Good morning. My name is Amanda 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 2016 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 will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, Operator. This is Brian. Welcome everybody to our second quarter conference call. As usual, I have with me Matt Farabaugh, our VP and CFO. Matt and I will go ahead with some introductory remarks and then we will go to the questions. And I just want to remind you that Matt’s remarks and comments, there is a transcript of those comments and reports on our Web site. There is some detail in, so there if you want to check on our Web site feel free. Go ahead Matt.

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 March 1, 2015, 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 August 30, 2015 P&L, which are not specifically addressed in the earnings release. During the fiscal year 2016 second quarter, North American sales were 56% of total sales, European sales were 6% of total sales, and Asian sales were 38% of total sales, compared to 46%, 6%, and 48% respectively for the 2015 fiscal year second quarter, and 48%, 6%, and 46% respectively for the 2016 fiscal year first quarter. Sales of Park's high performance non-FR-4 electronics materials were 93% of total electronics material sales in the 2016 fiscal year second quarter, 92% in the 2015 fiscal year second quarter and 93% in the 2016 fiscal year first quarter. Park's electronics sales were 26.2 million or 69% of total sales in the 2016 fiscal year second quarter, compared to 33.8 million or 80% of total sales in the 2015 fiscal year second quarter, and 28.1 million or 74% of total sales in the 2016 fiscal year first quarter. Park's aerospace sales were 11.8 million or 31% of total sales in the 2016 fiscal year second quarter compared to 8.6 million or 20% of total…

Thanks Matt. And we did decide to provide the detailed share purchase, the stock repurchase plan for the last three quarters. So, let me see if I can add a little more perspective, this is Brian of course. So let’s talk about second quarter. Actually, things were going fairly well for us through June and July and then things kind of fell apart in August. So it’s really when I -- and it’s really to look at the facts and the details for Park, it’s an Asia story, meaning it’s a Singapore story for us. The reasons, now there are people that are probably smarter than I am, not probably, definitely smarter than I am that might have more informed opinions. But to me it’s something about the global economy and that’s kind of maybe a [cop out] [ph] explanation because you could say the global economy is responsible for just about everything. But if you want to focus a little bit more, I think it also relates to China, two of our three largest electronics OEMs are Chinese, large Chinese electronic companies. And I think China has been affected even more so, my feeling is than the rest of the world globally and the electronics industry anyway. So, that’s not good for us because Singapore is where we have better margins. All revenues at Park are not equal, we rather have -- if we have a total of $37 million of revenue for instance in a quarter we want more of that in Singapore and less someplace else because the margins out of Singapore are better than they are in the west. The pricing is not different, that’s not the issue, we keep to -- we have pretty consistent pricing globally because most of our markets are global, but…

Thank you [Operator Instructions]. We do have a question from the line of Leonard Cooper who is a Private Investor. Your line is open.

Somehow in all this bit about buying back shares. Could you tell me what the number of shares currently outstanding is?

Matt, I don’t know if you can help us with that. I think it’s actually in the news release, such as a percentage average number.

It’s roughly 20 million, it is, but it’s 20 million.

Still around 20 million.

Hold on a second, what’s the number Matt?

It’s roughly 20,300,000.

Do you get that, about 20,300,000. See the number in the news release is an average for a quarter, I don’t think it has the end of the quarter. But Matt did indicate in his comments that we purchased since the stock buyback was authorized, just about 700,000 shares, 699,788 shares. So that’s close to 700,000 as you can get. So, I guess we have about 21 million, the kind of rough math and this number would I think also be in the 10-Q.

[Indiscernible] buyer of shares.

It's -- we're just under 20,300,000 at this point.

Just under 20,300,000, go ahead Len.

I see that you've made several personal purchases of shares.

Yes.

Well, I look at that as an optimistic sign.

Either it's optimistic or I have a very bad investment adviser, I don't know.

I thought you do that on your own.

Yes.

In prior discussions you spoke of seeing change and redundancies [indiscernible] supplies for GE.

Yes.

Any comments on those or?

Yes, my comment is, it's little bit frustrating for me because I think in our last call I said by now we'd have more news for you and the ball really is just in their court. I mentioned that we just got this forecast which was something which is important and that was as intended to lead in a very near future was actually supposed to be last month to the proposed 10-year agreement and once that is put to bed, then our understanding is that's when we would proceed with the redundant facility.

Thank you. Our next question comes from Sean Hannan of Needham and Company. Your line is open.

First question here and I've got a number of them. If you can help me to understand the degree of the drop off that you saw in August, were you running June and July around 9 million to 10 million a month and then maybe August dropped off to 6 to 7, can you help me understand that magnitude? Thanks.

So I think we're going to decline to quantify specifically and I have to remind you that June is a 5-week month and July and August are 4-week months, so we would always talk in weekly averages. The month of July actually was a month in which that onetime of sale occurred 2.2 million, so that pushed July up a little bit. But just looking at --.

Great, and I admit on the electronics side, Brian just to clarify.

Right, okay so, I am looking at that in total because the aerospace is kind of flat across the quarter except for that one time sale, so we kind of expected that question. I think we're going to decline to quantify it by percentage or anything like that, but it’s meaningful, it’s significant you could look at the numbers without getting your pocket calculator out and say yeah, the number in the month of the August is not like the prior months and particularly if you look at the Singapore line item, that where you see it. The rest of the lines are kind of going sideways, maybe a little up, little down, nothing to even speak about but that Singapore number actually dropped to some extent in July and then dropped further in August.

Okay, so then just to follow on those comments as well as getting back to some of the earlier comments you had for the first five weeks of this current quarter that we're in. It is -- when you were talking about the softness continuing, is that a reference -- are you going to a reference point of August meaning that we're running at a similar averaged August or that there is incremental softness that's materialized a similar trend?

I think that it is similar to August. September is trending with August.

Okay. And then if there is a way maybe if we can talk a little bit more or explore a little bit more on the electronics demand within China, so it looks like the regions down nearly 30% year-over-year. We've talked about some macro as well as perhaps some region specific demands challenges, didn't know if it's time perhaps also to revisit the topic of share losses. Now I realize that the PCB space hasn't been great, share allocation can move around a little bit at times, but in the grand scheme of things given we're offering higher technology pre-price in laminates, can we talk about whether there is a potential we could be losing share perhaps to some of the Taiwanese? Maybe that they're making enough product within this space that can be characterized as good enough, can we talk a little bit about this -- the share position and share dynamics competitively? Thanks.

Sure. So this is -- there is two answers to the question I guess, one is yes, there is an ongoing trend the Taiwanese and even some Japanese company coming in quite aggressively and that’s kind of maybe a longer story. If you want to look at the quarter of August and September I think that’s absolutely nothing to do with it at all. The good news is I think we have developed some pretty solid positions with these two leading Chinese OEMs and they are very significant companies and like I said two of our three largest electronics OEMs are now these two companies and that’s kind of a new development. So actually that’s going in the positive direction. But I think that the -- I don’t know my sense is that Chinese economy is really not very happy right now. And obviously these companies are not just supplying it to China, these are large companies, but I think they still are very much driven by the Chinese economy not just in terms of the market but also the psychological factors, I mean which effects them, I think in their way of looking at the markets. As aerospace is kind of much more steady as you go; electronics companies are very reactive and they turn on a dime. So the story for August-September, I don’t believe is in Asia, I don’t believe that’s a market-share story. There is a longer term trend where the kind of lower end of our high performance product keeps getting picked off and picked off and picked off. We basically sell very little non-high performance products and almost none in Asia. I mean I don’t remember the percentage 3% to 7% or something like that, it's very insignificant. So it’s being picked off though,…

Okay, as part of that, you would mention this new product momentum, it doesn't seem that the new products on the electronics side, perhaps, have had the degree of uptake in the aggregate thus far, that maybe you've been hoping for. Can you talk to that a little bit, and are there any signs of change or accelerated adoption, et cetera? Thanks.

Yes, so I think that’s a correct statement, but you're comparing it to what I was hoping for of course and for better. But the reason that the electronics top-line is what it is because of the adoption of the new products. If we’re just continuing to sell the legacy products, it wouldn’t be a good thing at all, not just in terms of the current P&L but also in terms of our position strategically. So you ask -- it’s depends on what minute you asked me really because electronic moves so quickly, but and there are lot of pretty hot issues we’re working on. However in terms of the new products, I have to be a little careful here because some of these things are highly confidential and we are working with a large circuit board, very large circuit board company and also OEMs on accelerated development work and just commercialization of our new products, and that’s something new those are not just kind of ongoing things that there is special activities, so it’s not just kind of more of the same. We still have to make these things work we still have to bring home the bacon if you will, so these things are not in the bank. But these activities are different they are significant, they’re consuming and they’re not just kind of, Sean, just the ongoing kind of development activities that we’ve been involved with or our commercialization activities we’ve been involved with for the last three to four years with the new products. This is in last three months, I would say. The activity has become heightened.

The interest level and activity has become heightened?

Not interest, no, it’s lot more interest. It’s putting a lot work and effort into being qualified on programs and with large OEMs and customers.

Okay, so it’s some cautious optimism?

Yes, it’s not interest. I mean that we’re exhausted actually from how demanding this work is, at least I am and I’m old, so I get exhausted easily.

Okay. So I'm going to ask one question now on the aerospace side, and then I'm going to jump back in the queue. So what should we now expect for aerospace in the back end of the year? So it looks like you're -- if I pull out AAE, you would have been very marginally down, effectively flattish quarter-over-quarter. Now, I realize we're a few years away from the bigger ramps, but I have the, at least, expectation there should be some incremental business working in the back half of this year. Is that still relevant and what should we be thinking about aerospace now at this point in FY16?

I think ’16 aerospace is a lot more predictable than electronics of course. I think that we should look for more or less flat over the first and second quarter, over third and fourth quarter. I mean there is -- the opportunities now are very palpable at present, but they don’t have months involved with them, they have years and decades. So, I am not aware of anything that would significantly impact up or down the aerospace situation in the short-term.

Okay, I mean for example, I saw that the -- and correct me if I'm wrong, but I saw that Comac ARJ21 aircraft did its final demonstration flight, and I think customers are going to start taking orders at the end of this year. I didn't know if there's any impact to you based on, I think you're in on the GE engine on that aircraft platform?

That’s correct.

It wasn't clear to me if that perhaps starts to provide a little bit more momentum, or what have you. Thanks.

So the big drivers for us with GE are the 747 which is kind of flat and the really big driver is A320neo with the LEAP engine. Now Comac you mentioned the bigger story for Park is C919 which has the LEAP engine as well, that’s another big program for Park but that’s still a couple of years out. The ARJ which is with CF34-10A engine that’s our program you’re right but it’s small. So the big drivers for at least GE, we’re talking GE 747 which just doesn’t seem to be much more than flat based upon the forecast that we’re receiving and the big one is going to be -- that has more immediate impact will be the A320neo with the LEAP engine, the C919 like I said also is a LEAP engine, but that’s a little bit further in the future and that also has some big potential revenue associated with it.

Thank you. Our next question comes from Morris Ajzenman of Griffin Securities. Your line is open.

Okay, thanks. Just a follow-up from the last previous question. You started touching on it, but I know there's not much more you can say about GE. But I was going to ask other programs you are on, if you'd give us any color. And you started to, but is there any more color you can give us? Is there any programs that would be a jump start to fiscal ’17? Anything that you can help us along that line, we'll be appreciative.

The forecast, we've talked about this and like I said aerospace doesn't change every three minutes like electronic does. Let’s talk calendar years because that's where the forecast its structure. It's more of a jump in ’17, ’18 then in ’16. The programs, there is also Embraer they have a CF34-10E engine. And I believe that we haven't switched over to that program yet. Once we do then it will be our program, meaning that there might be some legacy inventory that's been worked down, I got to be careful about saying too much there. The other -- we talked about both the Chinese programs which are good programs to be on and then there is the Passport 20 program. And that's not only the thrust reverser and cowlings to nacelles, but it’s also some internal structure of the engine which is -- that's an exciting thing for Park, that's a new area for Park. And we're working on a number of other engines platforms for GE and Boeing aircraft for different parts of the aircraft, which would not be -- different parts of the engine, which would not be as significant at these numbers we're talking about, which are mostly for thrust reversers and cowlings in very large parts. But we're looking at other parts of the engine, a number of them and a number of different engine platforms. But you're asking about big revenue driver that really hasn't changed, the biggest one of all is going to be the A320neo I think and that's happening now. I would think the next big driver might be even a Comac 919, we expect that could significant if the Chinese are successful in introducing that aircraft. That aircraft is a single aisle aircraft to compete against the single aisle Boeing and AirBus airplanes that's a lot different than the ARJ which is a regional jet which doesn’t really go into Boeing and AirBus' turf much.

Thank you. Our next question comes from Leonard Cooper who is a private investor. Your line is open.

While sitting here I noticed an absent of mention of many countries like India, Pakistan, Brazil, Russia, Mexico, Indonesia, Australia, do those mean anything to Park presently?

Well, could you explain a little bit more what you're asking Leo?

Are you trying to develop markets in those countries?

Oh, I see, yes. India, we do some aerospace work, electronic work already. Pakistan, I don’t think so. What are the other countries? I forgot.

Mexico, Russia.

Yes, Russia, we have not been successful in Russia, we tried in aerospace, haven't gone anywhere in electronics, there is nothing there for us. Brazil, Mexico not too much. So I think India is probably only country on that list where we have some meaningful presence at this time. Some of these are through like GE may use contractors in these countries, but that’s really not our work, that's just being quantified on programs. So we can't really take too much credit for that.

Thank you. Our next question comes from Sean Hannan of Needham and Company. Your line is open.

Yes, thanks for the follow-up here. So, want to see if I could ask, first, were there any 10% customers in the quarter, and how does that compare to last quarter? Obviously we have the data on the top five, but didn't know if anybody individually was over 10%.

We stopped specially disclosing that, but maybe Matt can take a look.

Yes there was one, TTM.

They’re our largest customer, I thought that’s what Matt was going to say. Of course TTM acquired Viasystems. So that’s our largest customer and I think we might have even told you who our second largest customer is in our annual report which is generally GE.

Sure, and then in terms of -- when I look at copper commodity prices, did you realize an effective benefit in gross margins based on declining prices in the quarter and does that present a little bit of a scenario next quarter where you don't get that benefit to help gross margins, or how should we think about copper impacts in the quarter and next?

I think that there is a little benefit in the second quarter and I think that the third quarter will be similar to the second quarter in terms of the copper impact. We’re not talking about significant dollars here. This is a kind of a sensitive topic because I’m thinking of our policies, we pass these changes on to the customers, but there is sometime a lag effect. So again little benefit in Q2 as compared to Q1, Q3 probably neutral to Q2, but little as in, let’s keep in perspective, small.

Sure, okay. And then in terms of the SG&A levels in bringing those down this quarter, are you able to sustain around this 5 million type of spend, particularly given where the revenue outlook or general demand outlook might be? Can you talk about SG&A expectations?

Yes, I think I tried to cover it, but I obviously didn’t do a good job. The answer is no because it was really one-time. These are 2015 accruals that we for bonuses and profit-sharing which had not been paid yet, but we really could do that once, so obviously now we have to go and it's kind of late in the year fiscal 2015 in other words the year that ended February ’15. So it's getting kind of late we need to go ahead and pay these things. So that’s a one-time item.

Okay, so it's a one-time true up?

It's a one-time adjustment, we reduced our accrual which actually has real impacts to the people in the Park and company in terms of their profit-sharing and bonuses, but it only can be done once for 2015 and now like I said it has to be paid. So it's not -- that adjustment is not -- is a one-time thing and it's not sustainable. So it isn’t really a true up, I guess you can say it's a true up, but it's a real adjustment and what we plan to pay, the bonuses and profit-sharing based upon the quarterly performance and other things.

Okay so outside of that adjustment would we be sustaining then the remainder of our SG&A spend and can you give us some context of what the adjustment level was? I mean, what should we be going back to? Are we getting back to a high $5 million number, approaching $6 million, or?

When we look at the -- the first quarter’s 5.8 million looks like the fourth quarter’s 5.6 million, the third quarter’s 5.7 million, I think we’re talking about those kind of numbers. You could -- and I can’t give you that kind of resolution down to the last dollar, but we’re probably talking more in the 5.5 range I think, Sean, not the $5 million range.

That’s great and alright I think that addresses all of my questions here.

Thank you. [Operator Instructions] And I am showing no additional questions. I like to hand the call back to Brian Shore for closing remarks.

Thank you. This is Brian again and thank you everybody for listening in on our second quarter call. Matt and I are at the Melville office please feel free to give us a call if you have any follow-up questions. Again thank you and have a good day. And we’ll talk to you soon. Good bye now.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.