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Park Electrochemical Corp. Reports Second Quarter Results

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Park Electrochemical Corp. (NYSE-PKE) reported net sales of $42,349,000 for the second quarter ended August 31, 2014 compared to net sales of $44,497,000 for the second quarter ended September 1, 2013. Park’s net sales for the six months ended August 31, 2014 were $91,166,000 compared to net sales of $87,935,000 for the six months ended September 1, 2013.

Park reported net earnings before special items of $5,015,000 for the second quarter ended August 31, 2014 compared to net earnings before special items of $5,983,000 for the second quarter of last year. During the second quarter ended August 31, 2014, the Company recorded pre-tax restructuring charges of $83,000 in connection with the closure of its Nelco Technology (Zhuhai FTZ) Ltd. facility located in the Free Trade Zone in Zhuhai, China and the closure of its New England Laminates Co., Inc. business unit located in Newburgh, New York. During the second quarter ended September 1, 2013, the Company recorded a tax benefit of $2,181,000 in connection with a tax refund related to amended federal income tax returns and pre-tax restructuring charges of $119,000 related to the closure of its Zhuhai facility. Accordingly, net earnings were $4,955,000 for the second quarter ended August 31, 2014 compared to $8,045,000 for the second quarter ended September 1, 2013.

For the six-month period ended August 31, 2014, Park reported net earnings before special items of $13,594,000 compared to net earnings before special items of $11,112,000 for the last fiscal year’s first six-month comparable period. The six-month period ended August 31, 2014 included pre-tax restructuring charges of $350,000 related to the facility closures mentioned above. In addition, the Company recorded a pre-tax charge of $260,000 during the six-month period ended August 31, 2014 for additional fees incurred in connection with the 2014 fiscal year-end audit. The six-month period of the prior fiscal year included the tax benefit of $2,181,000 mentioned above and pre-tax restructuring charges of $319,000 in connection with the closure of its Zhuhai facility. Accordingly, net earnings were $13,171,000 for the six-month period ended August 31, 2014 compared to net earnings of $12,974,000 for the six-month period ended September 1, 2013.

Park reported basic and diluted earnings per share before special items of $0.24 for the second quarter ended August 31, 2014 compared to basic and diluted earnings per share before special items of $0.29 for last year’s second quarter. Basic and diluted earnings per share were $0.24 for the second quarter ended August 31, 2014 compared to basic and diluted earnings per share of $0.39 for last year’s second quarter.

Park reported basic and diluted earnings per share before special items of $0.65 for the six months ended August 31, 2014 compared to basic and diluted earnings per share before special items of $0.53 for the six months ended September 1, 2013. Basic and diluted earnings per share were $0.63 for the six months ended August 31, 2014 compared to basic and diluted earnings per share of $0.62 for the six months ended September 1, 2013.

The Company will conduct a conference call to discuss its financial results at 11:00 a.m. EDT today. Forward-looking and other material information may be discussed in this conference call. The conference call dial-in number is (844) 466-4114 in the United States and Canada and (765) 507-2654 in other countries and the required passcode is 11656192.

For those unable to listen to the call live, a conference call replay will be available from approximately 2:00 p.m. EDT today through 11:59 p.m. EDT on Wednesday, October 8, 2014. The conference call replay can be accessed by dialing (855) 859-2056 in the United States and Canada and (404) 537-3406 in other countries and entering passcode 11656192 or on the Company’s web site at www.parkelectro.com/investor/investor.html.

Any additional material financial or statistical data disclosed in the conference call will also be available at the time of the conference call on the Company’s web site at www.parkelectro.com/investor/investor.html.

Park believes that an evaluation of its ongoing operations would be difficult if the disclosure of its financial results were limited to accounting principles generally accepted in the United States of America (“GAAP”) financial measures, which include special items, such as restructuring charges and tax benefits. Accordingly, in addition to disclosing its financial results determined in accordance with GAAP, Park discloses non-GAAP operating results that exclude special items in order to assist its shareholders and other readers in assessing the Company’s operating performance, since the Company’s on-going, normal business operations do not include such special items. The detailed operating information presented below reconciles the non-GAAP operating results before special items to earnings determined in accordance with GAAP. Such non-GAAP financial measures are provided to supplement the results provided in accordance with GAAP.

Park Electrochemical Corp. is a global advanced materials company which develops and manufactures high-technology digital and RF/microwave printed circuit materials principally for the telecommunications and internet infrastructure and high-end computing markets and advanced composite materials, parts and assemblies for the aerospace markets. Park’s core capabilities are in the areas of polymer chemistry formulation and coating technology. The Company’s manufacturing facilities are located in Singapore, France, Kansas, Arizona and California. The Company also maintains R&D facilities in Arizona, Kansas and Singapore.

Additional corporate information is available on the Company’s web site at www.parkelectro.com.

Performance table, including non-GAAP information (in thousands, except per share amounts -unaudited):

13 Weeks Ended 26 Weeks Ended
8/31/14 9/1/2013 6/1/2014 8/31/14 9/1/13
Sales $ 42,349 $ 44,497 $ 48,817 $ 91,166 $ 87,935
Net Earnings before Special Items1 $ 5,015 $ 5,983 $ 8,579 $ 13,594 $ 11,112
Special Items net of Tax (60 ) 2,062 (363 ) (423 ) 1,862
Net Earnings $ 4,955 $ 8,045 $ 8,216 $ 13,171 $ 12,974
Basic and Diluted Earnings per Share:
Basic Earnings before Special Items1 $ 0.24 $ 0.29 $ 0.41 $ 0.65 $ 0.53
Special Items 0.10 (0.02 ) (0.02 ) 0.09
Basic Earnings (Loss) per Share $ 0.24 $ 0.39 $ 0.39 $ 0.63 $ 0.62
Diluted Earnings before Special Items1 $ 0.24 $ 0.29 $ 0.41 $ 0.65 $ 0.53
Special Items 0.10 (0.02 ) (0.02 ) 0.09
Diluted Earnings (Loss) per Share $ 0.24 $ 0.39 $ 0.39 $ 0.63 $ 0.62
Weighted Average Shares Outstanding:
Basic 20,925 20,836 20,880 20,902 20,832
Diluted 21,029 20,852 20,988 21,008 20,848

1 Refer to “Detailed operating information” below for information regarding Special Items.

Comparative balance sheets (in thousands):

8/31/2014 3/2/2014

Assets

(unaudited)
Current Assets
Cash and Marketable Securities $ 285,185 $ 270,356
Accounts Receivable, Net 22,869 22,881
Inventories 15,157 13,871
Other Current Assets 4,147 4,132
Total Current Assets 327,358 311,240
Fixed Assets, Net 28,129 29,674
Restricted Cash 25,000 25,000
Other Assets 11,163 11,179
Total Assets $ 391,650 $ 377,093

Liabilities and Shareholders’ Equity

Current Liabilities
Current Portion of Long-Term Debt $ 15,000 $ 10,000
Accounts Payable 7,924 6,109
Accrued Liabilities 6,397 5,139
Income Taxes Payable 3,360 2,995
Total Current Liabilities 32,681 24,243
Long-Term Debt 89,000 94,000
Deferred Income Taxes 58,124 58,124
Other Liabilities 183 183
Total Liabilities 179,988 176,550
Shareholders’ Equity 211,662 200,543
Total Liabilities and Shareholders’ Equity $ 391,650 $ 377,093

Additional information

Equity per Share $ 10.10 $ 9.60
Total Cash, Restricted Cash and Marketable Securities $ 310,185 $ 295,356

Detailed operating information (in thousands – unaudited):

13 Weeks Ended
August 31, 2014

13 Weeks Ended
September 1, 2013

13 Weeks Ended
June 1, 2014

GAAP

Specials
Items

Before
Special
Items

GAAP

Specials
Items

Before
Special
Items

GAAP

Specials
Items

Before
Special
Items

Net Sales $ 42,349 $ 42,349 $ 44,497 $ 44,497 $ 48,817 $ 48,817
Cost of Sales 30,178 30,178 30,876 30,876 31,888 31,888
% 71.3 % 71.3 % 69.4 % 69.4 % 65.3 % 65.3 %
Gross Profit 12,171 12,171 13,621 13,621 16,929 16,929
% 28.7 % 28.7 % 30.6 % 30.6 % 34.7 % 34.7 %
Selling, General & Administrative

Expenses

6,252 6,252 6,041 6,041 6,596 (260 ) 6,336
% 14.8 % 14.8 % 13.6 % 13.6 % 13.5 % 13.0 %
Restructuring Charge 83 (83 ) 119 (119 ) 267 (267 )
% 0.2 % 0.0 % 0.3 % 0.0 % 0.5 % 0.0 %
Earnings from Operations 5,836 83 5,919 7,461 119 7,580 10,066 527 10,593
% 13.8 % 14.0 % 16.8 % 17.0 % 20.6 % 21.7 %
Interest Income 226 226 77 77 147 147
% 0.5 % 0.5 % 0.2 % 0.2 % 0.3 % 0.3 %
Interest Expense 360 360 185 185 353 353
% 0.9 % 0.9 % 0.4 % 0.4 % 0.7 % 0.7 %
Net Interest Expense (134 ) (134 ) (108 ) (108 ) (206 ) (206 )
% -0.3 % -0.3 % -0.2 % -0.2 % -0.4 % -0.4 %
Earnings before Income Taxes 5,702 83 5,785 7,353 119 7,472 9,860 527 10,387
% 13.5 % 13.7 % 16.5 % 16.8 % 20.2 % 21.3 %
Income Tax Provision 747 23 770 (692 ) 2,181 1,489 1,644 164 1,808
Effective Tax Rate 13.1 % 13.3 % -9.4 % 19.9 % 16.7 % 17.4 %
Net Earnings 4,955 60 5,015 8,045 (2,062 ) 5,983 8,216 363 8,579
% 11.7 % 11.8 % 18.1 % 13.4 % 16.8 % 17.6 %

Detailed operating information (in thousands – unaudited), continued:

26 Weeks Ended
August 31, 2014

26 Weeks Ended
September 1, 2013

GAAP

Specials
Items

Before
Special
Items

GAAP

Specials
Items

Before
Special
Items

Net Sales $ 91,166 $ 91,166 $ 87,935 $ 87,935
Cost of Sales 62,066 62,066 61,323 61,323
% 68.1 % 68.1 % 69.7 % 69.7 %
Gross Profit 29,100 29,100 26,612 26,612
% 31.9 % 31.9 % 30.3 % 30.3 %
Selling, General & Administrative

Expenses

12,848 (260 ) 12,588 12,597 12,597
% 14.1 % 13.8 % 14.3 % 14.3 %
Restructuring Charge 350 (350 ) 319 (319 )
% 0.4 % 0.0 % 0.4 % 0.0 %
Earnings from Operations 15,902 610 16,512 13,696 319 14,015
% 17.4 % 18.1 % 15.6 % 15.9 %
Interest Income 373 373 145 145
% 0.4 % 0.4 % 0.2 % 0.2 %
Interest Expense 713 713 356 356
% 0.8 % 0.8 % 0.4 % 0.4 %
Net Interest Expense (340 ) (340 ) (211 ) (211 )
% -0.4 % -0.4 % -0.2 % -0.2 %
Earnings before Income Taxes 15,562 610 16,172 13,485 319 13,804
% 17.1 % 17.7 % 15.3 % 15.7 %
Income Tax Provision 2,391 187 2,578 511 2,181 2,692
Effective Tax Rate 15.4 % 15.9 % 3.8 % 19.5 %
Net Earnings 13,171 423 13,594 12,974 (1,862 ) 11,112
% 14.4 % 14.9 % 14.8 % 12.6 %

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