Good morning. My name is Glynn and I will be your conference operator today. At this time, I would like to welcome everyone at the Park Electrochemical Corp. Fourth Quarter FY 20013 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. At this time, I would turn today's call over to Mr. Brian Shore, President and Chief Executive Officer. Mr. Shore, you may begin your conference. Brian E. Shore: Thank you, operator. Good morning, everybody, Brian Shore here. With me as usual is Matt Farabaugh, our CFO. So, Matt will start with the financial commentary, but we're going to try something a little different this time, which is that Matt will only cover items which are not covered on the news release. There's a transcript of Matt's comments which were posted on our website earlier this morning, so you have the news release and also a transcript of the comments Matt is about to give, and we're making this change based upon inputs we've received from some of our call participants in the past. Please let us know if you like this and if you'd like to suggest we try something else, but this is an attempt to make the introductory remarks a little more streamlined. Okay, alright now, why don't you go ahead? P. Matthew Farabaugh: Okay, thanks Brian. Certain statements we may make during the course of this discussion which do not relate to historical financial information may be deemed to constitute forward-looking statements. Any forward-looking statements are subject to various factors that could cause actual results to differ materially from our expectations. We have set forth in our most recent Annual Report on Form 10-K for the fiscal year ended February 26, 2012 various factors that could affect future results. Those factors are found in Item 1A and after Item 7 of that Form 10-K. Any forward-looking statements we may make are subject to those factors. I'd like to briefly review some of the items in our fourth quarter and fiscal year 2013 P&L, which are not specifically addressed in the earnings release. It is important to note that the fourth quarter ended March 3, 2013 was a 14-week period compared to the fourth quarter ended February 26, 2012, which was a 13-week period. In addition, the fiscal year ended March 3, 2013 was a 53-week period compared to the fiscal year ended February 26, 2012, which was a 52-week period. During the fiscal year 2013 fourth quarter, North American sales were 49% of total sales, European sales were 9% of total sales and Asian sales were 42% of total sales, compared to 46%, 14% and 40%, respectively, for the fourth quarter of the prior fiscal year, and 46%, 8% and 46%, respectively, for the 2013 fiscal year third quarter. Sales of Park’s high performance non-FR-4 printed circuit materials were 82% of total laminate and prepreg material sales in the fourth quarter of fiscal year 2013, 80% in the fourth quarter of the prior fiscal year, and 82% in the third quarter of fiscal year 2013. Sales of Park’s aerospace materials and parts were $7.0 million for the fourth quarter of the 2013 fiscal year compared to $6.7 million in the fourth quarter of the prior fiscal year and compared to $5.5 million in the third quarter of the 2013 fiscal year. Sales of aerospace materials and parts were $25.9 million in the 2013 fiscal year compared to $26.5 million in the prior year. During the fourth quarter of the 2013 fiscal year, the Company had one customer that was more than 10% of total sales, which was TTM. The four remaining customers rounding out the top five were, WUS, Sanmina, ISUPETASYS and Multek. The top five customers totaled approximately 47% of total sales, our top 10 customers totaled approximately 62% of total sales, and the top 20 customers totaled approximately 75% of total sales. During the 2013 fiscal year, the Company had two customers that were more than 10% of total sales, which were TTM and Sanmina. The three remaining customers rounding out the top five were WUS, Multek and ISUPETASYS. The top five customers totaled approximately 48% of total sales, our top 10 customers totaled approximately 63% of total sales, and the top 20 customers totaled approximately 74% of total sales. Brian E. Shore: Okay, Matt, thank you very much. As we indicated, much more short and sweet, so let us know how you like that. So let me give you some additional comments and perspective. As Matt noted, and also try to highlight in the news release itself, the fourth quarter was a 14 week quarter which is unusual, most of our quarters are 13 week quarters, but our fiscal year is always the closest Sunday to the end of February, so every four years across, we end up with a 53 week fiscal year, and when we have that occurrence, we always load 14 weeks into the last quarter to get the 53 weeks. It's almost like a leap year thing I think, but the calendar kind of works itself out. What's important to note that, of course then not only is it 14 week compared to 13 week for the prior year in the prior quarter, but also 53 weeks compared to 52 weeks. When you look at the fourth quarter's 14 weeks, and you adjust that to the top line revenue number, to a 13 week period, it would be about I think $39.6 million, will be under $40 million, in the fourth quarter if you adjusted for the 13 weeks. And that would actually be quite a bit lower than third quarter, I don't know you could make the value junction, it would be lower than third quarter of last year and lower than the fourth quarter of the prior year. The third quarter I think it was about $41.3 million and the fourth quarter of the prior year $43.7 million. So the thing is that it took 14 weeks to generate those revenues. Of course the thing that doesn't change is while the cost continued for the 14 weeks, so revenues were soft in the fourth quarter. It looked like they're a little bit up from the third quarter. I guess the point we're trying to make is actually it was down if you kind of apples-to-apples it, third quarter versus fourth, the fourth quarter as compared to the third quarter. So, just want you to be aware of that because that might explain some of the P&L features of the fourth quarter as well. So having said that, and again I think it's important that you just keep that in mind, let's talk about perspective with the market and what we are doing here. So, I think it was like the end of, yes the end of September of the last fiscal year or 2012 calendar year, these dropped off. Up through September, things weren't – I wouldn't say they were going like gangbusters, right, but things dropped off, so then we got October, November, December, January, February, March where things were quite low, they stayed at that low level. That's six months I guess, right. I didn't mention April though. That wasn't an oversight. But anyways, so they drop off end of September, beginning of October, and they stayed kind of level more or less for six months through March. People keep asking me what's going to happen, what's going to happen, of course I don't know. But what I can tell you is the facts. The fact is that in April, April was our best revenue month for about a year and our best bottom line month for over two years. And when I say best, we have five-week months and four-week months, we're talking weekly averages so that we can apples-to-apples it, it was a four-week month, March was a five-week month. So it's important to understand that when we compare months, we're always equalizing the timeframes between four and five weeks. So, what's going on in April, I really don't know, but those are the facts, our best revenue month in about a year and best bottom line month in over two years I think. So, why would that happen, why would we have the bottom line month better than the revenue month, if you look at it from that perspective, having to go back two years to match that, over two years? So what's happened to our bottom line in that period? Things you know about, in last year, we closed our Connecticut facility, I think towards the end of the prior fiscal year or the beginning of the last calendar year we closed our Washington facility, and also during I think August of last year we closed our China facility. All those closures were really part of a plan to consolidate into existing operations and did not involve losing any top line that I know of, but the bottom line impact was meaningful and significant. So, that contributes more to the bottom line as compared to those prior periods. If you look back a year ago for instance, where I said, you have to go back a year ago to get the same top line number, during that year ago, we might have had the same top line as we got in April but the bottom line would have been dragged down by those factors. Now let's look at the aerospace because remember I told you that after, I guess the end of September when we closed Waterbury, that aerospace will no longer be a negative from an operating profit perspective. I wouldn't have told you that if I wasn't pretty sure that would be true. Obviously I could speak factually about it in terms of past but also the future. And that is true, that has been true, was true in the fourth quarter as well that aerospace is no longer a drag. Now, I might say that it's not performing anywhere nearly what we would like to. As a matter of fact, it was a disappointing performance in the fourth quarter, and I would attribute it to start-up or execution, or certainly less than optimal execution, but I wouldn't say I was very happy with it. But nevertheless, you should know that was not a negative. It's still above water as it was expected to be. So those things contribute to the bottom line of course. As you went back a year ago, aerospace was more of a drag. I think we mentioned that there was a loss in aerospace in the 2012 and 2013 fiscal years. That was planned, because of the transitions we talked about, with the duplicate operating of facilities and a qualification cost, alright. Even though the 2013 year was negative, as we indicated it would be in our last conference call, the third and fourth quarters were not. Now the good news is, we – based on adjustments there about a month ago, I'm talking to Kansas when I say 'there', they were announced, and I feel that things are coming together more quickly now than they were before that and I feel more encouraged about how we are doing. Long-term, there's nothing into the long-term. We are talking short-term stuff because analysts are interested in that, but you're also interested in how we are doing I'm sure. Long-term, nothing really changes. This is a long-term investment for Park's future that I feel is critical and if we didn't make that decision and have the conviction to live with it, stick with it, six, seven years ago, I think Park would be a company that would not be – would be a company with question marks I would say at this time. So, we are very thankful we made that decision and stuck with it, but in terms of the current performance, I feel more encouraged, like I said, and I'm not just kind of, it's not just intuitive instinct, there are indicators that lead us to believe that, and that contributes also to the story in April I would say for sure, not only the numbers but the numbers are a function of the performance, you know execution. Remember I said execution was disappointing in Q4 even though still above water, as I promised it would be, and it was, but still disappointing. That disappointment is reversing itself now, and that was reflected in the month of April. Let's talk more about what's going on here. Let me just cover a couple of things. Yes, so we talked about the closure of, I want to backtrack here a little bit, of Waterbury, of Zhuhai, of Washington – oh, I just want to go back to copper because it was a significant impact, it was about $425,000 negative in Q4 versus the prior year's Q4 and about $150,000 negative in Q4 versus Q3. The Q1, we are not expecting very much of an impact as compared to Q4, alright, some housekeeping stuff that Matt and I want to cover. So let's talk about electronics. We have two new products that we have been talking about quite a bit, our –20, which is in very, very active qualification program activity now. We qualified many, many OEMs and customers, circuit board shops. So I think that's all very good. I think the market reception is good. That's my opinion. I think it's a very good product for the market. Remember this is what we look at as our follow on to –13, but I think it's – there are competitors to the –20 product line but there's something, I think when we think about it in terms of its combination of electrical properties and reliability, neither of which is unique, but the combination I think is unique. I believe it's a very good solid product for today's market and I'm not alone in that belief I will say. Meteorwave, that's our next generation, working with qualification on kind of more futuristic programs. Some people part think that the market is not quite collectible yet, but we are not stopping with our development activities because even though maybe it's a little (indiscernible) market, we plan to come out – I shouldn't say plan, we're working to come out with a new product in the near future, relatively near future, that will one up Meteorwave, and maybe that's based upon indications we've received from the OEMs about what might be three or four years down the road. So we don't know what else to do here except to try to stay ahead of the technology curve. We're certainly not going to get into commodity business thinking and selling on price, that's not our thing. So interesting with the proven revenue and also bottom line, we often talk about high performance, Matt talks about that, it's a very key factor. I think that Matt said it was 82% or something like that. My guess is that if you use our definition of high-performance, our competitors would really be way, way behind us, but they are catching up. I think I mentioned that we attracted competition in the high end, based upon the fact that we're public, we're public about our margins, we're public about our high-performance percentage, I think a lot of our competitors took notice of that and they are coming into our market hard. But when we talk high-performance, like I said, I think we are still quite a bit ahead of others in terms of the percentage of our business which is high-performance. But we never really gave you any, what's the word, like color about high-performance because we probably have, I don't know, 15 products what we sell actively that are high-performance area category, and they are not all the same. There's certain high performance which is higher than others. So, you remember we had an earthquake problem in Japan and it hurt one of our product lines, one of our real high-end product lines badly, our signal integrity product line which is based upon sourcing of a very specialized material from a Japanese company with which we have a very good relationship and partnership. That earthquake actually brought us closer together I think. If you look at our revenue at this point, not only in the first quarter, but even in the fourth quarter, the signal integrity product line continues to grow, even after the earthquake it grows every year, year-over-year. And it seems like a lot of the wins are in the signal integrity product line, recently a lot of the opportunities that we have been able to take advantage of, and that would be – if you want to kind of break down high-performance, that would be the higher end of high-performance and you're probably not going to be shocked to hear that that would equate to higher margins as well, and I'm talking about not comparing commodity, I'm comparing to other high-performance products. So, that's I think quite a solid technology, that signal integrity type technology, it's something that I think Park would be able to be a leader in, I don't know. I think there's too many people to argue that point. So I wanted to give you a little bit of a flavor, color on aerospace and also electronics piece. We haven't really broken down electronics very much in terms of what are we doing in high-performance. Couple of other things I want to cover though just to housekeeping, close some things up. In the third quarter conference call last year, I mentioned there were $300 million, plus or minus $25 million, opportunities for aerospace. Lots of people got confused or upset or all of the above which (indiscernible) we're just trying to say that this is an indicator of how far we have come with aerospace that we're now in the area of credibility where we're in a position to talk about things like this, but just by a way of update, I already told you that [Winloes 3] (ph) was an acquisition, and I think last summer, we ended that discussion, we couldn't get the numbers to work. The other two were joint ventures with aircraft OEMs that are household names as they say, and this is what's laying to develop their new airplanes or we would JV with them on some aspect of it. And one of these programs was put off for a couple of years, I think I referred to that last time, the other one seem to have just kind of died. So, all three of those opportunities are not active anymore. We are looking at acquisitions, I should let you know that, two things in particular, and one is a category, one is not, but interestingly in both cases, they relate to electronics and aerospace, kind of unusual but that's how it is. Let's see. Okay, aerospace, a couple of other things in aerospace. So, we haven't really grown our top line as you can see, we're kind of stuck at $25 million for several years now, but really our effort has been in transitioning to Kansas, getting Kansas up and running, closing the other facilities, re-signing the qualifications, we really haven't had a lot of energy and time to try to grow. It's hard to grow when you are in transition, it's like an unstable foundation, you want to get the foundation stable before you put another floor in the house, right. But we started that process of growing recently, and so, this is not earthshaking news but we did enter into a $13 million three-year contract with a jet engine company, again household name, you would definitely know who they are. So it's not going to break the bank, but it's a good thing, $13 million over three years, and we believe that's the estimate of the contract, but we believe actually there's quite a bit of upside opportunity there and we'll see, but we believe there could be quite a bit more than that with that one program, and that leads to other programs with the same company, it isn't just one program. We're doing a prototype work on a new jet aircraft, and will that aircraft will end up going into production or when it will end up being on the aircraft if those goes into production, I don't know but I just thought I would mention that you because that's a nice thing. And these are many, many composite parts for us in this new jet aircraft. We announced yesterday that we are on the James Webb Space Telescope, not a lot of volume, just for our patented struts, these are Sigma Struts, but it is very gratifying, a real honour to be on that program, I really love that kind of stuff. Remember, few years ago we won the Northrop Grumman R&D Supplier of the Year Award for these same patented struts, that was for the Orion, which was cancelled, but the James Webb hopefully won't be cancelled. We're pretty happy about being on that program. It's really an honour to be on such a special program. And these struts, they are not little components, this is a major part of the structure of these space vehicles. These struts are very attractive for space applications because they are very strong, very significant load-bearing capability with very light weight, and in space, it is so critical to really reduce weight. Actually there's another space program that we were told we're most likely to get onto, we just heard that about a month ago,, we can't talk for that one yet, but it was for the same struts, so that's good, we're happy about that. And yes, I guess that's it. I just wanted to give you a couple of little updates on some of the things going on in aerospace. So, operator, that ends our introductory remarks, can we go to question-and-answer portion of the call please?
Our next question comes from the line of Sean Hannan with Needham and Company. Please proceed. Sean Hannan - Needham and Company: So just wanted to see if I could ask a follow up around breakdown of what you would see in the quarter. So if I look and adjust for the 14 weeks versus 13 weeks, Asia looks like was down versus the November quarter while the others were up. It looks like it might have been down double digits and actually North America being up, it was really, I think it was probably a small number, Europe up a little bit more, so just wanted to see if I could get some comments from you, Brian, on the demand that you saw in those geographies and then how much of that decline in Asia was tied to Chinese New Year versus end demand issues? Brian E. Shore: We probably should have covered that question. North America, aero was up quite a bit, and if you look at quarter to quarter, Matt reported those numbers, that would have held up the North America percentage because most of our aerospace stuff, a large majority is still North America. So that's really the story there, not so much electronics. Europe, it's kind of very small, might have been more our PTFE product line actually than anything else which is a little bit of a different product line for cell towers, a niche product line for us, but it's so small that (indiscernible) to move the needle percentage-wise. But I'm glad you brought this, Asia is what is the big story and that was down quite a bit and Asia really drives our bottom line. There's more leverage in the Asian P&L than the other P&Ls. So, when Asia is down, it's not good for our bottom line generally. Now the April story is very much at least contributed to by the Asian story. The Asian story is very much part of the April story. So does that help a little bit? Sean Hannan - Needham and Company: That was helpful a little bit. And actually I think that that partly addresses the next question I have. Let me just see if I could ask though. So just trying to get a better explanation around the gross margin decline, how much of that was a function of mix with the aerospace revenues or advanced composites that are up really quarter over quarter, some of the drag I think that you had referenced that was perhaps still flowing through there, but to what degree was copper a factor that might have been smaller, and of course then the lost leverage that you had within Asia, just trying to get a sense of really what were the main puts and takes to that decline thee? Brian E. Shore: Gross margin, yes. So you talked about copper, that was a factor. We talked about the 14 weeks versus 13 weeks, that's a significant factor, because like I said, you got 14 weeks of cost and maybe 13 weeks of revenues, and costs don't take a vacation that one extra week of course. And then the other thing that you mentioned, you touched on which, let's talk about that, is aerospace. So aerospace, let's say a bigger market share, or whatever you call it, breakdown, sales breakdown, a lot more of it related to aerospace but the margins aren't there yet. As I said, we are above water but we are not looking at significant contributory margins in aerospace. So, when you say aerospace, the sales breakdown, aerospace is a bigger share, right, but not contributing very much, and electronics is a smaller share and Asia even a smaller share, and you look at all those things and you say, that's not good news for our gross margins. Sean Hannan - Needham and Company: Okay, thanks for that. And then, Brian, you had mentioned in your remarks a few comments around the competitors really coming into the market hard. So just wanted to see if I could get a little bit more of a sense from you today in terms of what are you seeing from their products, to what degree are they performing at least close enough perhaps with also better pricing where this is creating some of the pressure you might be seeing in various markets such as Asia, and does it feel like some of perhaps the Asian players have closed or already close to closing the gap? Brian E. Shore: What gap? Sean Hannan - Needham and Company: In terms of the performance of your products versus theirs. Brian E. Shore: This is not a fourth-quarter story, I mean this is going on since 2006 or something, I think I have mentioned this many times, and we create a problem, we attract it to competition. I mean at least in some cases I know that because I was told that by people who were competitors. So I guess with all that in hindsight, probably not much we could have done about it. I think we are doing what all we can do, which is to continue to probably stay ahead. But there's no question it's a tougher market than it was. I mean we really owned that high-end space in the mid-2000s, not that we had no competition at all but we were quite dominant. I hope I'm an optimist or what, but I still feel that Park has something special to offer, I feel it's something about our products, it's something about our quality, and something about our attitude towards the customers, and I sense that maybe some of these other companies are having difficulties putting those combinations together. Where pricing is going to be more of a factor, we're probably not going to win. So we're more likely to win when pricing is not the key issue, and that could be either technology or maybe working closely with our customers to help them succeed with their own factory or process, and it could be responsiveness, I guess a lot of intangibles. So my comment is, I feel we're doing the right thing and I think it's paying off now, but we're sticking to what we do and not selling our souls, not [coming forward] (ph) in the market. I'm very glad that we made those tough decisions and I think they are paying off now and my feeling is they will pay off on a going forward basis too. So that doesn't mean that there won't be tough competition there, there absolutely will be, it's probably going to even get more difficult, but we aren't negative about being in the electronics world. I'm glad like I said, we're here in space world as well, but we're not negative about being in the electronics world, and we feel there is a place for us in that world. It may not be $500 million which it was maybe back in late 90s, but we still feel there is a meaningful place, we feel that we are a company people come to often when they are looking for something special, they're looking for something different, they're looking for continuity, looking for a company that's plugged into the market, understands who the OEMs are and what they want with the customers, a company that always deals with integrity, always no matter what other people might do, and integrity is not cheap when certain of your competitors don't really feel that you can stay in commitment to integrity. Anyway, but so sometimes you lose by having integrity, but long-term, I think it's the right thing and I think it's something that the market recognizes. I'm not sure you're interested in these kind of comments at all but nevertheless I thought people should hear them because maybe not responsive to what you're specifically looking for, Sean, but that's how I feel about it anyway. Sean Hannan - Needham and Company: Those comments are helpful, Brian. I appreciate them. Last question, just in terms of the project you had announced for, or the James Webb project, what do you sense as a dollar opportunity here on an aggregate basis these next four to five years? It doesn't sound like it's all that major, but should it succeed $10 million-ish all in or how do we put that into context? Brian E. Shore: No, it will not succeed $10 million all in. I don't have the number because the program is still under development. So what they said is that for all these struts, we're hit, but they still didn't give us the design criteria for the struts, which is basically size and load-bearing, we have to design the struts based upon that criteria. This is not a kind of commodity type thing or volume thing, probably each one is going to be a one-off. Obviously there's a lot of premium that's paid for it because of all the design activity. But, Sean, this is not the type of thing that we mentioned because it's some big revenue opportunity, although it does lead to other space things, I think that we're getting to be pretty well-known in that space community, as to where to go when you build significant space vehicles, but it's not like for instance that I think I mentioned about the contract with the engine company where there is some real revenue that we should see from that that has upside potential as well. I just mentioned it I guess mostly because I feel very honored, we do, and that it might signify to some people that maybe we are for real. I mean let's face it, if they put that thing up there, and those things break, it's not a great situation, is it. Sean Hannan - Needham and Company: Agreed. I follow you, Brian. Thanks very much for all the color.