Park Electrochemical Corp. — Form 10-Q Summary
Period and issuer: The supplied filing is for the 13 and 39 weeks ended November 27, 2011 (the company’s fiscal 2012 third quarter), not 2010 Q3. The registrant is Park Electrochemical Corp., not Park Aerospace Corp.; investors should confirm that this is the intended filing.
Business context
Park develops and sells high-technology electronic materials for telecommunications, internet infrastructure and computing, as well as advanced composite materials and parts for aerospace. Its manufacturing facilities span North America, Europe and Asia.
Financial performance
| Metric | 13 weeks ended Nov. 27, 2011 | 39 weeks ended Nov. 27, 2011 |
|---|---|---|
| Net sales | $47.3 million, up 1% year over year | $149.6 million, down 7% |
| Gross profit / margin | $13.0 million / 27.5%, versus 30.9% | $43.5 million / 29.1%, versus 33.0% |
| Operating earnings | $6.0 million, versus $6.8 million | $22.1 million, versus $30.3 million |
| Net earnings | $5.4 million, versus $5.0 million | $20.3 million, versus $24.3 million |
| Diluted EPS | $0.26, versus $0.24 | $0.98, versus $1.18 |
For the nine months, operating cash flow was $22.8 million, compared with $34.0 million in the prior-year period. Capital expenditures were $3.4 million; dividends paid were $6.2 million. Cash and cash equivalents were $137.6 million and marketable securities were $124.4 million at quarter-end. Working capital was $286.4 million and the current ratio was 13.5:1. The company reported no long-term debt.
Changes and management commentary
- Quarterly sales were slightly higher, helped by European electronic-material sales and aerospace growth. Nine-month sales fell, mainly due to weaker electronic-material sales in North America and Asia.
- Aerospace sales rose to $7.0 million for the quarter and $19.8 million for the nine months. Aerospace represented 15% and 13% of total sales in those periods, respectively.
- Gross margins declined amid higher utility costs and additional, sometimes duplicative, costs of moving aerospace manufacturing to Newton, Kansas. The company also cited lower nine-month sales and partially fixed overhead costs.
- The Kansas aerospace facility expansion was completed in the quarter; the company reported approximately $5 million spent on the expansion and equipment.
Outlook, risks and unusual items
- No specific revenue or earnings guidance was provided. Management said electronic-material markets were difficult to forecast and it could not predict the effect of global economic and financial conditions on aerospace demand.
- Nine-month interest and other income included a $1.6 million pre-tax gain from lawsuit settlements; management said the after-tax benefit to net earnings was $1.1 million, or $0.05 per share.
- The prior-year comparison included a $1.3 million restructuring charge related to the 2009 closure of Neltec Europe SAS. Remaining obligations included $1.2 million for that closure and $647,000 of older lease obligations, with payments expected through fiscal 2013.
- Up to $2.2 million in additional acquisition earn-out payments may be due over two years, depending on objectives. Environmental matters involve four sites and a separate private-party claim; recorded environmental liabilities were $9,000. Management did not expect known environmental matters to materially affect the company overall, while noting an individual reporting period could be significantly affected.
- Approximately $190.5 million of cash and securities was held by foreign subsidiaries; the company stated its intent was to reinvest those funds in foreign operations or other foreign activities.
Key facts for investors to verify
- Confirm the issuer and reporting period: the source is Park Electrochemical Corp.’s fiscal 2012 Q3 filing, despite the request identifying Park Aerospace Corp. and 2010 Q3.
- Assess whether lower gross margins and the aerospace manufacturing transfer costs persist, and whether the Kansas expansion contributes to sales and profitability.
- Separate recurring earnings and cash generation from the one-time lawsuit settlement gain and consider the year-over-year decline in nine-month operating cash flow.
- Review the location and practical availability of foreign-held cash, the potential acquisition earn-out, and the remaining restructuring obligations.
- Monitor demand in electronic materials and aerospace, as well as environmental and other litigation contingencies; management reported no material change to previously disclosed risk factors.