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.

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?

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.

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…

(Operator Instructions) Our first question comes from the line of Andrew Fleming with Heartland Advisors. Please proceed.

Wondered if you could just comment on the strength you're seeing in the different end markets, and then also the OEM's reaction to Meteorwave product thus far?

So, taking in reverse, Meteorwave, that's the type of thing we are working with selective OEMs, large OEMs, on qualification programs that are for future programs, virtual products for them. I mean I don't know, my opinion is that, sorry to put this way but pretty damn good, the reaction. And then the end markets, so Andrew in electronics you're talking about, right?

Yes.

So you know what we supply into, we supply into Internet infrastructure. So we are talking servers, routers, storage, some base stations, so anything that would relate to Internet infrastructure, that's where we're going to supply into. We don't supply anything, I think just about zero, to any kind of end product that you or I could buy, any kind of portable devices or PCs, it doesn't work that way. But I think what I have indicated previously is that, I don't know, I don't like real explosion but the significant increase in the usage of portable devices and also the cloud, most people believe it creates a need from our infrastructure. So the Internet service provider companies and the telecom companies, they need more equipment to handle and process all the data that is being, because of the significant usage of portable devices and the cloud. So the cloud is interesting because everything has to be (indiscernible), it's not your computer that's doing the computing anymore, but people don't want to hit the enter button and wait 10 seconds for basically go to the cloud and come back, so it requires a lot of bandwidth. So that's what we are feeding into, those are the trends that matter to us. People ask us, semiconductor companies are doing well or not well. So that's all tied together but that's really going to be more a function of consumer activity with portable devices, PCs, consumer activity with portable devices, PCs, and that's all tied together but it's not the immediate driver. So, if you want to kind of think about Park, you got to think of the companies, the big OEMs that supply into the Internet infrastructure in the market. And then you also got to look at the big telecom companies, the Internet service providers, and ask if they are buying stuff globally. We saw our markets globally, it's not that North America is the only market for us.

Our next question comes from the line of Sean Hannan with Needham and Company. Please proceed.

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?

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?

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?

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.

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?

What gap?

In terms of the performance of your products versus theirs.

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…

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?

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.

Agreed. I follow you, Brian. Thanks very much for all the color.

(Operator Instructions) Our next question comes from the line of Morris Ajzenman with Griffin Securities. Please proceed.

A question here, going back a couple of years ago, your top line on a quarterly basis was probably running anywhere between 7 to 10, maybe it was higher, per quarter, and when I look at the associated gross margins and operating margins, gross margins were probably 31% to 32%, 34%, in last couple of quarters you're running it up to 20s, operating margins actually drove north of 20% in a couple of quarters, and now you're running anywhere between 12% and 15%. So my question is, I mean you talked about during the presentation three consolidations of facilities which will get you better operating leverage, but on accounts of that, just spoke about on high-end performance, particularly competitors moving into the space, so my question conceptually but nonetheless, if we get back the revenue run rate we were at a couple of years ago, putting all these twos together, can we get back to margins, both on a gross and operating basis, where we were previously or can we be higher or should we not expect those sort of margins if we hypothetically return to those revenue run rates we had a couple of years back?

I would say absolutely, and that's what's Park is always about. If you look at our history, we haven't had a lot of top line growth but we have always focused on finding ways to grow our bottom line. Now we'd like to see even top line grow too and we put a lot of hard labor in it over the last years with developing new products in electronics and also aerospace so we can get some top line growth, but we've always I think been able to do more with less, right, I mean that's kind of our way of doing things. So, if you look at equal top line, I would hope the bottom line would be better, not the same.

So I guess getting at the margins, those margins you had again a couple of years back, gross margins 33%, 34%, operating margins just north of 20%, if we got back to similar top line, again it's a big assumption on niche and everything, but you believe with certainty that those margins would be attainable should the revenue level get back to where it was in the past?

I believe that's correct, yes I do. Now I'm not predicting anything but…

I understand that, I'm not asking you to predict, I'm just asking is conceptually that's still in the room that things really haven't changed that materially outside of top line declining, if it were to revert back, maybe…

Morris, it's very much a room. Remember what we just said. You have to go back a year from April to get to the same top line, but you have to go back two years to get to the same bottom line. Now you tell me what that means.

Okay, you've answered my question. Thank you.

There are no further questions at this time.

Okay, thank you very much everybody. It's always good to catch up and we will be talking to you actually a little sooner interval-wise because – probably towards the end of June, after we release our Q1 results. Okay, thanks everybody. Have a good day. Matt and I are here in the office if you need to talk to us. Bye.

Ladies and gentlemen, thank you for your participation. This concludes the presentation. You may now disconnect. Have a wonderful day.