Good morning. My name is Katrina and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp. second quarter fiscal year 2014 earnings release conference call. (Operator Instructions) At this time, I would now like to turn the call over to Mr. Brian Shore, President and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, operator. This is Brian Shore. Welcome to Park's second quarter conference call. I have with me, as always, Matt Farabaugh, our CFO. Matt and I will start with some introductory remarks, then we'll go into Q&A. Matt, why don't we get started with some financial commentary.

Thank you, 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 March 3, 2013, 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 second quarter ended September 1, 2013, P&L which are not specifically addressed in the earnings release. During the fiscal year 2014 second quarter, North American sales were 51% of total sales, European sales were 6% of total sales and Asian sales were 43% of total sales compared to 42%, 9% and 49%, respectively, for the second quarter of the prior fiscal year and 48%, 9% and 43%, respectively, for the 2014 fiscal year first quarter. Sales of Park's high performance non-FR-4 printed circuit materials were 88% of total laminate and prepreg material sales in the second quarter of fiscal year 2014, 82% in the second quarter of the prior fiscal year and 86% in the first quarter of fiscal year 2014. Sales of Park's aerospace materials and parts were $7.5 million in the second quarter of the 2014 fiscal year compared to $5.8 million in the second quarter of the prior fiscal year and compared to $6.7 million in the first quarter of the 2014 fiscal year. Investment income, net of interest expense, for the second quarter of the 2014 fiscal year was negative $108,000 compared to…

Matt, thank a lot. This is Brian. And in last couple of quarters or so, Matt's comments are really limited to items that are not covered in the news release. So Matt's comments are therefore more brief and more to the point. Also a transcript of Matt's comments have already been posted on our website, so you can look up the data there. I know he's covering a lot of numbers, a lot of detail. Also just in case you didn't notice, in our news release, we do a comparison in the tables to the prior quarter. In this case, the first quarter as well as the prior year's comparable quarter, the second quarter, that was actually based upon a suggestion we got from one of our shareholders, which we liked. And it makes sense, because in this world things move so fast, a more relevant comparison is often in prior quarter rather than year ago. And as I think you know, Park's business is not really seasonal very much, so it's not that you want to compare second quarter piece of seasonality issues. So you might note that. And a lot of our comments also in these calls relate to the comparison to the prior quarter, that makes sense as well. Doesn't it? So a little more financial perspective for the second quarter. First of all, second quarter versus second quarter. The current year's second quarter sales a little bit lower, but the bottomline is a little bit better. One of the key reasons, well, in last year's second quarter we still had our Zhuhai and Waterbury plant open. They were closed kind of toward the end of second quarter and beginning of third quarter. So that's a big difference in terms of carrying those costs, last year's second…

(Operator Instructions) Your first question comes from the line of Sean Hannan representing Needham & Company. Sean Hannan - Needham & Company: So if I could start on the aerospace, Brian, looking to see maybe if you can talk a little bit more about the strength that you are actually seeing coming through in revenues in that space today. It looks like that business was up about maybe 30% almost year-over-year and I think better than 10% sequentially. So just trying to understand a little bit more of what's behind that? And the degree that you suspect that that could be sustainable beyond I think the explicit contracts that you laid out? And I have a follow-up to that, as it pertains to that jet engine contract.

Well, the big question mark is always going to be the overall economy and that's difficult to predict. As I said, even thought the electronics revenues dropped off in August and September, aerospace continue to be strong. So they're not always tracking each other in terms of the overall economy as a driver. But aerospace is certainly not immune to the economy. There is no question about that. So that's one factor, I think we really have trouble understanding. But I think what's going on here in part anyway is that we're still kind of emerging as a player in aerospace. So some of this is going to be new programs we're getting on, market share, it's not just economy. We're not just kind of holding up and down with the economy. But really, what we know so far is actually kind of a drop in a bucket as compared to the type of things we're talking about in terms of revenues and dollars. And let me just say that, we still have a way to go with Kansas. I don't think in my lifetime, I'll ever do that again, do a greenfield like that, where we just kind of pick a field somewhere and say, this is where we're going to do it. But we've paid a lot of dues for sure over the last five years and things are definitely getting better every week, every month, every quarter, just in terms of our operating situation, let's call it that. And as things get better and where we performed better, that opens up opportunities for us. When we're struggling, we struggle with the transition for Waterbury to Kansas. It's really difficult to get new business, because we're just not executing that well. But in last, I don't know three,…

Calendar. So 2013 or calendar, this is a calendar year arrangement. So for 2013, our 2013 is long gone. For calendar year 2013, less than $1 million. The original contract, which is still in place, call for about $6 million a year in 2014 and 2015, but we've been asked to double that and then extend to 2016, and that has not been finalized yet. And then we've asked to handle out years 2017 through 2021, where the numbers escalate really dramatically. Sean Hannan - Needham & Company: So all else being equal, it sounds like, if you are going to do sub $1 million for this calendar year, they are asking you to double that say that's a $12 million. So let's say the delta now we are at $11 million as an incremental number to add to whatever your otherwise calendar 2014 numbers would have been. And then there are some other perhaps not as large-sized contracts similar to this jet engine contract, but there are a few others that could be incremental or should be incremental as well in 2014, is that the proper way of thinking about this?

Yes, I think so this will double. It's easy math. So it would be $12 million, $11 million to $12 million let's say in calendar 2014 and in calendar 2015, and then more thereafter. Right, and then there is other things we're looking at, are always looking at, that none of which to my knowledge have this significant large and also fairly fast impact, but there are things which could impact 2014 nevertheless. Although, I'm not aware of anything that would be any one thing, Sean, which would be at that scale. Sean Hannan - Needham & Company: Brian, if I can just jump to the electronics side, and then I am going to jump back in the queue. The high performance percentage of 88%, that seems to imply about $32.5 million number, is that roughly accurate? And if so, can you then explain the non-high performance business, how that it performed in the quarter or what might have happened there? It seems like there might have been a decent dip in the quarter versus May down perhaps double digits when you look at that revenue line?

So our high performance were 88% now in electronics. And so right, I mean the non-high performance was 12% and it's going down. We really don't get any new non-high performance business and I don't think we have for a long time. So most will be running out the legacy stuff, but we're just not really attractive for non-high performance area. So what we have in our high performance is real legacy and that's going to continue to run out. And obviously, it's our challenge and it's important that we continue to emphasize in the high performance area. And I think so far that's going okay. The key thing there is for us to continue to develop new products and to get those new products on new programs, followed by new programs, because they do have really covered that before in conference calls. I think it's something an important point that you see lot's and lot's and lot's in news announcements of this and that from different companies, I mean it's like everyday. But the key thing is, are those products credible? Have they been all tested? Is the data valid? Are you ready to manufacture it? In other words, when we announce a product, we have a reputation for announcing much more slowly than others. It might take an extra nine months now to product. What it means is, like across the wires, next day, no, sorry, next minute. And somebody calls up, customer service, they want to order, we'll take the order, delivery next week. So I just want you to be aware there is another element of this, it's not just coming out with a nice press release about a new product, product has to be robust, the data has to be valid and need to be able to manufacture it on a consistent basis and be able to deliver it. And I don't know why, I think that that's going okay. Always more of a challenge, right, and we've discussed that. But that is our challenge and we continue to come out with new products that are valid and viable products that get into the market. And I feel pretty good about how we're doing with that effort I mean.

Your next question comes from the line of Morris Ajzenman representing Griffin Securities.

A question just kind of following up on the electronic side. You mentioned weakness into August through September, any geographic areas where the weakness was prominent? Anything you can give more color on that from a geographic perspective?

Not really. No. Nothing dramatic. The weakness seems to be, although it's -- we had this question last quarter Morris. And we're reluctant to give a lot more color on the first three or four weeks of the new quarter, because we're concerned that that's almost too much information. It could therefore be misleading. Every week-to-week it's going to be a little different, but if you look at the first three weeks of this third quarter, early month of August, you'd have to say, yes, hard to identify clear and discernible trend of any kind in terms of a geographic pattern.

Switching gears back on the composite side, you highlighted during the conversation here, again in the previous quarter the jet engine manufacturer, the potential possibilities going forward can be meaningful. And then you highlight, because Textron gave you permission to discuss talking about working with the Scorpion. How many other companies, and I know you can't mention them, are you in close negotiations that could be meaningful? Is it just a couple, is that half a dozen? I really have no idea of how many other potential customers exactly meaningful size you are in negotiations with. Can you give us some sort of ballpark idea?

Well, Morris, I guess it depends what you mean by negotiations. A lot of these situations don't end up with discussions of long-term contracts. In other word, we get an RFQ and we respond with a quote and it's a multiyear quote, but the price is adjusted based upon certain considerations. We get to a situation like this engine company, it's not going to be that way. They're not going give us an RFQ and then we respond and then they going to give us POs. There is long-term contract that's involved and that subject to a lot of back and forth negotiation. So it really depends what you're talking about. At this point, I mean I'd even know what to say, but I guess through half a dozen or more situation we're looking at in different stages of a maturity. But this situation with the jet engine company is a little different, because of this scale and size and how much is at stake for not only Park, but for this company as well. From their perspective, they absolutely need a contract, because so much is at stake.

Last quick question on the aerospace. Anything as far as on the horizon for acquisitions for the composite aerospace?

Last quarter, we announced we were looking at something and we were and that it actually was kind of an unusual thing with aerospace and electronics both. But that just kind of fizzled out, it just died on the vine, I don't know what you'll call it. We're looking at smaller acquisitions as well that would be both aerospace, potentially aerospace and electronics oriented. So I guess the answer is mostly no. I think some of the discussions that result could relate to use of cash might be more contracts where investment might be required. And I guess I should say, I have mixed feelings about this, but I know you're interested, so we'll talk about it a little bit with this jet engine company. I mention the out years, we would definitely need to make an investment in order to be able to service that expectation, I mean the factory.

Your next question comes from the line of Leonard Cooper [indiscernible].

Each time I call on these conference calls, you never mention depreciation or amortization. Is there a number for that for the last quarter?

I noticed that, I read this transcript from the prior quarter. I noticed you asked that question and I just mentioned to Matt maybe we better include that going forward, and I forgot to, so our bad. In the third quarter, we won't force you to ask that question, Len.

It's a little under $1 million a quarter.

For both?

For the combination of D&A.

That's for capital or just?

No, no. It was just depreciation and amortization.

Last year there was a return of capital situation. Is that something that my accountant should worry about for this year?

Well, I don't know. I mean accounts receivables are paid to worry about everything aren't they. But I really don't have any comments about it. I think you all know the situation, which is that our cash is largely overseas. We have the $52 million of debt now and something little less than $60 million of cash in the U.S. I don't know the exact number, but of the total much less than half of it, well, less than $60 million, somewhere $55 million or $60 million let say, is in the U.S. and rest is overseas. That's not an answer. I just want to remind you of that factor, because it is a consideration.

I hear a lot about 3D printing, is that of any interest to Park? Does that affect Park?

Well, it's a new technology that is being talked about for electronics as well as aerospace, right. And these are what you call bleeding-edge type technologies, and we try to stay tuned in with these things and try to understand what it can mean to us, how it can impact us, because that's really the question often with these new technologies. We're not going to be driving that technology. We're not that kind of company, we're smaller company. But for us, we need to figure out what it might mean for us and how we might want to take advantage of it. A lot of technologies, half a dozen of those kind of technologies, which are bleeding-edge, which we're trying to figure out, what it means and whatever they're going to really take off or not. And if they do, how it might impact us and how we might be able to take advantage of it.

Your next question comes from the line of Jiwon Lee representing Sidoti & Company. Jiwon Lee - Sidoti & Company: I've got a couple of quick questions. Brian, back to your aerospace and composites, now with this jet engine company are you sole source?

I don't think we can answer the question. I mean we know the answer, but I'm actually going to be careful about these discussions, because I don't really know, we haven't identified the company. But even still there are certain things that this company maybe identified at some point. If they give us permission and there are certain thing. They probably don't want to be known from their side. Jiwon Lee - Sidoti & Company: And if things go well in 2014 and 2015 and you finalize your 2016 negotiations soon, and then there is an uptick indicated some investments. Could you give us some ranges as to how many millions might be necessary? It doesn't have to be precise, but give us some ideas about the capital that might be necessary.

$10 million. Jiwon Lee - Sidoti & Company: About $10 million, very good.

That's a real, you asked for an estimate, and I don't mind sharing that with you. Well, that's kind of a rough estimate, let's call it. Jiwon Lee - Sidoti & Company: So at the present time, the infrastructure that you have can support a lot of the business that's going to ramp up.

What's your question, sorry? Jiwon Lee - Sidoti & Company: At the present time, I guess until 2016, I mean your current infrastructure is enough, almost enough to support this business ramp. Is that the right way to understand it, Brian?

No. It's enough. It's not almost enough, it's enough. And 2017 is when it would really -- maybe 2016, but certainly 2017, that's when we're not going to be able to make it anymore. Jiwon Lee - Sidoti & Company: And then switching gears to the PCB side, Brian, you mentioned the automotive radar that's relatively sort of a new market for you, that's strong as well as the antennas that's strong. I would imagine still just looking at the PCB side of things that they are relatively smaller portion of your overall business. So talking a little bit more about the traditional market for your PCB, the networking and datacom, could you talk a little bit more about the dynamics that might be going on in that market?

First of all, you're correct. Those are the products relate to RF, what we call digital. And digital that's our main market for electronics. And as you call it datacom, networking, internet infrastructure, based upon cloud computing and all latest and greatest things. When you look at our numbers and the numbers in August, in the first three weeks are anemic, a lot of that is based upon that market. And I don't know I have a feeling, this is tied into somewhat of a anemic economy that we have globally. I don't know if it's any one particular aspect of that market, Jiwon. Look I'm going to be careful, because I know people want to know what's going on currently and we try to address that. But I don't want to overemphasize it either by spending so much time on it. I just want to let you know what the facts are and those are the facts. And as I also commented, it's kind of frustrating, if we'd like to put together three or four good months in a row and it's seems like two months and you feel better and then next month isn't so great. I don't think anything we're talking about by the way relates to anything with market share. It's just like what you said, it's the overall markets, Jiwon. So I know that's not a very specific answer, but hopefully that's little helpful. Jiwon Lee - Sidoti & Company: Just I forgot one question related to the Textron thing. It is a prototype now, so typically with this type of military program, what's kind of the lead time and the risk of this program not actually materializing in the commercial value?

Now, I really shouldn't say, because this is you need to ask Textron. And I really got to be careful there, because I don't want to make news for Textron. But you might want to just Google it, look it up, because it's there. They are very out there with this product, there is a lot of promotion, a lot of news coverage, seems to be an exciting concept, because it's a little different than the normal way of developing a military strike aircraft. But in terms of the expectations for the aircraft and things like that, I think that you really need to talk to Textron about it. And I just also should comment that we're talking prototypes, so that doesn't mean we're on the production parts. So I don't know whether we would be or not. So I just want you to be aware of it. It's not significant volume in terms of revenue, because it's prototype. It's a lot of parts. The reason I brought it up is not so much that it has a major revenue impact, it's more to me anyway, it's indicative of the fact that we developed I think some pretty serious capability actually.

Your next question comes from the line of John Lopez representing Vertical.

I'd say, I don't want to get too focused on the short-term stuff, but you guys had given us like a little bit of a roadmap I guess last quarter. And is it just safe to assume, I don't need the exact numbers, but is it safe to assume that the June and July were sort of north of $15 million a month and then the August number dropped sort of below $14 million? Is that sort of the right framework?

I rather not. I don't think we want to get into actually quantifying the months. We haven't done that in the past and I prefer not do it. Also, one thing we have to explain, which is important is that, our June month is a five-week month and our July and August are four week months. So that's another reason, we wouldn't want to do that apples to apples. But I would say, you're probably in the right direction, your numbers are reasonable.

And then just qualitatively, is September lower than August?

No.

So kind of banging around where it was in August?

I think that's a good way to describe it. Yes.

And then I just want to go back to the market share thing for a quick second, because if I sort of just look at the string of numbers you guys reported in the printed circuit materials, I'm using the rounded numbers, I guess, so maybe I'm off by a little bit. But it looks like that business hasn't grown on a year-on-year basis for like two years. And the other thing just to get your thoughts on is, Sanmina was a 10% customer, they've dropped off. Flex was a 10% customer, they've dropped off and you guys have referenced some stuff going on there last quarter, TTM sort of the last 10% customer at the moment. So can you just sort of step through like why are you so confident this isn't a market share problem, because the markets have not contracted for two years and you had some guys that were 10% that aren't now, so how do we kind of square all that stuff?

So in terms of the customer share, it moves around. These are circuit board companies and the key thing is the OEM program. And sometimes the programs move around from one circuit board company to another. And that may or may not have a big impact on Park, whenever those things move around. For electronics, it's not really a topline push for us. And we've spoken that about just for a long time and we think it will be a mistake for us to go after topline electronics. So for us we need to continue to protect the quality of our revenues. And that's why you see we have more and more high performance. It's kind of a self-actuating strategy, as the low performance becomes more commoditized, moves market share there and we pick up business in the high performance area. So also our new products have been out, I guess a year or two now. And when I mean new products, I'm talking about not the ones you're just referring to, the new digital products of -20 and Meteorwave. And I've said before in last couple of quarters that it seems like those products are getting good reception. They're getting new OEM programs and that's what we really want to see. If you ask me, what I've expect, what we expect for the future, it's hard to say. We'd like to see some topline growth, but that wouldn't be our focus, our focus is the quality of the topline rather than the quantity, so that the bottom line continues to be protected and enhanced.

And I'm not trying to parse words, but it sounds like what you're sort of saying is maybe there is some proactive share loss to the extent that you're not chasing business to sort of low end that you may have chased before. So there maybe some like proactive pruning within the portfolio?

I'm not sure, I understand what you're point is, but we've lost market share in the low end for years now to the point where it is very little left in terms of low end. And now the large majority of what we'd have in electronics is what called high-end or high performance. I talked about this in last couple of quarters, when we just comment is that we are really simplistic in a description of high performance and non-high performance as if all high performance is equal, that's not really true. There is different strata within high performance. And our revenues within high performance are getting pushed more to the higher end of high performance, which means higher margin. I've mentioned our Signal Integrity product line in last couple of quarters, that's a bigger portion of high performance. And those kind of trends I think will continue, but it really it's not just a market thing, it's up to us to continue to drive this story from the perspective of developing new products and getting new products in the market in our new programs.

Just so I can to sound bite it in my head, what you're effectively arguing is the trace of the printed circuit materials business is mostly a function of the trace of the market and not so much related to the other stuff?

Well, in the short-term, I think absolutely. Absolutely, in the short-term, if you look quarter-over-quarter, I think that's really a general economy or market situation.

So just one last one, going back to the aerospace side, and that stuff sounds really exciting. I just want to make sure I understand the dynamic, and I am not asking for an update or the negotiation you have spoken about it. But is there a margin implication, you talked about the potential for investment, but is part of this that there is like a concern on your part is the only word I can think of, just in terms of what the initial margin profile that looks like on the upsized version of that, if that question makes sense? In other words, the initial negotiation you had with sort of $6 million for the next couple of years. If that does get upsized meaningfully, does that come with a price concession or something on your end that would lead you to some concern about the profitability of that for the interim period?

Firstly, the out years, and that would be the something we have to negotiate. And so we'll see what happens. But of course, it's a concern. I am not so concerned with the immediate term, but the out years. And those and part of things that are being discussed now.

Your next question comes as a follow-up from the line of Sean Hannan representing Needham & Company. Sean Hannan - Needham & Company: Actually most of my follow-ups have been answered. A quick housekeeping question though, CapEx, what was that in the quarter?

CapEx for the quarter, it wasn't actually very significant, a $200,000.

Very small. Sean Hannan - Needham & Company: So $200,000, $300,000?

Yes.

With no further questions at this time, I would now like to turn the call back to Mr. Brian Shore for closing remarks.

Thank you, operator. And thank you all for listening and I thank you for your questions. Matt and I will be here the rest of the day. If you have any follow-up questions, feel free to give us a call. Thank you, again. And have a good day. Goodbye.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.