SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED,EFFECTIVE OCTOBER 7, 1996] For the fiscal year ended March 2, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________ to________ Commission file number 1-4415 Park Electrochemical Corp. (Exact name of registrant as specified in its charter) New York 11-1734643 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5 Dakota Drive, Lake Success, New York 11042 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (516) 354-4100 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $.10 par value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange 5.5% Convertible Subordinated Notes New York Stock Exchange due 2006 Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] [cover page 1 of 2 pages] State the aggregate market value of the voting stock held by non- affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. As of close Title of Class Aggregate market value of business on Common Stock, $256,464,800* May 2, 1997 $.10 par value Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Shares As of close Title of Class outstanding of business on Common Stock, 11,273,178 May 2, 1997 $.10 par value DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement for Annual Meeting of Shareholders to be held July 16, 1997 incorporated by reference into Part III of this Report. ===================================================================== *Included in such amount are 1,015,032 shares of common stock valued at $22.75 per share and held by Jerry Shore, the Registrant's Chairman of the Board and a member of the Registrant's Board of Directors. [cover page 2 of 2 pages] PART I Item 1. Business. General Park Electrochemical Corp. ("Park"), through its subsidiaries (unless the context otherwise requires, Park and its subsidiaries are hereinafter called the "Company"), is primarily engaged in the design, production and marketing of advanced electronic materials used to fabricate complex multilayer printed circuit boards, semiconductor packages and other electronic interconnect systems. The Company's electronic materials business operates under the "Nelco" name. The Company is also engaged in the design, production and marketing of specialty adhesive tapes and films, advanced composite materials and microwave circuitry materials for the electronics, aerospace and industrial markets and plumbing hardware. Park was founded in 1954 by Jerry Shore, the Company's Chairman of the Board and largest shareholder. Unless otherwise indicated, all information in this Report has been adjusted to give effect to the Company's two-for-one stock split in the form of a stock dividend, which was distributed August 15, 1995 to shareholders of record at the close of business on July 24, 1995. The Company's business is divided into two industry segments: (1) electronic materials and (2) engineered materials and plumbing hardware. See Note 12 of the Notes to Consolidated Financial Statements included in Item 8 of this Report for information concerning the amounts of sales to unaffiliated customers, operating profit, identifiable assets, depreciation and amortization, and capital expenditures attributable to each of the Company's industry segments during its last three fiscal years. The sales, operating profit and identifiable assets of the Company's operations by geographic area for the last three fiscal years are also set forth in Note 12 of the Notes to Consolidated Financial Statements included in Item 8 of this Report. The Company's foreign operations are conducted principally by the Company's subsidiaries in the United Kingdom, France and Singapore. The Company's foreign operations are subject to the impact of foreign currency fluctuations. See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Report. Electronic Materials Operations The Company is a leading global designer and producer of advanced electronic materials used to fabricate complex multilayer printed circuit boards and other electronic interconnect systems, such as backplanes, PC cards and semiconductor packaging systems. The Company's multilayer printed circuit materials include copper-clad laminates, prepregs and semi-finished multilayer printed circuit board panels. The Company has long-term relationships with its major customers, which include leading independent printed circuit board fabricators and major electronic equipment manufac- turers. 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 micropro- cessors and memory and logic devices) and passive components (such as resistors and capacitors). Examples of end uses of the Company's printed circuit materials range from supercomputers to laptops and from satellite switching equipment to cellular telephones. 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 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. In 1962, the Company invented the first multilayer printed circuit materials system used to construct multilayer printed circuit boards. The Company also pioneered vacuum lamination and many other manufacturing technologies used in the industry today. The Company believes it is one of the industry's technological leaders. As a result of its leading edge products, extensive technical and engineering service support and responsive manufacturing capabilities, the Company expects to continue to take advantage of several industry trends. These trends include the increasing global demand for electronic products and technology, the increasing complexity of electronic products, the increasingly advanced electronic materials required for interconnect performance and manufacturability, the consolidation of the printed circuit board fabrication industry and the time-to-market and time-to-volume pressures requiring closer collaboration with materials suppliers. The Company believes that it is one of the world's largest manufacturers of multilayer printed circuit materials and the market leader in North America and Southeast Asia. It also believes that it is the only significant independent manufacturer of multilayer printed circuit materials in the world. The Company was the first manufacturer in the printed circuit materials industry to establish manufacturing presences in the three major global markets of North America, Europe and Asia, with facilities estab- lished in Europe in 1969 and Asia in 1986. Industry Background The electronic materials manufactured by the Company and its competitors are used to construct and fabricate complex multilayer printed circuit boards and other advanced electronic interconnect systems. Multilayer printed circuit materials consist of prepregs and copper-clad laminates, as well as semi-finished multilayer printed circuit board panels. Prepregs are chemically and electrically engineered plastic resin systems which are impregnated into and reinforced by a specially manufactured fiberglass cloth product or other woven or non-woven reinforcing fiber. This insulating dielectric substrate is .030 inch to .002 inch in thickness or less in some cases. These resin systems are usually based upon an epoxy chemistry. One or more plies of prepreg are laminated together to form an insulating dielectric substrate to support the copper circuitry patterns of a multilayer printed circuit board. Copper-clad laminates consist of one or more plies of prepreg laminated together with specialty thin copper foil laminated on the top and bottom. Copper foil is specially formed in thin sheets which may vary from .0030 inch to .0002 inch in thickness and normally have a thickness of .0014 inch or .0007 inch. The Company supplies both copper-clad laminates and prepregs to its customers, which use these products as a system to construct multilayer printed circuit boards. The printed circuit board fabricator processes copper-clad laminates to form the inner layers of a multilayer printed circuit board. The fabricator photoimages these laminates with a dry film or liquid photo- resist. After development of the photoresist, the copper surfaces of the laminate are etched to form the circuit pattern. The fabricator then assembles these etched laminates by inserting one or more plies of dielectric prepreg between each of the inner layer etched laminates and also between an inner layer etched laminate and the outer layer copper plane, and then laminating the entire assembly in a press. Prepreg serves as the insulator between the multiple layers of copper circuitry patterns found in the multilayer circuit board. When the multilayer configuration is laminated, these plies of prepreg form an insulating dielectric substrate supporting and separating the multiple inner and outer planes of copper circuitry. The fabricator drills vertical through holes or vias in the multilayer assembly and then plates the through holes or vias to form vertical conductors between the multiple layers of circuitry patterns. These through holes or vias combine with the conductor paths on the horizontal circuitry planes to create a three-dimensional electronic interconnect system. The outer two layers of copper foil are then imaged and etched to form the finished multilayer printed circuit board. The completed multilayer board is a three-dimensional interconnect system with electronic signals traveling in the horizontal planes of multiple layers of copper circuitry patterns, as well as the vertical plane through the plated holes or vias. The global market for advanced electronic products is growing as a result of technological change and frequent new product introductions. This growth is principally attributable to increased sales and more complex electronic content of newer products, such as cellular phones, pagers, personal computers and portable computing devices, and greater use of electronics in other products, such as automobiles. Further, large, almost completely untapped markets for advanced electronic equipment have emerged in such areas as India and China and other areas of the Pacific Rim. Semiconductor manufacturers have introduced successive generations of more powerful microprocessors and memory and logic devices. Electronic equipment manufacturers have designed these advanced semiconductors into more compact and often portable products. High performance computing devices in these smaller portable platforms require greater reliability, closer tolerances, higher component and circuit density and increased overall complexity. As a result, the interconnect industry has developed smaller, lighter, faster and more cost-effective interconnect systems, including advanced multilayer printed circuit boards and new types of semiconductor packaging systems such as ball-grid arrays and multi-chip modules. Advanced interconnect systems require higher technology printed circuit materials to insure the performance of the electronic system and to improve the manufacturability of the interconnect platform. The growth of the market for more advanced printed circuit materials has outpaced the market growth for standard printed circuit materials in recent years. Printed circuit board fabricators and electronic equipment manufacturers require advanced printed circuit materials that have increasingly higher temperature tolerances and more advanced electrical properties in order to support high speed computing in a miniaturized and often portable environ- ment. With the very high density circuit demands of miniaturized high performance interconnect systems, the uniformity, purity, consistency, performance predictability, dimensional stability and production tolerances of printed circuit materials have become successively more critical. High density printed circuit boards and interconnect systems often involve higher layer count multilayer circuit boards where the multiple planes of circuitry and dielectric insulating substrates are very thin (dielectric insulating substrate layers may be .002 inch or less) and the circuit line and space geometries in the circuitry plane are very narrow (.003 inch or less). In addition, advanced surface mount interconnect systems are typically designed with very small pad sizes and very narrow plated through holes or vias which electrically connect the multiple layers of circuitry planes. High density interconnect systems must utilize printed circuit materials whose dimension- al characteristics and purity are consistently manufactured to very high tolerance levels in order for the printed circuit board fabricator to attain and sustain acceptable production yields. Shorter product life cycles and competitive pressures have induced electronic equipment manufacturers to bring new products to market and increase production volume to commercial levels more quickly. These trends have highlighted the importance of front-end engineering of electronic products and have increased the level of collaboration among system designers, fabricators and printed circuit materials suppliers. As the complexity of electronic products increases, materials suppliers must provide greater technical support to interconnect systems fabricators on a timely basis regarding manufacturability and performance of new materials systems. Products and Services The Company produces a broad line of advanced printed circuit materials used to fabricate complex multilayer printed circuit boards and other electronic interconnect systems, including backplanes, PC cards and semiconductor packaging systems. The Company also manufactures semi- finished multilayer printed circuit board panels for a select group of customers. The Company's diverse advanced printed circuit materials product line is designed to address a wide array of end-use applications and performance requirements. The Company's product line has been developed internally and through long-term development projects with its principal suppliers. The Company focuses its research and development efforts on developing industry leading product technology to meet the most demanding product requirements and has designed its product line with a focus on the higher performance, higher technology end of the materials spectrum. All of the Company's existing electronic materials products have been introduced since 1990. Most of the Company's research and development expenditures are attributable to the efforts of its electronic materials operations. In response to the rapid technological changes in the electronic materials business, these expenditures on research and product development have increased over the past several years. The Company's products include high-temperature modified epoxies, bismaleimide triazine epoxies ("BT epoxy"), non-MDA polyimides, enhanced polyimides, high performance epoxy Thermount(R) materials ("Thermount" is a registered trademark of E.I. duPont de Nemours & Co.), cyanate esters and polytetrafluoroethylene ("PTFE") materials. During the 1996 and 1997 fiscal years, the Company introduced several new high technology electronic materials products, including: . N4000-13 - Nelco's high-temperature product with advanced electrical properties for high-speed computing and telecommunications applica- tions, which is being marketed; . N5000-30 and N5000-32 - Nelco's advanced BT-epoxy plastic laminate chip packaging materials for complex microprocessor cavity boards and plastic ball grid arrays and pin grid arrays, which are being sampled and tested by North American and European customers, and are currently entering the market; . N4000-X-1 - Nelco's advanced new proprietary plastic laminate chip packaging material, which is being tested and sampled by leading customers in North America, Asia and Europe. . N4500-6T - Nelco's high-temperature, high speed, non-woven Thermount(R) reinforced material suitable for advanced microvia and laservia applications, which is being marketed; and . Metclad's PTFE - Metclad's woven, metal-backed PTFE laminate substrate for microwave circuitry applications, which is being marketed in Europe. In addition to prepreg and copper-clad laminate printed circuit materials products, the Company also manufactures semi-finished multilayer printed circuit board panels as a value-added service for a limited number of its key customers. Production of the Company's semi-finished multilayer product involves several additional manufacturing steps beginning with the photoimaging and etching of the copper-clad laminate product into the circuitry patterns specified by the customer. These etched laminates form the inner layers of the multilayer circuit board. The etched inner layers are then laminated into a multilayer assembly with insulating dielectric prepreg inserted between the multiple etched inner layers and outer layer copper planes. The outer planes of copper foil are left in unprocessed "blank" form and the product is delivered to the customer at this stage in the process. The fabricator customer then drills and plates the through holes or vias and finishes the outer layers of circuitry patterns to complete the product. 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 organiza- tion. The Company focuses on developing a thorough understanding of its customer's business, product lines, processes and technological challenges. The Company seeks customers which are industry leaders committed to maintaining and improving their industry leadership positions and which are committed to long-term relationships with their suppliers. The Company also seeks business opportunities with the more advanced printed circuit fabricators and electronic equipment manufacturers which are interested in the full value of products and services provided by their suppliers. The Company believes its proactive and timely support in assisting its customers with the integration of advanced materials technology into new product designs further strengthens its relationships with its customers. The Company's emphasis on service and close relationship with its customers is reflected in its relatively short lead times. The Company has designed its manufacturing processes and service organizations to provide the customer with its printed circuit materials products on a just-in-time basis. The Company has located its advanced printed circuit materials manufacturing operations in strategic locations intended to serve specific regional markets. By situating its facilities in close geographical proximity to its customers, the Company is able to rapidly adjust its manufacturing processes to meet customers' new requirements and respond quickly to customers' technical needs. The Company has full technical staffs based at each of its manufacturing locations, which allows the rapid dispatch of technical personnel to a customer's facility to assist the customer in quickly solving design, process, production or manufacturing problems. Customers and End Markets The Company's customers for its advanced electronic materials include the leading independent printed circuit board fabricators and major electronic equipment manufacturers in the computer, 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 manufactur- ers which are industry leaders committed to maintaining and improving their industry leadership positions and to building long-term relationships with their suppliers. The Company's selling effort typically involves several stages and relies on the talents of Company personnel at different levels, from management to sales personnel and quality engineers. The Company's strategy emphasizes the use of multiple facilities established in market areas in close proximity to its customers. During the Company's 1997 fiscal year, more than 10% of the Company's sales were made to Delco Electronics Corporation, a subsidiary of General Motors Corp. Delco Electronics has purchased a significant amount of product from the Company for more than three years, and the Company believes its relations with this customer are strong and that this customer will continue to make significant purchases of printed circuit materials product from the Company in the immediate future. Although the Company's electronic materials segment is not dependent on this single customer, the loss of this customer could have a material adverse effect on the business of this segment. Although no other single customer accounted for 10% or more of total sales of the Company for the 1997 fiscal year and the electronic materials segment is not dependent on any other single customer, the loss of a major customer or of a group of this segment's customers could have a material adverse effect on the business of this segment. The Company's electronic materials segment's products are marketed by sales personnel in industrial centers in North America, Europe and Asia. Such personnel include both salaried employees and independent sales representatives who work on a commission basis. Manufacturing The process for manufacturing multilayer printed circuit materials is capital intensive and requires sophisticated equipment as well as clean- room environments. The key steps in the Company's manufacturing process include: the impregnation of specially designed fiberglass cloth with a resin system and the partial curing of that resin system; the assembling of laminates consisting of single or multiple plies of prepreg and copper foil in a clean-room environment; the vacuum lamination of the copper-clad assemblies under simultaneous exposure to heat, pressure and vacuum; and the finishing of the laminates to customer specifications. Prepreg is manufactured in a treater. A treater is a roll-to-roll continuous machine which sequences specially designed fiberglass cloth or other reinforcement fabric into a resin tank and then sequences the resin- coated cloth through a series of ovens which partially cure the resin system into the cloth. This partially cured product or prepreg is then sheeted or paneled and packaged by the Company for sale to customers, or used by the Company to construct its copper-clad laminates. The Company manufactures copper-clad laminates by first setting up in a clean room an assembly of one or more plies of prepreg stacked together with a sheet of specially manufactured copper foil on the top and bottom of the assembly. This assembly, together with a large quantity of other laminate assemblies, is then inserted into a large, multiple opening vacuum lamination press. The laminate assemblies are then laminated under simultaneous exposure to heat, pressure and vacuum. After the press cycle is complete, the laminates are removed from the press and sheeted, paneled and finished to customer specifications. The product is then inspected and packaged for shipment to the customer. The Company manufactures multilayer printed circuit materials at eight fully integrated facilities located in the United States, Europe and Southeast Asia. The Company opened its California facility in 1965, its United Kingdom facility in 1969, its first Arizona and France facilities in 1984, its Singapore facility in 1986 and its second Arizona and France facilities in 1992. The Company services the North American market principally through its United States manufacturing facilities, the European market principally through its manufacturing facilities in the United Kingdom and France, and the Asian market principally through its Singapore manufacturing facility. The Company has located its manufacturing facilities in its important markets. By maintaining full technical and engineering staffs at each of its manufacturing facilities, the Company is able to deliver fully-integrated products and services on a timely basis. During the 1996 fiscal year, the Company expanded its New York State operations to increase its production capacity for advanced printed circuit materials principally for the North American market and expanded its Tempe, Arizona operations to provide enhanced capability and capacity to produce high density, semi-finished multilayer panels and interconnect systems. It commenced commercial operations at these expanded facilities during the early part of its 1997 fiscal year. The Company added to the manufacturing capacity of its facilities in Arizona and Singapore during the latter part of its 1997 fiscal year and is planning further expansions of its electronic materials operations in one or more additional locations during the 1998 fiscal year, particularly in the United States and Asia. All of the Company's multilayer printed circuit materials manufacturing facilities are used for manufacturing, engineering and product development, except for the facility located in Lannemezan, France, which is principally a product research and development facility, but which in the 1997 fiscal year introduced a new woven, metal-backed PTFE laminate substrate for microwave circuitry applications in Europe. All of the Company's printed circuit materials manufacturing facilities are ISO 9002 certified. Materials and Sources of Supply The principal materials used in the manufacture of the Company's electronic products are specially manufactured copper foil, fiberglass cloth and synthetic reinforcements, and specially formulated resins and chemicals. The Company attempts to develop and maintain close working relationships with suppliers of those materials who have dedicated themselves to complying with the Company's stringent specifications and technical requirements. While the Company's philosophy is to work with a limited number of suppliers, the Company has identified alternate sources of supply for each of these materials. However, there are a limited number of qualified suppliers of these materials, substitutes for these materials are not readily available, and, in the recent past, the industry has experienced shortages in the market for certain of these materials. While the Company has not experienced significant problems in the delivery of these materials and considers its relationships with its suppliers to be strong, a disruption of the supply of material from one of the Company's principal suppliers or an inability to obtain essential materials could materially adversely affect the business, financial condition and results of operations of the Company. Significant increases in the cost of materials purchased by the Company could also have a material adverse effect on the Company's business, financial condition and results of operations if the Company were unable to pass such price increases through to its customers. Competition The multilayer printed circuit materials industry is characterized by intense competition and ongoing consolidation. The Company's competitors are primarily divisions or subsidiaries of very large, diversified multinational manufacturers which are substantially larger and have greater financial resources than the Company and, to a lesser degree, smaller regional producers. Because the Company focuses on the higher technology segment of the electronic materials market, technological innovation, quality and service, as well as price, are significant competitive factors. The Company believes that there are approximately ten significant multilayer printed circuit materials manufacturers in the world and many of these competitors have or are developing significant presences in the three major global markets of North America, Europe and Asia. The Company believes that the multilayer printed circuit materials industry is rapidly becoming more global and that the remaining smaller regional manufacturers will find it increasingly difficult to remain competitive. The Company believes that it is currently one of the world's largest multilayer printed circuit materials manufacturers and the market leader in North America and Southeast Asia. The Company further believes it is the only significant independent manufacturer of multilayer printed circuit materials in the world today. The markets in which the Company's electronic materials operations compete are characterized by rapid technological advances, and the Company's position in these markets depends largely on its continued ability to develop technologically advanced and highly specialized products. Although the Company believes it is an industry technology leader and directs a significant amount of its time and resources toward maintaining its technological competitive advantage, there is no assurance that the Company will be technologically competitive in the future, or that the Company will continue to develop new products that are technologically competitive. Engineered Materials and Plumbing Hardware The Company's engineered materials and plumbing hardware segment is comprised of its specialty adhesive tape and film, advanced composite materials and plumbing hardware businesses. Dielectric Polymers, Inc., the Company's specialty adhesive tape and film business, produces tapes and bonding films for a variety of applications including joining industrial components together. FiberCote Industries, Inc., the Company's composites business, designs and produces engineered advanced composite materials for the electronics, aerospace and industrial markets. Zin-Plas Corporation markets plumbing hardware products, which it designs and manufactures typically from chrome and brass plated zinc and plastic, and markets brass cast and plastic plumbing hardware products and components. Marketing and Customers The Company's engineered materials and plumbing hardware customers, substantially all of which are located in the United States, include manufacturers in the electronics, aerospace and industrial industries and original equipment manufacturers, hardware and plumbing wholesalers and home improvement centers. All of such products are marketed by sales personnel including both salaried employees and independent sales representatives who work on a commission basis. While no single engineered materials and plumbing hardware customer accounted for 10% or more of the Company's total sales during the last fiscal year, the loss of a major customer or of a group of some of the largest customers of the engineered materials and plumbing hardware segment could have a material adverse effect upon this segment. Manufacturing and Sources of Supply The Company's advanced composite materials manufacturing facility is located in Waterbury, Connecticut. Holyoke, Massachusetts is the site of the Company's specialty adhesive tape and film business. Zinc and plastic plumbing hardware products are manufactured and assembled at the Company's facilities in Grand Rapids and Comstock Park, Michigan. The Company's brass cast plumbing hardware products are designed by the Company and manufactured by a prominent Mexican faucet manufacturer under a long-term contract between the Company and this manufacturer. The Company designs and manufactures its advanced composite materials and industrial tapes and films to its own specifications and to the specifications of its customers. Product development efforts are devoted toward the conforming of the Company's advanced composites to the specifica- tions of, and the obtaining of approvals from, the Company's customers. The materials used in the manufacture of these engineered materials include chemicals, films, resins, fiberglass, plastics, and other fabricated materials and adhesives. The Company purchases these materials from several suppliers. Although satisfactory substitutes for many of these materials are not readily available, the Company has experienced no difficulties in obtaining such materials. The Company designs and manufactures its plumbing hardware to its own specifications and to the specifications of original equipment manufactur- ers, using combinations of materials and product designs that are developed by its personnel. The Company's product development efforts relating to its plumbing hardware business operations are directed toward the development of new decorative plumbing hardware product designs and new materials to be used in the manufacture of plumbing products. This requires market research, industrial design, engineering and testing for ease of installa- tion and durability. The Company usually combines chrome-plated zinc and plastic moldings for its products. The principal materials used in the manufacture of the Company's plumbing hardware products consist of zinc castings, plastics, plating materials, and other component parts. The Company purchases these materials from several suppliers. Although satisfactory substitutes for these materials are not readily available, the Company has experienced no difficulties in obtaining such materials. The Company purchases brass castings from one supplier and the Company has a long-term contract with this supplier. Competition The Company has many competitors in the engineered materials and plumbing hardware segment, including some major corporations which have substantially greater financial resources than the Company. The Company competes for business on the basis of product performance and development, product qualification and approval, the ability to manufacture and deliver products in accordance with customers' needs and requirements, and price. The Company's plumbing hardware business can be affected by fluctuations in the housing industry. Backlog The Company records an item as backlog when it receives a purchase order specifying the number of units to be purchased, the purchase price, specifications and other customary terms and conditions. At May 2, 1997, the unfilled portion of all purchase orders believed to be firm was approximately $21,524,000, compared to $18,917,000 at May 3, 1996. Backlog of the Company's two industry segments at May 2, 1997, compared to May 3, 1996, was as follows: May 2, 1997 May 3, 1996 Electronic Materials $13,784,000 $ 9,747,000 Engineered Materials and Plumbing Hardware 7,740,000 9,170,000 Total $21,524,000 $18,917,000 Various factors contribute to the size of the Company's backlog. Accordingly, the foregoing information may not be indicative of the Company's results of operations for any period subsequent to the fiscal year ended March 2, 1997. 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 2, 1997, the Company had approximately 2,340 employees. Of these employees, 2,060 were engaged in the Company's electronic materials operations, 260 in its engineered materials and plumbing hardware operations and 20 consisted of executive personnel and general administrative staff. Approximately 2% of the Company's employees, all of whom are engaged in the plumbing hardware operations, are subject to collective bargaining agreements. Management considers its labor relations to be satisfactory. Environmental Matters The Company is subject to stringent environmental regulation 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 environ- mental control facilities for its existing manufacturing operations during the remainder of its current fiscal year or its succeeding fiscal year. However, developments, such as the enactment or adoption of even more stringent environmental laws and regulations, could conceivably result in substantial additional costs to the Company. The Company and certain of its subsidiaries have been named by the Environmental Protection Agency (the "EPA") or a comparable state agency under the Comprehensive Environmental Response, Compensation and Liability Act (the "Superfund Act") or similar state law as potentially responsible parties in connection with alleged releases of hazardous substances at nine sites. In addition, a subsidiary of the Company has received cost recovery claims under the Superfund Act from other private parties involving three other sites and has received requests from the EPA under the Superfund Act for information with respect to its involvement at two other sites. Under the Superfund Act and similar state laws, all parties who may have contributed any waste to a hazardous waste disposal site or contaminated area identified by the EPA or comparable state agency may be jointly and severally liable for the cost of cleanup. Generally, these sites are locations at which numerous persons disposed of hazardous waste. In the case of the Company's subsidiaries, generally the waste was removed from their manufacturing facilities and disposed at the waste sites by various companies which contracted with the subsidiaries to provide waste disposal services. Neither the Company nor any of its subsidiaries have been accused of or charged with any wrongdoing or illegal acts in connection with any such sites. The Company believes it maintains an effective and comprehen- sive environmental compliance program. Management believes the ultimate disposition of known environmental matters will not have a material adverse effect upon the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Environmental Matters" included in Item 7 of this Report and Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Report. Item 2. Properties. The following chart indicates the significant properties owned and leased by the Company, the industry segment which uses the properties, and the location and size of each such property. All of such properties, except for the Lake Success, New York property, are used principally as manufactur- ing, warehouse and assembly facilities. <TABLE> <CAPTION> Size Owned or (Square Location Leased Use Footage) <S> <C> <C> <C> Lake Success, NY Leased Executive Offices 7,000 Walden, NY Owned Electronic Materials 51,000 Newburgh, NY Leased Electronic Materials 57,000 Fullerton, CA Leased Electronic Materials 95,000 Anaheim, CA Leased Electronic Materials 26,000 Tempe, AZ Leased Electronic Materials 86,000 Tempe, AZ Leased Electronic Materials 38,000 Tempe, AZ Leased Electronic Materials 15,000 Mirebeau, France Owned Electronic Materials 81,000 Lannemezan, France Owned Electronic Materials 29,000 Skelmersdale, England Owned Electronic Materials 54,000 Singapore Leased Electronic Materials 48,000 Singapore Leased Electronic Materials 10,000 Grand Rapids, MI Owned Plumbing Hardware 165,000 Comstock Park, MI Leased Plumbing Hardware 39,000 Holyoke, MA Leased Engineered Materials- 34,000 Specialty Adhesive Tapes and Films Waterbury, CT Leased Engineered Materials- 100,000 Advanced Composites </TABLE> The Company believes its facilities and equipment to be in good condition and reasonably suited and adequate for its current needs. Item 3. Legal Proceedings. (a) There are no material pending legal proceedings to which the Company is a party or to which any of its properties is subject. (b) No material pending legal proceeding was terminated during the fiscal quarter ended March 2, 1997. Item 4. Submission of Matters to a Vote of Security Holders. None. Executive Officers of the Registrant. Name Title Age Jerry Shore Chairman of the Board and a 71 Director Brian E. Shore Chief Executive Officer, President 45 and a Director E. Phillip Smoot Executive Vice President and a 59 Director Susan J. Denenholz Vice President-Planning and Analysis 44 Jerry Shore has served the Company in the capacities stated above for more than the past five years. He also served as President of the Company for more than five years until March 4, 1996 and as Chief Executive Officer of the Company for more than five years until November 19, 1996. Brian Shore has served as a Director of the Company for more than the past five years. Brian Shore was elected a Vice President of the Company in January 1993, Executive Vice President in May 1994, President effective March 4, 1996, the first day of the Company's last fiscal year, and Chief Executive Officer in November 1996. Brian Shore also served as General Counsel of the Company from April 1988 until April 1994. Mr. Smoot has served the Company in the capacities stated above for more than the past five years. Ms. Denenholz became Vice President-Planning and Analysis in December 1996. Prior to December 1996, she was employed by Dun & Bradstreet Corporation, as Assistant Vice President, Acquisitions from 1992, Director, Acquisitions Analysis, from 1982 to 1992 and Manager, Business Analysis from 1979 to 1982. From 1975 to 1979, she was employed by RCA Corporation. Ms. Denenholz is a certified public accountant and a member of the New York State Bar. There are no family relationships between the directors or executive officers of the Company, except that Brian Shore is the son of Jerry Shore. The term of office of each executive officer of the Company expires upon the election and qualification of his or her successor. PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters. The Company's Common Stock is listed and trades on the New York Stock Exchange (trading symbol PKE). (The Common Stock also trades on the Midwest Stock Exchange.) The following table sets forth, for each of the quarterly periods indicated, the high and low sales prices for the Common Stock as reported on the New York Stock Exchange Composite Tape and dividends declared on the Common Stock, all as adjusted for the two-for-one stock split in the form of a stock dividend distributed August 15, 1995 to shareholders of record at the close of business on July 24, 1995. For the Fiscal Year Stock Price Dividends Ended March 2, 1997 High Low Declared First Quarter $33 3/8 $21 3/4 $.08 Second Quarter 24 5/8 16 3/4 $.08 Third Quarter 24 17 1/2 $.08 Fourth Quarter 26 1/2 20 7/8 $.08 For the Fiscal Year Stock Price Dividends Ended March 3, 1996 High Low Declared First Quarter $20 1/16 $16 7/8 $.06 Second Quarter 31 1/2 17 1/8 $.06 Third Quarter 34 1/8 28 $.08 Fourth Quarter 37 7/8 28 3/8 $.08 As of May 2, 1997, there were 2,434 holders of record of Common Stock. The Company expects, for the immediate future, to continue to pay regular cash dividends. Item 6. Selected Financial Data. The following selected consolidated financial data of Park and its subsidiaries is qualified by reference to, and should be read in conjunction with, the consolidated financial statements, related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere herein. Insofar as such consolidated financial information relates to the five fiscal years ended March 2, 1997 and is as of the end of such periods, it is derived from the consolidated financial statements for such periods and as of such dates audited by Ernst & Young LLP, independent Certified Public Accountants, for the four fiscal years ended March 2, 1997 and Deloitte & Touche LLP, independent Certified Public Accountants, for the fiscal year ended February 28, 1993. The consolidated financial statements as of March 2, 1997 and March 3, 1996 and for the three years ended March 2, 1997, together with the auditors' reports for the three years ended March 2, 1997, appear elsewhere in this Report. Item 6 <TABLE> <CAPTION> Fiscal Year Ended Mar. 2, Mar. 3, Feb. 26, Feb. 27, Feb. 28, 1997 1996 1995 1994 1993 (In thousands, except per share amounts) <S> <C> <C> <C> <C> <C> STATEMENT OF EARNINGS INFORMATION: Net sales $334,490 $312,966 $253,022 $208,410 $175,176 Cost of sales 275,372 242,655 196,917 168,175 149,145 Gross profit 59,118 70,311 56,105 40,235 26,031 Selling, general and administrative expenses 34,366 35,236 29,995 25,930 22,865 Profit from operations 24,752 35,075 26,110 14,305 3,166 Other income (expense): Interest and other income, net 7,653 2,285 1,822 947 1,967 Interest expense (5,508) (96) (431) (2,407) (2,058) Total other income 2,145 2,189 1,391 (1,460) (91) Earnings before income taxes 26,897 37,264 27,501 12,845 3,075 Income tax provision 8,338 12,366 10,156 4,783 810 Net earnings $ 18,559 $ 24,898 $ 17,345 $ 8,062 $ 2,265 Earnings per share: Primary $ 1.61 $ 2.11 $ 1.59 $ 1.01 $ .25 Fully diluted $ 1.59 $ 2.10 $ 1.52 $ .84 $ .25 Weighted average number of common and common equivalent shares outstanding: Primary 11,551 11,794 10,858 7,986 9,068 Fully diluted 13,932 11,860 11,570 11,454 9,068 Cash dividends per common share $ .32 $ .28 $ .20 $ .16 $ .16 BALANCE SHEET INFORMATION: Working capital $165,004 $160,965 $ 55,035 $ 45,867 $ 45,811 Total assets 307,862 298,975 162,051 140,750 129,009 Long-term debt 100,000 100,000 23 32,861 33,957 Stockholders' equity 143,355 134,427 112,048 61,454 60,700 </TABLE> Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Park is a leading global designer and producer of advanced electronic materials used to fabricate complex multilayer printed circuit boards, semiconductor packages and other electronic interconnect systems. The Company's customers for its advanced printed circuit materials include leading independent circuit board fabricators and large electronic equipment manufacturers in the computer, telecommunications, transportation, aerospace and instrumentation industries. The Company's electronic materials operations accounted for approximately 86% of net sales worldwide and more than 89% of operating profit in each of the last three fiscal years. The Company's foreign electronic materials operations accounted for approximate- ly 29% of net sales worldwide for each of the last two fiscal years and approximately 24% for the 1995 fiscal year. Park is also engaged in the engineered materials and plumbing hardware business, which consists of the Company's specialty adhesive tape business, its advanced composite business and its plumbing hardware business, all of which operate as independent business units. This segment accounted for approximately 14% of the Company's total net sales worldwide and less than 11% of operating profit in each of the last three fiscal years. The Company's sales growth during the last three fiscal years has been led by strong growth in sales by its North American and Asian electronic materials operations. During the last two fiscal years, increased sales by the Company's European operations have also contributed to this growth. The Company's ongoing efforts to expand its higher technology, higher margin product lines have contributed to the growth of the Company's sales of electronic materials during this period. The Company introduced several new electronic materials products during the 1996 and 1997 fiscal years. Sales volume of the Company's electronic materials segment has increased during each of the last three fiscal years. However, growth of the Company's electronic materials business was interrupted in the first quarter of the 1997 fiscal year by an abrupt and unexpected weakening of the market for the Company's products which continued until the fourth quarter when the market strengthened. In addition, growth of the Company's electronic materials business was constrained during the 1996 fiscal year and the fourth quarter of the 1997 fiscal year by the Company's available manufacturing capacity. During the 1996 fiscal year, the Company expanded its manufacturing capacity in New York and Arizona and commenced commercial operations in both locations during the early part of the 1997 fiscal year. The Company further expanded the manufacturing capacity of its facilities in Arizona and Singapore during the later part of the 1997 fiscal year and is planning additional expansions of its electronic materials operations in the 1998 fiscal year. Fiscal Year 1997 Compared with Fiscal Year 1996: The Company's electronic materials business was responsible for the decline in the Company's results of operations for the fiscal year ended March 2, 1997. The North American, European and Asian markets for sophisti- cated printed circuit materials experienced weakness during the first half of the 1997 fiscal year which continued into the third quarter in the North American and European markets. The Company believes this weakness was principally attributable to an industry-wide inventory correction that began in the first quarter. During the 1997 fiscal year, the Company's electronic materials business experienced inefficiencies caused by operating its facilities at levels significantly lower than their designed manufacturing capacity in the first three quarters and faced price pressure from its customers resulting in an inability to pass along raw material cost increases which it received earlier in the current year. These factors adversely affected the Company's margins. The Company's performance during the 1997 fiscal year was also adversely affected by significant disruptions of the Company's business with its largest customer, Delco Electronics Corporation, caused by the Canadian Auto Workers' and United Auto Workers' strikes against General Motors in the first and third quarters of the fiscal year. The improvement in the Company's margins in the second quarter over the first quarter was achieved from internal operating adjustments in response to the industry downturn that occurred in the first quarter and the return of Delco Electronics to more normal business levels after the aforementioned strikes. The improvement in the Company's margins in the fourth quarter over the third quarter resulted from the return of Delco Electronics to more normal business levels after the aforementioned strikes and the strengthening of the market for the Company's products in the fourth quarter. Operating results of the Company's engineered materials and plumbing hardware business improved considerably during the 1997 fiscal year and accounted for approximately 11% of the Company's total operating profit. Results of Operations Sales for the fiscal year ended March 2, 1997 increased 7% to $334.5 million from $313.0 million for the fiscal year ended March 3, 1996. Sales of the electronic materials business for the 1997 fiscal year were $291.1 million, or 87% of total sales worldwide, compared with $274.9 million, or 88% of total sales worldwide, for the 1996 fiscal year. This 6% increase in sales of electronic materials was principally the result of higher volume of electronic materials shipped and an increase in sales of higher technology products. Sales of the engineered materials and plumbing hardware business for the 1997 fiscal year increased 14% to $43.3 million from $38.1 million for the 1996 fiscal year due primarily to increased sales in the specialty adhesive tape and advanced composite materials businesses resulting from new products and higher volumes in both businesses. The Company's foreign operations accounted for $99.5 million of sales, or 30% of the Company's total sales worldwide, during the 1997 fiscal year compared with $91.7 million of sales, or 29% of total sales worldwide, during the 1996 fiscal year. Sales by the Company's foreign operations during the 1997 fiscal year increased 9% from the 1996 fiscal year. While sales by each of the Company's foreign operations were higher in the 1997 fiscal year compared with the 1996 fiscal year, the increase in sales by foreign operations was principally due to an increase in sales by the Company's Asian operations. A further expansion of the Company's Singapore manufacturing facility is planned during the Company's 1998 fiscal year. The gross margin for the Company's worldwide operations was 17.7% during the 1997 fiscal year compared with 22.5% for the 1996 fiscal year. The decline in the gross margin was attributable to inefficiencies resulting from dramatic volume fluctuations during the year, the impact of disruptions to the Company's business with its largest customer, Delco Electronics Corporation, due to strikes against General Motors, selling price pressure and operating certain facilities at levels lower than their designed capacity, which were partially offset by the continuing growth in sales of higher technology, higher margin products. Selling, general and administrative expenses, measured as a percentage of sales, were 10.3% during the 1997 fiscal year compared with 11.3% during the 1996 fiscal year. This reduction was a function of the partially fixed nature of the selling, general and administrative expenses relative to the increase in sales and lower incentive payments due to lower operating profits. For the reasons set forth above, profit from operations for the 1997 fiscal year decreased 29% to $24.8 million from $35.1 million for the 1996 fiscal year. Interest and other income, principally investment income, increased 235% to $7.7 million for the 1997 fiscal year from $2.3 million for the 1996 fiscal year. Interest expense for the 1997 fiscal year was $5.5 million compared with $0.1 million during the 1996 fiscal year. The increases in investment income and interest expense were attributable to the increase in cash available for investment and the additional interest expense resulting from the Company's issuance of $100 million principal amount of 5.5% Convertible Subordinated Notes due 2006 at the end of the 1996 fiscal year. The Company's investments were primarily short-term taxable instruments and government securities. The Company's effective income tax rate for the 1997 fiscal year was 31.0% compared with 33.2% for the 1996 fiscal year. This decrease in the effective tax rate was primarily the result of favorable foreign tax rate differentials. Net earnings for the 1997 fiscal year were $18.6 million compared to $24.9 million for the 1996 fiscal year. Primary and fully diluted earnings per share decreased to $1.61 and $1.59, respectively, for the 1997 fiscal year from $2.11 and $2.10, respectively, for the 1996 fiscal year. This decrease in net earnings and earnings per share was primarily attributable to the decrease in the profit from operations. Fiscal Year 1996 Compared with Fiscal Year 1995: The Company's electronic materials business was responsible for the improvement in the Company's results of operations for the fiscal year ended March 3, 1996. The North American and Asian markets for sophisticated printed circuit materials were strong during the 1996 fiscal year, and the Company's electronic materials operations located in these regions performed well as a result. While the market in Europe for sophisticated printed circuit materials was not as strong as in North America or Asia, it improved over the prior fiscal year, and the Company's European operations benefitted from this improvement. During the 1996 fiscal year, the Company's electronic materials business incurred raw material cost increases and additional costs associated with the Company's major expansion projects in Newburgh, New York and Tempe, Arizona. In addition, the electronic materials business experienced temporary inefficiencies caused by operating certain facilities at levels in excess of their designed manufacturing capacity. These cost increases and temporary operating inefficiencies adversely affected the Company's gross margins. However, the Company was able to offset such effects by improving its overall operating efficiencies, in part, by consolidating functions, by continuing to reduce manufacturing waste and improve yields, and by improving the overall productivity of its workforce. In addition, the Company redesigned product in order to reduce material costs. The Company was also able to offset these cost increases and inefficiencies through its ongoing efforts to expand its higher technology, higher margin product lines. Operating results of the Company's engineered materials and plumbing hardware business improved slightly but were not significant during the 1996 fiscal year. Results of Operations Sales for the fiscal year ended March 3, 1996 increased 24% to $313.0 million from $253.0 million for the fiscal year ended February 26, 1995. Sales of the electronic materials business for the 1996 fiscal year were $274.9 million, or 88% of total sales worldwide, compared with $218.3 million, or 86% of total sales worldwide, for the 1995 fiscal year. This 26% increase in sales of electronic materials was principally the result of higher volume of electronic materials shipped and an increase in sales of higher technology products. Sales of the engineered materials and plumbing hardware business for the 1996 fiscal year increased 10% to $38.1 million from $34.7 million for the 1995 fiscal year due primarily to increased sales in the specialty adhesive tape and plumbing hardware businesses resulting from new products and higher volumes. The Company's foreign operations accounted for $91.7 million of sales, or 29% of the Company's total sales worldwide, during the 1996 fiscal year compared with $61.9 million of sales, or 24% of total sales worldwide, during the 1995 fiscal year. Sales by the Company's foreign operations during the 1996 fiscal year increased 48% from the 1995 fiscal year. While sales by each of the Company's foreign operations were higher in the 1996 fiscal year compared with the 1995 fiscal year, the increase in sales by foreign operations was principally due to an increase in sales by the Company's Asian operations. An expansion of the Company's Singapore manufacturing facility was completed at the end of the Company's 1995 fiscal year. The gross margin for the Company's worldwide operations was 22.5% during the 1996 fiscal year compared with 22.2% for the 1995 fiscal year. The improvement in the gross margin was attributable to the increase in sales volume over the prior fiscal year, the continuing growth in sales of higher technology, higher margin products and improved operating efficien- cies. This improvement was offset in part by higher raw material costs, costs associated with the start-up of the new facilities in New York and Arizona, and inefficiencies caused by operating certain facilities at levels in excess of designed capacity. Selling, general and administrative expenses, measured as a percentage of sales, were 11.3% during the 1996 fiscal year compared with 11.9% during the 1995 fiscal year. This reduction was a function of the partially fixed nature of the selling, general and administrative expenses relative to the increase in sales. For the reasons set forth above, profit from operations for the 1996 fiscal year increased 34% to $35.1 million from $26.1 million for the 1995 fiscal year. Interest and other income, principally investment income, increased 25% to $2.3 million for the 1996 fiscal year from $1.8 million for the 1995 fiscal year. The increase in investment income was attributable to the increase in the prevailing interest rates during the current year and to the increase in cash available for investment. The Company's investments were primarily short-term taxable instruments and government securities. Interest expense for the 1996 fiscal year was minimal compared with $0.4 million during the 1995 fiscal year. During the first quarter of the prior fiscal year, the Company called its 7.25% Convertible Subordinated Debentures for redemption; as a result, nearly all of such Debentures outstanding at the beginning of the prior fiscal year were converted into Common Stock during that fiscal year's first quarter, which eliminated the Company's long-term debt and the associated interest expense. The Company's effective income tax rate for the 1996 fiscal year was 33.2% compared with 36.9% for the 1995 fiscal year. This decrease in the effective tax rate was primarily the result of favorable foreign tax rate differentials. Net earnings for the 1996 fiscal year increased 44% to $24.9 million from $17.3 million for the 1995 fiscal year. Primary and fully diluted earnings per share increased to $2.11 and $2.10, respectively, for the 1996 fiscal year from $1.59 and $1.52, respectively, for the 1995 fiscal year. This increase in net earnings and earnings per share was primarily attributable to the increase in the profit from operations, the effects of the conversion of the Debentures and the lower effective tax rate. Liquidity and Capital Resources: At March 2, 1997, the Company's cash and temporary investments were $144.6 million compared with $143.2 million at March 3, 1996, the end of the Company's 1996 fiscal year. The increase in the Company's cash and investment position at March 2, 1997 was attributable to cash provided from operating activities in excess of investments in property, plant and equipment, as discussed below. The Company's working capital was $165.0 million at March 2, 1997 compared with $161.0 million at March 3, 1996. The increase at March 2, 1997 compared with March 3, 1996 was due to the increases in cash and receivables, offset in part by lower inventories. The increase in receivables at March 2, 1997 compared with March 3, 1996 was due principally to increased sales; the decrease in inventories for the same period was due to the utilization of raw materials accumulated in the 1996 fiscal year to ensure adequate supply of such materials. The Company's current ratio (the ratio of current assets to current liabilities) was 4.0 to 1 at March 2, 1997 compared with 3.8 to 1 at March 3, 1996. During the 1997 fiscal year, the Company generated funds from operations of $29.2 million and expended $18.7 million for the purchase of property, plant and equipment. Cash provided by net earnings before depreciation and amortization of $30.1 million was reduced by a net increase in non-cash working capital items, resulting in $29.2 million of cash provided from operating activities. A significant portion of the 1997 fiscal year's capital expenditures related to installation of additional capacity at the Company's electronic materials facilities in Tempe, Arizona and Singapore. These expansions will increase the Company's capacity and capability for the production of sophisticated printed circuit materials. Expenditures for property, plant and equipment were $18.7 million, $24.5 million and $17.5 million in the 1997, 1996 and 1995 fiscal years, respec- tively. The Company expects the level of capital expenditures in the 1998 fiscal year to be in excess of the expenditures in the 1997 fiscal year. The Company is planning further expansions of its electronic materials operations, particularly in the United States and Asia. At March 2, 1997, the Company's only long-term debt was the 5.5% Convertible Subordinated Notes due 2006 (the "Notes") issued at the end of the 1996 fiscal year. The Company believes its financial resources will be sufficient, for the foreseeable future, to provide for continued investment in property, plant and equipment and for general corporate purposes. Such resources, including the proceeds from the Notes, would also be available for appropriate acquisitions and other expansions of the Company's business. Environmental Matters: The Company is subject to various federal, state and local government requirements relating to the protection of the environment. The Company believes that, as a general matter, its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and that its handling, manufacture, use and disposal of hazardous or toxic substances are in accord with environmental laws and regulations. However, mainly because of past operations and operations of predecessor companies, which were generally in compliance with applicable laws at the time of the operations in question, the Company, like other companies engaged in similar businesses, is a party to claims by government agencies and third parties and has incurred remedial response and voluntary cleanup costs associated with environmental matters. Additional claims and costs involving past environmental matters may continue to arise in the future. It is the Company's policy to record appropriate liabilities for such matters when remedial efforts are probable and the costs can be reasonably estimated. In the 1997, 1996 and 1995 fiscal years, the Company charged approximately $0.2 million, $0.1 million and $0.2 million, respectively, against pretax income for remedial response and voluntary cleanup costs (including legal fees). While annual expenditures have generally been constant from year to year, and may increase over time, the Company expects it will be able to fund such expenditures from cash flow from operations. The timing of expenditures depends on a number of factors, including regulatory approval of cleanup projects, remedial techniques to be utilized and agreements with other parties. At March 2, 1997, the recorded liability in accrued liabilities for environmental matters was $1.2 million. Management does not expect that environmental matters will have a material adverse effect on the liquidity, capital resources, business or consolidated financial position of the Company. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Report for a discussion of the Company's commitments and contingencies, including those related to environmental matters. Factors That May Affect Future Results. The Private Securities Litigation Reform Act of 1995 provides a new "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. Accordingly, the Company hereby identifies the following important factors which could cause the Company's actual results to differ materially from any such results which might be projected, forecast, estimated or budgeted by the Company in forward-looking state- ments. . The Company's business is dependent on certain aspects of the electronics industry, which is a cyclical industry and which has experienced recurring downturns. The downturns, such as occurred in the first quarter of the Company's fiscal year ended March 2, 1997, can be unexpected and have often reduced demand for, and prices of, electronic materials. . The Company's operating results are affected by a number of factors, including various factors beyond the Company's control. Such factors include economic conditions in the electronics industry, the timing of customer orders, product prices, process yields, the mix of products sold and maintenance-related shutdowns of facilities. Operating results also can be influenced by development and introduction of new products and the costs associated with the start-up of new facilities. . Rapid technological advances in semiconductors and electronic equipment have placed rigorous demands on the electronic materials manufactured by the Company and used in printed circuit board production. The Company's operating results will be affected by the Company's ability to maintain and increase its technological and manufacturing capability and expertise in this rapidly changing industry. . The electronic materials industry is intensely competitive and the Company competes worldwide in the market for materials used in the production of complex multilayer printed circuit boards. The Company's competitors are substantially larger and have greater financial resources than the Company, and the Company's operating results will be affected by its ability to maintain its competitive position in the industry. . There are a limited number of qualified suppliers of the principal materials used by the Company in its manufacture of electronic materials products. Substitutes for these products are not readily available, and in the recent past there have been shortages in the market for certain of these materials. . The Company's customer base is concentrated, in part, because the Company's business strategy has been to develop long-term relation- ships with a select group of customers. During the Company's fiscal year ended March 2, 1997, the Company's ten largest customers accounted for approximately 46% of net sales. The Company expects that sales to a relatively small number of customers will continue to account for a significant portion of its net sales for the foreseeable future. A loss of one or more of such key customers could affect the Company's profitability. . The Company typically does not obtain long-term purchase orders or commitments. Instead, it relies primarily on continual communication with its customers to anticipate the future volume of purchase orders. A variety of conditions, both specific to the individual customer and generally affecting the customer's industry, can cause a customer to reduce or delay orders previously anticipated by the Company. . The Company, from time to time, is engaged in the expansion of certain of its manufacturing facilities for electronic materials. The anticipated costs of such expansions cannot be determined with precision and may vary materially from those budgeted. In addition, such expansions will increase the Company's fixed costs. The Company's future profitability depends upon its ability to utilize its manufacturing capacity in an effective manner. . The Company's business is capital intensive and, in addition, the introduction of new technologies could substantially increase the Company's capital expenditures. In order to remain competitive the Company must continue to make significant investments in capital equipment and expansion of operations. This may require that the Company continue to be able to access capital on terms acceptable to the Company. . The Company may acquire businesses, product lines or technologies that expand or complement those of the Company. The integration and management of an acquired company or business may strain the Company's management resources and technical, financial and operating systems. In addition, implementation of acquisitions can result in large one- time charges and costs. A given acquisition, if consummated, may materially affect the Company's business, financial condition and results of operations. . The Company's international operations are subject to risks, including unexpected changes in regulatory requirements, exchange rates, tariffs and other barriers, political and economic instability and potentially adverse tax consequences. . A portion of the sales and costs of the Company's international operations are denominated in currencies other than the U.S. dollar and may be affected by fluctuations in currency exchange rates. . The Company's success is dependent upon its relationship with key management and technical personnel. . The Company's future success depends in part upon its intellectual property which the Company seeks to protect through a combination of contract provisions, trade secret protections, copyrights and patents. . The Company's production processes require the use, storage, treatment and disposal of certain materials which are considered hazardous under applicable environmental laws and the Company is subject to a variety of regulatory requirements relating to the handling of such materials and the release of emissions and effluents into the environment. Other possible developments, such as the enactment or adoption of additional environmental laws, could result in substantial costs to the Company. . The market price of the Company's securities can be subject to fluctuations in response to quarter to quarter variations in operating results, changes in analysts' earnings estimates, market conditions in the electronic materials industry, as well as general economic conditions and other factors external to the Company. . The Company's results could be affected by changes in the Company's accounting policies and practices or changes in the Company's organization, compensation and benefit plans, or changes in the Company's material agreements or understandings with third parties. Item 8. Financial Statements and Supplementary Data. The Company's Financial Statements begin on the next page. REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders of Park Electrochemical Corp. Lake Success, New York We have audited the accompanying consolidated balance sheets of Park Electrochemical Corp. and subsidiaries as of March 2, 1997 and March 3, 1996 and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended March 2, 1997. Our audits also included the financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Park Electrochemical Corp. and subsidiaries as of March 2, 1997 and March 3, 1996 and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 2, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New York, New York April 18, 1997 <TABLE> PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except shares and per share amounts) <CAPTION> March 2, March 3, 1997 1996 <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 42,321 $ 75,970 Marketable securities (Note 2) 102,232 67,243 Accounts receivable, less allowance for doubtful accounts of $1,746 and $1,857, respectively 50,314 42,821 Inventories (Note 3) 20,458 27,712 Prepaid expenses and other current assets (Note 7) 5,089 4,026 Total current assets 220,414 217,772 Property, plant and equipment, at cost, less accumulated depreciation and amortization (Note 4) 83,391 76,439 Other assets (Notes 7 and 10) 4,057 4,764 Total $307,862 $298,975 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 32,892 $ 35,924 Accrued liabilities (Note 5) 18,565 16,941 Income taxes payable 3,953 3,942 Total current liabilities 55,410 56,807 Long-term debt (Note 6) 100,000 100,000 Deferred income taxes (Note 7) 7,963 6,324 Deferred pension liability (Note 10) 1,134 1,417 Commitments and contingencies (Notes 10 and 11) Stockholders' equity (Notes 6, 8, 9 and 10): Preferred stock, $1 par value per share-- authorized, 500,000 shares; issued, none - - Common stock, $.10 par value per share-- authorized, 30,000,000; issued, 13,580,018 shares 1,358 1,358 Additional paid-in capital 51,290 50,958 Retained earnings 108,804 93,892 Currency translation adjustments 831 1,328 Pension liability adjustment (850) (1,001) Unrealized losses on investments (11) (30) 161,422 146,505 Less treasury stock, at cost, 2,307,765 and 2,033,704 shares, respectively (18,067) (12,078) Total stockholders' equity 143,355 134,427 Total $307,862 $298,975 <FN> See notes to consolidated financial statements. </TABLE> <TABLE> PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) <CAPTION> 52 Weeks 53 Weeks 52 Weeks Ended Ended Ended March 2, March 3, February 26, 1997 1996 1995 <S> <C> <C> <C> Net sales $334,490 $312,966 $253,022 Cost of sales 275,372 242,655 196,917 Gross profit 59,118 70,311 56,105 Selling, general and administrative expenses 34,366 35,236 29,995 Profit from operations 24,752 35,075 26,110 Other income (expense): Interest and other income, net 7,653 2,285 1,822 Interest expense (Note 6) (5,508) (96) (431) Total other income 2,145 2,189 1,391 Earnings before income taxes 26,897 37,264 27,501 Income tax provision (Note 7) 8,338 12,366 10,156 Net earnings $ 18,559 $ 24,898 $ 17,345 Earnings per share (Note 9): Primary $1.61 $2.11 $1.59 Fully diluted $1.59 $2.10 $1.52 <FN> See notes to consolidated financial statements. </TABLE>
<TABLE> PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except shares and per share amounts) <CAPTION> Additional Currency Pension Unrealized Common Stock Paid-in Retained Translation Liability Losses on Treasury Stock Shares Amount Capital Earnings Adjustments Adjustment Investments Shares Amount <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Balance, February 27, 1994 10,407,650 $1,041 $17,444 $ 57,098 $ 177 $(1,148) $ - 2,301,284 $(13,158) Net earnings 17,345 Exchange rate changes 1,368 Change in pension liability adjustment 176 Market revaluation (139) Stock options exercised 696 (212,700) 1,220 Conversion of debentures 3,172,368 317 32,588 Cash dividends ($.20 per share) (2,227) Purchase of treasury stock 47,832 (750) Balance, February 26, 1995 13,580,018 1,358 50,728 72,216 1,545 (972) (139) 2,136,416 (12,688) Net earnings 24,898 Exchange rate changes (217) Change in pension liability adjustment (29) Market revaluation 109 Stock options exercised 230 (102,726) 610 Cash dividends ($.28 per share) (3,222) Purchase of treasury stock 14 - Balance, March 3, 1996 13,580,018 1,358 50,958 93,892 1,328 (1,001) (30) 2,033,704 (12,078) Net earnings 18,559 Exchange rate changes (497) Change in pension liability adjustment 151 Market revaluation 19 Stock options exercised 332 (84,868) 547 Cash dividends ($.32 per share) (3,647) Purchase of treasury stock 358,929 (6,536) Balance, March 2, 1997 13,580,018 $1,358 $51,290 $108,804 $ 831 $ (850) $ (11) 2,307,765 $(18,067) <FN> See notes to consolidated financial statements. /TABLE
<TABLE> PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) <CAPTION> 52 Weeks 53 Weeks 52 Weeks Ended Ended Ended March 2, March 3, February 26, 1997 1996 1995 <S> <C> <C> <C> Cash flows from operating activities: Net earnings $ 18,559 $ 24,898 $ 17,345 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 11,584 9,849 8,951 Provision for doubtful accounts receivable (306) (495) (44) (Gain) loss on sale of marketable securities (16) (38) 17 Provision for deferred income taxes 1,596 1,425 355 Accrued interest in connection with Debenture conversion - - 389 Other, net 65 64 (89) Changes in operating assets and liabilities: (Increase) in accounts receivable (7,612) (9,277) (3,536) Decrease (increase) in inventories 7,202 (11,671) 249 (Increase) in prepaid expenses and other current assets (1,456) (1,057) (77) Decrease (increase) in other assets 122 (42) 25 (Decrease) increase in accounts payable (2,528) 11,409 (620) Increase in accrued liabilities 1,700 1,108 3,719 Increase in income taxes payable 286 1,260 277 Net cash provided by operating activities 29,196 27,433 26,961 Cash flows from investing activities: Purchases of property, plant and equipment, net (18,735) (24,510) (17,523) Purchases of marketable securities (137,897) (74,881) (11,161) Proceeds from sales of marketable securities 103,330 22,952 19,827 Net cash used in investing activities (53,302) (76,439) (8,857) Cash flows from financing activities: Convertible notes offering - 100,000 - Convertible notes issuance costs - (3,250) - Repayments of borrowings - - (84) Dividends paid (3,647) (3,222) (2,227) Proceeds from exercise of stock options 604 697 1,499 Purchase of treasury stock (6,535) - (750) Other - 4 (100) Net cash (used in) provided by financing activities (9,578) 94,229 (1,662) (Decrease) increase in cash and cash equivalents before effect of exchange rate changes (33,684) 45,223 16,442 Effect of exchange rate changes on cash and cash equivalents 35 (56) 226 (Decrease) increase in cash and cash equivalents (33,649) 45,167 16,668 Cash and cash equivalents, beginning of year 75,970 30,803 14,135 Cash and cash equivalents, end of year $ 42,321 $ 75,970 $ 30,803 <FN> See notes to consolidated financial statements. </TABLE> PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three years ended March 2, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Park Electrochemical Corp. ("Park"), through its subsidiaries (collectively, the "Company"), is a leading global designer and producer of advanced electronic materials used to fabricate complex multilayer printed circuit boards, semiconductor packages and other electronic interconnect systems. The Company's multilayer printed circuit board materials include copper-clad laminates, prepregs and semi-finished multilayer printed circuit board panels. 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 and passive components. The Company also designs and manufactures specialty adhesive tapes, advanced composite materials, microwave circuitry materials and plumbing hardware for the electronics, aerospace, industrial and plumbing markets. a. Principles of Consolidation - The consolidated financial statements include the accounts of Park and its subsidiaries, all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated. b. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could 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 1997, 1996 and 1995 fiscal years ended on March 2, 1997, March 3, 1996 and February 26, 1995, respectively. Fiscal 1997 and 1995 each included 52 weeks; fiscal 1996 included 53 weeks. d. Marketable Securities - All marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. Realized gains and losses, amortization of premiums and discounts, and interest and dividend income are included in other income. The cost of securities sold is based on the specific identification method. e. Inventories - Inventories are stated at the lower of cost (first-in, first-out method) or market. f. Revenue Recognition - Revenues are recognized at the time product is shipped to the customer. g. Depreciation and Amortization - Depreciation and amortization are computed principally by the straight-line method over the estimated useful lives of the related assets or, with respect to leasehold improvements, the term of the lease, if shorter. h. Deferred Charges - Costs incurred in connection with the issuance of debt financing are deferred and included in other assets and amortized, using the effective interest method, over the respective debt repayment period. i. 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 $23,800,000 at March 2, 1997) of the Company's foreign subsidiaries, since it is management's practice and intent to reinvest such earnings in the operations of these subsidiaries. j. Foreign Currency Translation - Assets and liabilities of foreign subsidiaries using currencies other than the U.S. dollar as their functional currency are translated into U.S. dollars at year-end exchange rates and income and expense items are translated at average exchange rates for the period. Gains and losses resulting from translation are recorded as currency translation adjustments in stockholders' equity. k. Consolidated Statements of Cash Flows - The Company considers all money market securities and investments with maturities at the date of purchase of 90 days or less to be cash equivalents. Supplemental cash flow information: <TABLE> <CAPTION> Fiscal Year 1997 1996 1995 <S> <C> <C> <C> Cash paid during the year for: Interest $2,792,000 $ - $ 42,000 Income taxes 6,570,000 9,701,000 9,712,000 </TABLE> 2. MARKETABLE SECURITIES <TABLE> The following is a summary of available-for-sale securities: <CAPTION> Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value <S> <C> <C> <C> <C> March 2, 1997: U.S. Treasury and other government securities $ 35,423,000 $19,000 $47,000 $ 35,395,000 U.S. corporate debt securities 66,822,000 20,000 40,000 66,802,000 Total debt securities 102,245,000 39,000 87,000 102,197,000 Equity securities 4,000 31,000 - 35,000 $102,249,000 $70,000 $87,000 $102,232,000 March 3, 1996: U.S. Treasury and other government securities $ 50,602,000 $32,000 $62,000 $ 50,572,000 U.S. corporate debt securities 16,680,000 7,000 22,000 16,665,000 Total debt securities 67,282,000 39,000 84,000 67,237,000 Equity securities 6,000 - - 6,000 $ 67,288,000 $39,000 $84,000 $ 67,243,000 </TABLE> The gross realized gains on sales of available-for-sale securities totalled $39,000 for 1997 and $50,000 for 1996, and the gross realized losses totalled $23,000, $12,000 and $17,000 for 1997, 1996 and 1995, respectively. The amortized cost and estimated fair value of the debt and marketable equity securities at March 2, 1997, by contractual maturity, are shown below: <TABLE> <CAPTION> Estimated Fair Cost Value <S> <C> <C> Due in one year or less $ 82,007,000 $ 81,972,000 Due after one year through five years 20,238,000 20,225,000 102,245,000 102,197,000 Equity securities 4,000 35,000 $102,249,000 $102,232,000 </TABLE> <TABLE> 3. INVENTORIES <CAPTION> March 2, March 3, 1997 1996 <S> <C> <C> Raw materials $ 8,459,000 $13,040,000 Work-in-process 4,037,000 4,280,000 Finished goods 7,173,000 9,674,000 Manufacturing supplies 789,000 718,000 $20,458,000 $27,712,000 </TABLE> <TABLE> 4. PROPERTY, PLANT AND EQUIPMENT <CAPTION> March 2, March 3, 1997 1996 <S> <C> <C> Land, buildings and improvements $ 30,983,000 $ 27,054,000 Machinery, equipment, furniture and fixtures 134,774,000 121,661,000 165,757,000 148,715,000 Less accumulated depreciation and amortization 82,366,000 72,276,000 $ 83,391,000 $ 76,439,000 </TABLE> Depreciation and amortization expense relating to property, plant and equipment amounted to $11,146,000, $9,382,000 and $8,501,000 for fiscal 1997, 1996 and 1995, respectively. Interest expense capitalized to property, plant and equipment amounted to $260,000 for fiscal 1997. <TABLE> 5. ACCRUED LIABILITIES <CAPTION> March 2, March 3, 1997 1996 <S> <C> <C> Payroll and commissions $ 4,239,000 $ 5,040,000 Taxes, other than income taxes 899,000 1,014,000 Interest 2,781,000 - Other 10,646,000 10,887,000 $18,565,000 $16,941,000 </TABLE> 6. LONG-TERM DEBT On February 28, 1996, the Company issued $100,000,000 principal amount of 5.5% Convertible Subordinated Notes due 2006 (the "Notes") with interest payable semiannually on March 1 and September 1 of each year, commencing September 1, 1996. The Notes are unsecured and subordinated to other long-term debt and are convertible at the option of the holder at any time prior to maturity, unless previously redeemed or repurchased, into shares of the Company's common stock at $42.188 per share, subject to adjustment under certain conditions. The Notes are not redeemable at the option of the Company prior to March 1, 1999; at any time on or after such date, the Notes will be redeemable at the option of the Company, in whole or in part, initially at 102.75% of the principal amount of such Notes redeemed and thereafter at prices declining to 100% on March 1, 2001, together with accrued interest. At March 2, 1997 and March 3, 1996, the fair value of the Notes approximated $90,625,000 and $100,000,000, respectively. Foreign lines of credit totalled $5,400,000 at March 2, 1997, all of which remains available to the subsidiaries. 7. INCOME TAXES <TABLE> The income tax provision includes the following: <CAPTION> Fiscal Year 1997 1996 1995 <S> <C> <C> <C> Current: Federal $6,150,000 $ 9,980,000 $ 8,798,000 State and local 592,000 961,000 1,003,000 6,742,000 10,941,000 9,801,000 Deferred: Federal 863,000 655,000 50,000 State and local 150,000 60,000 40,000 Foreign 583,000 710,000 265,000 1,596,000 1,425,000 355,000 $8,338,000 $12,366,000 $10,156,000 </TABLE> The Company's effective income tax rate differs from the statutory U.S. Federal income tax rate as a result of the following: Fiscal Year 1997 1996 1995 Statutory U.S. Federal tax rate 35.0% 35.0% 35.0% State and local taxes, net of Federal benefit 1.8 1.8 2.5 Foreign tax rate differentials (7.8) (4.6) (1.5) Other, net 2.0 1.0 .9 31.0% 33.2% 36.9% The Company has foreign net operating loss carryforwards of approximately $14,400,000, most of which were acquired in fiscal 1993 when the Company purchased 100% of the capital stock of Metclad, S.A. ("Metclad"), a French corporation located in Lannemezan, France. Metclad has recently commenced operation, in commercial volumes, for the production of PTFE laminates used in wireless communication applications. Accordingly, long-term deferred tax assets arising from these net operating loss carryforwards were valued at $0 at both March 2, 1997 and March 3, 1996, net of valuation reserves of approximately $5,000,000 and $5,900,000, respectively. None of the acquired net operating loss carryforwards relate to goodwill or other intangible assets. Approximately $2,700,000 of the foreign net operating loss carryforwards expire in varying amounts from fiscal 1998 through fiscal 2002; the remainder have an indefinite expiration. At March 2, 1997 and March 3, 1996, current deferred tax assets of $1,135,000 and $1,082,000, respectively, which were primarily attributable to expenses not currently deductible for tax purposes, were included in other current assets. The long-term deferred tax liabilities consisted primarily of timing differences relating to depreciation. 8. STOCKHOLDERS' EQUITY a. Stock Split and Number of Authorized Shares - On July 12, 1995, the Company's Board of Directors voted a two-for-one stock split in the form of a 100% common stock dividend. The stock dividend was distributed August 15, 1995, to shareholders of record on July 24, 1995. All share and per share data for prior periods have been retroactively restated to reflect the stock split. In addition, on July 12, 1995, the Company's stockholders approved an increase in the number of authorized shares of common stock from 15,000,000 to 30,000,000 shares. b. Stock Options - Under the stock option plans approved by the Company's stockholders, key employees may be granted options to purchase shares of common stock exercisable at prices not less than the fair market value at the date of grant. Options become exercisable 25% one year from the date of grant, with an additional 25% exercisable each succeeding year. The options expire 10 years from the date of grant. On July 14, 1992, the Company's stockholders approved the adoption of a 1992 stock option plan (the "1992 Plan") pursuant to which options to acquire 600,000 shares of the Company's common stock are available for grant to key employees. On July 17, 1996, the Company's stockholders approved an amendment to the 1992 Plan which increased the number of shares of the Company's common stock authorized for issuance under such Plan by 550,000 shares to 1,150,000 shares. The purchase price for common stock to be acquired, upon the exercise of options, will be no less than 100% of the fair market value of such stock at the date the options are granted. The 1992 Plan will expire in March, 2002. In October 1995, Statement of Financial Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) was issued and requires companies to either recognize compensation expense for grants of stock options and other equity based instruments, or provide pro forma disclosure of net income and earnings per share in the notes to the financial statements. The Company has elected the disclosure provision of SFAS 123, and continues to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related interpretations in accounting for the option plans. Under APB 25, because the exercise price of the granted options is not less than the market price at the date of the grant, no compensation expense is recognized. The weighted average fair value for options was estimated at the date of grant using the Black-Scholes option pricing model to be $7.78 for fiscal 1997 and $5.40 for fiscal 1996, with the following weighted average assumptions for fiscal 1997 and 1996, respectively: risk free interest rate of 6%; expected volatility factors of 34% and 31%; expected dividend yield of 2%; and estimated option lives of 4.6 years. For the purpose of pro forma disclosures, the effect of applying SFAS 123 on net income and earnings per share for fiscal 1997 and 1996 would approximate the amounts shown below (in thousands, except EPS data): 1997 1996 As Pro As Pro Reported forma Reported forma Net income $18,559 $18,330 $24,898 $24,805 EPS-primary $1.61 $1.59 $2.11 $2.11 EPS-fully diluted $1.59 $1.57 $2.10 $2.10 <TABLE> Information with respect to the Company's stock option plans follows: <CAPTION> Weighted Average Range of Outstanding Exercise Exercise Prices Options Price <S> <C> <C> <C> Balance, February 26, 1995 $ 5.50 - $17.00 504,718 $ 8.63 Granted 18.31 - 27.19 124,000 19.03 Exercised 5.50 - 13.13 (102,726) 6.79 Cancelled 5.50 - 18.13 (6,374) 12.80 Balance, March 3, 1996 5.50 - 27.19 519,618 11.43 Granted 23.75 - 24.63 111,675 24.55 Exercised 5.50 - 18.31 (84,868) 7.11 Cancelled 7.38 - 27.19 (26,450) 20.68 Balance, March 2, 1997 $ 5.50 - $24.63 519,975 $14.48 Exercisable, March 2, 1997 $ 5.50 - $18.31 231,950 $ 9.89 </TABLE> <TABLE> The following table summarizes information concerning currently outstanding and exercisable options. <CAPTION> Options Outstanding Options Exercisable Weighted Average Weighted Weighted Remaining Average Average Range of Number Contractual Exercise Number Exercise Exercise Prices Outstanding Life(Years) Price Exercisable Price <S> <C> <C> <C> <C> <C> $ 5.50 - $ 9.99 187,900 5.50 $ 7.02 148,925 $ 6.93 10.00 - 19.99 224,250 7.75 15.88 83,025 15.19 20.00 - 25.00 107,825 9.25 24.54 - - 519,975 231,950 </TABLE> Stock options available for future grant under the 1992 Plan at March 2, 1997 and March 3, 1996 were 603,881 and 136,356, respectively. c. Treasury Stock - The Company repurchased 349,102, 14 and 24 shares of its common stock under authorizations of the Board of Directors during fiscal 1997, 1996 and 1995, respectively. d. Stockholders' Rights Plan - On February 2, 1989, the Company adopted a stockholders' rights plan designed to protect stockholder interests in the event the Company is confronted with coercive or unfair takeover tactics. Under the terms of the plan, as amended on July 12, 1995, each share of the Company's common stock held of record on February 15, 1989 or issued thereafter received one right. In the event that a person has acquired, or has the right to acquire, 15% (25% in certain cases) or more of the then outstanding common stock of the Company (an "Acquiring Person") or tenders for 15% or more of the then outstanding common stock of the Company, such rights will become exercisable, unless the Board of Directors otherwise determines. Upon becoming exercisable as aforesaid, each right will entitle the holder thereof to purchase one one-hundredth of a share of Series A Preferred Stock for $75, subject to adjustment (the "Purchase Price"). In the event that any person becomes an Acquiring Person, each holder of an unexercised exercisable right, other than an Acquiring Person, shall have the right to purchase, at a price equal to the then current Purchase Price, such number of shares of the Company's common stock as shall equal the then current Purchase Price divided by 50% of the then market price per share of the Company's common stock. In addition, if after a person becomes an Acquiring Person, the Company engages in any of certain business combination transactions as specified in the plan, the Company will take all action to ensure that, and will not consummate any such business combination unless, each holder of an unexercised exercisable right, other than an Acquiring Person, shall have the right to purchase, at a price equal to the then current Purchase Price, such number of shares of common stock of the other party to the transaction for each right held by such holder as shall equal the then current Purchase Price divided by 50% of the then market price per share of such other party's common stock. The Company may redeem the rights for a nominal consideration at any time, and after any person becomes an Acquiring Person, but before any person becomes the beneficial owner of 50% or more of the outstanding common stock of the Company, the Company may exchange all or part of the rights for shares of the Company's common stock at a one-for-one exchange ratio. Unless redeemed, exchanged or exercised earlier, all rights expire on July 12, 2005. e. Reserved Common Shares - At March 2, 1997, 2,370,342 shares of common stock were reserved for issuance upon conversion of the Notes and 1,123,856 shares were reserved for issuance upon exercise of stock options. 9. EARNINGS PER SHARE Primary earnings per share are computed based on the weighted average number of common and common equivalent shares outstanding during the period. The weighted average number of common and common equivalent shares used to compute earnings per share are as follows: <TABLE> <CAPTION> Fiscal Year 1997 1996 1995 <S> <C> <C> <C> Primary 11,551,000 11,794,000 10,858,000 Fully diluted 13,932,000 11,860,000 11,570,000 </TABLE> 10. EMPLOYEE BENEFIT PLANS a. Profit Sharing Plan - Park and certain of its subsidiaries have a noncontributory profit sharing retirement plan covering their regular full-time employees. The plan may be modified or terminated at any time, but in no event may any portion of the contributions revert to the Company. The Company's contributions under the plan amounted to $1,775,000, $2,329,000 and $2,297,000 for fiscal 1997, 1996 and 1995, respectively. Contributions are discretionary and may not exceed the amount allowable as a tax deduction under the Internal Revenue Code. In addition, the Company sponsors a 401(k) savings plan; commencing in fiscal 1996, the contributions of employees of certain subsidiaries were partially matched by the Company, amounting to $554,000 and $499,000 in fiscal 1997 and 1996, respectively. b. Pension Plans - A subsidiary of the Company has two pension plans, one of which is inactive, covering its union employees. The pension plans are noncontributory defined benefit plans. The Company's funding policy is to contribute annually the amounts necessary to satisfy applicable funding standards. In accordance with SFAS No. 87, the Company records its deferred pension liability related to its two defined benefit pension plans, which amounted to $1,134,000 and $1,417,000 at March 2, 1997 and March 3, 1996, respectively. The effect on the Company's consolidated financial statements in recording the liability was to recognize an asset (included in other assets) of $284,000 and $416,000 at March 2, 1997 and March 3, 1996, respectively, and to record a corresponding reduction of stockholders' equity of $850,000 and $1,001,000 at those same dates. Net pension cost includes the following components: <TABLE> <CAPTION> Fiscal Year 1997 1996 1995 <S> <C> <C> <C> Service cost--benefits earned during the period $ 50,000 $ 51,000 $ 65,000 Interest cost on projected benefit obligation 289,000 299,000 279,000 Return on plan assets--actual (155,000) (400,000) (24,000) Net amortization and deferral 35,000 354,000 9,000 Effect of curtailment 75,000 - - Net periodic pension cost $294,000 $304,000 $329,000 </TABLE> <TABLE> The funded status of the pension plans follows: <CAPTION> March 2, March 3, 1997 1996 <S> <C> <C> Accumulated benefit obligation (including vested benefit obligation of $3,893,000 and $4,028,000, respectively) $3,931,000 $4,043,000 Projected benefit obligation $3,931,000 $4,043,000 Plan assets at fair value 2,937,000 2,616,000 Excess of projected benefit obligation over plan assets 994,000 1,427,000 Unrecognized net loss (850,000) (1,001,000) Unrecognized prior service cost (135,000) (237,000) Unrecognized initial net obligation being amortized over 15 years (149,000) (179,000) Accrued pension (asset) liability $ (140,000) $ 10,000 </TABLE> The projected benefit obligation was determined using an assumed discount rate of 7.75% and 7.5% for fiscal 1997 and 1996, respectively, and the assumed long-term rate of return on plan assets was 8% for both fiscal years. Projected wage increases are not applicable as benefits pursuant to the plans are based upon years of service without regard to levels of compensation. At March 2, 1997, plan assets were invested in U.S. government securities, corporate debt securities, mutual funds and money market funds. 11. COMMITMENTS AND CONTINGENCIES a. Lease Commitments - The Company conducts certain of its operations from leased facilities, which include several manufacturing plants, warehouses and offices, and land leases. The leases on facilities are for terms of up to 10 years, the latest of which expires in 2005. Many of the leases contain renewal options for periods ranging from one to ten years and require the Company to pay real estate taxes and other operating costs. The latest land lease expiration is 2013 and this land lease contains renewal options of up to 35 years. These noncancelable operating leases have the following payment schedule: Fiscal Year Amount 1998 $2,079,000 1999 1,592,000 2000 1,370,000 2001 1,081,000 2002 905,000 Thereafter 2,817,000 $9,844,000 Rental expense, inclusive of real estate taxes and other costs, amounted to $2,620,000, $2,259,000 and $2,226,000 for fiscal 1997, 1996 and 1995, respectively. b. Environmental Contingencies - The Company and certain of its subsid- iaries have been named by the Environmental Protection Agency (the "EPA") or a comparable state agency under the Comprehensive Environ- mental Response, Compensation and Liability Act (the "Superfund Act") or similar state law as potentially responsible parties in connection with alleged releases of hazardous substances at nine sites. In addition, a subsidiary of the Company has received cost recovery claims under the Superfund Act from other private parties involving three other sites, and has received requests from the EPA under the Superfund Act for information with respect to its involvement at two other sites. Under the Superfund Act and similar state laws, all parties who may have contributed any waste to a hazardous waste disposal site or contaminated area identified by the EPA or comparable state agency may be jointly and severally liable for the cost of cleanup. Generally, these sites are locations at which numerous persons disposed of hazardous waste. In the case of the Company's subsidiaries, generally the waste was removed from their manufacturing facilities and disposed at waste sites by various companies which contracted with the subsidiaries to provide waste disposal services. Neither the Company nor any of its subsidiaries have been accused of or charged with any wrongdoing or illegal acts in connection with any such sites. The Company believes it maintains an effective and comprehensive environmental compliance program. The insurance carriers that provided general liability insurance coverage to the Company and its subsidiaries for the years during which the Company's subsidiaries' waste was disposed at these sites have agreed to pay, or reimburse the Company and its subsidiaries for, 100% of their legal defense and remediation costs associated with three of these sites, 35% of such costs associated with one of these sites and 25% of such costs associated with another three of these sites. The total costs incurred by the Company and its subsidiaries in connection with these sites, including legal fees incurred by the Company and its subsidiaries and their assessed share of remediation costs and excluding amounts paid or reimbursed by insurance carriers, were approximately $0.2 million during each of the 1997, 1996 and 1995 fiscal years. At March 2, 1997, the recorded liability in other liabilities for environmental matters was $1.2 million. Included in cost of sales are charges for actual expenditures and accruals, based on estimates, for certain environmental matters described above. The Company accrues estimated costs associated with known environmental matters, when such costs can be reasonably estimated and when the outcome appears probable. Management believes the ultimate disposition of known environmental matters will not have a material adverse effect on the liquidity, capital resources, business or consolidated financial position of the Company. However, one or more of such environmental matters could have a significant negative impact on the Company's consolidated financial results for a particular reporting period. 12. BUSINESS SEGMENTS The Company has two major business segments: electronic materials and engineered materials and plumbing hardware. The Company's electronic materials products are marketed primarily to major independent printed circuit board fabricators and to large electronic original equipment manufacturers ("OEMs") that are located throughout North America, Europe and Asia. The Company's engineered materials and plumbing hardware customers, the majority of which are located in the United States, include OEMs, independent firms and distributors in the electronics, aerospace, industrial and plumbing industries. Financial information concerning the Company's business segments follows (in thousands): <TABLE> <CAPTION> Fiscal Year 1997 1996 1995 <S> <C> <C> <C> Sales to unaffiliated customers: Electronic materials $291,146 $274,903 $218,288 Engineered materials and plumbing hardware 43,344 38,063 34,734 Net sales $334,490 $312,966 $253,022 Operating profit(1): Electronic materials $ 25,298 $ 37,699 $ 28,710 Engineered materials and plumbing hardware 3,026 1,466 1,226 Total operating profit 28,324 39,165 29,936 General corporate expense (3,572) (4,090) (3,826) Interest and other income, net 7,653 2,285 1,822 Interest expense (5,508) (96) (431) Total other income 2,145 2,189 1,391 Earnings before income taxes $ 26,897 $ 37,264 $ 27,501 Identifiable assets(2): Electronic materials $153,653 $146,549 $104,478 Engineered materials and plumbing hardware 14,111 13,260 12,588 167,764 159,809 117,066 Corporate assets 140,098 139,166 44,985 Total assets $307,862 $298,975 $162,051 Depreciation and amortization: Electronic materials $ 10,789 $ 9,013 $ 8,133 Engineered materials and plumbing hardware 774 813 793 11,563 9,826 8,926 Corporate depreciation 21 23 25 Total depreciation and amortization $ 11,584 $ 9,849 $ 8,951 Capital expenditures: Electronic materials $ 18,030 $ 23,852 $ 16,302 Engineered materials and plumbing hardware 795 689 1,472 18,825 24,541 17,774 Corporate capital expenditures 26 21 30 Total capital expenditures $ 18,851 $ 24,562 $ 17,804 <FN> (1) Operating profit is comprised of total operating revenues, less costs and expenses other than interest expense, general corporate expense and income taxes. (2) Identifiable assets consist of those assets which are used by the segments. Corporate identifiable assets consist primarily of cash, cash equivalents and marketable securities. </TABLE> Intersegment sales and sales between geographic areas were not significant. Financial information regarding the Company's operations by geographic area follows (in thousands): <TABLE> Fiscal Year 1997 1996 1995 <S> <C> <C> <C> Sales: North America $235,773 $221,975 $191,652 Europe 48,421 47,368 34,540 Asia 50,296 43,623 26,830 $334,490 $312,966 $253,022 Operating income: North America $ 21,550 $ 33,206 $ 28,366 Rest of World 6,774 5,959 1,570 $ 28,324 $ 39,165 $ 29,936 Identifiable assets: North America $245,596 $241,191 $118,076 Europe 33,751 31,291 24,526 Asia 28,515 26,493 19,449 $307,862 $298,975 $162,051 </TABLE> 13. CUSTOMER AND SUPPLIER CONCENTRATIONS a. Customers - Sales to Delco Electronics Corporation, a subsidiary of General Motors Corp., were 17.3%, 17.1% and 21.8% of the Company's consolidated sales for fiscal 1997, 1996 and 1995, respectively. The Company believes its relations with Delco Electronics to be very satisfactory and further believes Delco Electronics will continue to make significant purchases in the immediate future. Although the Company's electronic materials segment is not dependent on this single customer, the loss of this customer could have a material adverse effect on the business of this segment. Furthermore, while no other customer accounts for 10% or more of the total sales of the Company in fiscal 1997 and the Company is not dependent on any other single customer, the loss of a major customer or of a group of customers within each significant business segment could have a material adverse effect on the Company's business. b. Sources of Supply - The principal materials used in the manufacture of the Company's electronic materials products are specially manufactured copper foil, fiberglass cloth and synthetic reinforcements, and specially formulated resins and chemicals. Although there are a limited number of qualified suppliers of these materials, the Company has nevertheless identified alternate sources of supply for each of the aforementioned materials. While the Company has not experienced significant problems in the delivery of these materials and considers its relationships with its suppliers to be strong, a disruption of the supply of material from a principal supplier could adversely affect the electronic materials segment's business. Furthermore, substitutes for the aforesaid materials are not readily available and an inability to obtain essential materials, if prolonged, could materially adversely affect the business of the electronic materials segment. 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) [CAPTION] <TABLE> Quarter First Second Third Fourth (In thousands, except per share amounts) <S> <C> <C> <C> <C> Fiscal 1997: Net sales $75,406 $81,974 $88,972 $88,138 Gross profit 11,832 14,854 15,385 17,047 Net earnings 3,125 4,681 4,888 5,865 Earnings per share: Primary $.26 $.40 $.43 $.51 Fully diluted $.26 $.40 $.42 $.49 Weighted average common and common equivalent shares outstanding: Primary 11,829 11,590 11,444 11,477 Fully diluted 11,829 13,960 13,835 13,849 Fiscal 1996: Net sales $75,412 $69,937 $81,866 $85,751 Gross profit 17,717 15,209 18,397 18,988 Net earnings 6,024 5,366 6,467 7,041 Earnings per share: Primary $.51 $.45 $.55 $.59 Fully diluted $.51 $.45 $.55 $.59 Weighted average common and common equivalent shares outstanding: Primary 11,708 11,801 11,857 11,881 Fully diluted 11,708 11,829 11,857 12,002 </TABLE> Earnings per share is computed separately for each quarter. Therefore, the sum of such quarterly per share amounts may differ from the total for the years. ******* Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. The information called for by this Item (except for information as to the Company's executive officers, which information appears elsewhere in this Report) is incorporated by reference to the Company's definitive proxy statement for the 1997 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 1997 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information called for by this Item is incorporated by reference to the Company's definitive proxy statement for the 1997 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions. The information called for by this Item is incorporated by reference to the Company's definitive proxy statement for the 1997 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A. PART IV Item 14. Exhibits, Financial Statement Page Schedules, and Reports on Form 8-K. (a) Documents filed as a part of this report (1) Financial Statements: The following Consolidated Financial Statements of the Company are included in Part II, Item 8: Report of Ernst & Young LLP, independent auditors 24 Balance sheets 25 Statements of earnings 26 Statements of stockholders' equity 27 Statements of cash flows 28 Notes to consolidated financial statements (1-14) 29 (2) Financial Statement Schedules: Schedule II - Valuation and qualifying accounts 51 All other schedules have been omitted because they are inapplicable or not required, or the information is included elsewhere in the financial statements or notes thereto.
(3)Exhibits: Exhibit Number Description 3.01 Restated Certificate of Incorporation, as amended (Reference is made to Exhibit 3.01 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 27, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 3.02 By-Laws, as amended (Reference is made to Exhibit 3(i) of the Company's Current Report on Form 8-K dated January 23, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 4.01 Amended and Restated Rights Agreement, dated as of July 12, 1995, between the Company and Registrar and Transfer Company, as Rights Agent, relating to the Company's Preferred Stock Purchase Rights. (Reference is made to Exhibit 1 to Amendment No. 1 on Form 8-A/A to the Company's Registration Statement on Form 8-A filed on August 10, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 4.02 Form of Indenture, dated as of February 1, 1996, between the Company and The Chase Manhattan Bank, N.A., as Trustee, relating to the Company's 5.5% Convertible Subordinated Notes due 2006 (Reference is made to Exhibit 1.02 to Amendment No. 1 to the Company's Form S-3 Registration Statement, Registration No. 333- 00213, as filed with the Securities and Exchange Commission on February 1, 1996, which is incorporated herein by reference.) Information concerning Registrant's long-term debt is set forth in Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Report. Other than the Indenture filed as Exhibit 4.02 hereto, no instrument defining the rights of holders of such long-term debt relates to securities having an aggregate principal amount in excess of 10% of the consoli- dated assets of Registrant and its subsidiaries; therefore, in accordance with paragraph (iii) of Item 4 of Item 601(b) of Regulation S-K, the other instruments defining the rights of holders of long-term debt are not filed herewith. Registrant hereby agrees to furnish a copy of any such other instruments to the Securities and Exchange Commission upon request. 10.01 Lease dated December 12, 1989 regarding real property located at 1100 East Kimberly Avenue, Anaheim, California between Nelco Products, Inc. and James Emmi and letter dated December 29, 1994 from Nelco Products, Inc. to James Emmi exercising its option to extend such Lease. (Reference is made to Exhibit 10.01 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.02 Lease dated December 12, 1989 regarding real property located at 1107 East Kimberly Avenue, Anaheim, California between Nelco Products, Inc. and James Emmi and letter dated December 29, 1994 from Nelco Products, Inc. to James Emmi exercising its option to extend such Lease. (Reference is made to Exhibit 10.02 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.03 Lease Agreement dated August 16, 1983 and Exhibit C, First Addendum to Lease, regarding real property located at 1411 E. Orangethorpe Avenue, Fullerton, California between Nelco Products, Inc. and TCLW/Fullerton. (Reference is made to Exhibit 10.03 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.03(a) Second Addendum to Lease dated January 26, 1987 between Nelco Products, Inc. and TCLW/Fullerton to Lease Agreement dated August 16, 1983 (see Exhibit 10.03 hereto) regarding real prop- erty located at 1421 E. Orangethorpe Avenue, Fullerton, Califor- nia. (Reference is made to Exhibit 10.03(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.03(b) Third Addendum to Lease dated January 7, 1991 and Fourth Addendum to Lease dated January 7, 1991 between Nelco Products, Inc. and TCLW/Fullerton to Lease Agreement dated August 16, 1983 (see Exhibit 10.03 hereto) regarding real property located at 1411, 1421 and 1431 E. Orangethorpe Avenue, Fullerton, California. 10.03(c) Fifth Addendum to Lease dated July 5, 1995 between Nelco Products, Inc. and TCLW/Fullerton to Lease Agreement dated August 16, 1983 (See Exhibit 10.03 hereto) regarding real property located at 1411 E. Orangethorpe Avenue, Fullerton, California. (Reference is made to Exhibit 10.03(c) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.04 Lease dated February 15, 1983 between Nelco Products, Inc. and CMD Southwest, Inc. regarding real property located at 1130 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.04 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.04(a) First Amendment to Lease dated December 10, 1992 to Lease dated February 15, 1983 (see Exhibit 10.04 hereto) between Nelco Technology, Inc. and CMD Southwest Inc., and novation substituting Nelco Technology, Inc. for Nelco Products, Inc., regarding real property located at 1130 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.04(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.05 Lease Agreement, dated May 26, 1982 between Nelco Products Pte. Ltd. (lease was originally entered into by Kiln Technique (Pri- vate) Limited, which subsequently assigned this lease to Nelco Products Pte. Ltd.) and the Jurong Town Corporation regarding real property located at 4 Gul Crescent, Jurong, Singapore. (Reference is made to Exhibit 10.05 of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.05(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 10.05 hereto) between Kiln Technique (Private) Limited and the Jurong Town Corporation regarding real property located at 4 Gul Crescent, Jurong, Singapore. (Reference is made to Exhibit 10.05(a) of the Com- pany's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorpo- rated herein by reference.) 10.06(a) Amended and Restated 1982 Stock Option Plan of the Company. (Reference is made to Exhibit 10.06(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1992, Commission File No. 1-4415, which exhibit is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 10.06(b) 1992 Stock Option Plan of the Company. (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, 1992, Commission File No. 1-4415, which exhibit is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 10.06(c) First Amendment to 1992 Stock Option Plan of the Company (see Exhibit 10.06(b) hereto). (This exhibit is a management contract or compensatory plan or arrangement.) 10.07 Amended and Restated Employment Agreement dated February 28, 1994 between the Company and Jerry Shore. (Reference is made to Exhibit 10.07(c) of the Company's Annual Report on Form 10-K for the fiscal year ended February 27, 1994, Commission File No. 1- 4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 10.07(a) Amendment No. 1 dated March 1, 1995 to the Amended and Restated Employment Agreement dated February 28, 1994 (see Exhibit 10.07 hereto) between the Company and Jerry Shore. (Reference is made to Exhibit 10.07(c) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 10.07(b) Amendment No. 2 dated December 5, 1996 to the Amended and Restated Employment Agreement dated February 28, 1994 (see Exhibit 10.07 hereto) between the Company and Jerry Shore. (This exhibit is a management contract or compensatory plan or arrangement.) 10.08 Lease dated April 15, 1988 between FiberCote Industries, Inc. (lease was initially entered into by USP Composites, Inc., which subsequently changed its name to FiberCote Industries, Inc.) and Geoffrey Etherington, II regarding real property located at 172 East Aurora Street, Waterbury, Connecticut. (Reference is made to Exhibit 10.08 of the Company's Annual Report on form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1- 4415, which is incorporated herein by reference.) Exhibit Number Description 10.08(a) Amendment to Lease dated December 21, 1992 to Lease dated April 15, 1988 (see Exhibit 10.08 hereto) between FiberCote Indus- tries, Inc. and Geoffrey Etherington II regarding real property located at 172 East Aurora Street, Waterbury, Connecticut. (Reference is made to Exhibit 10.08(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.09 Lease dated March 14, 1988 between Nelco Products, Inc. and CMD Southwest One regarding real property located at 1117 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.09 of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.09(a) First Amendment to Lease dated December 10, 1992 to Lease dated March 14, 1988 (see Exhibit 10.09 hereto) between Nelco Technology, Inc. and CMD Southwest One regarding real property located at 1117 West Fairmont, Tempe, Arizona, and novation substituting Nelco Technology, Inc. for Nelco Products, Inc. (Reference is made to Exhibit 10.09(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.09(b) Second Amendment to Lease dated March 24, 1995 to Lease dated March 14, 1988 (see Exhibit 10.09 hereto) between Nelco Technology, Inc. and CMD Southwest One regarding real property located at 1117 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.09(b) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.09(c) Third Amendment to Lease dated January 18, 1996 to Lease dated March 14, 1988 (see Exhibit 10.09 hereto) between Nelco Technology, Inc. and CMD Southwest One regarding real property located at 1117 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.09(c) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.10 Lease dated October 1, 1991 between Zin-Plas Corporation and Philip L. Johnson d/b/a Johnson Development Company regarding real property located at 25 North Park, N.E., Comstock Park, Michigan. (Reference is made to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) . 10.10(a) Letter dated October 17, 1996 from Zin-Plas Corporation to Philip L. Johnson extending the Lease dated October 1, 1991 (see Exhibit 10.10 hereto) between Zin-Plas Corporation and Philip L. Johnson d/b/a Johnson Development Company regarding real property located at 25 North Park, N.E., Comstock Park, Michigan. 10.11 Lease dated August 31, 1989 between Nelco Technology, Inc. and Cemanudi Associates regarding real property located at 1104 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.11 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.11(a) First Amendment to Lease dated October 21, 1994 to Lease dated August 31, 1989 (see Exhibit 10.11 hereto) between Nelco Technology, Inc. and Cemanudi Associates regarding real property located at 1104 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.11(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.12 Lease dated March 24, 1995 between Nelco Technology, Inc. and CMD Southwest Inc. regarding real property located at 1131 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.12(a) First Amendment to Lease dated January 18, 1996 to Lease dated March 24, 1995 (see Exhibit 10.12 hereto) between Nelco Technology, Inc. and CMD Southwest Inc. regarding real property located at 1131 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.12(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.13 Lease dated December 12, 1990 between Neltec, Inc. and NZ Properties, Inc. regarding real property located at 1420 W. 12th Place, Tempe, Arizona. 10.13(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 10.13 hereto) between Neltec, Inc. and NZ Properties, Inc. regarding real property located at 1420 W. 12th Place, Tempe, Arizona. 10.14 Indenture of Lease dated November 1, 1984 between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14 of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.14(a) Extension of Lease dated May 30, 1986 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.14(b) Second Extension of Lease dated May 30, 1991 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14(b) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.14(c) Amendment to Second Extension of Lease dated May 19, 1994 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14(c) of the Company's Annual Report on Form 10-K for the fiscal year ended February 27, 1994, Commission File No. 1-4415, which is incorporated herein by reference.) 10.14(d) 1995 Extension to Amendment to Second Extension of Lease dated October 19, 1995 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14(d) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.14(e) Letter dated July 31, 1996 from Dielectric Polymers, Inc. to Holyoke Supply Company, Inc. exercising its option to extend the Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. 10.14(f) 1997 Extension to Amendment to Second Extension of Lease dated March 26, 1997 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. 10.15 Lease dated January 8, 1992 between Nelco Technology, Inc. and CMD Southwest, Inc. regarding real property located at 1135 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.15 of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1992, Commission File No. 1-4415, which exhibit is incorporated herein by reference.) 10.15(a) First Amendment dated July 8, 1996 to Lease dated January 8, 1992 (see Exhibit 10.15 hereto) between Nelco Technology, Inc. and CMD Southwest, Inc. regarding real property located at 1135 West Geneva Drive, Tempe, Arizona. 10.16 Tenancy Agreement dated October 8, 1992 between Nelco Products Pte. Ltd. and Jurong Town Corporation regarding real property located at 36 Gul Lane, Jurong Town, Singapore. (Reference is made to Exhibit 10.18 of the Company's Annual Report on Form 10- K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.16(a) Tenancy Agreement dated November 3, 1995 between Nelco Products Pte. Ltd. and Jurong Town Corporation regarding real property located at 36 Gul Lane, Jurong Town, Singapore. 10.17 Lease Contract dated February 26, 1988 between the New York State Department of Transportation and the Edgewater Stewart Company regarding real property located at 15 Governor Drive in the Stewart International Airport Industrial Park, New Windsor, New York. (Reference is made to Exhibit 10.19 of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.17(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 10.17 hereto) for the real property located at 15 Governor Drive in the Stewart International Airport Industrial Park, New Windsor, New York. (Reference is made to Exhibit 10.19(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.17(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 10.17 hereto) regarding the real property located at 15 Governor Drive in the Stewart International Airport Industrial Park, New Windsor, New York. (Reference is made to Exhibit 10.19(b) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.18 Employment Agreement, dated March 18, 1996, between the Company and E. Phillip Smoot. (Reference is made to Exhibit 10.20 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 11.01 Computation of fully-diluted earnings per share. 22.01 Subsidiaries of the Company. 24.01 Consent of Ernst & Young LLP. 27.01 Financial Data Schedule (b) No reports on Form 8-K have been filed during the fiscal quarter ended March 2, 1997. SIGNATURES 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 28, 1997 PARK ELECTROCHEMICAL CORP. By:/s/Brian E. Shore Brian E. Shore, 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 Chief Executive Officer, Brian E. Shore President and Director (principal executive and May 28, 1997 financial officer) /s/Murray O. Stamer Corporate Controller Murray O. Stamer (principal accounting officer) May 28, 1997 /s/E. Phillip Smoot Director E. Phillip Smoot May 28, 1997 /s/Jerry Shore Chairman of the Board and Jerry Shore Director May 28, 1997 /s/Anthony Chiesa Director Anthony Chiesa May 28, 1997 /s/Lloyd Frank Director Lloyd Frank May 28, 1997 /s/Norman M. Schneider Director Norman M. Schneider May 28, 1997 <TABLE> Schedule II PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES <CAPTION> SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Column A Column B Column C Column D Column E Balance at Charged to Other Balance at Beginning Cost and Accounts Translation End Description of Period Expenses Written Off Adjustment of Period (A) ALLOWANCE FOR DOUBTFUL ACCOUNTS: <S> <C> <C> <C> <C> <C> 52 weeks ended March 2, 1997 $1,857,000 $(306,000) $ 204,000 $ (9,000) $1,746,000 53 weeks ended March 3, 1996 $2,490,000 $(495,000) $(128,000) $(10,000) $1,857,000 52 weeks ended February 26, 1995 $2,673,000 $ (44,000) $(186,000) $ 47,000 $2,490,000 <FN> (A) Uncollectible accounts, net of recoveries. </TABLE> ================================================= SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________ EXHIBITS filed with FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 2, 1997 ___________________ PARK ELECTROCHEMICAL CORP. ================================================= Exhibit Number Description 3.01 Restated Certificate of Incorporation, as amended (Reference is made to Exhibit 3.01 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 27, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 3.02 By-Laws, as amended (Reference is made to Exhibit 3(i) of the Company's Current Report on Form 8-K dated January 23, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 4.01 Amended and Restated Rights Agreement, dated as of July 12, 1995, between the Company and Registrar and Transfer Company, as Rights Agent, relating to the Company's Preferred Stock Purchase Rights. (Reference is made to Exhibit 1 to Amendment No. 1 on Form 8-A/A to the Company's Registration Statement on Form 8-A filed on August 10, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 4.02 Form of Indenture, dated as of February 1, 1996, between the Company and The Chase Manhattan Bank, N.A., as Trustee, relating to the Company's 5.5% Convertible Subordinated Notes due 2006 (Reference is made to Exhibit 1.02 to Amendment No. 1 to the Company's Form S-3 Registration Statement, Registration No. 333- 00213, as filed with the Securities and Exchange Commission on February 1, 1996, which is incorporated herein by reference.) Information concerning Registrant's long-term debt is set forth in Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Report. Other than the Indenture filed as Exhibit 4.02 hereto, no instrument defining the rights of holders of such long-term debt relates to securities having an aggregate principal amount in excess of 10% of the consoli- dated assets of Registrant and its subsidiaries; therefore, in accordance with paragraph (iii) of Item 4 of Item 601(b) of Regulation S-K, the other instruments defining the rights of holders of long-term debt are not filed herewith. Registrant hereby agrees to furnish a copy of any such other instruments to the Securities and Exchange Commission upon request. 10.01 Lease dated December 12, 1989 regarding real property located at 1100 East Kimberly Avenue, Anaheim, California between Nelco Products, Inc. and James Emmi and letter dated December 29, 1994 from Nelco Products, Inc. to James Emmi exercising its option to extend such Lease. (Reference is made to Exhibit 10.01 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.02 Lease dated December 12, 1989 regarding real property located at 1107 East Kimberly Avenue, Anaheim, California between Nelco Products, Inc. and James Emmi and letter dated December 29, 1994 from Nelco Products, Inc. to James Emmi exercising its option to extend such Lease. (Reference is made to Exhibit 10.02 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.03 Lease Agreement dated August 16, 1983 and Exhibit C, First Addendum to Lease, regarding real property located at 1411 E. Orangethorpe Avenue, Fullerton, California between Nelco Products, Inc. and TCLW/Fullerton. (Reference is made to Exhibit 10.03 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.03(a) Second Addendum to Lease dated January 26, 1987 between Nelco Products, Inc. and TCLW/Fullerton to Lease Agreement dated August 16, 1983 (see Exhibit 10.03 hereto) regarding real prop- erty located at 1421 E. Orangethorpe Avenue, Fullerton, Califor- nia. (Reference is made to Exhibit 10.03(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.03(b) Third Addendum to Lease dated January 7, 1991 and Fourth Addendum to Lease dated January 7, 1991 between Nelco Products, Inc. and TCLW/Fullerton to Lease Agreement dated August 16, 1983 (see Exhibit 10.03 hereto) regarding real property located at 1411, 1421 and 1431 E. Orangethorpe Avenue, Fullerton, California. 10.03(c) Fifth Addendum to Lease dated July 5, 1995 between Nelco Products, Inc. and TCLW/Fullerton to Lease Agreement dated August 16, 1983 (See Exhibit 10.03 hereto) regarding real property located at 1411 E. Orangethorpe Avenue, Fullerton, California. (Reference is made to Exhibit 10.03(c) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.04 Lease dated February 15, 1983 between Nelco Products, Inc. and CMD Southwest, Inc. regarding real property located at 1130 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.04 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.04(a) First Amendment to Lease dated December 10, 1992 to Lease dated February 15, 1983 (see Exhibit 10.04 hereto) between Nelco Technology, Inc. and CMD Southwest Inc., and novation substituting Nelco Technology, Inc. for Nelco Products, Inc., regarding real property located at 1130 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.04(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.05 Lease Agreement, dated May 26, 1982 between Nelco Products Pte. Ltd. (lease was originally entered into by Kiln Technique (Pri- vate) Limited, which subsequently assigned this lease to Nelco Products Pte. Ltd.) and the Jurong Town Corporation regarding real property located at 4 Gul Crescent, Jurong, Singapore. (Reference is made to Exhibit 10.05 of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.05(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 10.05 hereto) between Kiln Technique (Private) Limited and the Jurong Town Corporation regarding real property located at 4 Gul Crescent, Jurong, Singapore. (Reference is made to Exhibit 10.05(a) of the Com- pany's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorpo- rated herein by reference.) 10.06(a) Amended and Restated 1982 Stock Option Plan of the Company. (Reference is made to Exhibit 10.06(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1992, Commission File No. 1-4415, which exhibit is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 10.06(b) 1992 Stock Option Plan of the Company. (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, 1992, Commission File No. 1-4415, which exhibit is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 10.06(c) First Amendment to 1992 Stock Option Plan of the Company (see Exhibit 10.06(b) hereto). (This exhibit is a management contract or compensatory plan or arrangement.) 10.07 Amended and Restated Employment Agreement dated February 28, 1994 between the Company and Jerry Shore. (Reference is made to Exhibit 10.07(c) of the Company's Annual Report on Form 10-K for the fiscal year ended February 27, 1994, Commission File No. 1- 4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 10.07(a) Amendment No. 1 dated March 1, 1995 to the Amended and Restated Employment Agreement dated February 28, 1994 (see Exhibit 10.07 hereto) between the Company and Jerry Shore. (Reference is made to Exhibit 10.07(c) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 10.07(b) Amendment No. 2 dated December 5, 1996 to the Amended and Restated Employment Agreement dated February 28, 1994 (see Exhibit 10.07 hereto) between the Company and Jerry Shore. (This exhibit is a management contract or compensatory plan or arrangement.) 10.08 Lease dated April 15, 1988 between FiberCote Industries, Inc. (lease was initially entered into by USP Composites, Inc., which subsequently changed its name to FiberCote Industries, Inc.) and Geoffrey Etherington, II regarding real property located at 172 East Aurora Street, Waterbury, Connecticut. (Reference is made to Exhibit 10.08 of the Company's Annual Report on form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1- 4415, which is incorporated herein by reference.) Exhibit Number Description 10.08(a) Amendment to Lease dated December 21, 1992 to Lease dated April 15, 1988 (see Exhibit 10.08 hereto) between FiberCote Indus- tries, Inc. and Geoffrey Etherington II regarding real property located at 172 East Aurora Street, Waterbury, Connecticut. (Reference is made to Exhibit 10.08(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.09 Lease dated March 14, 1988 between Nelco Products, Inc. and CMD Southwest One regarding real property located at 1117 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.09 of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.09(a) First Amendment to Lease dated December 10, 1992 to Lease dated March 14, 1988 (see Exhibit 10.09 hereto) between Nelco Technology, Inc. and CMD Southwest One regarding real property located at 1117 West Fairmont, Tempe, Arizona, and novation substituting Nelco Technology, Inc. for Nelco Products, Inc. (Reference is made to Exhibit 10.09(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.09(b) Second Amendment to Lease dated March 24, 1995 to Lease dated March 14, 1988 (see Exhibit 10.09 hereto) between Nelco Technology, Inc. and CMD Southwest One regarding real property located at 1117 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.09(b) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.09(c) Third Amendment to Lease dated January 18, 1996 to Lease dated March 14, 1988 (see Exhibit 10.09 hereto) between Nelco Technology, Inc. and CMD Southwest One regarding real property located at 1117 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.09(c) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.10 Lease dated October 1, 1991 between Zin-Plas Corporation and Philip L. Johnson d/b/a Johnson Development Company regarding real property located at 25 North Park, N.E., Comstock Park, Michigan. (Reference is made to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) . 10.10(a) Letter dated October 17, 1996 from Zin-Plas Corporation to Philip L. Johnson extending the Lease dated October 1, 1991 (see Exhibit 10.10 hereto) between Zin-Plas Corporation and Philip L. Johnson d/b/a Johnson Development Company regarding real property located at 25 North Park, N.E., Comstock Park, Michigan. 10.11 Lease dated August 31, 1989 between Nelco Technology, Inc. and Cemanudi Associates regarding real property located at 1104 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.11 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.11(a) First Amendment to Lease dated October 21, 1994 to Lease dated August 31, 1989 (see Exhibit 10.11 hereto) between Nelco Technology, Inc. and Cemanudi Associates regarding real property located at 1104 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.11(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.12 Lease dated March 24, 1995 between Nelco Technology, Inc. and CMD Southwest Inc. regarding real property located at 1131 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.12(a) First Amendment to Lease dated January 18, 1996 to Lease dated March 24, 1995 (see Exhibit 10.12 hereto) between Nelco Technology, Inc. and CMD Southwest Inc. regarding real property located at 1131 West Fairmont, Tempe, Arizona. (Reference is made to Exhibit 10.12(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.13 Lease dated December 12, 1990 between Neltec, Inc. and NZ Properties, Inc. regarding real property located at 1420 W. 12th Place, Tempe, Arizona. 10.13(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 10.13 hereto) between Neltec, Inc. and NZ Properties, Inc. regarding real property located at 1420 W. 12th Place, Tempe, Arizona. 10.14 Indenture of Lease dated November 1, 1984 between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14 of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.14(a) Extension of Lease dated May 30, 1986 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.14(b) Second Extension of Lease dated May 30, 1991 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14(b) of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.14(c) Amendment to Second Extension of Lease dated May 19, 1994 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14(c) of the Company's Annual Report on Form 10-K for the fiscal year ended February 27, 1994, Commission File No. 1-4415, which is incorporated herein by reference.) 10.14(d) 1995 Extension to Amendment to Second Extension of Lease dated October 19, 1995 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. (Reference is made to Exhibit 10.14(d) of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference.) 10.14(e) Letter dated July 31, 1996 from Dielectric Polymers, Inc. to Holyoke Supply Company, Inc. exercising its option to extend the Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. 10.14(f) 1997 Extension to Amendment to Second Extension of Lease dated March 26, 1997 to Indenture of Lease dated November 1, 1984 (see Exhibit 10.14 hereto) between Dielectric Polymers, Inc. and Holyoke Supply Company, Inc. regarding real property located at 218 Race Street, Holyoke, Massachusetts. 10.15 Lease dated January 8, 1992 between Nelco Technology, Inc. and CMD Southwest, Inc. regarding real property located at 1135 West Geneva Drive, Tempe, Arizona. (Reference is made to Exhibit 10.15 of the Company's Annual Report on Form 10-K for the fiscal year ended March 1, 1992, Commission File No. 1-4415, which exhibit is incorporated herein by reference.) 10.15(a) First Amendment dated July 8, 1996 to Lease dated January 8, 1992 (see Exhibit 10.15 hereto) between Nelco Technology, Inc. and CMD Southwest, Inc. regarding real property located at 1135 West Geneva Drive, Tempe, Arizona. 10.16 Tenancy Agreement dated October 8, 1992 between Nelco Products Pte. Ltd. and Jurong Town Corporation regarding real property located at 36 Gul Lane, Jurong Town, Singapore. (Reference is made to Exhibit 10.18 of the Company's Annual Report on Form 10- K for the fiscal year ended February 28, 1993, Commission File No. 1-4415, which is incorporated herein by reference.) 10.16(a) Tenancy Agreement dated November 3, 1995 between Nelco Products Pte. Ltd. and Jurong Town Corporation regarding real property located at 36 Gul Lane, Jurong Town, Singapore. 10.17 Lease Contract dated February 26, 1988 between the New York State Department of Transportation and the Edgewater Stewart Company regarding real property located at 15 Governor Drive in the Stewart International Airport Industrial Park, New Windsor, New York. (Reference is made to Exhibit 10.19 of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) Exhibit Number Description 10.17(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 10.17 hereto) for the real property located at 15 Governor Drive in the Stewart International Airport Industrial Park, New Windsor, New York. (Reference is made to Exhibit 10.19(a) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.17(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 10.17 hereto) regarding the real property located at 15 Governor Drive in the Stewart International Airport Industrial Park, New Windsor, New York. (Reference is made to Exhibit 10.19(b) of the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 1995, Commission File No. 1-4415, which is incorporated herein by reference.) 10.18 Employment Agreement, dated March 18, 1996, between the Company and E. Phillip Smoot. (Reference is made to Exhibit 10.20 of the Company's Annual Report on Form 10-K for the fiscal year ended March 3, 1996, Commission File No. 1-4415, which is incorporated herein by reference. This exhibit is a management contract or compensatory plan or arrangement.) 11.01 Computation of fully-diluted earnings per share. 22.01 Subsidiaries of the Company. 24.01 Consent of Ernst & Young LLP. 27.01 Financial Data Schedule