Park Electrochemical Corp. — Form 10-Q Summary
Filing identity and period: The supplied filing is for Park Electrochemical Corp., not Park Aerospace Corp. It covers the 13 weeks ended May 31, 2015 (the company’s fiscal 2016 first quarter), compared with the 13 weeks ended June 1, 2014. This does not match the request metadata identifying Park Aerospace Corp. and “2014 Q1.”
Business context and key financial metrics
Park develops and sells advanced materials for electronics and aerospace markets. Figures below are in millions of dollars, except per-share amounts and percentages.
| Metric | 13 weeks ended May 31, 2015 | Prior-year comparable period |
|---|---|---|
| Net sales | $37.829 | $48.817 |
| Gross profit / margin | $11.367 / 30.0% | $16.929 / 34.7% |
| Operating earnings | $5.442 | $10.066 |
| Net earnings | $4.777 | $8.216 |
| Diluted EPS | $0.23 | $0.39 |
| Operating cash flow | $(5.818) | $9.339 |
At May 31, 2015, cash and cash equivalents were $61.559 million and marketable securities were $167.459 million, totaling $229.018 million; an additional $25.000 million was restricted. Working capital was $244.431 million and the current ratio was 10.1 to 1. Debt was $91.500 million, down from $94.000 million at March 1, 2015; the reported interest rate was 1.34%. The company declared a $0.10-per-share dividend.
Material changes versus the prior comparable period
- Sales declined 23%, primarily because of lower printed circuit materials sales in Asia and North America. Printed circuit materials revenue fell to $28.1 million from $39.8 million; aerospace materials revenue rose to $9.7 million from $9.0 million.
- Gross margin contracted to 30.0% from 34.7%, reflecting lower sales and production of printed circuit materials and fixed overhead costs. Operating earnings fell 46%, and net earnings fell 42%.
- Sales decreased in all reported regions: North America by 14%, Asia by 30%, and Europe by 25%. Foreign sales were 52% of total sales, versus 56%.
- Operating cash flow shifted to an outflow, primarily due to a $10.9 million decrease in the deferred-tax provision associated with the Singapore cash repatriation and related tax payment. Investing cash outflow was $35.5 million; financing cash outflow was $39.0 million.
Outlook, liquidity, risks, and unusual items
- Management said demand for the company’s products in the remainder of fiscal 2016 and beyond was difficult to forecast. No specific revenue or earnings guidance was provided.
- Management believed financial resources were sufficient through the end of fiscal 2016 and for the foreseeable future. Approximately $218.5 million of the $229.0 million in cash and marketable securities was held by foreign subsidiaries.
- The company repatriated $58.0 million from Singapore and paid $10.7 million in related taxes during the quarter; the tax expense had been accrued in the prior fiscal year. The company also recorded $25.0 million of restricted cash for credit-facility covenant requirements.
- The quarter included $0.124 million of restructuring charges. The company sold its Nelco Zhuhai building for approximately $2.026 million with no gain or loss, repurchased 444,834 shares for $9.493 million, and made a $2.5 million debt principal payment.
- The credit facility includes financial covenants and scheduled debt installments beginning in July 2015. Environmental matters include potential-responsible-party status at four sites; the company reported no recorded environmental liabilities and did not expect known proceedings or claims to materially affect its financial position or results.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. The filing reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Confirm the intended issuer and reporting period: the filing is Park Electrochemical Corp.’s quarter ended May 31, 2015, not a Park Aerospace Corp. 2014 Q1 filing.
- Assess whether the decline in printed circuit materials sales and gross margin persisted after this quarter; management provided no specific forward guidance.
- Review the location and availability of foreign-held cash, covenant requirements, debt repayment schedule, and the effect of repatriation taxes on domestic liquidity.
- Monitor operating cash conversion, restructuring-related costs, and the outcome and insurance coverage of environmental and other contingencies.