SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 14(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 25, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to__________ Commission file Number 1-4415 PARK ELECTROCHEMICAL CORP. (Exact Name of Registrant as Specified in Its Charter) New York 11-1734643 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5 Dakota Drive, Lake Success, N.Y. 11042 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (516) 354-4100 Not Applicable ------------------------------------------------------ (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X} No[ } APPLICABLE ONLY TO ISSERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes { } No { } APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 19,456,000 as of January 4, 2002. PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION: Number Item 1. Financial Statements Consolidated Balance Sheets November 25, 2001(Unaudited) and February 25, 3 2001 Consolidated Statements of Operations 13 weeks and 39 weeks ended November 25, 2001 and November 26, 2000 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows 39 weeks ended November 25, 2001 and November 26, 2000 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Factors That May Affect Future Results 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II. OTHER INFORMATION: Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands) <TABLE> <CAPTION> November 25, 2001 February 25, (Unaudited) 2001* <s> <c> <c> ASSETS Current assets: Cash and cash equivalents $126,670 $123,726 Marketable securities 27,694 32,017 Accounts receivable, net 29,847 71,105 Inventories (Note 2) 14,433 32,307 Prepaid expenses and other current 12,493 9,456 assets Total current assets 211,137 268,611 Property, plant and equipment, net 152,258 159,309 Other assets 941 2,661 Total $364,336 $430,581 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 15,349 $ 29,481 Accrued liabilities 29,455 39,052 Income taxes payable - 11,567 Total current liabilities 44,804 80,100 Long-term debt (Note 3) - 97,672 Deferred income taxes 14,080 12,679 Deferred pension liability and other 10,993 11,224 Stockholders' equity: Common stock 2,037 2,037 Additional paid-in capital 130,426 57,318 Retained earnings 175,151 203,150 Treasury stock, at cost (6,013) (27,835) Accumulated other non-owner changes (7,142) (5,764) Total stockholders' equity 294,459 228,906 Total $364,336 $430,581 <FN> *The balance sheet at February 25, 2001 has been derived from the audited financial statements at that date. </TABLE> <TABLE> PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) <CAPTION> 13 Weeks Ended 39 Weeks Ended (Unaudited) (Unaudited) November November November November 25, 26, 25, 26, 2001 2000 2001 2000 <s> <c> <c> <c> <c> Net sales $ 52,625 $142,608 $173,470 $392,669 Cost of sales 51,086 108,492 167,243 306,465 Gross profit 1,539 34,116 6,227 86,204 Selling, general and administrative expenses 8,380 13,034 26,300 37,533 Loss on sale of NTI and closure of related support facility (Note 4) - - 15,707 - Restructuring and other severance charges (Note 5) 3,046 - 3,727 - (Loss)/income from operations (9,887) 21,082 (39,507) 48,671 Other income/(expense): Interest and other income, net 1,149 2,115 4,496 5,979 Interest expense - (1,401) - (4,205) Total other income 1,149 714 4,496 1,774 (Loss)/earnings before income taxes (8,738) 21,796 (35,011) 50,445 Income tax (benefit)/provision (2,621) 6,969 (10,503) 15,134 Net (loss)/earnings $ (6,117) $ 14,827 $(24,508) $ 35,311 (Loss)/earnings per share (Note 6): Basic $ (.31) $ .93 $ (1.26) $ 2.22 Diluted $ (.31) $ .78 $ (1.26) $ 1.91 Weighted average number of common and common equivalent shares outstanding: Basic 19,559 15,940 19,508 15,894 Diluted 19,559 20,217 19,508 19,920 Dividends per share $ .06 $ .06 $ .18 $ .16 </TABLE> <TABLE> PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) <CAPTION> 39 Weeks Ended (Unaudited) November November 25, 26, 2001 2000 <s> <c> <c> Cash flows from operating activities: Net (loss) earnings $(24,508) $35,311 Depreciation and amortization 12,276 12,105 Loss on sale of fixed assets 10,636 - Impairment of fixed assets 2,959 1,266 Change in operating assets and liabilities 23,000 5,901 Net cash provided by operating activities 24,363 54,583 Cash flows from investing activities: Purchases of property, plant and equipment, net (20,871) (34,802) Purchases of marketable securities (20,647) (70,642) Proceeds from sales and maturities of marketable securities 24,773 84,786 Net cash used in investing activities (16,745) (20,658) Cash flows from financing activities: Redemption of long-term debt (Note 3) (1,738) - Dividends paid (3,491) (2,623) Proceeds from exercise of stock options 909 1,286 Net cash used in financing activities (4,320) (1,337) Increase in cash and cash equivalents before exchange rate changes 3,298 32,588 Effect of exchange rate changes on cash and cash equivalents (354) (1,944) Increase in cash and cash equivalents 2,944 30,644 Cash and cash equivalents, beginning of period 123,726 53,153 Cash and cash equivalents, end of period $126,670 $83,797 Supplemental cash flow information: Cash paid during the period for: Interest - $ 5,500 Income taxes $ 6,847 8,142 </TABLE> PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of November 25, 2001, the consolidated statements of operations for the 13 weeks and 39 weeks ended November 25, 2001 and November 26, 2000, and the condensed consolidated statements of cash flows for the 39 weeks then ended have been prepared by the Company, without audit. In the opinion of management, these unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position at November 25, 2001 and the results of operations and cash flows for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended February 25, 2001. <TABLE> 2. INVENTORIES Inventories consisted of the following: <CAPTION> (Amounts in thousands) November February 25, 25, 2001 2001 <s> <c> <c> Raw materials $ 6,311 $14,988 Work-in-process 3,446 5,075 Finished goods 4,049 11,319 Manufacturing supplies 627 925 $14,433 $32,307 </TABLE> 3. LONG-TERM DEBT On March 1, 2001, $95,934,000 principal amount of the Company's 5.5% Convertible Subordinated Notes due March 1, 2006 was converted into 3,410,908 shares of the Company's common stock, and the remaining $1,738,000 principal amount of the Notes was redeemed by the Company on March 2, 2001 for cash. 4. SALE OF NELCO TECHNOLOGY, INC. On April 27, 2001, the Company sold the assets and business of its wholly owned subsidiary, Nelco Technology, Inc. ("NTI"). NTI was a manufacturer of semi-finished printed circuit boards commonly known as mass lamination. As a result of this sale, the Company exited the mass lamination business in North America. In addition to the sale of NTI, the Company also closed a related support facility. In connection with the sale of NTI's assets and business, the Company incurred pre-tax charges of $10,580,000 in the fiscal quarter ended May 27, 2001. In addition, the Company paid $482,000 in severance payments and related costs for terminated employees in the fiscal quarter ended May 27, 2001, all of whom were terminated in such quarter. The Company closed the related NTI support facility during May 2001 and terminated all the manufacturing and support employees at that facility by the end of the second fiscal quarter ended August 26, 2001. In conjunction with the closure of the facility, the Company incurred pre-tax charges in the first quarter of fiscal year 2002 totaling $4,645,000, consisting of $2,058,000 related to the impairment of long lived assets, $940,000 to write down inventories and accounts receivables to their estimated net realizable values, $821,000 of employee severance payments and related costs, $781,000 of ongoing lease and other facility related costs, and $45,000 of other exit costs. As of November 25, 2001, the inventories and accounts receivable have been disposed of and all the severance payments have been made, while $641,000 of accrued liabilities, principally related to unexpired lease obligations, remained. NTI did not have a material effect on Park's consolidated financial position, results of operations, capital resources, liquidity or continuing operations, and the sale of NTI is not expected to have a material effect on the Company's future operating results. 5. RESTRUCTURING AND OTHER SEVERANCE CHARGES During the third fiscal quarter ended November 25, 2001, the Company incurred non-recurring, pre-tax charges totaling $2,921,000 to close down the conventional lamination line of Dielektra GmbH ("Dielektra"), its advanced electronic materials business located in Cologne, Germany, and to reduce the size of Dielektra's mass lamination operations to enable Dielektra to focus on its unique DatlamT automated continuous lamination and paneling technology and on the marketing and manufacturing of high technology, higher layer count mass lamination product. The charges included $2,020,000 for severance payments and related costs for terminated employees, all of whom were terminated in the third fiscal quarter, and $901,000 for fixed asset impairments. At November 25, 2001, $2,002,000 of accrued expenses relating to employee severance payments and related costs remained. All of these accrued expenses are expected to be paid before September 1, 2002, the end of the first half of the Company's 2003 fiscal year. The Company also incurred $125,000 in pre- tax charges for severance payments and related costs for terminated employees, all of whom were terminated in the third quarter, at another business unit. In addition, during the fiscal quarter ended May 27, 2001, the Company incurred pre-tax severance charges of $681,000 for severance payments and related costs for terminated employees, all of whom were terminated in such quarter, at the Company's continuing operations. 6. EARNINGS PER SHARE The following table sets forth the calculation of basic and diluted earnings per share for the periods specified (amounts in thousands, except per share amounts): <TABLE> <caption> 13 weeks ended 39 weeks ended November November November November 25, 26, 25, 26, 2001 2000 2001 2000 <s> <c> Net (loss)/income for basic EPS $(6,117) $14,827 $(24,508) $ 35,311 Add interest on 5.5% Convertible Subordinated Notes, net of taxes - 911 - 2,733 Net (loss)/income for diluted EPS $(6,117) $15,738 $(24,508) $38,044 Weighted average common shares outstanding for basic EPS 19,559 15,940 19,508 15,894 Net effect of dilutive options * 774 * 488 Assumed conversion of 5.5% Convertible Subordinates Notes - 3,503 - 3,538 Weighted averages shares outstanding for diluted EPS 19,559 20,217 19,508 19,920 Basic (loss)/earnings per share $ (.31) $ .93 $ (1.26) $ 2.22 Diluted (loss)/earnings per share $ (.31) $ .78 $ (1.26) $ 1.91 <FN> *For the 13 weeks and 39 weeks ended November 25, 2001, the effect of employee stock options was not considered because it was anti-dilutive. </TABLE> 7. BUSINESS SEGMENTS The Company's specialty adhesive tape and film business, advanced composite materials business and plumbing hardware business were previously aggregated into the engineered materials and plumbing hardware segment. During fiscal 2001, the Company closed and liquidated its plumbing hardware business. In fiscal 2001, 2000 and 1999, the specialty adhesive tape, advanced composite materials and plumbing hardware businesses comprised less than 10% of the Company's consolidated revenues and assets, and therefore, the Company considers itself to operate in one business segment. The Company's electronic materials products are marketed primarily to leading independent printed circuit board fabricators, electronic manufacturing service companies, electronic contract manufacturers and, to a lesser extent, major electronic original equipment manufacturers ("OEMs") located throughout North America, Europe and Asia. The Company's specialty adhesive tape and advanced composite materials customers, the majority of which are located in the United States, include OEMs, independent firms and distributors in the electronics, aerospace and industrial industries. Sales are attributed to geographic region based upon the region from which the materials were shipped to the customer. Sales between geographic regions were not significant. Financial information concerning the Company's operations by geographic area follows (amounts in thousands): <TABLE> <CAPTION> 13 weeks ended 39 weeks ended November November November November 25, 26, 25, 26, 2001 2000 2001 2000 <s> <c> <c> <c> <c> Sales: North America $ 27,493 $ 86,687 $ 98,650 $237,645 Europe 13,482 30,378 43,763 90,622 Asia 11,650 25,543 31,057 64,402 Total sales $ 52,625 $142,608 $173,470 $392,669 </TABLE> <TABLE> <CAPTION> November November 25, 26, 2001 2000 <s> <c> <c> Assets North America $199,362 $250,809 Europe 59,902 74,057 Asia 105,072 97,032 Total assets $364,336 $421,898 </TABLE> 8. COMPREHENSIVE (LOSS) INCOME Total comprehensive (loss) income for the 13 weeks ended November 25, 2001 and November 26, 2000 was $(7,390,000) and $13,255,000, respectively. Total comprehensive (loss) income for the 39 weeks ended November 25, 2001 and November 26, 2000 was $(25,886,000) and $30,189,000, respectively. Comprehensive (loss) income consisted primarily of net (loss) income and foreign currency translation adjustments. 9. RECENTLY ISSUED ACCOUNTING PROUNOUNCEMENTS In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations", and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years beginning after December 15, 2001. Under the new rules set forth in these Statements, goodwill and other intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. In addition, Statement 141 eliminates the pooling-of-interests method of accounting for business combinations, except for qualifying business combinations that were initiated prior to July 1, 2001. The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of its fiscal year ending March 2, 2003. The Company does not have any goodwill on its balance sheet and has virtually no intangible assets, and is not engaged in any transactions, that are affected by SFAS 141 or SFAS 142; and, therefore, the Company believes that application of the non-amortization provisions of the Statements will not have a material adverse effect on the Company's consolidated results of operations or financial position. In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which supercedes Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). Although it retains the basic requirements of SFAS 121 regarding when and how to measure an impairment loss, SFAS 144 provides additional implementation guidance. SFAS 144 is effective for all fiscal years beginning after December 15, 2001. The Company has not yet determined what effect SFAS 144 will have on the Company's consolidated results of operations or financial position. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General Park is a leading global designer and producer of advanced electronic materials used to fabricate complex multilayer printed circuit boards and other electronic interconnect systems. The Company's customers include leading independent printed circuit board fabricators, electronic manufacturing service companies, electronic contract manufacturers and major electronic original equipment manufacturers in the computer, telecommunications, transportation, aerospace and instrumentation industries. The Company's sales declined dramatically in the three- month and nine-month periods ended November 25, 2001, with steep declines in sales by the Company's North American, European and Asian operations. The earnings growth that the Company achieved during its 2001 and 2000 fiscal years halted in the 2002 fiscal year first three quarters as a result of a severe downturn in the global electronics industry. Three and Nine Months Ended November 25, 2001 Compared with Three and Nine Months Ended November 26, 2000: The Company experienced a sharp decline in its results of operations for the three-month and nine-month periods ended November 25, 2001 as the North American, European and Asian markets for sophisticated printed circuit materials experienced severe downturns during such periods. During the three months ended November 25, 2001, the Company incurred pre-tax charges totaling $2.9 million in connection with the realignment of the operations of its German subsidiary, Dielektra GmbH, the Company's advanced electronic materials business located in Cologne, Germany. The realignment included the closure of Dielektra's conventional lamination line to enable it to better focus its efforts and capabilities on its unique DatlamT automated continuous lamination and paneling manufacturing technology and the reduction of the size of its mass lamination operations in order to focus on the marketing and manufacturing of high technology, higher layer count mass lamination product. The Company also incurred $125,000 in pre-tax charges during the third quarter for a workforce reduction at another business unit. In addition, the Company incurred a pre-tax charge of $15.7 million during the 2002 fiscal year first quarter in connection with the sale of the assets and business of Nelco Technology, Inc. ("NTI"), the Company's wholly owned subsidiary that manufactured semi-finished printed circuit boards, commonly known as mass lamination, in Tempe, Arizona, and the closure of a related support facility in Arizona. NTI formerly supplied Delco Electronics Corporation with semi-finished printed circuit boards. The Company also incurred pre-tax severance charges of $0.7 million during the 2002 fiscal year first quarter in connection with workforce reductions at the Company's continuing operations. Results of Operations Net sales for the three-month and nine-month periods ended November 25, 2001 declined 63% to $52.6 million and 56% to $173.5 million, respectively, from $142.6 million and $392.7 million for last fiscal year's comparable periods. These decreases in net sales were the result of lower unit volumes of materials shipped and the absence of sales by NTI, which, as described above, the Company sold in the 2002 fiscal year first quarter. Although the net sales of NTI during the nine-month period ended November 26, 2000 were material relative to the Company's consolidated net sales during such period, the operations of NTI were not material to the Company's consolidated financial position, results of operations, capital resources or liquidity, and the sale of NTI is not expected to have any material effect on the Company's future operating results, financial position, capital resources, liquidity or continuing operations. The Company's foreign operations accounted for $25.1 million and $74.8 million, respectively, of net sales, or 48% and 43% of the Company's total net sales worldwide, during the three- month and nine-month periods ended November 25, 2001 compared with $55.9 million and $155.0 million, respectively, of net sales, or 39% of the Company's total net sales worldwide, during last fiscal year's comparable periods. Net sales by the Company's foreign operations during the three-month and nine-month periods ended November 25, 2001 declined 55% and 52%, respectively, from the 2001 fiscal year comparable periods. The declines in sales by foreign operations were due to decreases in sales in both Asia and Europe. The overall gross margins as a percentage of net sales for the Company's worldwide operations were 2.9% and 3.6%, respectively, during the three-month and nine-month periods ended November 25, 2001 compared with 23.9% and 22.0%, respectively, for last fiscal year's comparable periods. The deteriorations in the gross margins were attributable to the significant declines in sales volumes compared with last fiscal year's comparable periods. Although the Company's cost of sales decreased significantly as a result of lower production volumes and cost reduction measures implemented by the Company, including significant workforce reductions and the decision to not implement annual salary increases, the declines in sales and production volumes resulted in lower volumes to absorb fixed overhead costs and, consequently, increases in the costs of sales as percentages of net sales in the three-month and nine-month periods ended November 25, 2001. Although selling, general and administrative expenses declined by $4.7 million and $11.2 million, respectively, or by 36% and 30%, during the three-month period and nine-month period, respectively, ended November 25, 2001 compared with last year's comparable periods, these expenses, measured as a percentage of sales, were 15.9% and 15.2% during the three-month period and nine- month period, respectively, ended November 25, 2001 compared with 9.1% and 9.6%, respectively, during last fiscal year's comparable periods. The increases in the selling, general and administrative expenses as percentages of sales in the 2002 fiscal year periods resulted from proportionately lower sales compared to the comparable periods during the last fiscal year. For the reasons set forth above, for the three-month period ended November 25, 2001, income from operations, including the non- recurring, pre-tax charges, described above, related to the realignment of the operations of the Company's German business unit and a workforce reduction at another business unit, declined to a loss of $9.9 million and income from operations, before the non-recurring, pre-tax charges, declined to a loss of $6.8 million, in both cases compared to a profit of $21.1 million for last fiscal year's comparable period; and for the nine-month period ended November 25, 2001, income from operations, including the non-recurring, pre-tax charges, described above, related to the realignment of the German business unit and a workforce reduction at another business unit and related to the sale of NTI and the closure of a related support facility and severance for workforce reductions at the Company's continuing operations, declined to a loss of $39.5 million and income from operations, before the non-recurring, pre-tax charges, declined to a loss of $20.1 million, in both cases compared to a profit of $48.7 million for last year's comparable period. Interest and other income, net, principally investment income, declined 46% to $1.1 million and 25% to $4.5 million, respectively, for the three-month and nine-month periods ended November 25, 2001 from $2.1 million and $6.0 million, respectively, for last fiscal year's comparable periods. The decreases were attributable to lower prevailing interest rates. The Company's investments were primarily short-term taxable instruments. The Company incurred no interest expense for the three-month and nine-month periods ended November 25, 2001 compared with $1.4 million and $4.2 million, respectively, during last fiscal year's comparable periods. The Company's interest expense was related primarily to its $100 million principal amount of 5.5% Convertible Subordinated Notes due 2006 issued in 1996, $2,328,000 principal amount of which was converted into 82,750 shares of the Company's common stock prior to February 25,2001, the end of the Company's 2001 fiscal year, $95,934,000 of which was converted into 3,410,908 shares of the Company's common stock on March 1, 2001, and $1,738,000 of which was redeemed by the Company for cash on March 2, 2001. The Company's effective income tax rate for the three-month period ended November 25, 2001 was 30% compared with 32% for last fiscal year's comparable period, and the Company's effective income tax rate for the nine-month period ended November 25, 2001 was 30% compared with the same rate for last fiscal year's comparable period. The decrease in the effective tax rate for the three-month period was primarily the result of a change in the Company's income mix among the tax jurisdictions in which the Company does business. Net earnings for the three-month period ended November 25, 2001, including the non-recurring, pre-tax charges, described above, related to the realignment of the operations of the Company's German business unit and a workforce reduction at another business unit, declined to a net loss of $6.1 million and net earnings for such period, before the non-recurring, pre-tax charges, declined to a net loss of $4.0 million, in both cases from a profit of $14.8 million for last fiscal year's comparable period. For the nine-month period ended November 25, 2001, net earnings, including the non-recurring, pre-tax charges, described above, related to the realignment of the German business unit and a workforce reduction at another business unit and related to the sale of NTI and the closure of a related support facility and severance for workforce reductions at the Company's continuing operations, declined to a net loss of $24.5 million and net earnings, before the non-recurring, pre-tax charges, declined to a net loss of $10.9 million, in both cases from a profit of $35.3 million for last fiscal year's comparable period. Basic and diluted earnings per share decreased from $0.93 and $0.78, respectively, for the three-month period ended November 26, 2000 to a loss of $0.31 including the non-recurring, pre-tax charges and to a loss of $0.20 before the non-recurring, pre-tax charges for the three-month period ended November 25, 2001; and basic and diluted earnings per share decreased from $2.22 and $1.91, respectively, for the nine-month period ended November 26, 2000 to a loss of $1.26 including the non-recurring, pre-tax charges and to a loss of $0.56 before the non-recurring, pre-tax charges for the nine-month period ended November 25, 2001. Liquidity and Capital Resources: At November 25, 2001, the Company's cash and temporary investments were $154.4 million compared with $155.7 million at February 25, 2001, the end of the Company's 2001 fiscal year. The Company's working capital (which includes cash and temporary investments) was $166.3 million at November 25, 2001 compared with $188.5 million at February 25, 2001. The decrease in working capital at November 25, 2001 compared with February 25, 2001 was due principally to significantly lower accounts receivable and inventories, offset in part by lower current liabilities. The lower accounts receivable, inventories and current liabilities were the result of the contractions in the Company's business and operations during the 2002 fiscal year first three quarters. The Company's current ratio (the rate of current assets to current liabilities) was 4.7 to 1 at November 25, 2001 and 3.4 to 1 at February 25, 2001. During the nine-months ended November 25, 2001, cash provided by the Company's operations, before depreciation and amortization and before non-cash losses related to the sale and impairment of fixed assets, of $1.4 million was enhanced by a significant net reduction in working capital items, resulting in $24.4 million of cash provided from operating activities. During the same nine-month period, the Company had net expenditures of $20.9 million for property, plant and equipment. Net expenditures for property, plant and equipment were $51.8 million in the 2001 fiscal year and $27.7 million in the 2000 fiscal year. During its 2000 fiscal year, the Company commenced significant expansions of its electronic materials manufacturing facilities in California and New York, which it expects to complete in its 2002 fiscal year; and during the 2001 fiscal year, the Company commenced a significant expansion of its higher technology product line manufacturing facility in Arizona, which was completed in the 2002 fiscal year first quarter. At November 25, 2001, the Company had no long-term debt. The Company believes its financial resources will be sufficient, for the foreseeable future, to provide for continued investment in property, plant and equipment and for general corporate purposes. Such resources would also be available for appropriate acquisitions and other expansions of the Company's business. Environmental Matters: In the nine-month periods ended November 25, 2001 and November 26, 2000, the Company charged less than $0.2 million against pretax income for environmental remedial response and voluntary cleanup costs (including legal fees). While annual expenditures have generally been constant from year to year and may increase over time, the Company expects it will be able to fund such expenditures from available cash. 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 November 25, 2001 and February 25, 2001, the recorded liability in accrued liabilities for environmental matters was approximately $4.4 million. Management does not expect that environmental matters will have a material adverse effect on the liquidity, capital resources, business, consolidated results of operations or consolidated financial position of the Company. Factors That May Affect Future Results. Certain portions of this Report which do not relate to historical financial information may be deemed to constitute forward-looking statements that are subject to various factors which could cause actual results to differ materially from Park's expectations or from results which might be projected, forecast, estimated or budgeted by the Company in forward-looking statements. Such factors include, but are not limited to, general conditions in the electronics industry, the Company's competitive position, the status of the Company's relationships with its customers, economic conditions in international markets, the cost and availability of utilities, and the various factors set forth under the caption "Factors That May Affect Future Results" after Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended February 25, 2001. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Company is exposed to market risks for changes in foreign currency exchange rates and interest rates. The Company's primary foreign currency exchange exposure relates to the translation of the financial statements of foreign subsidiaries using currencies other than the U.S. dollar as their functional currency. The Company does not believe that a 10% fluctuation in foreign exchange rates would have had a material impact on its consolidated results of operations or consolidated financial position. The exposure to market risks for changes in interest rates relates to the Company's short-term investment portfolio. This investment portfolio is managed by outside professional managers in accordance with guidelines issued by the Company. These guidelines are designed to establish a high quality fixed income portfolio of government and highly rated corporate debt securities with a maximum weighted average maturity of less than one year. The Company does not use derivative financial instruments in its investment portfolio. Based on the average maturity of the investment portfolio at the end of the 2001 fiscal year and at November 25, 2001, a 10% increase in short term interest rates would not have had a material impact on the consolidated results of operations or consolidated financial position of the Company. PART II. OTHER INFORMATION Item 1. Legal Proceedings. In May 1998, the Company and its Nelco Technology, Inc. ("NTI") subsidiary in Arizona filed a complaint against Delco Electronics Corporation and the Delphi Automotive Systems unit of General Motors Corp. in the United States District Court for the District of Arizona. The complaint alleged, among other things, that Delco breached its contract to purchase semi-finished multilayer printed circuit boards from NTI and that Delphi interfered with NTI's contract with Delco, that Delco breached the covenant of good faith and fair dealing implied in the contract, that Delco engaged in negligent misrepresentation and that Delco fraudulently induced NTI to enter into the contract. The Company and NTI sought substantial compensatory and punitive damages. On November 29, 2000, after a five day trial in Phoenix, Arizona, a jury awarded damages to NTI in the amount of $32,280,000, and on December 12, 2000 the judge in the United States District Court entered judgment for NTI on its claim of breach of the implied covenant of good faith and fair dealing with damages in the amount of $32,280,000. Both parties filed motions for post-judgment relief and a new trial, all of which the judge denied, and both parties have filed notices to appeal the decision to the United States Court of Appeals for the Ninth Circuit in San Francisco. In March 1998, the Company had been informed by Delco Electronics that Delco planned to close its printed circuit board fabrication plant and exit the printed circuit board manufacturing business. As a result, the Company's sales to Delco declined significantly during the three-month period ended May 31, 1998, were negligible during the three-month period ended August 30, 1998, have been nil since that time and are expected to be nil in future periods. During the Company's 1999 fiscal year first quarter and during its 1998 fiscal year and for several years prior thereto, more than 10% of the Company's total sales were to Delco Electronics Corporation; and the Company had been Delco's principal supplier of semi-finished multilayer printed circuit board materials for more than ten years. These materials were used by Delco to produce finished multilayer printed circuit boards. See "Factors That May Affect Future Results" after Item 2 of Part I of this Report. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: None (b) Reports on Form 8-K filed during the fiscal quarter ended November 25, 2001: Report on Form 8-K dated October 15, 2001, Commission File No. 1-4415, reporting in Item 5 that on October 15, 2001, Park announced that Dielektra GmbH, Park's advanced electronic materials business located in Cologne, Germany, is realigning its operations to better position itself for success in the future, including closing down its conventional lamination line and focusing its efforts and capabilities in the future on its unique DatlamT automated continuous lamination and paneling manufacturing technology and reducing the size of its mass lamination operations in order to focus on the marketing and manufacturing of high technology, higher layer count mass lamination product. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Park Electrochemical Corp. -------------------------- (Registrant) /s/Brian E. Shore Date: January 7, 2002 -------------------------- Brian E. Shore President and Chief Executive Officer /s/Murray O. Stamer Date: January 7, 2002 -------------------------- Murray O. Stamer Senior Vice President, Finance Principal Financial Officer