sheet of specially manufactured copper foil
on the top and bottom of the assembly. This assembly, together with a large
quantity of other laminate assemblies, is then inserted into a large, multiple
opening vacuum lamination press. The laminate assemblies are then laminated
under simultaneous exposure to heat, pressure and vacuum. After the press cycle
is complete, the laminates are removed from the press and sheeted, paneled and
finished to customer specifications. The product is then inspected and packaged
for shipment to the customer.
The Company manufactures multilayer
printed circuit materials at four fully integrated facilities located in the
United States, Europe and Southeast Asia. The Company opened its California
facility in 1965, its Arizona facility in 1984, its Singapore facility in 1986
and its France facility in 1992. The Company services the North America market
principally
9
through
its United States manufacturing facilities, the European market principally
through its manufacturing facilities in the United States and in France, and the
Asian market principally through its Singapore manufacturing facility. During
its 2002 fiscal year, the Company established a business center in central
China, which was replaced by a manufacturing facility in the Zhuhai Free Trade
Zone approximately 50 miles west of Hong Kong in southern China. This facility
was completed in the Company’s 2007 fiscal year. During the 2008 fiscal year,
the Company modified certain of the equipment in this facility so that it can
laminate PTFE based circuitry materials in Asia. In addition, the Company
upgraded its printed circuit materials treating operation in Singapore during
the 2007 fiscal year so that such operation is capable of treating the Company’s
full line of advanced printed circuit materials in Singapore, except PTFE
materials. By maintaining technical and engineering staffs at each of its
manufacturing facilities, the Company is able to deliver fully-integrated
products and services on a timely basis.
Printed Circuit Materials –
Materials and Sources of Supply
The principal materials used in the
manufacture of the Company’s printed circuit materials products are specially
manufactured copper foil, fiberglass and quartz cloth and synthetic
reinforcements, and specially formulated resins and chemicals. The Company
attempts to develop and maintain close working relationships with suppliers of
those materials who have dedicated themselves to complying with the Company’s
stringent specifications and technical requirements. While the Company’s
philosophy is to work with a limited number of suppliers, the Company has
identified alternate sources of supply for each of these materials. However,
there are a limited number of qualified suppliers of these materials,
substitutes for these materials are not readily available, and, in the recent
past, the industry has experienced shortages in the market for certain of these
materials. While the Company has not experienced significant problems in the
delivery of these materials and considers its relationships with its suppliers
to be strong, a disruption of the supply of materials could materially adversely
affect the business, financial condition and results of operations of the
Company. Significant increases in the cost of materials purchased by the Company
could also have a material adverse effect on the Company’s business, financial
condition and results of operations if the Company were unable to pass such
increases through to its customers. During the first and second quarters of the
2007 and 2008 fiscal years, the Company incurred significant increases in the
cost of copper foil, one of the Company’s primary raw materials, and the Company
passed a substantial portion of such increases through to its
customers.
Printed Circuit Materials –
Competition
The multilayer printed circuit
materials industry is characterized by intense competition and ongoing
consolidation. The Company’s competitors are primarily divisions or subsidiaries
of very large, diversified multinational manufacturers which are substantially
larger and have greater financial resources than the Company and, to a lesser
degree, smaller regional producers. Because the Company focuses on the higher
technology segment of the printed circuit materials market, technological
innovation, quality and service, as well as price, are significant competitive
factors.
The Company believes that there are
several significant multilayer printed circuit materials manufacturers in the
world and many of these competitors have significant presences in the three
major global markets of
10
North
America, Europe and Asia. The Company believes that it is currently one of the
world’s largest advanced multilayer printed circuit materials manufacturers. The
Company further believes it is one of only a few significant independent
manufacturers of multilayer printed circuit materials in the world
today.
The markets in which the Company’s
printed circuit materials operations compete are characterized by rapid
technological advances, and the Company’s position in these markets depends
largely on its continued ability to develop technologically advanced and highly
specialized products. Although the Company believes it is an industry technology
leader and directs a significant amount of its time and resources toward
maintaining its technological competitive advantage, there is no assurance that
the Company will be technologically competitive in the future, or that the
Company will continue to develop new products that are technologically
competitive.
Advanced Composite Materials
and Parts
Advanced Composite Materials
Operations
The Company also develops and produces
engineered, advanced composite materials (the Nelcote® product line) for the
aerospace, aircraft, rocket motor, radio frequency (“RF”) and specialty
industrial markets.
The Company’s advanced composite
materials are manufactured by the Company’s Park Advanced Composite Materials,
Inc. subsidiary located in Waterbury, Connecticut, which was named Nelcote, Inc.
from May 2006 to March 2008 and which was named FiberCote Industries, Inc. prior
to May 2006, and by the Company’s Nelco Products Pte. Ltd. subsidiary in
Singapore. Such materials will also be manufactured by the Company’s Park
Aircraft Technologies Corp. subsidiary located in Newton, Kansas.
Advanced Composite Materials
– Industry Background
The
advanced composite materials manufactured by the Company and its competitors are
used primarily to fabricate light-weight, high-strength structures with
specifically designed performance characteristics. Composite materials are
typically highly specified combinations of resin formulations and
reinforcements. Reinforcements can be woven fabrics, non-woven goods such as
mats or felts, or in some cases unidirectional fibers. Reinforcement materials
are constructed of E-glass (fiberglass), carbon fiber, S2 glass, aramids such as
Kevlar® ("Kevlar" is a registered trademark of E.I. du Pont de Nemours &
Co.) and Twaron® (“Twaron” is a registered trademark of Teijin Twaron B.V. LLC),
quartz, polyester, and other synthetic materials. Resin formulations are
typically highly proprietary, and include various chemical mixtures. The Company
produces resin formulations using various epoxies, polyesters, phenolics,
cyanate esters, polyimides and other complex matrices. The reinforcement
combined with the resin is referred to as a “prepreg”, which is an acronym for
pre-impregnated material. Advanced composite materials can be broadly
categorized as either a thermoset or a thermoplastic. While both material types
require the addition of heat and pressure to achieve the molecular cross-linking
of the matrices, thermoplastics can be reformed using additional heat and
pressure. Once fully cured, thermoset materials can not be further reshaped. The
Company believes that the demand for thermoset advanced materials is greater
than that for thermoplastics due to the fact that fabrication processes for
thermoplastics require much higher temperatures and pressures, and are,
therefore, typically
11
more
capital intensive than the fabrication processes for thermoset
materials.
The
advanced composite materials industry suppliers have historically been large
chemical corporations. During the past ten years, considerable consolidation has
occurred in the industry, resulting in three relatively large composite
materials suppliers and a number of smaller suppliers.
Composite
part fabricators typically design and specify a material specifically to meet
the needs of the part’s end use and the fabricators’ processing methods.
Fabricators sometimes work with a supplier to develop the specific resin system
and reinforcement combination to match the application. Fabricators’ processing
may include hand lay-up or more advanced automated lay-up techniques. Automated
lay-up processes include automated tape lay-up (“ATL”), fiber placement and
filament winding. These fabrication processes significantly alter the material
form purchased. After the lay-up process is completed, the material is cured by
the addition of heat and pressure. Cure processes typically include vacuum bag
oven curing, high pressure autoclave, press forming and in some cases in-situ
curing. After the part has been cured, final finishing and trimming, and
assembly of the structure is performed by the fabricator.
Advanced Composite Materials
– Products
The
products manufactured by the Company are primarily thermoset curing prepregs. By
analyzing the needs of the markets in which it participates, and working with
its customers, the Company has developed proprietary resin formulations to suit
the needs of its markets. The complex process of developing resin formulations
and selecting the proper reinforcement is accomplished through a collaborative
effort of the Company’s research and development resources working with the
customers’ technical staff. The Company focuses on developing a thorough
understanding of its customers’ businesses, product lines, processes and
technical challenges. The Company believes that it develops innovative solutions
which utilize technologically advanced materials and concepts for its
customers.
The
Company’s advanced composite materials products include prepregs manufactured
from proprietary formulations using modified epoxies, phenolics, polyesters,
cyanate esters, polyimides combined with woven, non-woven, and unidirectional
reinforcements. Reinforcement materials used to produce the Company’s products
include polyacrylonitrile (“PAN”) and pitch based carbons, aramids, E-glass, S2
glass, polyester, quartz and rayon. The Company also sells certain specialty
fabrics, such as Raycarb C2, a carbonized rayon fabric produced by Snecma
Propulsion Solide and used mainly in the rocket motor industry.
Advanced Composite Materials
– Customers and End Markets
The
Company’s advanced composite materials customers include manufacturers in the
aerospace, aircraft, rocket motor, electronics, radio frequency (“RF”) and
specialty industrial markets. The Company’s materials are marketed by sales
personnel and independent sales representatives.
While no
single advanced composite materials customer accounted for 10% or more of the
Company’s total sales during either of the last two fiscal years, the loss of a
major customer or of a group of some of the largest
12
customers
of the advanced composite materials business could have a material adverse
effect upon the Company’s advanced composite materials business.
The
Company’s aerospace customers are fabricators of aircraft composite hardware.
The Company’s advanced composite materials are used to produce primary and
secondary structures, aircraft interiors, and various other aircraft components.
The majority of the Company’s customers for aerospace materials do not produce
hardware for commercial aircraft, but for the general aviation and business
aviation, kit aircraft and military segments.
Customers
for the Company’s rocket motor materials include United States defense prime
contractors and subcontractors. These customers fabricate rocket motors for
heavy lift space launchers, strategic defense weapons, tactical motors and
various other applications. The Company’s materials are used to produce heat
shields, exhaust gas management devices, and insulative and ablative nozzle
components. Rocket motors are primarily used for commercial and military space
launch, and for tactical and strategic weapons. The Company also has customers
for these materials outside of the United States.
The
Company also sells composite materials for use in RF electrical applications.
Customers buying these materials typically fabricate antennas and radomes
engineered to preserve electrical signal integrity. A radome is a protective
cover over an electrical antenna or signal generator. The radome is designed to
minimize signal loss and distortion.
Many of the Company’s composite
materials are used in the manufacture of aircraft certified by the Federal
Aviation Administration (the “FAA”). In support of these programs, the Company
has developed FAA accepted databases of design allowables for certain materials
that can be used by customers in the design and certification of FAA certified
aircraft structures. The Company continues to support public FAA accepted
databases such as NCAMP by funding ongoing material qualifications.
Advanced Composite Materials
– Manufacturing
The Company’s manufacturing facilities
for advanced composite materials are currently located in Waterbury, Connecticut
and in Singapore. In the 2007 fiscal year, the Company acquired a facility in
Singapore which the Company modified and expanded for use as an advanced
composites manufacturing plant. In addition, the Company has completed a new
development and manufacturing facility in Newton, Kansas to produce advanced
composite materials principally for the aerospace industry. The Company also
produces some products through the use of toll coating services at other
locations in North America.
The
process for manufacturing composite materials is capital intensive and requires
sophisticated equipment, significant technical know-how and very tight process
control. The key steps used in the manufacturing process include chemical
reactors, resin mixing, reinforcement impregnation, and in some cases resin film
casting, and solvent drying processes.
Prepreg
is manufactured by the Company using either solvent (solution) coating methods
on a treater or by hot melt impregnation. A solution treater is a roll-to-roll
continuous process machine which sequences reinforcement through tension
controllers and combines solvated resin with the reinforcement. The
reinforcement is dipped in resin, passed through a drying
13
oven
which removes the solvent and advances (or partially cures) the resin. The
prepreg material is interleafed with a carrier and cut to the roll lengths
desired by the customer. The Company also manufactures prepreg using hot melt
impregnation methods which use no solvent. Hot melt prepreg manufacturing is
achieved by mixing a resin formulation in a heated resin vessel, casting a thin
film on a carrier paper, and laminating the reinforcement with the resin film.
The Company also completes additional processing services, such as toll coating,
slitting, sheeting, biasing, sewing and cutting, if needed by the customer. Many
of the products manufactured by the Company also undergo extensive testing of
the chemical, physical and mechanical properties of the product. These testing
requirements are completed in the laboratories and facilities located at the
Company’s manufacturing facilities. The Company’s laboratories have been
approved by several aerospace contractors. After all the processing has been
completed, the product is inspected and packaged for shipment to the customer.
The Company typically supplies final product to the customer in roll or sheet
form.
Advanced Composite Materials
– Materials and Sources of Supply
The Company designs and manufactures
its advanced composite materials to its own specifications and to the
specifications of its customers. Product development efforts are focused on
developing prepreg materials that meet the specifications of the customers. The
materials used in the manufacture of these engineered materials include graphite
and carbon fibers and fabrics, Kevlar®, quartz, fiberglass, polyester, specialty
chemicals, resins, films, plastics, adhesives and certain other synthetic
materials. The Company purchases these materials from several suppliers.
Substitutes for many of these materials are not readily available, and demand
has increased for certain materials, such as carbon fiber. The Company is
working globally to determine acceptable alternatives for several raw materials
with limited availability.
Advanced Composite Materials
– Competition
The Company has many competitors in the
advanced composite materials business, ranging in size from large, international
corporations to small regional producers. Several of the Company’s largest
competitors are vertically integrated. Some of the Company’s competitors may
also serve as a supplier to the Company. The Company competes for business on
the basis of responsiveness, product performance, innovative new product
development, product qualification listing and price.
Advanced Composite
Parts
On April 1, 2008, the Company’s wholly
owned subsidiary, Park Aerospace Structures Corp., acquired substantially all
the assets and business of Nova Composites, Inc. 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. Park Aerospace Structures Corp.
manufactures aircraft composite parts and the tooling for such parts. These
composite parts are manufactured with carbon, fiberglass and other
reinforcements impregnated with formulated resins. These impregnated
reinforcements, sometimes know as “prepregs”, are supplied by other subsidiaries
of Park, as well as independent companies. Park’s composite parts product line
is marketed and sold as Park’s Nova™ product line.
14
Backlog
The Company records an item as backlog
when it receives a purchase order specifying the number of units to be
purchased, the purchase price, specifications and other customary terms and
conditions. At May 3, 2009, the unfilled portion of all purchase orders received
by the Company and believed by it to be firm was approximately $5,397,000,
compared to $7,636,000 at May 4, 2008.
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 March 1, 2009.
Patents and
Trademarks
The Company holds several patents and
trademarks or licenses thereto. In the Company’s opinion, some of these patents
and trademarks are important to its products. Generally, however, the Company
does not believe that an inability to obtain new, or to defend existing, patents
and trademarks would have a material adverse effect on the Company.
Employees
At March 1, 2009, the Company had 615
employees. Of these employees, 483 were engaged in the Company’s printed circuit
materials operations, 88 in its advanced composite materials and parts
operations and 44 consisted of executive personnel and general administrative
staff. None of the Company’s employees are subject to a collective bargaining
agreement. Management considers its employee relations to be good.
Environmental
Matters
The Company is subject to stringent
environmental regulation of its use, storage, treatment and disposal of
hazardous materials and the release of emissions into the environment. The
Company believes that it currently is in substantial compliance with the
applicable federal, state and local environmental laws and regulations to which
it is subject and that continuing compliance therewith will not have a material
effect on its capital expenditures, earnings or competitive position. The
Company does not currently anticipate making material capital expenditures for
environmental control facilities for its existing manufacturing operations
during the remainder of its current fiscal year or its succeeding fiscal year.
However, developments, such as the enactment or adoption of even more stringent
environmental laws and regulations, could conceivably result in substantial
additional costs to the Company.
The Company and certain of its
subsidiaries have been named by the Environmental Protection Agency (the “EPA”)
or a comparable state agency under the Comprehensive Environmental Response,
Compensation and Liability Act (the “Superfund Act”) or similar state law as
potentially responsible parties in connection with alleged releases of hazardous
substances at nine sites. In addition, two subsidiaries of the Company have
received cost recovery claims under the Superfund Act 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.
15
Under the Superfund Act and similar
state laws, all parties who may have contributed any waste to a hazardous waste
disposal site or contaminated area identified by the EPA or comparable state
agency may be jointly and severally liable for the cost of cleanup. Generally,
these sites are locations at which numerous persons disposed of hazardous waste.
In the case of the Company’s subsidiaries, generally the waste was removed from
their manufacturing facilities and disposed at the waste sites by various
companies which contracted with the subsidiaries to provide waste disposal
services. Neither the Company nor any of its subsidiaries have been accused of
or charged with any wrongdoing or illegal acts in connection with any such
sites. The Company believes it maintains an effective and comprehensive
environmental compliance program. Management believes the ultimate disposition
of known environmental matters will not have a material adverse effect 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.
See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Environmental
Matters” included in Item 7 of Part II of this Report and Note 16 of the Notes
to Consolidated Financial Statements included in Item 8 of Part II of this
Report.
ITEM 1A. RISK FACTORS.
The business of the Company faces
numerous risks, including those set forth below or those described elsewhere in
this Form 10-K Annual Report or in the Company's other filings with the
Securities and Exchange Commission. The risks described below are not the only
risks that the Company faces, nor are they necessarily listed in order of
significance. Other risks and uncertainties may also affect the Company’s
business. Any of these risks may have a material adverse effect on the Company's
business, financial condition, results of operations or cash flow.
The
industries in which the Company operates are undergoing technological changes,
and the Company's business could suffer if the Company is unable to adjust to
these changes.
The
Company's operating results could be negatively affected by the Company's
inability to maintain and increase its technological and manufacturing
capability and expertise. Rapid technological advances in semiconductors and
electronic equipment have placed rigorous demands on the printed circuit
materials manufactured by the Company and used in printed circuit board
production.
The
industries in which the Company operates are very competitive.
Certain
of the Company's principal competitors are substantially larger and have greater
financial resources than the Company, and the Company's operating results will
be affected by its ability to maintain its competitive positions in these
industries. The printed circuit materials and advanced composite materials
industries are intensely competitive and the Company competes worldwide in the
markets for such materials.
16
The
Company is vulnerable to an increase in the cost of gas or
electricity.
Changes
in the cost or availability of gas or electricity could materially increase the
Company's cost of operations. The Company's production processes require the use
of substantial amounts of gas and electricity, the cost and available supply of
which are beyond the control of the Company.
The
Company’s cost of sales and results of operations were affected by increases in
utility costs in the Company’s fiscal year ended March 1, 2009. See
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Item 7 of Part II of this Report.
The
Company is vulnerable to an increase in the price of certain raw
materials.
There are
a limited number of qualified suppliers of the principal materials used by the
Company in its manufacture of printed circuit materials, advanced composite
materials and composite parts. Substitutes for these materials are not readily
available, and in the past there have been shortages in the market for certain
of these materials. These shortages could materially increase the Company's cost
of operations. Raw material substitutions for certain aircraft related products
may require governmental (such as Federal Aviation Administration)
approval.
During
the first and second quarters of the Company’s 2007 and 2008 fiscal years, the
Company incurred significant increases in the cost of copper foil, one of the
Company’s primary raw materials, and the Company passed a substantial portion of
such increases through to its customers. See “Business—Printed Circuit
Materials—Materials and Sources of Supply” in Item 1 of Part I of this Report
and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Item 7 of Part II of this Report.
The
Company's customer base is highly concentrated, and the loss of one or more
customers could affect the Company's business.
A loss of
one or more key customers could affect the Company's
profitability. The Company's customer base is concentrated, in part,
because the Company's business strategy has been to develop long-term
relationships with a select group of customers. During the Company's fiscal year
ended March 1, 2009, the Company's ten largest customers accounted for
approximately 67% of net sales. The Company expects that sales to a relatively
small number of customers will continue to account for a significant portion of
its net sales for the foreseeable future. See "Business—Printed Circuit
Materials—Customers and End Markets” and “Business—Advanced Composite
Materials—Customers and End Markets” in Item 1 of Part I of this
Report.
The
Company's business is dependent on the electronics and aerospace industries
which are cyclical in nature.
The
electronics and aerospace industries are cyclical and have experienced recurring
cycles. The downturns, such as occurred in the electronics industry during the
first quarter of the Company's fiscal year ended March 3, 2002, can be
unexpected and have often reduced demand for, and prices of, printed circuit
materials, advanced composite materials and composite parts. This potential
reduction in demand and prices could have a negative impact on the Company’s
business.
17
In
addition, the Company is subject to the effects of general regional and global
economic and financial conditions, such as the worldwide economic and financial
crises that occurred in the second half of the Company’s fiscal year ended March
1, 2009 and that is continuing in the first quarter of the Company’s fiscal year
ending February 28, 2010.
The
Company relies on short-term orders from its customers.
A variety
of conditions, both specific to the individual customer and generally affecting
the customer’s industry, can cause a customer to reduce or delay orders
previously anticipated by the Company, which could negatively impact the
Company’s business. The Company typically does not obtain long-term purchase
orders or commitments. Instead, it relies primarily on continual communication
with its customers to anticipate the future volume of purchase
orders.
The
Company faces extensive capital expenditure costs.
The
Company’s business is capital intensive and, in addition, the introduction of
new technologies could substantially increase the Company’s capital
expenditures. In order to remain competitive the Company must continue to make
significant investments in capital equipment and expansion of operations, which
could affect the Company’s results of operations.
The
Company’s international operations are subject to different and additional risks
than the Company’s domestic operations.
The
Company’s international operations are subject to various risks, including
unexpected changes in regulatory requirements, foreign currency exchange rates,
tariffs and other barriers, political and economic instability, potentially
adverse tax consequences, and any impact on economic and financial conditions
around the world resulting from geopolitical conflicts or acts of terrorism, all
of which could negatively impact the Company’s business. A portion of the sales
and costs of the Company’s international operations are denominated in
currencies other than the U.S. dollar and may be affected by fluctuations in
currency exchange rates.
The
Company is subject to a variety of environmental regulations.
The
Company’s production processes require the use, storage, treatment and disposal
of certain materials which are considered hazardous under applicable
environmental laws, and the Company is subject to a variety of regulatory
requirements relating to the handling of such materials and the release of
emissions and effluents into the environment, non-compliance with which could
have a negative impact on the Company. Other possible developments, such as the
enactment or adoption of additional environmental laws, could result in
substantial costs to the Company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES.
Set forth below are the locations of
the significant properties owned and leased by the Company, the businesses which
use the properties, and the size of each such property. All of such properties,
except for the Melville,
18
New York
property, are used principally as manufacturing and warehouse
facilities.
|
Location
|
Owned
or
Leased
|
Use
|
Size
(Square
Footage)
|
|
Melville,
NY
|
Leased
|
Administrative
Offices
|
8,000
|
|
Fullerton,
CA
|
Leased
|
Electronic
Materials
|
95,000
|
|
Anaheim,
CA
|
Leased
|
Electronic
Materials
|
26,000
|
|
Tempe,
AZ
|
Leased
|
Electronic
Materials
|
87,000
|
|
Lannemezan,
France
|
Owned
|
Electronic
Materials
|
29,000
|
|
Singapore
|
Leased
|
Electronic
Materials
|
128,000
|
|
Zhuhai,
China
|
Leased
|
Electronic
Materials
|
40,000
|
|
Waterbury,
CT
|
Leased
|
Advanced
Composites
|
100,000
|
|
Newton,
KS
|
Leased
|
Advanced
Composites
|
50,000
|
|
Singapore
|
Leased
|
Advanced
Composites
|
24,000
|
|
Lynnwood,
WA
|
Leased
|
Aerospace
Parts
|
21,000
|
The advanced composites facility in
Newton, Kansas was constructed during the 2009 fiscal year and is currently
undergoing equipment testing and qualification.
The Company believes its facilities and
equipment to be in good condition and reasonably suited and adequate for its
current needs. During the 2009, 2008 and 2007 fiscal years, certain of the
Company's printed circuit materials manufacturing facilities were utilized at
less than 50% of their designed capacity.
During the 2009 fiscal year fourth
quarter, the Company closed its New England Laminates Co., Inc. business unit
located in Newburgh, New York, which had a facility consisting of approximately
171,000 square feet, and its Neltec Europe SAS business unit in Mirebeau,
France, which had a facility consisting of approximately 81,000 square feet; and
the Company is attempting to sell its interests in both such
facilities.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.
None
19
|
Name
|
Title
|
Age
|
|
Brian
E. Shore
|
Chief
Executive Officer, President and a Director
|
57
|
|
Stephen
E. Gilhuley
|
Executive
Vice President, Secretary and General Counsel
|
64
|
|
P.
Matthew Farabaugh
|
Vice
President and Controller
|
48
|
|
Anthony
W. DiGaudio
|
Vice
President of Marketing and Sales
|
39
|
|
Margaret
M. Kendrick
|
Vice
President of Operations
|
49
|
Mr. Shore has served as a Director of
the Company since 1983 and as Chairman of the Board of Directors since July
2004. He was elected a Vice President of the Company in January 1993, Executive
Vice President in May 1994, President in March 1996, and Chief Executive Officer
in November 1996. Mr. Shore also served as General Counsel of the Company from
April 1988 until April 1994.
Mr. Gilhuley has been General Counsel
of the Company since April 1994 and Secretary since July 1996. He was elected a
Senior Vice President in March 2001 and Executive Vice President on October 24,
2006.
Mr. Farabaugh was appointed Vice
President and Controller of the Company on October 8, 2007. Prior to joining
Park, Mr. Farabaugh was Corporate Controller of American Technical Ceramics, a
publicly traded international company and a manufacturer of electronic
components, located in Huntington Station, New York, from 2004 to September 2007
and Assistant Controller from 2000 to 2004. Prior thereto, Mr. Farabaugh was
Assistant Controller of Park Electrochemical Corp. from 1989 to
2000. Prior to joining Park in 1989, Mr. Farabaugh had been a senior
accountant with KPMG.
Mr. DiGaudio joined the Company as a
Product Director in May 2002, was promoted to Vice President of Quality in May
2004 and was promoted to Vice President of Sales effective June 13, 2005. He was
appointed Vice President of Marketing in June 2006 in addition to the position
of Vice President of Sales. For several years prior to joining Park, Mr.
DiGaudio was Technical Manager for Metro Circuits, Division of PJC Technologies,
Inc. in Rochester, New York.
Ms. Kendrick was appointed Vice
President of Operations effective April 13, 2009. Previously, she was
Vice President of North American Operations of the Company since her appointment
to that position in September 2008. She had been President of the Company’s
Nelco Products, Inc. subsidiary in California from January 2004 to October 2008.
Prior to January 2004, she served as Vice President of Global Materials for the
Company. Ms. Kendrick originally joined the Company in 1984. She is also
currently Vice President of Global Supplier Relations of the
Company.
There are no family relationships
between the directors or executive officers of the Company.
Each executive officer of the Company
serves at the pleasure of the Board of Directors of the Company.
20
|
MARKET
FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
|
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 Chicago Stock Exchange.) The following table sets
forth, for each of the quarterly periods indicated, the high and low sales
prices for the Common Stock as reported on the New York Stock Exchange Composite
Tape and dividends declared on the Common Stock.
|
For
the Fiscal Year
|
Stock Price
|
Dividends
|
||||||||||
|
Ended March 1, 2009
|
High
|
Low
|
Declared
|
|||||||||
|
First
Quarter
|
$ |
30.55
|
$ |
22.58
|
$ |
.08
|
||||||
|
Second
Quarter
|
29.83
|
22.77
|
.08
|
|||||||||
|
Third
Quarter
|
30.91
|
12.99
|
.08
|
|||||||||
|
Fourth
Quarter
|
21.64
|
15.28
|
.08
|
|||||||||
|
For
the Fiscal Year
|
Stock Price
|
Dividends
|
||||||||||
|
Ended March 2, 2008
|
High
|
Low
|
Declared
|
|||||||||
|
First
Quarter
|
$ |
29.87
|
$ |
25.68
|
$ |
.08
|
||||||
|
Second
Quarter
|
33.99
|
26.05
|
1.58(a)
|
|||||||||
|
Third
Quarter
|
37.17
|
28.16
|
.08
|
|||||||||
|
Fourth
Quarter
|
31.66
|
21.11
|
.08
|
|||||||||
|
|
(a)
|
During
the 2008 fiscal year second quarter, the Company declared its regular
quarterly cash dividend of $0.08 per share in June 2007, and in July 2007
the Company announced that its Board of Directors had declared a one-time,
special cash dividend of $1.50 per share, payable August 22, 2007 to
stockholders of record on August 1,
2007.
|
As of May 11, 2009, there were
approximately 840 holders of record of Common Stock.
The Company expects, for the immediate
future, to continue to pay regular cash dividends.
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 2009 fiscal year fourth
quarter ended March 1, 2009.
21
|
Maximum
Number (or
|
||||
|
Total
Number of
|
Approximate
Dollar
|
|||
|
Shares
(or
|
Value)
of Shares
|
|||
|
Total
|
Units)Purchased
|
(or
Units) that
|
||
|
Number
of
|
Average
|
As
Part of
|
May
Yet Be
|
|
|
Shares
(or
Units)
|
Price
Paid
Per
Share
|
Publicly
Announced
Plans
|
Purchased
Under
The
Plans or
|
|
|
Period
|
Purchased
|
(or Unit)
|
or Programs
|
Programs
|
|
December
1 - January
1 |
0
|
-
|
0
|
|
|
January
2 –
February
1
|
0
|
-
|
0
|
|
|
February
2 –
March
1
|
0
|
-
|
0
|
|
|
Total
|
0
|
-
|
0
|
2,000,000
(a)
|
(a) Aggregate
number of shares available to be purchased by the Company pursuant to a 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 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 March
1, 2009 and is as of the end of such periods, it is derived from the
Consolidated Financial Statements for the five fiscal years ended March 1,
2009 and as of such dates audited by Grant Thornton LLP, independent auditor.
The Consolidated Financial Statements as of March 1, 2009 and March 2, 2008 and
for the three years ended March 1, 2009, together with the independent auditor’s
report for the three years ended March 1, 2009, appear in Item 8 of Part II of
this Report.
22
|
Fiscal
Year Ended
|
||||||||||||||||||||
|
(In
thousands, except per share amounts)
|
||||||||||||||||||||
|
March
1,
2009
|
March
2,
2008
|
February
25, 2007
|
February
26,
2006
|
February
27,
2005
|
||||||||||||||||
|
STATEMENTS
OF EARNINGS INFORMATION:
|
||||||||||||||||||||
|
Net
sales
|
$ | 200,062 | $ | 241,852 | $ | 257,377 | $ | 222,251 | $ | 211,187 | ||||||||||
|
Cost
of sales
|
156,638 | 179,398 | 193,270 | 167,650 | 167,937 | |||||||||||||||
|
Gross
profit
|
43,424 | 62,454 | 64,107 | 54,601 | 43,250 | |||||||||||||||
|
Selling,
general and
administrative
expenses
|
24,806 | 27,159 | 26,682 | 25,129 | 26,960 | |||||||||||||||
|
Insurance
arrangement
termination
charge
|
- | - | 1,316 | - | - | |||||||||||||||
|
Asset
impairment charge
|
3,967 | - | - | 2,280 | - | |||||||||||||||
|
Realignment
and severance
charges
(Note 12)
|
2,290 | 1,362 | - | 889 | 625 | |||||||||||||||
|
Gain
on insurance settlement
|
-
|
-
|
-
|
-
|
(4,745
|
) | ||||||||||||||
|
Earnings
from operations
|
12,361 | 33,933 | 36,109 | 26,303 | 20,410 | |||||||||||||||
|
Interest
and other income, net
|
6,648 | 9,361 |
8,033
|
6,056
|
3,386 | |||||||||||||||
|
Earnings
from continuing
operations
before income taxes
|
19,009 | 43,294 | 44,142 | 32,359 | 23,796 | |||||||||||||||
|
Income
tax provision from
continuing
operations
|
495 | 8,615 |
4,351
|
5,484
|
2,191 | |||||||||||||||
|
Net
earnings from continuing
operations
|
18,514 | 34,679 | 39,791 | 26,875 | 21,605 | |||||||||||||||
|
Gain
from discontinued
operations
(Note 11)
|
16,486 |
-
|
-
|
-
|
-
|
|||||||||||||||
|
Net
earnings
|
$ | 35,000 | $ | 34,679 | $ | 39,791 | $ | 26,875 | $ | 21,605 | ||||||||||
|
Basic
earnings per share:
|
||||||||||||||||||||
|
Net
earnings from continuing
operations
|
$ | .90 | $ | 1.71 | $ | 1.97 | $ | 1.34 | $ | 1.09 | ||||||||||
|
Gain
from discontinued
operations
|
.81 |
-
|
-
|
-
|
-
|
|||||||||||||||
|
Basic
earnings per share
|
$ | 1.71 | $ | 1.71 | $ | 1.97 | $ | 1.34 | $ | 1.09 | ||||||||||
|
Diluted
earnings per share:
|
||||||||||||||||||||
|
Net
earnings from continuing
operations
|
$ | .90 | $ | 1.70 | $ | 1.96 | $ | 1.33 | $ | 1.08 | ||||||||||
|
Gain
from discontinued
operations
|
.81 |
-
|
-
|
-
|
-
|
|||||||||||||||
|
Diluted
earnings per share
|
$ | 1.71 | $ | 1.70 | $ | 1.96 | $ | 1.33 | $ | 1.08 | ||||||||||
|
Cash
dividends per common share
|
$ | .32 | $ | 1.82 | $ | 1.32 | $ | 1.32 | $ | 1.26 | ||||||||||
|
Weighted
average number of
common
shares outstanding:
|
||||||||||||||||||||
|
Basic
|
20,441 | 20,305 | 20,175 | 20,047 | 19,879 | |||||||||||||||
|
Diluted
|
20,486 | 20,364 | 20,317 | 20,210 | 20,075 | |||||||||||||||
|
BALANCE
SHEET INFORMATION:
|
||||||||||||||||||||
|
Working
capital
|
$ | 239,645 | $ | 239,060 | $ | 233,767 | $ | 214,934 | $ | 206,714 | ||||||||||
|
Total
assets
|
327,579 | 327,407 | 321,922 | 311,312 | 307,311 | |||||||||||||||
|
Long-term
debt
|
- | - | - | - | - | |||||||||||||||
|
Stockholders'
equity
|
295,709 | 269,172 | 264,167 | 245,423 | 242,857 | |||||||||||||||
|
|
||||||||||||||||||||
See Notes
to Consolidated Financial Statements in Item 8 of Part II of this
Report.
23
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
General:
Park 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 and parts principally for the aerospace
markets. Park’s core capabilities are in the areas of polymer chemistry
formulation and coating technology. Park also specializes in the 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 products are marketed and sold
under the Nelco®, Nelcote® and Nova™ names.
The comparisons of the Company’s
results of operations for its 2009 fiscal year ended March 1, 2009 to the
Company’s results of operations for its 2008 fiscal year ended March 2, 2008 and
the comparisons of the Company’s results of operations for its 2008 fiscal year
to the Company’s results of operations for its 2007 fiscal year ended February
25, 2007 are impacted by the facts that the 2008 fiscal year consisted of 53
weeks and the 2009 and 2007 fiscal years each consisted of 52
weeks.
The Company’s total net sales declined
in the fiscal year ended March 1, 2009 compared to the fiscal year ended March
2, 2008 as a result of decreases in sales of the Company’s printed circuit
materials products in North America, Asia and Europe, following a decline in the
Company’s total net sales in the fiscal year ended March 2, 2008 compared to the
fiscal year ended February 25, 2007 as a result of decreases in sales of the
Company’s printed circuit materials products in North America and Europe. These
decreases in sales of the Company’s printed circuit materials were only
partially offset by increases in sales of the Company’s advanced composite
materials in the 2009 fiscal year compared to the 2008 fiscal year and in the
2008 fiscal year compared to the 2007 fiscal year and, in the 2009 fiscal year,
by the addition of sales of the Company’s advanced composite parts products as a
result of the Company’s acquisition of the composite parts business of Nova
Composites in Lynnwood, Washington in the 2009 fiscal year first
quarter.
As a result of the declines in the
Company’s total net sales in the 2009 and 2008 fiscal years compared to the
immediately preceding fiscal years, the Company’s earnings from continuing
operations were lower in the 2009 fiscal year than in the 2008 fiscal year and
lower in the 2008 fiscal year than in the 2007 fiscal year.
The significant decreases in sales of
printed circuit materials products, combined with, among other things,
substantial losses at the Company’s Neltec Europe SAS electronic materials
business unit in Mirebeau, France, resulted in lower gross profits and lower
earnings from continuing operations in the 2009 fiscal year compared to the 2008
fiscal year. The declines in the Company’s operating and earnings performances
during the 2009 fiscal year compared to the 2008 fiscal year were partially
offset by higher percentages of sales of higher margin, high performance printed
circuit materials and advanced composite materials products during the 2009
fiscal year and by the benefits resulting from the restructurings of the
Company’s
24
Neltec
Europe SAS and Neltec SA business units in the 2008 fiscal year and from the
workforce reductions at the Nelco Products, Inc., Neltec, Inc. and Nelco
Products Pte. Ltd. business units and the closures of the New England Laminates
Co., Inc. and Neltec Europe SAS business units in the 2009 fiscal years, all
described elsewhere in this Discussion.
The Company’s net earnings for the 2009
fiscal year were significantly increased by a discontinued operations benefit of
$16.5 million recorded by the Company in the 2009 fiscal year fourth quarter
related to the elimination of a liability from discontinued operations of the
Company’s Dielektra GmbH subsidiary located in Germany as a result of certain
legal proceedings in Germany. The Company’s earnings were also increased by a
tax benefit of $4.7 million recorded by the Company in the 2009 fiscal year
fourth quarter related to the elimination of certain valuation allowances
resulting principally from the closure of the Company’s New England Laminates
Co., Inc. electronic materials business unit located in Newburgh, New York and
by a tax benefit of $1.2 million recorded by the Company in the 2009 fiscal year
fourth quarter related to one-time pre-tax charges also recorded by the Company
in such quarter for the aforementioned closure of the Company’s New England
Laminates Co., Inc. business unit and the closure of the Company’s Neltec Europe
SAS electronic materials business unit located in Mirebeau, France and for a
workforce reduction and an asset impairment at the Company’s Nelco Products Pte.
Ltd. electronic materials and advanced composite materials business unit in
Singapore. Such benefits were partially offset by the one-time pre-tax charges
of $5.7 million recorded by the Company in the 2009 fiscal year fourth quarter
related to the aforementioned business unit closures, workforce reduction and
asset impairment and by a one-time pre-tax charge of $0.6 million recorded by
the Company in the 2009 fiscal year third quarter related to restructurings at
certain of its North American and European business units.
The Company’s net earnings for the
fiscal year ended March 2, 2008 were increased by a tax benefit of $1.5 million
recorded by the Company in the 2008 fiscal year fourth quarter resulting from
the reduction of tax reserves in the United States related to transfer pricing
and were reduced by a charge of $1.4 million recorded by the Company in the 2008
fiscal year fourth quarter for employment termination benefits and other
expenses related to a restructuring and workforce reduction at the Company’s
Neltec Europe SAS business unit.
The markets for the Company’s printed
circuit materials products have contracted from the levels that existed in the
2007 fiscal year. Consequently, sales of the Company’s printed circuit materials
products decreased in the 2009 fiscal year compared to the 2008 fiscal year and
in the 2008 fiscal year compared to the 2007 fiscal year. The markets for the
Company’s advanced composite materials and parts continued to be relatively
strong during the first half of the 2009 fiscal year, and sales of the Company’s
advanced composite materials products increased in the 2009 fiscal year compared
to the 2008 fiscal year and in the 2008 fiscal year compared to the prior fiscal
year principally as a result of the Company’s marketing and sales
efforts.
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 materials products will be in the 2010 fiscal
year. Further, the Company is not able to predict the impact the current global
financial and credit crisis
25
will have
on the markets for its advanced composite materials and parts products in the
2010 fiscal year.
As previously
reported, in the first
quarter of the Company’s 2009 fiscal year, the Company’s new wholly owned
subsidiary, Park Aerospace Structures Corp., acquired substantially all the
assets and business of Nova Composites, Inc., a manufacturer of composite parts
and the tooling for such parts, 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.
In addition, 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 industry. The Company spent
approximately $15 million on the facility and equipment in Kansas.
In the fourth quarter of the 2009
fiscal year, the Company recorded a discontinued operation benefit of $16.5
million related to the elimination of a liability from discontinued operations
of the Company’s Dielektra GmbH subsidiary located in Germany as a result of
certain legal proceedings in Germany.
In the fourth quarter of the 2008
fiscal year, the Company opened its new advanced composite materials
manufacturing plant in Singapore, which it had acquired in the 2007 fiscal year
and modified and expanded for use as a composite materials manufacturing
plant.
As previously reported, the Company
discontinued its participation in the bidding for certain of the assets and
business of Columbia Aircraft Manufacturing Corporation (“Columbia”) in an
auction conducted in the United States Bankruptcy Court for the District of
Oregon in Portland, Oregon on November 27, 2007 and incurred approximately $0.5
million in out-of-pocket expenses relating to its extensive due diligence
investigation of Columbia in Bend, Oregon and elsewhere, all of which was
expensed in the 2008 fiscal year third quarter ended November 25,
2007.
In the fourth quarter of the 2008
fiscal year, the Company also recorded a tax benefit of $1.5 million relating to
the reduction of tax reserves in the United States related to transfer
pricing.
In the 2007 fiscal year, the Company
completed the construction of a new manufacturing facility in the Zhuhai Free
Trade Zone in Guangdong Province in southern China. During the 2008 fiscal year,
the Company modified certain of the equipment in this facility so that it can
laminate PTFE based circuitry materials in Asia. In addition, the Company
upgraded its printed circuit materials treating operation in Singapore during
the 2007 fiscal year so that such operation is capable of treating the Company’s
full line of advanced printed circuit materials in Singapore, except
polytetrafluoroethylene (“PTFE”) materials.
While the Company continues to invest
in its business, it also continues to make additional adjustments to certain of
its operations, which have resulted in workforce reductions and plant
closures.
26
In the 2008 fiscal year fourth quarter,
the Company’s Neltec Europe SAS electronic materials business unit located in
Mirebeau, France, completed a restructuring of its operations and a reduction of
its workforce in response to the continuing erosion of the markets for
electronic materials in Europe and the continuing migration of such markets to
Asia, and the Company recorded a one-time charge of approximately $1.4 million
in such quarter for employment termination benefits and other expenses resulting
from such restructuring and workforce reduction. In addition, in the 2006 fiscal
year first and second quarters, the Company reduced the size of the workforce at
its Neltec Europe SAS business unit as a result of deterioration of the European
market for high-technology printed circuit materials, and it recorded an
employment termination benefits charge of $0.9 million during the 2006 fiscal
year.
Despite the restructurings implemented
in the 2006 and 2008 fiscal years, Neltec Europe generated significant operating
losses in the second and third quarters of the 2009 fiscal year. In the 2009
fiscal year third quarter, the Company announced that its Neltec Europe SAS and
Neltec SA business units were proposing to restructure their operations and
that, as a major component of such restructurings, Neltec Europe SAS was
proposing to close completely its operations and had commenced an information
and consultation process with its employees regarding the proposed closure in
accordance with French law. Although the Company intends to continue the
operations of its Neltec SA RF/microwave electronic materials business unit
located in Lannemezan, France, the proposed restructuring included a
reorganization of certain of the activities of Neltec SA. Neltec Europe SAS
proposed to close fully its operations in response to the very serious erosion
of the markets for digital electronic materials in Europe and the migration of
such markets to Asia. The market for such products in Europe had eroded to the
point where the Company believed it was not possible for the Neltec Europe SAS
business to be viable. Neltec Europe SAS completed the information and
consultation process with its employees early in the 2009 fiscal year fourth
quarter, and the Company implemented the plant closure and recorded a one-time
pre-tax charge of $4.1 million, reduced by $4.0 million of non-cash cumulative
currency translation adjustment recapture, in the fourth quarter of the
Company’s 2009 fiscal year.
In addition to the restructurings of
its Neltec Europe SAS and Neltec SA business units in France, the Company
implemented workforce reductions at its Nelco Products, Inc. electronic
materials business unit located in Fullerton, California and its Neltec, Inc.
high-technology electronics circuitry materials business unit located in Tempe,
Arizona in the third quarter of its 2009 fiscal year and recorded a charge of
$0.6 million in such quarter for such workforce reductions and for the
restructuring at its Neltec SA business unit in Lannemezan, France.
In addition, in the 2009 fiscal year
fourth quarter, the Company implemented a workforce reduction at its Nelco
Products Pte. Ltd. high-technology electronics circuitry materials and advanced
composite materials business unit located in Singapore and as a result of this
workforce reduction, the Company recorded a charge of $0.4 million in the fourth
quarter of the 2009 fiscal year.
Also, in the 2009 fiscal year fourth
quarter, the Company’s New England Laminates Co., Inc. electronic materials
business unit located in Newburgh, New York closed its operations in response to
the very serious erosion of the markets for electronic materials in North
America, and as the result of this
27
closure,
the Company recorded a one-time pre-tax charge of $1.2 million in the fourth
quarter of the 2009 fiscal year.
Since the closures of the Neltec Europe
SAS and New England Laminates Co., Inc. business units, the Company has been
supplying and supporting customers of such business units from the Company’s
electronic materials operations in Fullerton, California and Tempe,
Arizona.
The total one-time pre-tax charges
related to the restructurings of the Company’s Neltec Europe SAS and Neltec SA
business units in the 2009 fiscal year, the workforce reductions at the Nelco
Products, Inc., Neltec, Inc. and Nelco Products Pte. Ltd. business units and the
closures of the New England Laminates Co., Inc. and the Neltec Europe SAS
business units, all described above, and related to an asset impairment at the
Company’s business unit in Singapore recorded by the Company in the 2009 fiscal
year were $6.3 million, net of the recapture of non-cash cumulative currency
translation adjustments totaling $4.0 million recognized by the Company in the
2009 fiscal year fourth quarter relating to the closure of the Neltec Europe SAS
business unit.
During the 2007 fiscal year, the
Company recorded a pre-tax charge of $1.3 million in connection with the
termination of an insurance arrangement with Jerry Shore, the Company’s founder
and former Chairman, President and Chief Executive Officer, and recognized a
$0.5 million tax benefit relating to this insurance termination charge. The
termination of the insurance arrangement involved a payment of $1.3 million by
the Company to Mr. Shore in January 2007, which resulted in a net cash cost to
the Company of $0.7 million, after the Company’s receipt of a portion of the
cash surrender value of the insurance policies. During the 2007 fiscal year, the
Company also recognized a tax benefit of $3.5 million relating to the
elimination of certain valuation allowances previously established relating to
deferred tax assets in the United States and a tax benefit of $1.4 million
relating to the elimination of reserves no longer required as the result of the
completion of a tax audit.
Fiscal
Year 2009 Compared with Fiscal Year 2008:
The Company’s total net sales worldwide
and its total net sales of printed circuit materials declined, while its total
net sales of its advanced composite materials and parts increased, in the fiscal
year ended March 1, 2009 compared to the fiscal year ended March 2, 2008 as a
result of declines in net sales of printed circuit materials in North America,
Europe and Asia.
The reduced sales in the 2009 fiscal
year resulted in significantly lower gross profit and gross profit margin in the
2009 fiscal year than in the 2008 fiscal year, following a slight improvement in
the Company’s gross profit margin in the 2008 fiscal year compared to the 2007
fiscal year.
The Company’s gross profit in the 2009
fiscal year was substantially lower than the gross profit in the prior fiscal
year primarily as a result of reduced total sales of printed circuit materials
products, which were partially offset by higher percentages of sales by the
Company of its higher margin, high performance printed circuit materials
products and advanced composite materials and parts and by the benefits
resulting from the restructurings of the Company’s Neltec Europe SAS and Neltec
SA business units in the 2008 fiscal year and from the workforce reductions at
the Nelco Products, Inc., Neltec, Inc. and Nelco Products Pte. Ltd. business
units and
28
the
closures of the New England Laminates Co., Inc. and Neltec Europe SAS business
units in the 2009 fiscal year, all described elsewhere in this
Discussion.
Sales of the Company’s advanced
composite materials and parts increased during the 2009 fiscal year primarily as
a result of the Company’s marketing and sales efforts and the addition of sales
of the Company’s advanced composite parts as a result of the Company’s
acquisition of the advanced composites parts manufacturing business of Nova
Composites in Lynnwood, Washington in the 2009 fiscal year first quarter. Sales
of advanced composite materials and parts were 13% of the Company’s total net
sales worldwide in the 2009 fiscal year compared to 9% in the 2008 fiscal
year.
The Company’s earnings in the 2009
fiscal year were enhanced by a tax benefit of $4.7 million recorded by the
Company in the 2009 fiscal year fourth quarter related to the elimination of
certain valuation allowances resulting principally from the closure of the
Company’s New England Laminates Co., Inc. electronic
materials business unit located in Newburgh, New York and by a tax
benefit of $1.2 million recorded by the Company in the 2009 fiscal year fourth
quarter related to one-time pre-tax charges also recorded by the Company in such
quarter for the aforementioned closure of the Company’s New England Laminates
Co., Inc. business unit and the closure of the Company’s Neltec Europe SAS
electronic materials business unit located in Mirebeau, France and for a
workforce reduction and an asset impairment at the Company’s Nelco Products Pte.
Ltd. electronic materials and advanced composite materials business unit in
Singapore. Such benefits were offset by the one-time pre-tax charges of $5.7
million recorded by the Company in the 2009 fiscal year fourth quarter related
to the aforementioned business unit closures, workforce reduction and asset
impairment and a one-time pre-tax charge of $0.6 million recorded by the Company
in the 2009 fiscal year third quarter related to restructurings at certain of
its North American and European business units.
The Company’s net earnings in the 2009
fiscal year were also significantly increased by a discontinued operations
benefit of $16.5 million recorded by the Company in the 2009 fiscal year fourth
quarter related to the elimination of a liability from discontinued operations
of the Company’s Dielektra GmbH subsidiary located in Germany.
The Company’s results of operations in
the 2008 fiscal year were slightly enhanced by a tax benefit of $1.5 million
recorded by the Company in the 2008 fiscal year fourth quarter resulting from
the reduction of tax reserves in the United States related to transfer pricing,
which was partially offset by a charge of $1.4 million recorded by the Company
in the 2008 fiscal year fourth quarter for employment termination benefits and
other expenses resulting from a restructuring and workforce reduction at the
Company’s Neltec Europe SAS electronic materials business unit located in
Mirebeau, France.
Results
of Operations
The Company’s total net sales worldwide
for the fiscal year ended March 1, 2009 declined 17% to $200.1 million from
$241.9 million for the fiscal year ended March 2, 2008. The decline in net sales
was the result of decreased sales of the Company’s printed circuit materials in
North America, Europe and Asia which were only partially offset by increased
sales of the
29
Company’s
high performance printed circuit materials and advanced composite materials and
parts.
The Company's foreign sales were $96.3
million, or 48% of the Company's total net sales worldwide, during the 2009
fiscal year, compared with $120.9 million of sales, or 50% of total net sales
worldwide, during the 2008 fiscal year and 47% of total net sales worldwide
during the 2007 fiscal year. The Company's foreign sales during the 2009 fiscal
year decreased 20% from the 2008 fiscal year primarily as a result of decreases
in sales in Europe and Asia.
For the fiscal year ended March 1,
2009, the Company’s sales in North America, Asia and Europe were 52%, 37% and
11%, respectively, of the Company’s total net sales worldwide compared with 50%,
37% and 13%, respectively, for the fiscal year ended March 2, 2008. The
Company’s sales in Asia declined 19%, its sales in North America declined 14%
and its sales in Europe declined 25% in the 2009 fiscal year compared to the
2008 fiscal year.
The overall gross profit as a
percentage of net sales for the Company's worldwide operations declined to 21.7%
during the 2009 fiscal year compared to 25.8% during the 2008 fiscal year. The
deterioration in the gross profit margin was attributable primarily to reduced
sales volumes, which were only partially offset by higher percentages of sales
of higher margin, high performance printed circuit materials products and
advanced composite materials and parts and by the benefits resulting from the
restructurings of the Company’s Neltec Europe SAS and Neltec SA business units
in the 2008 fiscal year and from the workforce reductions at the Nelco Products,
Inc., Neltec, Inc. and Nelco Products Pte. Ltd. business units and the closures
of the New England Laminates Co., Inc. and Neltec Europe SAS business units in
the 2009 fiscal year, all described elsewhere in this Discussion.
During the fiscal year ended March 1,
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, compared with 99% for last fiscal year.
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,
and PTFE materials for RF/microwave systems that operate at frequencies up to
77GHz.
During the fiscal year ended March 1,
2009, the Company’s total net sales worldwide of high performance printed
circuit materials (non-FR4 printed circuit materials) were 61% of the Company’s
total net sales worldwide of printed circuit materials, compared with 52% for
last fiscal year.
The Company’s cost of sales decreased
by 13% in the 2009 fiscal year from the 2008 fiscal year as a result of lower
sales and lower production volumes in the 2009 fiscal year than in the 2008
fiscal year. However, the Company’s cost of sales as a percentage of net sales
increased in the 2009 fiscal year compared to the prior year resulting in a
gross profit margin percentage decline, which was attributable to lower sales
volumes in the 2009
30
fiscal
year and the impact of currency translation on costs incurred in Singapore
dollars and increases in utility costs in the 2009 fiscal year, partially offset
by higher percentages of sales of higher margin, high performance printed
circuit materials and advanced composite materials products in the 2009 fiscal
year.
Selling, general and administrative
expenses decreased by $2.4 million, or by 9%, during the 2009 fiscal year
compared to the 2008 fiscal year, but these expenses, measured as a percentage
of sales, were 12.4% during the 2009 fiscal year compared to 11.2% during the
2008 fiscal year. The higher percentage in the 2009 fiscal year was the result
of lower sales in such year. Selling, general and administrative expenses
included $1.2 million for the 2009 fiscal year for stock option expenses
compared to $1.4 million for the 2008 fiscal year, which the Company recorded
pursuant to Statement of Financial Accounting Standards 123(R).
In the 2009 fiscal year fourth quarter,
the Company recorded one-time pre-tax charges of $5.7 million related to the
closure of the Company’s New England Laminates Co., Inc. electronic materials
business unit located in Newburgh, New York and the closure of the Company’s
Neltec Europe SAS electronic materials business unit located in Mirebeau, France
and related to a workforce reduction and an asset impairment at the Company’s
Nelco Products Pte. Ltd. electronic materials and advanced composite materials
business unit in Singapore, and recognized tax benefits of $1.2 million related
to these charges and a tax benefit of $4.7 million related to the elimination of
valuation allowances resulting principally from the aforementioned closure of
the Company’s New England Laminates Co., Inc. business unit. In the 2009 fiscal
year third quarter, the Company recorded a pre-tax charge of $0.6 million
related to the restructurings at certain of its North American and European
business units.
During the 2008 fiscal year, the
Company recorded a charge of $1.4 million for employment termination benefits
and other expenses resulting from the restructuring and workforce reduction at
the Company’s Neltec Europe SAS electronic materials business unit located in
Mirebeau, France and a tax benefit of $1.5 million resulting from the reduction
of tax reserves in the United States related to transfer pricing.
For the reasons set forth above, the
Company’s earnings from continuing operations for the 2009 fiscal year,
including the charges described above relating to the facility closures and
asset impairment and the restructurings at certain of the Company’s North
American and European business units and the tax benefits described above
relating to the facility closure and asset impairment charges and to the
elimination of valuation allowances, were $12.4 million compared to earnings
from continuing operations for the 2008 fiscal year, including the charge
described above for the restructuring and workforce reduction at the Company’s
Neltec Europe SAS electronic materials business unit and the tax benefit
relating to the reduction of tax reserves, of $33.9 million. The net impacts of
the charges and tax benefits described above were to decrease earnings from
continuing operations by $6.3 million for the 2009 fiscal year and to decrease
earnings from continuing operations by $1.4 million for the 2008 fiscal
year.
Interest and other income, net,
principally investment income, declined 29% to $6.6 million for the 2009 fiscal
year from $9.4 million for the 2008 fiscal year. The decline in investment
income was attributable to lower prevailing interest rates partially offset by
higher levels of cash available
31
for
investment during the 2009 fiscal year than during the 2008 fiscal year. The
Company's investments were primarily in short-term instruments and money market
funds. The Company incurred no interest expense during the 2009, 2008 or 2007
fiscal years. See "Liquidity and Capital Resources" elsewhere in this Item
7.
The Company's effective income tax rate
was 2.6% for the 2009 fiscal year compared to 19.9% for the 2008 fiscal year.
The Company's effective income tax rate for continuing operations, excluding the
tax benefits and the charges described above, for the 2009 fiscal year was 25.4%
compared to 22.7% for the 2008 fiscal year.
The Company’s net earnings from
continuing operations for the 2009 fiscal year, including the charges and tax
benefits described above, were $18.5 million compared to net earnings from
continuing operations for the 2008 fiscal year, including the charge and tax
benefit described above, of $34.7 million. The net impacts of the charges and
tax benefits described above were to increase net earnings from continuing
operations by $0.3 million for the 2009 fiscal year and to decrease net earnings
from continuing operations by $0.1 million for the 2008 fiscal
year.
In the 2009 fiscal year fourth quarter,
the Company also recorded a discontinued operations benefit of $16.5 million
related to the elimination of a liability from discontinued operations of its
Dielektra GmbH subsidiary located in Germany.
The Company’s net earnings for the 2009
fiscal year, including the charges and tax benefits described above and the
discontinued operations benefit described above, were $35.0 million compared to
net earnings for the 2008 fiscal year, including the charge and tax benefit
described above, of $34.7 million. The net impacts of the charges and tax
benefits described above and the discontinued operations benefit described above
were to increase net earnings by $16.8 million for the 2009 fiscal year and to
decrease net earnings by $0.1 million for the 2008 fiscal year.
Basic and diluted earnings per share,
including the charges and tax benefits described above and the discontinued
operations benefit described above, were $1.71 per share for the 2009 fiscal
year compared to basic and diluted earnings per share of $1.71 and $1.70 per
share, respectively, including the charge and tax benefit described above, for
the 2008 fiscal year. The net impacts of the charges and tax benefits described
above were to increase the basic and diluted earnings per share by $0.81 for the
2009 fiscal year.
Fiscal
Year 2008 Compared with Fiscal Year 2007:
The Company’s total net sales worldwide
and its total net sales of printed circuit materials declined, while its sales
of its advanced composite materials increased, in the fiscal year ended March 2,
2008 compared to the fiscal year ended February 25, 2007, following increases in
total net sales worldwide in the 2007 fiscal year compared to the 2006 fiscal
year.
The reduced sales in the 2008 fiscal
year resulted in a slightly lower gross profit in the 2008 fiscal year than in
the 2007 fiscal year, although the Company experienced a slight improvement in
the Company’s gross profit margin in the 2008 fiscal year, following substantial
improvements in the
32
2007
fiscal year compared to the 2006 fiscal year and in the 2006 fiscal year
compared to the 2005 fiscal year.
The Company’s gross profit in the 2008
fiscal year was lower than its gross profit in the prior fiscal year primarily
as a result of reduced total sales of printed circuit materials products, which
were less than offset by higher percentages of sales by the Company of its
higher margin, high performance printed circuit materials products and a higher
percentage of sales by the Company’s operations in Singapore.
Sales of the Company’s advanced
composite materials products increased during the 2008 fiscal year primarily as
a result of the strength of the aerospace markets for advanced composite
materials. Sales of advanced composite materials were 9% of the Company’s total
net sales worldwide in the 2008 fiscal year and 8% of the Company’s total net
sales worldwide in the 2007 fiscal year.
The Company’s results of operations in
the 2008 fiscal year were slightly enhanced by a tax benefit of $1.5 million
recorded by the Company in the 2008 fiscal year fourth quarter resulting from
the reduction of tax reserves in the United States related to transfer pricing,
which was partially offset by a charge of $1.4 million recorded by the Company
in the 2008 fiscal year fourth quarter for employment termination benefits and
other expenses resulting from a restructuring and workforce reduction at the
Company’s Neltec Europe SAS electronic materials business unit located in
Mirebeau, France.
The Company’s results of operations in
the 2007 fiscal year were enhanced by the tax benefit of $0.7 million recorded
by the Company for the recognition of tax credits resulting from operating
losses sustained in prior years in France and by the tax benefits of $3.5
million relating to the elimination of certain valuation allowances previously
established related to deferred tax assets in the United States, $1.4 million
relating to the elimination of reserves no longer required as the result of the
completion of a tax audit and $0.5 million relating to the termination of a life
insurance agreement with Jerry Shore, the Company’s founder and former Chairman,
President and Chief Executive Officer, which benefits were partially offset by a
pre-tax charge of $1.3 million relating to the termination of the insurance
agreement with Jerry Shore.
Results
of Operations
The
Company’s total net sales worldwide for the fiscal year ended March 2, 2008
decreased 6% to $241.9 million from $257.4 million for the fiscal year ended
February 25, 2007. The decrease in net sales was primarily the result of
decreased sales of the Company’s printed circuit materials products in North
America and Europe,
which
were only partially offset by increased sales of the Company’s printed circuit
materials products in Asia and by increased sales of the Company’s high
technology printed circuit materials and advanced composite
materials.
The Company’s foreign sales were $120.9
million, or 50% of the Company’s total net sales worldwide, during the 2008
fiscal year, compared with $119.5 million of sales, or 47% of total net sales
worldwide during the 2007 fiscal year and 44% of total net sales worldwide
during the 2006 fiscal year. The Company’s foreign sales during the 2008 fiscal
year increased 1%
33
from
the 2007 fiscal year primarily as a result of increases in sales by the
Company’s operations in Asia.
For
the fiscal year ended March 2, 2008, the Company’s sales in North America, Asia
and Europe were 50%, 37% and 13%, respectively, of the Company’s total net sales
worldwide compared with 54%, 32% and 14%, respectively, for the fiscal year
ended February 25, 2007. The Company’s sales in Asia increased 10% in the 2008
fiscal year over the 2007 fiscal year, while its sales in North America
decreased 12% and its sales in Europe decreased 18% in the 2008 fiscal year
compared to the 2007 fiscal year.
The
overall gross profit as a percentage of net sales for the Company’s worldwide
operations improved to 25.8% during the 2008 fiscal year compared with 24.9%
during the 2007 fiscal year. The improvement in the gross profit margin was
attributable to higher percentages of sales of higher margin, high performance
printed circuit materials and a higher percentage of sales by the Company’s
operations in Singapore, partially offset by higher copper foil costs in the
2008 fiscal year than in the 2007 fiscal year and by lower total sales volumes
in the 2008 fiscal year.
During the fiscal year ended March 2, 2008, the
Company’s total net sales worldwide of high temperature printed circuit
materials, which included high performance materials (non-FR4 printed circuit
materials), were 99% of the Company’s total net sales worldwide of printed
circuit materials, compared with 97% for the 2007 fiscal
year.
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, BT
materials, polyimides for applications that demand extremely high thermal
performance, cyanate esters, and PTFE materials for RF/microwave systems that
operate at frequencies up to 77GHz.
During the fiscal year ended March 2, 2008, the
Company’s total net sales worldwide of high performance printed circuit
materials (non-FR4 printed circuit materials) were 52% of the Company’s total
net sales worldwide of printed circuit materials, compared with 42% for the 2007
fiscal year.
The
Company’s cost of sales declined by 7% in the 2008 fiscal year from the 2007
fiscal year as a result of lower sales and lower production volumes in the 2008
fiscal year than in the 2007 fiscal year. The Company’s cost of sales as a
percentage of net sales also decreased slightly in the 2008 fiscal year compared
to the prior year resulting in a slight gross profit percentage improvement,
which was attributable to higher percentages of sales of higher margin, high
performance printed circuit materials and a higher percentage of sales by the
Company’s operations in Singapore.
Selling, general and administrative expenses
increased by $0.5 million, or by 2%, during the 2008 fiscal year compared with
the 2007 fiscal year, and these expenses, measured as a percentage of sales,
were 11.2% during the 2008 fiscal year compared with 10.4% during the 2007
fiscal year. Such expenses were higher in the 2008 fiscal year primarily as a
result of the out-of-pocket expenses incurred by the Company related to its due
diligence investigation of Columbia Aircraft Manufacturing Corporation discussed
below and the additional week in the 53-week 2008 fiscal year compared to the
52-
34
week
2007 fiscal year. The higher percentage in the 2008 fiscal year was the result
of lower sales in such year and the aforementioned out-of-pocket expenses. In
addition, selling, general and administrative expenses in the 2007 fiscal year
were reduced by a reduction in the fourth quarter of restructuring reserves
established in prior years for the Company’s operations in Europe. Selling,
general and administrative expenses included $1.4 million for the 2008 fiscal
year for stock option expenses compared to $1.3 million for the 2007 fiscal
year, which the Company recorded pursuant to Statement of Financial Accounting
Standards 123(R).
In
the 2008 fiscal year fourth quarter, the Company recorded a charge of $1.4
million for employment termination benefits and other expenses resulting from
the restructuring and workforce reduction at the Company’s Neltec Europe SAS
electronic materials business unit located in Mirebeau, France and a tax benefit
of $1.5 million resulting from the reduction of tax reserves in the United
States related to transfer pricing.
During the 2008 fiscal year third quarter, the
Company incurred approximately $0.5 million in out-of-pocket expenses related to
its extensive due diligence investigation of Columbia Aircraft Manufacturing
Corporation (“Columbia”) located in Bend, Oregon in preparation for its
participation in the bidding for certain of the assets and business of Columbia
in an auction conducted in the United States Bankruptcy Court for the District
of Oregon in Portland, Oregon on November 27, 2007. The Company had submitted an
initial bid for certain of the assets and business of Columbia on November 20,
2007 after conducting extensive due diligence at Columbia in Bend, Oregon and
elsewhere. The Company participated in the auction in the Bankruptcy Court in
Portland on November 27, 2007 but chose to discontinue its participation in the
auction bidding process.
In
the 2007 fiscal year fourth quarter, the Company recorded a tax benefit of $0.7
million relating to the recognition of tax credits resulting from operating
losses sustained in prior years in France. In the 2007 fiscal year
second quarter, the Company recorded a pre-tax charge of $1.3 million in
connection with the termination of a life insurance arrangement with Jerry
Shore, the Company’s founder and former Chairman, President and Chief Executive
Officer, and recognized a tax benefit of $0.5 million relating to this insurance
termination charge. The termination of the insurance arrangement involved a
payment of $1.3 million by the Company to Mr. Shore in January 2007, which
resulted in a net cash cost to the Company of $0.7 million, after the Company’s
receipt of a portion of the cash surrender value of the insurance policies.
During the 2007 fiscal year second quarter, the Company also recognized a tax
benefit of $3.5 million relating to the elimination of certain valuation
allowances previously established relating to deferred tax assets in the United
States and a tax benefit of $1.4 million relating to the elimination of reserves
no longer required as the result of the completion of a tax
audit.
For
the reasons set forth above, the Company’s earnings from continuing operations
for the 2008 fiscal year, including the charge described above for employment
termination benefits and other expenses resulting from the workforce reduction
in France and the tax benefit described above relating to the reduction of tax
reserves, were $33.9 million, and earnings from continuing operations for the
2007 fiscal year, including the charge described above relating to the
termination of the life insurance arrangement, were
$36.1 million. The net impacts of the charges and tax benefit described above
were to decrease earnings from continuing
operations
35
by
$1.4 million for the 2008 fiscal year and to decrease earnings from continuing
operations by $1.3 million for the 2007 fiscal year.
Interest and other income, net, principally
investment income, increased 17% to $9.4 million for the 2008 fiscal year from
$8.0 million for the 2007 fiscal year. The increase in investment income was
attributable to higher prevailing interest rates and larger amounts of cash
available for investment during the 2008 fiscal year than during the 2007 fiscal
year. The Company's investments were primarily in short-term taxable
instruments. The Company incurred no interest expense during the 2008, 2007 or
2006 fiscal years. See "Liquidity and Capital Resources" elsewhere in this Item
7.
The
Company's effective income tax rate was 19.9% for the 2008 fiscal year compared
to 9.9% for the 2007 fiscal year. The 2008 fiscal year tax rate included the tax
benefit relating to the reduction of tax reserves, and the 2007 fiscal year tax
rate included tax benefits relating to the recognition of tax credits in France,
the termination of a life insurance agreement, the elimination of certain
valuation allowances previously established related to deferred tax assets in
the United States and the elimination of reserves no longer required as the
result of the completion of a tax audit. The Company's effective income tax rate
for continuing operations, excluding the tax benefits and the charges described
above, for the 2008 fiscal year was 22.7% compared to 23.0% for the 2007 fiscal
year.
The
Company’s net earnings for the 2008 fiscal year, including the tax benefit
described above relating to the reduction of tax reserves and the charge
described above for employment termination benefits and other expenses resulting
from the workforce reduction in France, were $34.7 million compared to net
earnings of $39.8 million for the 2007 fiscal year, including the tax benefits
described above relating to the recognition of tax credits in France, the
termination of the life insurance arrangement, the elimination of certain
valuation allowances and the elimination of reserves no longer required and the
charge described above relating to the termination of the life insurance
arrangement. The net impacts of the charges and tax benefits described above
were to increase net earnings by $4.8 million for the 2007 fiscal
year.
Basic
and diluted earnings per share, including the tax benefit and charge described
above, were $1.71 and $1.70 per share, respectively, for the 2008 fiscal year,
and basic
and diluted earnings per share, including the charge and tax benefits described
above, were $1.97 and $1.96 per share, respectively, for the 2007 fiscal year.
The net impacts of the charges and tax benefits described above were to increase
the basic earnings per share by $0.01 for the 2008 fiscal year and to increase
the basic and diluted earnings per share by $0.23 and $0.24, respectively, for
the 2007 fiscal year.
Liquidity
and Capital Resources:
At
March 1, 2009, the Company's cash and temporary investments (consisting of
marketable securities) were $225.3 million compared to $214.0 million at March
2, 2008, the end of the Company's 2008 fiscal year. The Company's working
capital (which includes cash and temporary investments) was $239.6 million at
March 1, 2009 compared with $239.1 million at March 2, 2008. Although the
Company’s working capital at March 1, 2009 was essentially the same amount as it
was at March 2, 2008, the amounts of many of the components of its working
capital changed substantially from March 2, 2008 to March 1, 2009. The 5%
increase in cash and temporary investments at March 1,
36
2009
compared with March 2, 2008 was the result of cash provided by operating
activities. At March 1, 2009, accounts receivable were 40% lower, accounts
payable were 34% lower and inventories were 24% lower than at March 2, 2008
principally as a result of lower production and sales volumes during the period
ended March 1, 2009 compared to the period ended March 2, 2008. The
14% decline in accrued liabilities at March 1, 2009 compared to March 2, 2008
was primarily the result of decreased accruals for compensation programs,
environmental matters and professional fees. Income taxes payable were 25% lower
at March 1, 2009 than at March 2, 2008 primarily as a result of payments made
during the 2009 fiscal year and as a result of lower taxable
income.
The Company's current ratio (the ratio
of current assets to current liabilities) was 10.9 to 1 at March 1, 2009
compared with 8.5 to 1 at March 2, 2008.
During the 2009 fiscal year, net
earnings from the Company’s operations and a net increase in working capital
items and the discontinued operations benefit related to the elimination of a
liability from discontinued operations of the Company’s Dielektra GmbH
subsidiary in Germany resulted in $33.6 million of cash provided by operating
activities. This increase in cash provided by operating activities was partially
offset by $6.5 million of dividends paid during the 2009 fiscal year. Cash
dividends paid were $37.0 million, including a special cash dividend of $30.5
million, during the 2008 fiscal year, and $26.6 million, including a special
cash dividend of $20.1 million, during the 2007 fiscal year. Net earnings in the
2008 fiscal year resulted in $41.9 million of cash provided by operating
activities.
Net expenditures for property, plant
and equipment were $12.2 million, $4.4 million and $3.9 million in the 2009,
2008 and 2007 fiscal years, respectively.
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 the tooling for
such parts, 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.
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.
At March 1, 2009 and March 2, 2008, 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.
37
The
Company's contractual obligations and other commercial commitments to make
future payments under contracts, such as lease agreements, consist only of the
operating lease commitments, commitments to purchase equipment for the Company’s
new development and manufacturing facility in Newton, Kansas described in Note
15 of the Notes to Consolidated Financial Statements included elsewhere in this
Report and the Company’s obligation to pay up to an additional $5.5 million over
five 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 $1.45 million to
secure the Company's obligations under its workers’ compensation insurance
program and certain limited energy purchase contracts intended to protect the
Company from increased utilities costs.
As of
March 1, 2009, the Company’s significant contractual obligations, including
payments due by fiscal year, were as follows:
|
Contractual
Obligations
(Amounts
in thousands)
|
Total
|
2010
|
2011-
2012
|
2013-
2014
|
2015
and thereafter
|
|||||||||||||||
|
Operating
lease
obligations
|
$ | 8,754 | $ | 2,335 | $ | 3,294 | $ | 1,645 | $ | 1,480 | ||||||||||
|
Equipment
purchase
obligations
|
3,483 | 3,483 |
-
|
-
|
-
|
|||||||||||||||
|
Total
|
$ | 12,237 | $ | 5,818 | $ | 3,294 | $ | 1,645 | $ | 1,480 | ||||||||||
Off-Balance
Sheet Arrangements:
The
Company's liquidity is not dependent on the use of, and the Company is not
engaged in, any off-balance sheet financing arrangements, such as securitization
of receivables or obtaining access to assets through special purpose
entities.
Environmental
Matters:
The Company is subject to various
Federal, state and local government requirements relating to the protection
of the environment. The Company believes that, as a general matter, its
policies, practices and procedures are properly designed to prevent unreasonable
risk of environmental damage and that its handling, manufacture, use and
disposal of hazardous or toxic substances are in accord with environmental laws
and regulations. However, mainly because of past operations and operations
of predecessor companies, which were generally in compliance with applicable
laws at the time of the operations in question, the Company, like other
companies engaged in similar businesses, is a party to claims by government
agencies and third parties and has incurred remedial response and voluntary
cleanup costs associated with environmental matters. Additional claims and costs
involving past environmental matters may continue to arise in the future. It is
the Company's policy to record appropriate liabilities for such matters when
remedial efforts are probable and the costs can be reasonably
estimated.
38
In the 2009, 2008 and 2007 fiscal
years, the Company charged approximately $(0.7) million, $(0.2) million and $0.0
million, respectively, against pre-tax income for remedial response and
voluntary cleanup costs (including legal fees). While annual expenditures have
generally been constant from year to year, and may increase over time, the
Company expects it will be able to fund such expenditures from cash flow from
operations. The timing of expenditures depends on a number of factors, including
regulatory approval of cleanup projects, remedial techniques to be utilized and
agreements with other parties. At March 1, 2009, the amount recorded in accrued
liabilities for environmental matters was $0.8 million compared with $2.1
million of liabilities from discontinued operations for environmental matters
related to Dielektra and $1.6 million for other environmental matters at March
2, 2008.
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. See Note 16 of the Notes to
Consolidated Financial Statements included in Item 8 of Part II of this Report
for a discussion of the Company's contingencies, including those
related to environmental matters.
Critical
Accounting Policies and Estimates:
In response to financial reporting
release, FR-60,"Cautionary Advice Regarding Disclosure About Critical Accounting
Policies", issued by the Securities and Exchange Commission in December 2001,
the following information is provided regarding critical accounting policies
that are important to the Consolidated Financial Statements and that entail, to
a significant extent, the use of estimates, assumptions and the application of
management's judgment.
General
The
Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's Consolidated Financial Statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires the
Company to make estimates, assumptions and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and the related disclosure
of contingent liabilities. On an ongoing basis, the Company evaluates its
estimates, including those related to sales allowances, accounts receivable,
allowances for doubtful accounts, inventories, valuation of long-lived assets,
income taxes, restructurings, contingencies and litigation, and pensions and
other 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.
39
Revenue Recognition
Sales
revenue is recognized at the time title to product is transferred to a customer.
All material sales transactions are for the shipment of manufactured prepreg and
laminate products and advanced composite materials. The Company ships its
products to customers based upon firm orders, with fixed selling prices, when
collection is reasonably assured.
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. 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 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.
Accounts Receivable
The majority of the Company’s accounts
receivable are due from purchasers of the Company’s printed circuit
materials. Credit is extended based on evaluation of a customer’s
financial condition and, generally, collateral is not
required. 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 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. 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.
Allowances
for Doubtful Accounts
The
Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be
required.
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
40
assumptions
about future demand for the Company's products and market
conditions.
Valuation
of Long-Lived Assets
The
Company assesses the impairment of long-lived assets whenever events or changes
in circumstances indicate that the carrying value of such assets may not be
recoverable. Important factors that could trigger an impairment review include,
but are not limited to, significant negative industry or economic trends and
significant changes in the use of the Company’s assets or strategy of the
overall business.
Income
Taxes
Carrying
value of the Company's net deferred tax assets assumes that the Company will be
able to generate sufficient future taxable income in certain tax jurisdictions,
based on estimates and assumptions. If these estimates and assumptions change in
the future, the Company may be required to record additional valuation
allowances against its deferred tax assets resulting in additional income tax
expense in the Company's consolidated statement of operations, or conversely to
further reduce the existing valuation allowance resulting in less income tax
expense. Management evaluates the realizability of the deferred tax assets
quarterly and assesses the need for additional valuation allowances
quarterly.
Restructurings
The
Company recorded one-time pre-tax charges of $5.7 million in the fourth quarter
of the fiscal year ended March 1, 2009 related to the closure of the Company’s
New England Laminates Co., Inc. electronic materials business unit located in
Newburgh, New York and the closure of the Company’s Neltec Europe SAS electronic
materials business unit located in Mirebeau, France and related to a workforce
reduction and an asset impairment at the Company’s Nelco Products Pte. Ltd.
electronic materials and advanced composite materials business unit in
Singapore. In the 2009 fiscal year third quarter, the Company recorded a
one-time pre-tax charge of $0.6 million related to restructurings at certain of
its North American and European business units. The Company recorded a one-time
pre-tax charge of $1.4 million in the fourth quarter of the fiscal year ended
March 2, 2008 in connection with a restructuring and workforce reduction at its
Neltec Europe SAS business unit. Such restructuring and workforce reductions are
described in Note 12 of the Notes to Consolidated Financial Statements in Item 8
of Part II of this Report and in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Item 7 of Part II of this
Report.
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.
41
The
Company is obligated to pay up to an additional $5.5 million over five 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 the tooling for such
parts, 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.
Pension
and Other 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 out.
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,
some 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:
The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for forward-looking statements to
encourage companies to provide prospective information about their companies
without fear of litigation so long as those statements are identified as
forward-looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those projected in the statement. Certain portions of this
Report which do not relate to historical financial information may be deemed to
constitute forward-looking statements that are subject to various factors which
could cause actual results to differ materially from Park's expectations or
from results which might be projected, forecasted, estimated or budgeted by the
Company in forward-looking statements. The factors described under “Risk
Factors” in Item 1A of this Report, as well as the following additional factors,
could cause the Company's actual results to differ materially from any such
results which might be projected, forecasted, estimated or budgeted by the
Company in forward-looking statements.
|
|
§
|
The Company's operating
results are affected by a number of factors, including various factors
beyond the Company's control. Such factors include economic
conditions in the electronics industry, the timing of customer
orders, product prices, process yields, the mix of products sold and
maintenance-related shutdowns of facilities. Operating results also
can be influenced by development and introduction of new products and
the costs associated with the start-up of new
facilities.
|
42
|
|
§
|
The Company, from time to
time, is engaged in the expansion of certain of its manufacturing
facilities. The anticipated costs of such expansions cannot be determined
with precision and may vary materially from those budgeted. In
addition, such expansions will increase the Company's fixed costs.
The Company's future profitability depends upon its ability to utilize its
manufacturing capacity in an effective
manner.
|
|
|
§
|
The Company may acquire
businesses, product lines or technologies that expand or complement
those of the Company. The integration and management of an acquired
company or business may strain the Company's management resources and
technical, financial and operating systems. In addition, implementation of
acquisitions can result in large one-time charges and costs. A given
acquisition, if consummated, may materially affect the Company's
business, financial condition and results of
operations.
|
|
|
§
|
The Company's success is
dependent upon its relationship with key management and technical
personnel.
|
|
|
§
|
The Company's future success
depends in part upon its intellectual property which the Company
seeks to protect through a combination of contract provisions, trade
secret protections, copyrights and
patents.
|
|
|
§
|
The market price of the
Company’s securities can be subject to fluctuations in response to quarter
to quarter variations in operating results, changes in analyst earnings
estimates, market conditions in the electronic materials industry, as well
as general economic conditions and other factors external to the
Company.
|
|
|
§
|
The Company's results could
be affected by changes in the Company's accounting policies and practices
or changes in the Company's organization, compensation and benefit plans,
or changes in the Company's material agreements or understandings
with third parties.
|
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
|
|
The
Company is exposed to market risks for changes in foreign currency
exchange rates and interest rates. The Company's primary foreign
currency exchange exposure relates to the translation of the financial
statements of foreign subsidiaries using currencies other than the U.S.
dollar as their functional currency. The Company does not believe that a
10% fluctuation in foreign exchange rates would have had a material impact
on its consolidated results of operations or financial position. The
exposure to market risks for changes in interest rates relates to the
Company's short-term investment portfolio. This investment portfolio is
managed in accordance with guidelines issued by the Company. These
guidelines are designed to establish a high quality fixed income portfolio
of government and highly rated corporate debt securities with a maximum
weighted maturity of less than one year. The Company does not use
derivative financial instruments in its investment portfolio. Based on the
average anticipated maturity of the investment portfolio at the end of the
2009 fiscal year, a 10% increase in
short-term
|
43
interest
rates would not have had a material impact on the consolidated results of
operations or financial position of the Company.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
|
The Company's Financial Statements
begin on the next page.
44
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders
and Board of Directors of
Park
Electrochemical Corp.
We have
audited the accompanying consolidated balance sheets of Park Electrochemical
Corp. and subsidiaries (the “Company”) as of March 1, 2009 and March 2, 2008,
and the related consolidated statements of operations, stockholders’ equity and
cash flows for each of the three years in the period ended March 1, 2009. Our
audits of the basic financial statements included the financial statement
schedule listed in the index appearing under Item 15 (a)(2). These financial
statements and financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Park Electrochemical Corp.
and subsidiaries as of March 1, 2009 and March 2, 2008 and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended March 1, 2009, in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth
therein.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Park Electrochemical Corp. and subsidiaries’
internal control over financial reporting as of March 1, 2009, based on criteria
established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) and our report dated May 13,
2009 expressed an unqualified opinion thereon.
/s/ GRANT
THORNTON LLP
New York,
New York
May 13,
2009
45
PARK
ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(In thousands, except share and per share
amounts)
|
March
1,
|
March
2,
|
|||||||
|
2009
|
2008
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 40,790 | $ | 100,159 | ||||
|
Marketable
securities (Note 2)
|
184,504 | 113,819 | ||||||
|
Accounts
receivable, less allowance
for
doubtful accounts of $687 and
$750,
respectively
|
22,433 | 37,466 | ||||||
|
Inventories
(Note 3)
|
10,677 | 14,049 | ||||||
|
Prepaid
expenses and other current assets
|
5,527 | 5,546 | ||||||
|
Total
current assets
|
263,931 | 271,039 | ||||||
|
Property,
plant and equipment, net of
accumulated depreciation and
amortization (Note 4)
|
48,777 | 47,188 | ||||||
|
Other
assets (Note 5)
|
14,871 | 9,180 | ||||||
|
Total
assets
|
$ | 327,579 | $ | 327,407 | ||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 8,480 | $ | 12,828 | ||||
|
Accrued
liabilities (Note 6)
|
11,425 | 13,314 | ||||||
|
Income
taxes payable
|
4,381 | 5,837 | ||||||
|
Total
current liabilities
|
24,286 | 31,979 | ||||||
| Deferred income taxes (Note 7) | 3,927 | 4,851 | ||||||
|
Other
liabilities
|
3,657 | 4,224 | ||||||
|
Liabilities
from discontinued operations (Note 11)
|
- | 17,181 | ||||||
|
Total
liabilities
|
31,870 | 58,235 | ||||||
|
Commitments
and contingencies (Notes 15 and 16)
|
||||||||
|
Stockholders'
equity (Note 9):
|
||||||||
|
Preferred
stock, $1 par value per
share—authorized,
500,000 shares;
issued,
none
|
- | - | ||||||
|
Common
stock, $.10 par value per
share—authorized,
60,000,000
shares;
issued, 20,470,661 and 20,369,986
shares,
respectively
|
2,047 | 2,037 | ||||||
|
Additional
paid-in capital
|
146,934 | 143,267 | ||||||
|
Retained
earnings
|
145,107 | 116,646 | ||||||
|
Accumulated
other comprehensive income
|
1,622 | 7,436 | ||||||
| 295,710 | 269,386 | |||||||
|
Less
treasury stock, at cost,
145
and 23,106
shares,
respectively
|
(1 | ) | (214 | ) | ||||
|
Total
stockholders' equity
|
295,709 | 269,172 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 327,579 | $ | 327,407 | ||||
|
See
Notes to Consolidated Financial Statements.
|
||||||||
46
PARK
ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per share
amounts)
|
Fiscal Year Ended
|
||||||||||||
|
March
1,
|
March
2,
|
February
25,
|
||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
Net
sales
|
$ | 200,062 | $ | 241,852 | $ | 257,377 | ||||||
|
Cost
of sales
|
156,638 | 179,398 | 193,270 | |||||||||
|
Gross
profit
|
43,424 | 62,454 | 64,107 | |||||||||
|
Selling,
general and administrative
expenses
|
24,806 | 27,159 | 26,682 | |||||||||
|
Insurance
arrangement termination
charge
(Note 13)
|
- | - | 1,316 | |||||||||
|
Realignment
and severance charges
(Note
12)
|
2,290 | 1,362 | - | |||||||||
|
Asset
impairment charge
|
3,967 | - | - | |||||||||
|
Earnings
from continuing operations
|
12,361 | 33,933 | 36,109 | |||||||||
|
Interest
and other income, net
|
6,648 | 9,361 | 8,033 | |||||||||
|
Earnings
before income taxes
|
19,009 | 43,294 | 44,142 | |||||||||
|
Income
tax provision (Note 7)
|
495 |
8,615
|
4,351
|
|||||||||
| Net earnings from continuing operations | 18,514 |
34,679
|
39,791
|
|||||||||
|
Gain
from discontinued operations (Note 11)
|
16,486 | - | - | |||||||||
|
Net
earnings
|
$ | 35,000 | $ | 34,679 | $ | 39,791 | ||||||
|
Earnings
per share:
Basic
earnings per share:
|
||||||||||||
| Net earnings from continuing operations | $ | .90 | $ | 1.71 | $ | 1.97 | ||||||
| Gain from discontinued operations | .81 | - | - | |||||||||
| Basic earnings per share | $ | 1.71 | $ | 1.71 | $ | 1.97 | ||||||
|
Basic
weighted average shares
|
20,441 | 20,305 | 20,175 | |||||||||
|
Diluted
earnings per share:
|
||||||||||||
|
Net
earnings from continuing operations
|
$ | .90 | $ | 1.70 | $ | 1.96 | ||||||
|
Gain
from discontinued operations
|
.81 | - | - | |||||||||
|
Diluted
earnings per share
|
$ | 1.71 | $ | 1.70 | $ | 1.96 | ||||||
|
Diluted
weighted average shares
|
20,486 | 20,364 | 20,317 | |||||||||
See Notes
to Consolidated Financial Statements.
47
PARK
ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share
amounts)
|
Accumulated
|
||||||||||||||||||||||||||||||||
|
Other
|
||||||||||||||||||||||||||||||||
|
Additional
|
Comprehensive
|
Comprehensive
|
||||||||||||||||||||||||||||||
|
Common Stock
|
Paid-in
|
Retained
|
Income
|
Treasury Stock
|
Income
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Earnings
|
(Loss)
|
Shares
|
Amount
|
(Loss)
|
|||||||||||||||||||||||||
|
Balance,
February 26, 2006
|
20,369,986 | $ | 2,037 | $ | 137,513 | $ | 105,808 | $ | 2,435 | 255,428 | $ | (2,370 | ) | |||||||||||||||||||
|
Net
earnings
|
39,791 | $ | 39,791 | |||||||||||||||||||||||||||||
|
Exchange
rate changes
|
1,684 | 1,684 | ||||||||||||||||||||||||||||||
|
Unrealized
loss on
marketable
securities
|
645 | 645 | ||||||||||||||||||||||||||||||
|
Stock
option activity
|
687 | (80,236 | ) | 745 | ||||||||||||||||||||||||||||
|
Stock-based
compensation
|
1,283 | |||||||||||||||||||||||||||||||
|
Tax
benefit on exercise of
options
|
547 | |||||||||||||||||||||||||||||||
|
Cash
dividends ($1.32 per
share)
|
(26,638 | ) | ||||||||||||||||||||||||||||||
|
Comprehensive
income
|
$ | 42,120 | ||||||||||||||||||||||||||||||
|
Balance,
February 25, 2007
|
20,369,986 | $ | 2,037 | $ | 140,030 | $ | 118,961 | $ | 4,764 | 175,192 | $ | (1,625 | ) | |||||||||||||||||||
|
Net
earnings
|
34,679 | $ | 34,679 | |||||||||||||||||||||||||||||
|
Exchange
rate changes
|
2,217 | 2,217 | ||||||||||||||||||||||||||||||
|
Unrealized
gain on
marketable
securities
|
455 | 455 | ||||||||||||||||||||||||||||||
|
Stock
option activity
|
1,211 | (152,086 | ) | 1,411 | ||||||||||||||||||||||||||||
|
Stock-based
compensation
|
1,392 | |||||||||||||||||||||||||||||||
|
Tax
benefit on exercise of
options
|
634 | |||||||||||||||||||||||||||||||
|
Cash
dividends ($1.82 per
share)
|
(36,994 | ) | ||||||||||||||||||||||||||||||
|
Comprehensive income
|
$ | 37,351 | ||||||||||||||||||||||||||||||
|
Balance,
March 2, 2008
|
20,369,986 | $ | 2,037 | $ | 143,267 | $ | 116,646 | $ | 7,436 | 23,106 | $ | (214 | ) | |||||||||||||||||||
|
Net
earnings
|
35,000 | $ | 35,000 | |||||||||||||||||||||||||||||
|
Exchange
rate changes
|
(5,659 | ) | (5,659 | ) | ||||||||||||||||||||||||||||
|
Unrealized
gain on
marketable
securities
|
(155 | ) | (155 | ) | ||||||||||||||||||||||||||||
|
Stock
option activity
|
100,675 | 10 | 2,056 | (22,961 | ) | 213 | ||||||||||||||||||||||||||
|
Stock-based
compensation
|
1,231 | |||||||||||||||||||||||||||||||
|
Tax
benefit on exercise of
options
|
380 | |||||||||||||||||||||||||||||||
|
Cash
dividends ($0.32 per
share)
|
(6,539 | ) | ||||||||||||||||||||||||||||||
|
Comprehensive
income
|
$ | 29,186 | ||||||||||||||||||||||||||||||
|
Balance,
March 1, 2009
|
20,470,661 | $ | 2,047 | $ | 146,934 | $ | 145,107 | $ | 1,622 | 145 | $ | (1 | ) | |||||||||||||||||||
See Notes
To Consolidated Financial Statements.
48
PARK
ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
|
Fiscal Year Ended
|
||||||||||||
|
March
1,
2009
|
March
2,
2008
|
February
25,
2007
|
||||||||||
|
Cash
flows from operating activities:
|
||||||||||||
|
Net
earnings
|
$ | 35,000 | $ | 34,679 | $ | 39,791 | ||||||
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
Depreciation
and amortization
|
7,707 | 8,286 | 8,992 | |||||||||
|
Loss
(gain) on sale of fixed assets
|
(3 | ) | (74 | ) | (18 | ) | ||||||
|
Stock-based
compensation
|
1,231 | 1,392 | 1,283 | |||||||||
|
Provision
for doubtful accounts receivable
|
7 | 166 | (954 | ) | ||||||||
|
Provision
for deferred income taxes
|
(5,409 | ) | (812 | ) | (899 | ) | ||||||
|
Gain
from discontinued operations
|
(16,486 | ) | - | - | ||||||||
|
Impairment
of fixed assets
|
3,967 | - | - | |||||||||
|
Non-cash
restructuring
|
(3,752 | ) | - | - | ||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||
|
Accounts
receivable
|
14,683 | 2,300 | (2,092 | ) | ||||||||
|
Inventories
|
3,199 | 1,375 | 210 | |||||||||
|
Prepaid
expenses and other current assets
|
583 | (3,087 | ) | (627 | ) | |||||||
|
Other
assets and liabilities
|
1,026 | (1,603 | ) | 1,302 | ||||||||
|
Accounts
payable
|
(4,186 | ) | (983 | ) | 158 | |||||||
|
Accrued
liabilities
|
(2,028 | ) | (209 | ) | (6,782 | ) | ||||||
|
Income
taxes payable
|
(1,890 | ) | 473 | (4,576 | ) | |||||||
|
Net
cash provided by operating activities
|
33,649 | 41,903 | 35,788 | |||||||||
|
Cash
flows from investing activities:
|
||||||||||||
|
Purchases
of property, plant and equipment
|
(12,224 | ) | (4,525 | ) | (4,793 | ) | ||||||
|
Proceeds
from sales of property, plant and
equipment
|
16 | 78 | 896 | |||||||||
|
Purchases
of marketable securities
|
(296,252 | ) | (165,690 | ) | (123,592 | ) | ||||||
|
Proceeds
from sales and maturities of
marketable
securities
|
224,808 | 142,535 | 126,844 | |||||||||
|
Business
acquisition
|
(4,728 | ) | - | - | ||||||||
|
Net
cash used in investing activities
|
(88,380 | ) | (27,602 | ) | (645 | ) | ||||||
|
Cash
flows from financing activities:
|
||||||||||||
|
Dividends
paid
|
(6,539 | ) | (36,994 | ) | (26,638 | ) | ||||||
|
Proceeds
from exercise of stock options
|
2,280 | 2,622 | 1,432 | |||||||||
|
Tax
benefits from stock-based compensation
|
380 | 634 | 547 | |||||||||
|
Net
cash used in financing activities
|
(3,879 | ) | (33,738 | ) | (24,659 | ) | ||||||
|
Increase
(decrease) in cash and cash equivalents before effect of exchange rate
changes
|
(58,610 | ) | (19,437 | ) | 10,484 | |||||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
(759 | ) | 545 | 540 | ||||||||
|
Increase(decrease)in
cash and cash equivalents
|
(59,369 | ) | (18,892 | ) | 11,024 | |||||||
|
Cash
and cash equivalents, beginning of year
|
100,159 | 119,051 | 108,027 | |||||||||
|
Cash
and cash equivalents, end of year
|
$ | 40,790 | $ | 100,159 | $ | 119,051 | ||||||
See Notes
to Consolidated Financial Statements.
49
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Three
years ended March 1, 2009
(In
thousands, except share, per share and option amounts)
|
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Park
Electrochemical Corp. (“Park”), through its subsidiaries (collectively, 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 and parts
principally for the aerospace markets.
|
|
a.
|
Principles of
Consolidation – The consolidated financial statements include the
accounts of Park and its subsidiaries. All significant intercompany
balances and transactions have been
eliminated.
|
|
|
b.
|
Use of Estimates – The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results may differ from those
estimates.
|
|
|
c.
|
Accounting Period – The
Company’s fiscal year is the 52 or 53 week period ending the Sunday
nearest to the last day of February. The 2009, 2008 and 2007 fiscal years
ended on March 1, 2009, March 2, 2008 and February 25, 2007, respectively.
Fiscal years 2009, 2008 and 2007 consisted of 52, 53 and 52 weeks,
respectively.
|
|
|
d.
|
Cash and Cash
Equivalents – The Company considers all money market securities and
investments with contractual maturities at the date of purchase of 90 days
or less to be cash equivalents.
|
|
Supplemental
cash flow information:
|
Fiscal Year
|
|||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
Cash
paid during the year for:
|
||||||||||||
|
Income
taxes paid, net of refunds
|
$ | 5,381 | $ | 9,804 | $ | 11,712 | ||||||
|
|
e.
|
Marketable Securities –
All marketable securities are classified as available-for-sale and are
carried at fair value, with the unrealized gains and losses, net of tax,
included in comprehensive income (loss). Realized gains and losses,
amortization of premiums and discounts, and interest and dividend income
are included in other income. The cost of securities sold is based on the
specific identification method. The Company has classified any investment
in auction rate securities for which the underlying security had a
maturity greater than three months as marketable securities. The Company
has not had any investment in auction rate securities since the 2008
fiscal year third quarter.
|
|
|
f.
|
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.
|
50
|
|
g.
|
Revenue Recognition –
Sales revenue is recognized at the time title is transferred to a
customer. All material sales transactions are for the shipment of
manufactured prepreg and laminate products and advanced composite
materials. The Company ships its products to customers based upon firm
orders, with fixed selling prices, when collection is reasonably
assured.
|
|
|
h.
|
Sales Allowances and Product
Warranties - 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 specifications before shipment to customers. 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 products supplied by the Company. The Company is
focused on manufacturing the highest quality printed circuit and advanced
composite materials 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.
|
|
|
i.
|
Accounts Receivable –
The majority of the Company’s accounts receivable are due from
purchasers of the Company’s printed circuit materials. Credit
is extended based on evaluation of a customer’s financial condition and,
generally, collateral is not required. 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 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. 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.
|
|
|
j.
|
Allowance for Doubtful
Accounts - The Company maintains allowances for doubtful accounts
for estimated losses resulting
from the inability of its customers to make required payments. If the
financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.
|
|
|
|
k.
|
Valuation of Long-Lived
Assets - The Company assesses the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying
value of such assets may not be recoverable. Important factors that could
trigger an impairment review include, but are not limited to, significant
negative industry or economic trends and significant changes in the use of
the Company's assets or strategy of the overall
business.
|
|
|
l.
|
Intangible Assets -
Goodwill is not amortized. Other intangible assets are amortized over the
useful lives of the assets on a straight line basis. The Company tests for
impairment of intangible assets whenever events or changes in
circumstances
|
51
indicate
that the carry value of such assets may not be recoverable.
|
|
m.
|
Shipping Costs – The
amounts paid by the Company to third-party shippers for transporting
products to customers, which are not reimbursed by customers, are
classified as selling expenses. The shipping costs included in selling,
general and administrative expenses were approximately $3,929, $4,221 and
$4,417 for fiscal years 2009, 2008 and 2007,
respectively.
|
|
|
n.
|
Property, Plant and
Equipment – Property, plant and equipment are stated at cost less
accumulated depreciation. The Company capitalizes additions, improvements
and major renewals and expenses maintenance, repairs and minor renewals as
incurred. Depreciation and amortization are computed principally by the
straight-line method over the estimated useful lives. Machinery and
equipment are generally depreciated over 10 years. Building and leasehold
improvements are depreciated over 25-30 years or the term of the lease, if
shorter.
|
|
|
o.
|
Income Taxes – Deferred
income taxes are provided for temporary differences in the reporting of
certain items, primarily depreciation, for income tax purposes as compared
with financial accounting purposes.
|
|
|
United
States (“U.S.”) Federal income taxes have not been provided on the
undistributed earnings (approximately $128,000 March 1, 2009) of the
Company’s foreign subsidiaries, because it is management’s practice and
intent to reinvest such earnings in the operations of such
subsidiaries.
|
|
|
p.
|
Foreign Currency
Translation – Assets and liabilities of foreign subsidiaries using
currencies other than the U.S. dollar as their functional currency are
translated into U.S. dollars at fiscal year-end exchange rates, and income
and expense items are translated at average exchange rates for the period.
Gains and losses resulting from translation are recorded as currency
translation adjustments in comprehensive
income.
|
|
|
q.
|
Stock-Based
Compensation - The Company implemented the disclosure provisions of
Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting
for Stock-Based Compensation – Transition and Disclosure”, in the fourth
quarter of fiscal year 2003. Effective February 27, 2006, the beginning of
the Company’s 2007 fiscal year, the Company began recording compensation
expense associated with stock options, the only form of equity
compensation issued by the Company, in accordance with Statement of
Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS
123R”). The Company recognizes such compensation expense on a
straight-line basis over the four-year service period during which the
options become exercisable.
|
52
|
2.
|
MARKETABLE
SECURITIES
|
The following is a summary of
available-for-sale securities:
|
Gross
Unrealized Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||||
|
March
1, 2009:
|
||||||||||||
|
U.S.
Treasury and other
government securities
|
$ | 25 | $ | - | $ | 7,975 | ||||||
|
U.S.
corporate debt securities
|
48 | 166 | 40,918 | |||||||||
|
Certificates
of deposit
|
10 | - | 135,611 | |||||||||
|
Total
debt securities
|
$ | 83 | $ | 166 | $ | 184,504 | ||||||
|
March
2, 2008:
|
||||||||||||
|
U.S.
Treasury and other
government securities
|
$ | 39 | $ | 47 | $ | 30,829 | ||||||
|
U.S.
corporate debt securities
|
90 | 185 | 70,390 | |||||||||
|
Certificates
of deposit
|
-
|
-
|
12,600
|
|||||||||
|
Total
debt securities
|
$ | 129 | $ | 232 | $ | 113,819 | ||||||
The gross
realized gains on the sales of securities were $0, $1 and $43 for fiscal years
2009, 2008 and 2007, respectively, and the gross realized losses were $0, $4 and
$114 for fiscal years 2009, 2008 and 2007, respectively.
As of
March 3, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”). The adoption of SFAS 157 did not have a material effect on the
Company’s Consolidated Financial Statements. Under SFAS 157, fair
values of the investments are determined based on observable inputs, which are
quoted market prices for identical assets in active markets.
The
estimated fair value of the debt and marketable securities at March 1, 2009, by
contractual maturity, are shown below:
|
Estimated Fair Value
|
||||
|
Due
in one year or less
|
$ | 173,964 | ||
|
Due
after one year through five years
|
10,540
|
|||
| $ | 184,504 | |||
|
3.
|
INVENTORIES
|
Inventories consisted of the
following:
|
March 1, 2009
|
March 2, 2008
|
|||||||
|
Raw
materials
|
$ | 5,711 | $ | 5,923 | ||||
|
Work-in-process
|
2,110 | 3,686 | ||||||
|
Finished
goods
|
2,561 | 3,951 | ||||||
|
Manufacturing
supplies
|
295 | 489 | ||||||
| $ | 10,677 | $ | 14,049 | |||||
53
|
4.
|
PROPERTY,
PLANT AND EQUIPMENT
|
|
March 1, 2009
|
March 2, 2008
|
|||||||
|
Land,
buildings and improvements
|
$ | 35,496 | $ | 36,182 | ||||
|
Machinery,
equipment, furniture
and
fixtures
|
131,731 | 137,816 | ||||||
| 167,227 | 173,998 | |||||||
|
Less
accumulated depreciation
and
amortization
|
118,450 | 126,810 | ||||||
| $ | 48,777 | $ | 47,188 | |||||
|
|
Property,
plant and equipment are initially valued at cost. Depreciation and
amortization expense relating to property, plant and equipment was $7,707,
$8,286 and $8,992 for fiscal years 2009, 2008 and 2007, respectively. In
the 2009 fiscal year fourth quarter, the Company recorded a pre-tax
impairment charge of $3,967 for the write-off of construction costs
related to the installation of an advanced high-speed treater at the
Company’s Nelco Products Pte. Ltd. electronic materials business unit in
Singapore.
|
|
|
The
Company has $950 of building and machinery and equipment which are held
for sale at its Neltec Europe SAS business unit in Mirebeau, France and
its New England Laminates, Co., Inc. business unit in Newburgh, New York.
The Company has stopped depreciating these assets and intends to sell the
machinery and equipment during the 2010 fiscal year and the buildings
during the 2010 or 2011 fiscal years. The selling prices are expected to
equal or exceed the book values.
|
5. GOODWILL
AND OTHER INTANGIBLE ASSETS
|
|
In
the first quarter of the Company’s 2009 fiscal year, the Company’s new
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 the tooling for such parts,
located in Lynnwood, Washington, for a cash purchase price of $4,500 paid
at the closing of the acquisition and up to an additional $5,500 payable
over five years depending on the achievement of specified earn-out
objectives. The Company is in the process of determining the additional
amount, if any, up to $1.1 million, payable for the first year. The
Company recorded $4,351 of goodwill and an intangible asset related to a
patent of $106, which will be amortized over 15 years. Other intangibles
are amortized over the useful lives of the
assets.
|
|
March 1, 2009
|
March 2, 2008
|
|||||||
|
Goodwill
|
$ | 4,351 | $ | - | ||||
|
Other
Intangibles
|
112 | 6 | ||||||
| $ | 4,463 | $ | 6 | |||||
|
6.
|
ACCRUED
LIABILITIES
|
|
March 1, 2009
|
March 2, 2008
|
|||||||
|
Payroll
and payroll related
|
$ | 2,485 | $ | 3,812 | ||||
|
Employee
benefits
|
989 | 966 | ||||||
|
Workers’
compensation accrual
|
1,233 | 1,274 | ||||||
|
Environmental
reserve (Note 15)
|
844 | 1,577 | ||||||
|
Restructuring
accruals
|
2,239 | 1,169 | ||||||
|
Other
|
3,635 |
4,516
|
||||||
| $ | 11,425 | $ | 13,314 | |||||
54
|
7.
|
INCOME
TAXES
|
|
|
The
income tax (benefit) provision includes the
following:
|
|
Fiscal
Year
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
Current:
|
||||||||||||
|
Federal
|
$ | 2,087 | $ | 3,388 | $ | 2,319 | ||||||
|
State
and local
|
224 | 698 | 349 | |||||||||
|
Foreign
|
3,593 | 5,341 | 3,445 | |||||||||
| 5,904 | 9,427 | 6,113 | ||||||||||
|
Deferred:
|
||||||||||||
|
Federal
|
(4,354 | ) | (1,015 | ) | (664 | ) | ||||||
|
State
and local
|
(583 | ) | (100 | ) | (554 | ) | ||||||
|
Foreign
|
(472 | ) | 303 | (544 | ) | |||||||
| (5,409 | ) | (812 | ) | (1,762 | ) | |||||||
| $ | 495 | $ | 8,615 | $ | 4,351 | |||||||
|
|
During
the fourth quarter of the 2009 fiscal year, the Company recorded a tax
benefit of $4,677 from the elimination of certain valuation allowances
resulting principally from the closure of the Company’s New England
Laminates Co., Inc. business unit located in Newburgh, New
York.
|
|
|
During
the fourth quarter of the 2008 fiscal year, the Company recognized a tax
benefit of $1,500 related to reserves previously established in the United
States for transfer pricing. During the third quarter of the 2008 fiscal
year, the Company recognized a tax benefit of $540 related to reserves
that were deemed no longer required due to a change in market
conditions. During the second quarter of the 2008 fiscal year,
the Company recognized a tax benefit of $537 for the elimination of a
reserve in a foreign jurisdiction where the Company no longer
operates.
|
|
|
As
part of its evaluation of deferred tax assets, the Company recognized a
tax benefit of $3,500 during the 2007 fiscal year relating to the
elimination of certain valuation allowances previously established in the
United States. During the 2007 fiscal year, the Company also recognized a
tax benefit of $1,391 relating to the elimination of reserves no longer
required as the result of the completion of a tax audit, a $499 tax
benefit relating to a life insurance arrangement termination charge and a
tax benefit of $715 relating to the recognition of tax credits resulting
from operating losses sustained in prior years in
France.
|
|
|
The
components of earnings before income taxes were as
follows:
|
|
Fiscal
Year
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
United
States
|
$ | 2,422 | $ | 13,729 | $ | 18,330 | ||||||
|
Foreign
|
16,587 | 29,565 | 25,812 | |||||||||
|
Earnings
from continuing operations before income taxes
|
$ | 19,009 | $ | 43,294 | $ | 44,142 | ||||||
|
|
The
Company’s effective income tax rate differs from the statutory U.S.
Federal income tax rate as a result of the
following:
|
55
|
Fiscal
Year
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
Statutory
U.S. Federal tax rate
|
34.0 | % | 35.0 | % | 35.0 | % | ||||||
|
State
and local taxes, net of
Federal
benefit
|
0.6 | 0.9 | (0.3 | ) | ||||||||
|
Foreign
tax rate differentials
|
(7.7 | ) | (8.1 | ) | (9.1 | ) | ||||||
|
Valuation
allowance on deferred tax
assets
|
(24.0 | ) | 0.1 | (4.4 | ) | |||||||
|
Adjustment
of tax accruals and
reserves
|
(0.4 | ) | (6.0 | ) | (5.8 | ) | ||||||
|
Utilization
of net operating loss carryovers
|
- | - | (1.6 | ) | ||||||||
|
Foreign
tax credits
|
(3.2 | ) | (2.3 | ) | (2.1 | ) | ||||||
|
Other,
net
|
3.3 | 0.3 | (1.8 | ) | ||||||||
| 2.6 | % | 19.9 | % | 9.9 | % | |||||||
|
|
The
Company had total net operating loss carryforwards of approximately
$24,300 and $19,200 in fiscal years 2009 and 2008, respectively. All of
the total net operating loss carryforwards related to foreign operations
in fiscal years 2009 and 2008.The foreign net operating loss carryforwards
have no expiration.
|
|
|
The
Company had New York State investment tax credits of $1,180 and $2,164 in
fiscal years 2009 and 2008, respectively. The reduction of the investment
tax credit carryforward is primarily due to the recapture of certain
credits in accordance with New York State Tax Law in connection with the
closing of the Company’s New England Laminates Co., Inc. business unit
located in Newburgh, New York. A $50 benefit has been recognized for these
credits; however, the Company does not believe that realization of the
principal portion of the investment tax credit carryforward is more likely
than not.
|
|
|
The
deferred tax asset valuation allowance of $8,787 as of March 1, 2009
related to foreign net operating losses and New York State investment tax
credit carryforwards. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts for income
tax purposes. Significant components of the Company's long-term deferred
tax liabilities and assets as of March 1, 2009 and March 2, 2008 were as
follows:
|
|
March
1,
|
March
2,
|
|||||||
|
2009
|
2008
|
|||||||
|
Deferred
tax assets:
|
||||||||
|
Impairment
of fixed assets
|
$ | 5,757 | $ | 4,455 | ||||
|
Net
operating loss carryforwards
|
7,657 | 6,125 | ||||||
|
New
York State investment tax credits
|
1,180 | 2,164 | ||||||
|
Other,
net
|
4,310
|
5,422
|
||||||
| 18,904 | 18,166 | |||||||
|
Valuation
allowance for deferred
tax
assets
|
(8,787 | ) | (13,014 | ) | ||||
|
Net
deferred tax assets
|
10,117 |
5,152
|
||||||
|
Depreciation
|
(1,354 | ) | (1,665 | ) | ||||
|
Offshore
Singapore earnings subject to
local
tax
|
(3,056 | ) | (3,186 | ) | ||||
|
Total
deferred tax liabilities
|
(4,410 | ) | (4,851 | ) | ||||
|
Net
deferred tax
|
$ | 5,707 | $ | 301 | ||||
|
|
Net
deferred tax assets are included in non-current “Other assets” on the
Consolidated Balance Sheets. In addition, “Prepaid expenses and other
current assets” on the Consolidated Balance Sheets include
a
|
56
|
|
French
income tax refund of $1,811, which the Company expects to receive in the
2010 fiscal year first quarter.
|
|
|
At
March 1, 2009, the Company had gross tax-affected unrecognized tax
benefits of $702, all of which if recognized, would impact the effective
tax rate. A reconciliation of the beginning and ending amount
of unrecognized tax benefits is as
follows:
|
|
Unrecognized
|
||||
|
Tax Benefits
|
||||
|
Balance
as of March 2, 2008
|
$ | 952 | ||
|
Gross
increases–tax positions in prior period
|
- | |||
|
Gross
decreases-tax positions in prior period
|
(250 | ) | ||
|
Gross
increases-current period tax positions
|
- | |||
|
Gross
decreases-current period tax positions
|
- | |||
|
Lapse
of statute of limitations
|
- | |||
|
Balance
as of March 1, 2009
|
$ | 702 | ||
|
|
The
amount of unrecognized tax benefits may increase or decrease in the future
for various reasons, including adding or reducing amounts for current year
tax positions, expiration of statutes of limitation on open income tax
returns, changes in management’s judgment about the level of uncertainty,
status of tax examinations, and legislative activity. The Company does not
expect the unrecognized tax benefits to significantly decrease during the
2010 fiscal year.
|
|
|
A
list of open tax years by major jurisdiction
follows:
|
|
United
States
|
2004-2009
|
|
Arizona
|
2003-2009
|
|
California
|
2003-2009
|
|
New
York
|
2004-2009
|
|
France
|
2004-2009
|
|
Singapore
|
2004-2009
|
|
|
The
Company had approximately $180 and $140 of accrued interest and penalties
as of March 1, 2009 and March 2, 2008, respectively. The Company’s policy
is to include applicable interest and penalties related to unrecognized
tax benefits as a component of income tax
expense.
|
8. STOCK-BASED
COMPENSATION
As of
March 1, 2009, 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 March 1, 2009, 2,029,333 shares of common stock of
the Company were reserved for issuance upon
57
exercise
of stock options under the 1992 Stock Option Plan and the 2002 Stock Option Plan
and 1,046,606 shares were available for future grant under the 2002 Stock Option
Plan. Options to purchase 146,850 and 168,150 shares of common stock
were granted during the 2009 fiscal year and 2008 fiscal year,
respectively.
|
|
The
Company records its stock-based compensation at fair value in accordance
with Statement of Financial Accounting Standards No. 123 (revised 2004),
“Share-Based Payment” (“SFAS
123R”).
|
|
|
The
compensation expense for stock options includes an estimate for
forfeitures and is recognized over the vesting term using the ratable
method. Prior to the Company’s adoption of SFAS 123R, benefits
of tax deductions in excess of recognized compensation costs were reported
as operating cash flows. SFAS 123R requires that such benefits be recorded
as a financing cash inflow rather than as a reduction of taxes
paid.
|
|
|
The
future compensation expense affecting earnings before income taxes for
options outstanding at March 1, 2009 will be
$2,026.
|
The
weighted average fair value for options was estimated at the dates of grants
using the Black-Scholes option-pricing model to be $ 3.22 for fiscal year 2009,
$10.30 for fiscal year 2008 and $10.84 for fiscal year 2007, with the
following assumptions: risk free interest rate of 2.75%-4.00% for
fiscal year 2009, 4.75% for fiscal year 2008 and 4.0%-5.0% for fiscal year 2007;
expected volatility factors of 27.5%-32.5%, 32.1%-32.4% and 34.4%-58.8% for
fiscal years 2009, 2008 and 2007, respectively; expected dividend yield of
1.18%-1.77% for fiscal year 2009, 1.06% for fiscal year 2008 and 1.0%-1.6% for
fiscal year 2007; and estimated option terms of 4.7-5.6 years for fiscal year
2009, 5.2–5.4 years for fiscal year 2008 and 4.0-5.6 years for fiscal year
2007.
The
estimated term of the options is based on evaluations of historical and expected
future employee exercise behavior. The risk free interest rate is
based on U.S. Treasury rates at the date of grant with maturity dates
approximately equal to the estimated term of the options at the date of the
grant. Volatility is based on historical volatility of the Company’s
stock.
Information
with respect to options follows:
|
Outstanding
Options
|
Weighted
Average Exercise Price
|
|||||||
|
Balance,
February 26, 2006
|
1,003,454 | $ | 20.80 | |||||
|
Granted
|
174,700 | 25.35 | ||||||
|
Exercised
|
(80,236 | ) | 17.85 | |||||
|
Terminated
or expired
|
(31,291 | ) | 26.07 | |||||
| Balance, February 25, 2007 | 1,066,627 | $ | 21.61 | |||||
|
Granted
|
168,150 | 30.29 | ||||||
|
Exercised
|
(152,086 | ) | 17.74 | |||||
|
Terminated
or expired
|
(41,952 | ) | 25.27 | |||||
|
Balance,
March 2, 2008
|
1,040,739 | $ | 23.50 | |||||
|
Granted
|
146,850 | 26.36 | ||||||
|
Exercised
|
(123,649 | ) | 18.07 | |||||
|
Terminated
or expired
|
(81,213 | ) | 26.72 | |||||
|
Balance
March 1, 2009
|
982,727 | 24.35 | ||||||
|
Exercisable
March 1, 2009
|
644,742 | $ | 22.82 |
58
At March
1, 2009, 982,727 stock options were outstanding having a weighted average
remaining contract term of 5.53 years and an aggregate intrinsic value of $0. At
March 1, 2009, 644,742 stock options were exercisable having a weighted average
remaining contract term of 3.94 years and an aggregate intrinsic value of
$0.
A summary
of the status of the Company’s nonvested options at March 1, 2009, and changes
during the fiscal year then ended, is presented below:
|
Weighted
Average
|
||||||||
|
Shares
Subject
|
Grant
Date Fair
|
|||||||
|
to Options
|
Value
|
|||||||
|
Nonvested,
beginning
of
year
|
361,372 | $ | 9.90 | |||||
|
Granted
|
146,850 | 3.22 | ||||||
|
Vested
|
(116,875 | ) | 9.55 | |||||
|
Terminated
|
(53,362 | ) | 9.69 | |||||
|
Nonvested,
end of year
|
337,985 | $ | 7.16 | |||||
The total
values realized (the market value of the underlying shares on the date of
exercise, less the exercise price, times the number of shares acquired) from the
exercise of options during the 2009, 2008 and 2007 fiscal years were $1,259,
$1,889 and $1,153, respectively. Stock options available for future
grant under the 2002 Stock Option Plan at March 1, 2009 and March 2, 2008 were
1,046,606 and 223,193, respectively.
9. STOCKHOLDERS’
EQUITY
|
|
a.
|
Stockholders’
Rights Plan – On July 20, 2005, the Board of Directors renewed the
Company’s stockholders’ rights plan on substantially the same terms as its
previous rights plan which expired in July 2005. In accordance with the
Company’s stockholders’ rights plan, a right (the “Right”) to purchase
from the Company a unit consisting of one one-thousandth (1/1000) of a
share (a “Unit”) of Series B Junior Participating Preferred Stock, par
value $1.00 per share (the “Series B Preferred Stock”), at a purchase
price of $150 (the “Purchase Price”) per Unit, subject to adjustment, is
attached to each outstanding share of the Company’s common stock. The
Rights expire on July 20, 2015. Subject to certain exceptions,
the Rights will become exercisable 10 business days after a person
acquires 20 percent or more of the Company’s outstanding common stock or
commences a tender offer that would result in such person’s owning 20
percent or more of such stock. If any person acquires 20 percent or more
of the Company’s outstanding common stock, the rights of holders, other
than the acquiring person, become rights to buy shares of the Company’s
common stock (or of the acquiring company if the Company is involved in a
merger or other business combination and is not the surviving corporation)
having a market value of twice the Purchase Price of each Right. The
Company may redeem the Rights for $.01 per Right until 10 business days
after the first date of public
announcement by the Company that a person acquired 20 percent or more
of the Company’s outstanding common
stock.
|
59
|
|
b.
|
Reserved Common Shares
– At March 1, 2009, 2,029,333 shares of common stock were reserved for
issuance upon exercise of stock
options.
|
|
|
c.
|
Accumulated Other
Comprehensive Income – Accumulated balances related to each
component of other comprehensive income were as
follows:
|
|
March
1,
2009
|
March
2,
2008
|
|||||||
|
Currency
translation adjustment
|
$ | 1,568 | $ | 7,227 | ||||
|
Unrealized
gains (losses) on
investments
|
54 | 209 | ||||||
|
Accumulated
balance
|
$ | 1,622 | $ | 7,436 | ||||
|
|
d.
|
Dividends Declared - On
July 19, 2007, the Company announced that its Board of Directors had
declared a special cash dividend of $1.50 per share, which was paid August
22, 2007 and was in addition to the Company’s regular quarterly cash
dividends of $0.08 per share.
|
|
10.
|
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 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 last three fiscal years:
|
2009
|
2008
|
2007
|
||||||||||
|
Net
earnings from continuing
operations
|
$ | 18,514 | $ | 34,679 | $ | 39,791 | ||||||
|
Gain
from discontinued
operations
|
16,486 | - | - | |||||||||
|
Net
earnings
|
$ | 35,000 | $ | 34,679 | $ | 39,791 | ||||||
|
Weighted
average common shares outstanding for basic EPS
|
20,441,354 | 20,305,199 | 20,175,422 | |||||||||
|
Net
effect of dilutive options
|
44,762 | 59,004 | 141,418 | |||||||||
|
Weighted
average shares outstanding for diluted EPS
|
20,486,116 | 20,364,203 | 20,316,840 | |||||||||
|
Basic
earnings per share:
|
||||||||||||
|
Net
earnings from continuing
operations
|
$ | .90 | $ | 1.71 | $ | 1.97 | ||||||
|
Gain
from discontinued
operations
|
81 | - | - | |||||||||
|
Basic
earnings per share
|
$ | 1.71 | $ | 1.71 | $ | 1.97 | ||||||
|
Diluted
earnings per share:
|
||||||||||||
|
Net
earnings from continuing
operations
|
$ | .90 | $ | 1.70 | $ | 1.96 | ||||||
|
Gain
from discontinued
operations
|
.81 | - | - | |||||||||
|
Diluted
earnings per share
|
$ | 1.71 | $ | 1.70 | $ | 1.96 | ||||||
60
Common
stock equivalents, which were not included in the computation of diluted
earnings per share because either the effect would have been antidilutive or the
options' exercise prices were greater than the average market price of the
common stock, were 123,503, 10,885 and 3,619 for the fiscal years 2009, 2008 and
2007, respectively.
| 11. | DISCONTINUED OPERATIONS AND PENSION LIABILITY | |
|
|
On
February 4, 2004, the Company announced that it was discontinuing its
financial support of its Dielektra GmbH (“Dielektra”) subsidiary located
in Cologne, Germany, due to the continued erosion of the European market
for the Company’s high technology products. Without Park’s financial
support, Dielektra filed an insolvency petition, which the Company
believes will result in the liquidation of Dielektra. In accordance with
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets”, Dielektra is treated as a discontinued operation. As a
result of the discontinuation of financial support for Dielektra, the
Company recognized an impairment charge of $22,023 for the write-off of
Dielektra assets and other costs during the fourth quarter of the 2004
fiscal year. The liabilities from discontinued operations are
reported separately on the Consolidated Balance Sheet. These
liabilities from discontinued operations included $12,094 for Dielektra’s
deferred pension liability.
|
|
|
In
the 2009 fiscal year fourth quarter, the Company recognized a gain of
approximately $16.5 million related to the reversal of these liabilities
as a result of the Company’s judgment that the incurrence of such
liabilities is remote based on certain legal proceedings in
Germany.
|
|
|
Liabilities
for discontinued operations as of March 1, 2009 were nil. Liabilities for
discontinued operations as of March 2, 2008 consisted of the
following:
|
|
March
2,
|
||||
|
2008
|
||||
|
Environmental
and
other
liabilities
|
$ | 5,087 | ||
|
Pension
liabilities
|
12,094 | |||
|
Total
liabilities
|
$ | 17,181 | ||
|
12.
|
REALIGNMENT
AND SEVERANCE CHARGES
|
|
|
In
the 2009 fiscal year fourth quarter, the Company recorded one-time pre-tax
charges of $5,688 related to the closure of the Company’s New England
Laminates Co., Inc. electronic materials business unit located in
Newburgh, New York and the closure of the Company’s Neltec Europe SAS
electronic materials business unit located in Mirebeau, France and related
to an asset impairment and workforce reduction at the Company’s Nelco
Products Pte. Ltd. electronic materials and advanced composite materials
business unit in Singapore. The charges for the closure of the business
units included a non-cash asset impairment charge of $650 and were net of
the recapture of non-cash cumulative currency translation adjustments of
$3,957. In the 2009 fiscal year third quarter, the Company recorded a
pre-tax charge of $570 related to restructurings at certain of its North
American and European business units. The Company paid $3,045 of these
charges during the 2009 fiscal year and expects to pay the remaining
$3,213 during the 2010 fiscal year.
|
61
|
|
In
the 2008 fiscal year fourth quarter, the Company recorded a charge of
$1,362 for employment termination benefits and other expenses resulting
from a restructuring and workforce reduction at the Company’s Neltec
Europe SAS business unit. The Company paid $626 of these charges during
the 2008 fiscal year and paid the remaining $736 during the 2009 fiscal
year.
|
|
|
During
the 2004 fiscal year, the Company recorded charges related to the
realignment of its North America 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 $3,209 and $3,706 as of March
1, 2009 and March 2, 2008, respectively. The Company applied $497 and
$443 of payments against this liability during the 2009 and 2008 fiscal
years, respectively.
|
|
13.
|
INSURANCE
ARRANGEMENT TERMINATION CHARGE
|
During
the 2007 fiscal year, the Company terminated a split-dollar life insurance
arrangement with Jerry Shore, the Company’s founder and former Chairman,
President and Chief Executive Officer. The insurance arrangement, which involved
two life insurance policies payable on the death of the survivor of Jerry Shore
and his spouse with an aggregate face value of $5 million and annual premium
payments by the Company of approximately $129, was implemented in 1997 but
discontinued in 2004 in light of certain provisions of the Sarbanes-Oxley Act of
2002 and due to
changes in the income taxation of split-dollar life insurance arrangements. The
arrangement is more fully described in the Company’s annual proxy statements for
each of the years 1998 through 2007. Pursuant to an agreement entered into
between Jerry Shore and the Company, the termination of the insurance
arrangement involved a payment of $1,335 by the Company to Mr. Shore in January
2007. Such termination and payment resulted in a net cash cost to the Company of
$685, after the Company’s receipt of a portion of the cash surrender value of
the life insurance policies. The Company recorded a pre-tax charge of $1,316 in
the 2007 fiscal year in connection with this termination and recognized a $499
tax benefit relating to this insurance termination charge.
|
14.
|
EMPLOYEE
BENEFIT PLANS
|
|
|
a.
|
Profit Sharing Plan -
The Company and certain of its subsidiaries have a non-contributory profit
sharing retirement plan covering their regular full-time
employees. The plan may be modified or terminated at any time,
but in no event may any portion of the contributions revert
back to the Company. The Company's estimated contributions are
accrued at the end of each fiscal year and paid to the plan in
the subsequent fiscal year. The Company’s actual contributions
to the plan were $833 and $900 for fiscal years 2008 and 2007,
respectively. The contribution for fiscal year 2009 has not
been paid. Contributions are discretionary and may not exceed
the amount allowable as a tax deduction under the Internal
Revenue Code.
|
62
|
|
b.
|
Savings Plan - The
Company also sponsors a 401(k) savings plan, pursuant to which
the contributions of employees of certain subsidiaries were partially
matched by the Company in the amounts of $210, $222 and $247 in fiscal
years 2009, 2008 and 2007,
respectively.
|
|
15.
|
COMMITMENTS
|
|
|
The
Company conducts certain of its operations in leased facilities, which
include several manufacturing plants, warehouses and offices. The leases
on facilities are for terms of up to 10 years, the latest of which expires
in 2015. Many of the leases contain renewal options for periods ranging
from one to ten years and require the Company to pay real estate taxes and
other operating costs. The latest land lease expiration is
2054.
|
|
|
These
non-cancelable operating leases have the following payment
schedule.
|
|
Fiscal Year
|
Amount
|
|||
|
2010
|
$ | 2,335 | ||
|
2011
|
1,935 | |||
|
2012
|
1,359 | |||
|
2013
|
966 | |||
|
2014
|
679 | |||
|
Thereafter
|
1,480
|
|||
| $ | 8,754 | |||
|
|
Rental
expenses, inclusive of real estate taxes and other costs, were $2,721,
$2,465 and $2,047 for fiscal years 2009, 2008 and 2007,
respectively.
|
|
|
In
addition, the Company has commitments to purchase equipment for its
development and manufacturing facility in Newton, Kansas of
$3,483.
|
|
16.
|
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 haz-ardous substances at
nine sites. In addition, two subsidiaries of the Company have received
cost recovery claims under the Superfund Act 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.
|
63
|
|
Under
the Superfund Act and similar state laws, all parties who may have
contributed any waste to a hazardous waste disposal site or contaminated
area identified by the EPA or comparable state agency may be jointly and
severally liable for the cost of cleanup. Generally, these sites are
locations at which numerous persons disposed of hazardous waste. In the
case of the Company's subsidiaries, generally the waste was removed
from their manufacturing facilities and disposed at waste sites by various
companies which contracted with the subsidiaries to provide waste disposal
services. Neither the Company nor any of its sub- sidiaries 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 environ- mental 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 $117,
$11 and $13 in fiscal years 2009, 2008 and 2007, respectively. The
recorded liabilities included in accrued liabilities for environmental
matters were $844, $1,577 and $1,757 for fiscal years 2009, 2008 and 2007,
respectively.
|
|
|
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 cost of sales are charges for actual expenditures and accruals, based
on estimates, for certain environmental matters described above. The
Company accrues estimated costs associated with known environmental
matters, when such costs can be reasonably estimated and when the outcome
appears probable. 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 $5.5 million over five
years depending on the achievement of specified earn-out objectives in
connection with the acquisition
|
64
|
|
|
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 the tooling for such parts, 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. The Company is in
the process of determining the additional amount, if any, up to $1.1
million, payable for the first year.
|
|
17.
|
GEOGRAPHIC
REGIONS
|
|
|
The
Company’s printed circuit materials (the Nelco® product line), the
Company’s advanced composite materials (the Nelcote® product line) and the
Company’s composite parts (the Nova™ product line) are sold to customers
in North America, Europe and Asia.
|
|
|
Sales
are attributed to geographic region based upon the region which the
materials were delivered to the customer. Sales between geographic regions
were not significant.
|
|
|
Financial
information regarding the Company’s operations by geographic region
follows:
|
|
Fiscal
Year
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
Sales:
|
||||||||||||
|
North
America
|
$ | 103,772 | $ | 120,953 | $ | 137,897 | ||||||
|
Europe
|
22,804 | 30,533 | 37,363 | |||||||||
|
Asia
|
73,486 | 90,366 | 82,117 | |||||||||
|
Total
sales
|
$ | 200,062 | $ | 241,852 | $ | 257,377 | ||||||
|
Long-lived
assets:
|
||||||||||||
|
North
America
|
$ | 41,423 | $ | 25,069 | $ | 25,600 | ||||||
|
Europe
|
1,112 | 4,552 | 4,659 | |||||||||
|
Asia
|
21,113 | 26,747 | 25,331 | |||||||||
|
Total
long-lived assets
|
$ | 63,648 | $ | 56,368 | $ | 55,590 | ||||||
|
18.
|
CUSTOMER
AND SUPPLIER CONCENTRATIONS
|
|
|
a.
|
Customers - Sales to
Sanmina-SCI Corporation were 13.6%, 13.4% and 16.7% of the Company's total
worldwide sales for fiscal years 2009, 2008 and 2007,
respectively. Sales to TTM Technologies Inc. (“TTM”) were
12.1%, 10.8% and 10.7% of the Company's total worldwide sales for fiscal
years 2009, 2008 and 2007, respectively. The sales to TTM during the 2007
fiscal year included sales to Tyco Printed Circuit Group L.P., which was
acquired by TTM during the Company’s 2007 fiscal
year.
|
|
|
While
no other customer accounted for 10% or more of the Company's total
worldwide sales in fiscal years 2009, 2008 and 2007, and the Company is
not dependent on any single customer, the loss of a major printed circuit
materials customer or of a group of customers could have a material
adverse effect on the Company's business or consolidated results of
operations or financial position.
|
|
|
b.
|
Sources of Supply - The
principal materials used in the manufacture of the Company's
high-technology printed circuit materials and advanced composite materials
and parts are specially manufactured copper foil, fiberglass cloth and
synthetic reinforcements, and specially formulated resins and chemicals.
Although there are a limited number of qualified suppliers of these
materials, the Company has
nevertheless
|
65
|
|
|
identified
alternate sources of supply for each of such materials. While the
Company has not experienced significant problems in the delivery of these
materials and considers its relationships with its suppliers to be strong,
a disruption of the supply of material from a principal supplier could
adversely affect the Company's business. Furthermore, substitutes for
these materials are not readily available and an inability to obtain
essential materials, if prolonged, could materially adversely affect the
Company’s business.
|
|
19.
|
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
|
|
|
In
December 2007, the FASB issued SFAS No. 141R (revised 2007) which replaces
SFAS No. 141, “Business Combinations” (“SFAS No. 141R”). This
statement requires an acquirer, upon initially obtaining control of
another entity, to recognize the assets, liabilities and any
non-controlling interest in the acquiree at fair value as of the
acquisition date. This fair value approach replaces the original Statement
141’s cost allocation process, whereby the cost of an acquisition was
allocated to the individual assets acquired and liabilities assumed based
on their estimated fair value. SFAS No. 141R requires acquirers
to expense acquisition-related costs as incurred rather than allocating
such costs to the assets acquired and liabilities assumed, as was
previously the case under SFAS No. 141. The adoption of SFAS No. 141R will
impact how the Company records future business
combinations.
|
20. ACQUISITION
|
On
April 1, 2008, the Company’s wholly owned subsidiary, Park Aerospace
Structures Corp., acquired substantially all the assets and business of
Nova Composites, Inc. 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. Park Aerospace Structures
Corp. manufactures aircraft composite parts and the tooling for such
parts. Park’s composite parts product line is marketed and sold as Park’s
Nova™ product line.
|
The allocation of the purchase price is
as follows;
|
Current
assets
|
$ | 181 | ||
|
Fixed
assets
|
174 | |||
|
Intangibles
|
4,457 | |||
|
Total
assets acquired
|
4,812 | |||
|
Current
liabilities assumed
|
(84 | ) | ||
|
Total
Purchase Price
|
$ | 4,728 |
66
PARK
ELECTROCHEMICAL CORP. AND SUBSIDIARIES
SELECTED
QUARTERLY FINANCIAL DATA (UNAUDITED)
|
Quarter
|
||||||||||||||||
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
|
(In
thousands, except per share amounts)
|
||||||||||||||||
|
Fiscal
2009:
|
||||||||||||||||
|
Net
sales
|
$ | 59,800 | $ | 55,599 | $ | 49,166 | $ | 35,497 | ||||||||
|
Gross
profit
|
14,573 | 10,953 | 9,786 | 8,112 | ||||||||||||
|
Net
earnings from continuing
|
||||||||||||||||
|
operations
|
7,557 | 4,937 | 2,934 | 3,086 | ||||||||||||
|
Discontinued
operations
|
- | - | - | 16,486 | ||||||||||||
|
Net
Earnings
|
7,557 | 4,937 | 2,934 | 19,572 | ||||||||||||
|
Basic
earnings per share:
|
||||||||||||||||
|
Net
earnings from continuing operations
|
$ | 0.37 | $ | 0.24 | $ | 0.14 | $ | 0.15 | ||||||||
|
Discontinued
operations
|
$ | - | $ | - | $ | - | $ | 0.81 | ||||||||
|
Net
earnings per share
|
$ | 0.37 | $ | 0.24 | $ | 0.14 | $ | 0.96 | ||||||||
|
Diluted
earnings per share:
|
||||||||||||||||
|
Net
earnings from continuing operations
|
$ | 0.37 | $ | 0.24 | $ | 0.14 | $ | 0.15 | ||||||||
|
Discontinued
operations
|
$ | - | $ | - | $ | - | $ | 0.81 | ||||||||
|
Net
earnings per share
|
$ | 0.37 | $ | 0.24 | $ | 0.14 | $ | 0.96 | ||||||||
|
Weighted
average common
shares
outstanding:
|
||||||||||||||||
|
Basic
|
20,366 | 20,458 | 20,471 | 20,471 | ||||||||||||
|
Diluted
|
20,430 | 20,520 | 20,512 | 20,483 | ||||||||||||
|
Fiscal
2008:
|
||||||||||||||||
|
Net
sales
|
$ | 57,077 | $ | 60,541 | $ | 63,653 | $ | 60,581 | ||||||||
|
Gross
profit
|
14,109 | 16,435 | 16,076 | 15,834 | ||||||||||||
|
Net
earnings
|
7,411 | 9,160 | 8,777 | 9,331 | ||||||||||||
|
Basic
earnings per share:
|
||||||||||||||||
|
Net
earnings per share
|
$ | 0.37 | $ | 0.45 | $ | 0.43 | $ | 0.46 | ||||||||
|
Diluted
earnings per share:
|
||||||||||||||||
|
Net
earnings per share
|
$ | 0.37 | $ | 0.45 | $ | 0.43 | $ | 0.46 | ||||||||
|
Weighted
average common
shares
outstanding:
|
||||||||||||||||
|
Basic
|
20,206 | 20,325 | 20,340 | 20,347 | ||||||||||||
|
Diluted
|
20,235 | 20,405 | 20,452 | 20,362 | ||||||||||||
Earnings
per share are computed separately for each quarter. Therefore, the sum of
such quarterly per share amounts may differ from the total for the
years.
67
ITEM
9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
|
|
Not
applicable.
|
|
CONTROLS
AND PROCEDURES.
|
(a) Disclosure
Controls and Procedures.
The Company's management, with the
participation of the Company's Chief Executive Officer and Vice President and
Controller (the person currently performing the functions similar to those
performed by a principal 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 March 1, 2009, the end of the fiscal year
covered by this annual report. Based on such evaluation, the Company's Chief
Executive Officer and Vice President and Controller have concluded that, as of
the end of such fiscal year, 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 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 Vice
President and Controller, as appropriate to allow timely decisions regarding
required disclosure.
(b) Management’s
Annual Report on Internal Control Over Financial Reporting.
The management of the Company is
responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. The Company’s internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the United States of
America. The Company’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company, (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company, and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
68
Management assessed the effectiveness
of the Company’s internal control over financial reporting as of March 1, 2009.
In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in
Internal Control–Integrated Framework. Based on management’s assessment and
those criteria, management concluded that the Company maintained effective
internal control over financial reporting as of March 1, 2009.
The independent registered public
accounting firm that audited the Company’s financial statements included in this
Annual Report on Form 10-K has issued an attestation report on the Company’s
internal control over financial reporting. That report appears in Item 9A(c)
below.
(c) Attestation
Report of the Independent Registered Public Accounting Firm.
69
Stockholders
and Board of Directors of
Park
Electrochemical Corp.
We have
audited Park Electrochemical Corp. and subsidiaries (the “Company”) internal
control over financial reporting as of March 1, 2009, based on criteria
established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). The Company’s management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, Park Electrochemical Corp. and subsidiaries maintained, in all material
respects, effective internal control over financial reporting as of March 1,
2009, based on criteria established in Internal Control-Integrated Framework
issued by COSO.
70
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Park
Electrochemical Corp. and subsidiaries as of March 1, 2009 and March 2, 2008,
and the related consolidated statements of operations, stockholders’ equity and
cash flows for each of the three years in the period ended March 1, 2009, and
our report dated May 13, 2009 expressed an unqualified opinion on those
consolidated financial statements.
/s/GRANT
THORNTON LLP
New York,
New York
May 13,
2009
71
(d)
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 fourth fiscal
quarter of the fiscal year to which this report relates that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
|
OTHER
INFORMATION.
|
None.
72
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.
|
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 2009 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 2009 Annual Meeting of Shareholders to be filed pursuant to Regulation
14A.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
|
The information called for by this Item
is incorporated by reference to the Company's definitive proxy statement
for the 2009 Annual Meeting of Shareholders to be filed pursuant to Regulation
14A.
ITEM
13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information called for by this Item
is incorporated by reference to the Company's definitive proxy statement for the
2009 Annual Meeting of Shareholders to be filed pursuant to Regulation
14A.
ITEM
14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
This information called for by this
Item is incorporated by reference to the Company's definitive proxy statement
for the 2009 Annual Meeting of Shareholders to be filed pursuant to Regulation
14A.
73
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
||
|
Page
|
||
|
(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 Independent Registered Public Accounting Firm
|
45
|
|
|
Balance
Sheets
|
46
|
|
|
Statements
of Operations
|
47
|
|
|
Statements
of Stockholders' Equity
|
48
|
|
|
Statements
of Cash Flows
|
49
|
|
|
Notes
to Consolidated Financial Statements (1-20)
|
50
|
|
|
(2) Financial
Statement Schedules:
|
||
|
The
following additional information should be read in conjunction
with the Consolidated Financial Statements of the Registrant described in
Item 15(a)(1) above:
|
||
|
Schedule
II – Valuation and Qualifying Accounts
|
76
|
|
|
All
other schedules have been omitted because they are not applicable or not
required, or the information is included elsewhere in the financial
statements or notes thereto.
|
||
|
(3) Exhibits:
|
||
|
The
information required by this Item relating to Exhibits to this Report is
included in the Exhibit Index beginning on page 77 hereof.
|
||
74
Pursuant to the requirements of Section
13 or 15(d) 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.
|
Date: May 13,
2009
|
PARK
ELECTROCHEMICAL CORP.
|
|
By:_____________________________________
|
|
|
Brian
E. Shore,
|
|
|
President
and Chief Executive Officer
|
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
|
Signature
|
Title
|
Date
|
||
| /s/ Brian E. Shore | Chairman of the Board, President and | |||
|
Brian
E. Shore
|
Chief
Executive Officer and Director
(principal
executive officer)
|
May 13, 2009
|
||
| /s/ P. Matthew Farabaugh | Vice President and Controller | |||
|
P.
Matthew Farabaugh
|
(principal
accounting officer and
principal
financial officer)
|
May 13,
2009
|
||
| /s/ Dale Blanchfield | ||||
|
Dale
Blanchfield
|
Director
|
May 13,
2009
|
||
| /s/ Lloyd Frank | ||||
|
Lloyd
Frank
|
Director
|
May 13,
2009
|
||
| /s/ Steven T. Warshaw | ||||
|
Steven
T. Warshaw
|
Director
|
May 13,
2009
|
75
PARK
ELECTROCHEMICAL CORP. AND SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
|
Column A
|
Column B
|
Column
C
Additions
|
Column D
|
Column E
|
||||||||||||||||
|
Description
|
Balance
at
Beginning
of
Period
|
Costs
and
Expenses
|
Other
|
Reductions
|
Balance
at
End
of
Period
|
|||||||||||||||
|
DEFERRED
INCOME TAX ASSET VALUATION ALLOWANCE:
|
||||||||||||||||||||
|
52
weeks ended March 1, 2009
|
$ | 13,014,000 | $ | 450,000 | $ | - | $ | (4,677,000 | ) | $ | 8,787,000 | |||||||||
|
53
weeks ended March 2, 2008
|
$ | 12,469,000 | $ | 545,000 | $ | - | $ | - | $ | 13,014,000 | ||||||||||
|
52
weeks ended February 25, 2007
|
$ | 14,683,000 | $ | 1,286,000 | $ | - | $ | (3,500,000 | ) | $ | 12,469,000 | |||||||||
|
Column A
|
Column B
|
Column C
|
Column D
|
Column E
|
||||||||||||||||
|
Other
|
||||||||||||||||||||
|
Description
|
Balance
at
Beginning
of
Period
|
Charged
to
Cost and Expenses
|
Accounts
Written Off
|
Translation
Adjustment
|
Balance
at
End
of
Period
|
|||||||||||||||
|
(A)
|
||||||||||||||||||||
|
ALLOWANCE
FOR DOUBTFUL ACCOUNTS:
|
||||||||||||||||||||
|
52
weeks ended March 1, 2009
|
$ | 750,000 | $ | (48,000 | ) | $ | (10,000 | ) | $ | (5,000 | ) | $ | 687,000 | |||||||
|
53
weeks ended March 2, 2008
|
$ | 1,144,000 | $ | (166,000 | ) | $ | (190,000 | ) | $ | (38,000 | ) | $ | 750,000 | |||||||
|
52
weeks ended February 25, 2007
|
$ | 1,930,000 | $ | (623,000 | ) | $ | (140,000 | ) | $ | (23,000 | ) | $ | 1,144,000 | |||||||
|
(A)
|
Uncollectible
accounts, net of recoveries.
|
76
|
Exhibit Numbers
|
Description
|
Page
|
|
3.1
|
Restated
Certificate of Incorporation, dated March 28, 1989, filed with the
Secretary of State of the State of New York on April 10, 1989, as amended
by Certificate of Amendment of the Certificate of Incorporation,
increasing the number of authorized shares of Common stock from 15,000,000
to 30,000,000 shares, dated July 12, 1995, filed with the Secretary of
State of the State of New York on July 17, 1995, and by Certificate of
Amendment of the Certificate of Incorporation, amending certain provisions
relating to the rights, preferences and limitations of the shares of a
series of Preferred Stock, date August 7, 1995, filed with the Secretary
of State of the State of New York on August 16, 1995 (Reference is made to
Exhibit 3.01 of the Company's Annual Report on Form 10-K for the fiscal
year ended March 3, 2002, Commission File No. 1-4415, which is
incorporated herein by reference.)
|
-
|
|
3.2
|
Certificate
of Amendment of the Certificate of Incorporation, increasing the number of
authorized shares of Common Stock from 30,000,000 to 60,000,000 shares,
dated October 10, 2000, filed with the Secretary of State of the State of
New York on October 11, 2000 (Reference is made to Exhibit 3.02 of the
Company’s Annual Report on Form 10-K for the fiscal year ended March 2,
2003, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
3.3
|
Certificate
of Amendment of the Certificate of Incorporation, canceling Series A
Preferred Stock of the Company and authorizing a new Series B Junior
Participating Preferred Stock of the Company, dated July 21, 2005, filed
with the Secretary of the State of New York on July 21, 2005 (Reference is
made to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on
July 21, 2005, Commission File No. 1-4415, which is incorporated herein by
reference)
|
-
|
|
3.4
|
By-Laws,
as amended November 15, 2007 (Reference is made to Exhibit 3 of the
Company's Current Report on Form 8-K filed on November 21, 2007,
Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
4.1
|
Rights
Agreement, dated as of July 20, 2005, between the Company and Registrar
and Transfer Company, as Rights Agent, relating to the Company’s Preferred
Stock Purchase Rights. (Reference is made to Exhibit 1 to Form 8-A filed
on July 21, 2005, Commission File No. 1-4415, which is incorporated herein
by reference.)
|
-
|
|
10.1
|
Lease
dated December 12, 1989 between Nelco Products, Inc. and James Emmi
regarding real property located at 1100 East Kimberly Avenue, Anaheim,
California and letter dated December 29, 1994 from Nelco Products,
Inc. to James Emmi exercising its option to extend such Lease
(Reference is made to Exhibit 10.01 of the Company's Annual Report on Form
10-K for the fiscal year ended March 3, 2002, Commission File No. 1-4415,
which is incorporated herein by reference.)
|
-
|
77
|
Exhibit Numbers
|
Description
|
Page
|
|
10.2
|
Lease
dated December 12, 1989 between Nelco Products, Inc. and James Emmi
regarding real property located at 1107 East Kimberly Avenue, Anaheim,
California and letter dated December 29, 1994 from Nelco Products,
Inc. to James Emmi exercising its option to extend such Lease
(Reference is made to Exhibit 10.02 of the Company's Annual Report on Form
10-K for the fiscal year ended March 3, 2002, Commission File No. 1-4415,
which is incorporated herein by reference.)
|
-
|
|
10.3
|
Lease
Agreement dated August 16, 1983 and Exhibit C, First Addendum to Lease,
between Nelco Products, Inc. and TCLW/Fullerton regarding real property
located at 1411 E. Orangethorpe Avenue, Fullerton, California (Reference
is made to Exhibit 10.03 of the Company's Annual Report on Form 10-K for
the fiscal year ended March 3, 2002, Commission File No. 1-4415, which is
incorporated herein by reference.)
|
-
|
|
10.3(a)
|
Second
Addendum to Lease dated January 26, 1987 to Lease Agreement dated August
16, 1983 (see Exhibit 10.03 hereto) between Nelco Products, Inc. and
TCLW/Fullerton regarding real property located at 1421 E. Orangethorpe
Avenue, Fullerton, California (Reference is made to Exhibit 10.03(a) of
the Company's Annual Report on Form 10-K for the fiscal year ended March
3, 2002, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.3(b)
|
Third
Addendum to Lease dated January 7, 1991 and Fourth Addendum to Lease dated
January 7, 1991 to Lease Agreement dated August 16, 1983 (see Exhibit
10.03 hereto) between Nelco Products, Inc. and TCLW/Fullerton regarding
real property located at 1411, 1421 and 1431 E. Orangethorpe Avenue,
Fullerton, California. (Reference is made to Exhibit 10.03(b) of the
Company's Annual Report on Form 10-K for the fiscal year ended March 2,
1997, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.3(c)
|
Fifth
Addendum to Lease dated July 5, 1995 to Lease dated August 16, 1983 (see
Exhibit 10.03 hereto) between Nelco Products, Inc. and TCLW/Fullerton
regarding real property located at 1411 E. Orangethorpe Avenue, Fullerton,
California (Reference is made to Exhibit 10.03(c) of the Company's Annual
Report on Form 10-K for the fiscal year ended March 3, 2002, Commission
File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.4
|
Lease
Agreement dated May 26, 1982 between Nelco Products Pte. Ltd. (lease was
originally entered into by Kiln Technique (Private) Limited, which
subsequently assigned this lease to Nelco Products Pte. Ltd.) and the
Jurong Town Corporation regarding real property located at 4 Gul
Crescent, Jurong, Singapore (Reference is made to Exhibit 10.04 of the
Company's Annual Report on Form 10-K for the fiscal year ended March 3,
2002, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
78
|
Exhibit Numbers
|
Description
|
Page
|
|
10.4(a)
|
Deed
of Assignment, dated April 17, 1986 between Nelco Products Pte. Ltd.,
Kiln Technique (Private) Limited and Paul Ma, Richard Law, and Michael Ng,
all of Peat Marwick & Co., of the Lease Agreement dated May 26, 1982
(see Exhibit 10.04 hereto) between Kiln Technique (Private) Limited and
the Jurong Town Corporation regarding real property located at 4 Gul
Crescent, Jurong, Singapore (Reference is made to Exhibit 10.04(a) of the
Company's Annual Report on Form 10-K for the fiscal year ended March 3,
2002, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.5
|
1992
Stock Option Plan of the Company, as amended by First Amendment thereto.
(Reference is made to Exhibit 10.06(b) of the Company's Annual Report on
Form 10-K for the fiscal year ended March 1, 1998, Commission File No.
1-4415, which is incorporated herein by reference. This exhibit is a
management contractor compensatory plan or
arrangement.)...
|
-
|
|
10.6
|
Lease
dated April 15, 1988 between FiberCote Industries, Inc. (lease was
initially entered into by USP Composites, Inc., which subsequently changed
its name to FiberCote Industries, Inc.) and Geoffrey Etherington, II
regarding real property located at 172 East Aurora Street, Waterbury,
Connecticut (Reference is made to Exhibit 10.07 of the Company's Annual
Report on Form 10-K for the fiscal year ended March 3, 2002, Commission
File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.6(a)
|
Amendment
to Lease dated December 21, 1992 to Lease dated April 15, 1988 (see
Exhibit 10.06 hereto) between FiberCote Industries, Inc. and Geoffrey
Etherington II regarding real property located at 172 East Aurora Street,
Waterbury, Connecticut (Reference is made to Exhibit 10.07(a) of the
Company's Annual Report on Form 10-K for the fiscal year ended March 3,
2002, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.6(b)
|
Letter
dated June 30, 1997 from FiberCote Industries, Inc. to Geoffrey
Etherington II extending the Lease dated April 15, 1988 (see Exhibit 10.06
hereto) between FiberCote Industries, Inc. and Geoffrey Etherington II
regarding real
property located at 172 East Aurora Street,
Waterbury Connecticut. (Reference is made to Exhibit 10.08(b) of the
Company's Annual Report on Form 10-K for the fiscal year ended March 1,
1998, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.7
|
Lease
dated December 12, 1990 between Neltec, Inc. and NZ Properties, Inc.
regarding real property located at 1420 W. 12th Place, Tempe, Arizona.
(Reference is made to Exhibit 10.13 of the Company's Annual Report on Form
10-K for the fiscal year ended March 2, 1997, Commission File No. 1-4415,
which is incorporated herein by reference.)
|
-
|
79
|
Exhibit Numbers
|
Description
|
Page
|
|
10.7(a)
|
Letter
dated January 8, 1996 from Neltec, Inc. to NZ Properties, Inc.
exercising its option to extend the Lease dated December 12, 1990 (see
Exhibit 10.7 hereto) between Neltec, Inc. and NZ Properties, Inc.
regarding real property located at 1420 W. 12th Place, Tempe, Arizona.
(Reference is made to Exhibit 10.13(a) of the Company's Annual Report on
Form 10-K for the fiscal year ended March 2, 1997, Commission File No.
1-4415, which is incorporated herein by reference.)
|
-
|
|
10.7(b)
|
Letter
dated January 25, 2001 from Neltec, Inc. to NZ Properties, Inc. exercising
its option to extend the Lease dated December 12, 1990 (see Exhibit 10.7
hereto) between Neltec, Inc. and NZ Properties, Inc. regarding real estate
property located at 1420 W. 12th
Place, Tempe, Arizona (Reference is made to Exhibit 10.7(b) of the
Company’s Annual Report on Form l0-K for the fiscal year ended February
26, 2006, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.7(c)
|
Letter
dated February 14, 2006 from Neltec, Inc. to REB Ltd. Properties, Inc.
exercising its option to extend the Lease dated December 12, 1990 (see
Exhibit 10.7 hereto) between Neltec, Inc. and NZ Properties, Inc.
regarding real property located at 1420 W. 12th
Place, Tempe, Arizona (Reference is made to Exhibit 10.7(c) of the
Company’s Annual Report on Form 10-K for the fiscal year ended February
26, 2006, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.8
|
Lease
Contract dated February 26, 1988 between the New York State Department of
Transportation and the Edgewater Stewart Company regarding real property
located at 15 Governor Drive in the Stewart International Airport
Industrial Park, New Windsor, New York (Reference is made to Exhibit 10.13
of the Company's Annual Report on Form 10-K for the fiscal year ended
March 3, 2002, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
10.8(a)
|
Assignment
and Assumption of Lease dated February 16, 1995 between New England
Laminates Co., Inc. and the Edgewater Stewart Company regarding the
assignment of the Lease Contract (see Exhibit 10.8 hereto) for the
real property located at 15 Governor Drive in the Stewart International
Airport Industrial Park, New Windsor, New York (Reference is made to
Exhibit 10.13(a) of the Company's Annual Report on Form 10-K for the
fiscal year ended March 3, 2002, Commission File No. 1-4415, which is
incorporated herein by reference.)
|
-
|
|
10.8(b)
|
Lease
Amendment No. 1 dated February 17, 1995 between New England Laminates Co.,
Inc. and the New York State Department of Transportation to Lease
Contract dated February 26, 1988 (see Exhibit 10.8 hereto) regarding the
real property
|
80
|
Exhibit Numbers
|
Description
|
Page
|
|
located
at 15 Governor Drive in the Stewart International Airport Industrial Park,
New Windsor, New York (Reference is made to Exhibit 10.13(b) of the
Company's Annual Report on Form 10-K for the fiscal year ended March 3,
2002, Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
|
10.9
|
2002
Stock Option Plan of the Company (Reference is made to Exhibit 10.01 of
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 1, 2002, Commission File No. 1-4415, which is incorporated
herein by reference. This exhibit is a management contract or compensatory
plan or arrangement.)
|
-
|
|
10.10
|
Forms
of Incentive Stock Option Contract for employees, Non-Qualified Stock
Option Contract for employees and Non-Qualified Stock Option Contract for
directors under the 2002 Stock Option Plan of the Company (Reference is
made to Exhibit 10.10 of the Company’s Annual Report on Form 10-K for the
fiscal year ended February 27, 2005, Commission File No. 1-4415, which is
incorporated herein by reference.)
|
-
|
|
14.1
|
Code
of Ethics for Chief Executive Officer and Senior Financial Officers
adopted on May 6, 2004 (Reference is made to Exhibit 14.1 of the Company’s
Annual Report on Form 10-K for the fiscal year ended February 29, 2004,
Commission File No. 1-4415, which is incorporated herein by
reference.)
|
-
|
|
21.1
|
Subsidiaries
of the Company
|
82
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm (Grant Thornton
LLP)
|
83
|
|
31.1
|
Certification
of principal executive officer pursuant to Exchange Act Rule 13a-14(a) or
15d-14(a)
|
84
|
|
31.2
|
Certification
of principal financial officer pursuant to Exchange Act Rule 13a-14(a) or
15d-14(a)
|
86
|
|
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
|
88
|
|
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
|
89
|
81