Good morning. My Name is Sammy, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Park Electrochemical Corp. Third Quarter Fiscal Year 2015 Earnings Release Conference Call. [Operator Instructions] At this time, I'd like to turn the call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, operator. Good morning. This is Brian Shore. Happy New Year, everybody. I have with me Matt Farabaugh, our Vice President and CFO, as usual. And we'll begin our Third Quarter Conference Call with our introductory remarks, and then we'll go to questions. Why don't we get started, Matt?

Okay, 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 2, 2014, 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 third quarter ended November 30, 2014, P&L, which are not specifically addressed in the earnings release. During the fiscal year 2015 third quarter, North American sales were 50% of total sales, European sales were 9% of total sales and Asian sales were 41% of total sales compared to 51%, 6% and 43%, respectively, for the third quarter of the 2014 fiscal year; and 46%, 6% and 48%, respectively, for the 2015 fiscal year second quarter. Sales of Park's high-performance non-FR-4 printed circuit materials were 92% of total laminate and prepreg material sales in the third quarter of the fiscal year 2015, 89% in the third quarter of the 2014 fiscal year and 92% in 2015 fiscal year second quarter. Sales of Park's electronic materials were $25.4 million or 73% of total sales in the third quarter of the 2015 fiscal year, compared to $31.5 million or 79% of total sales in the third quarter of the 2014 fiscal year and compared to $33.7 million or 80% of total sales in the 2015 fiscal year second quarter. Sales of Park's aerospace materials and parts were $9.3 million or 27%…

Okay, thanks, Matt. This is Brian again. And a transcript of Matt -- Mike's -- Matt's remarks are going to be posted on our website, in case you want to check it out. So I have a few things I'd like to cover this morning, before we go to questions. First of all, let's talk about the numbers for Q3. I think the bottom line doesn't require much discussion. It's really the top line because the bottom line is driven by the top line and, in this case, with no -- nothing unusual about the bottom line, except the revenues, which are way off. So let's talk about the revenues in the third quarter. Let's back up a little bit to the Second Quarter Call because, based upon the comments we made in the Second Quarter Call, the revenues really should not be a surprise, and let's go through that. Okay, so remember, when we discussed that in the first quarter and also including -- the first quarter, including as well as the first month of the second quarter, which is June, the revenues were quite strong, but we feel that was really the inventory build that was artificial, based mostly in Asia. And we commented that, in July, the revenues fell off further and then, in August, even further than that, but also we explained that, in June, the June revenues were at the level of the first quarter. So we knew what the June revenues were. We knew what the total was for the second quarter. We knew that July was the middle month. August was a down month, so it would have been pretty easy to figure out within a small range what the August revenues were. Then we said in the Second Quarter Call that the…

[Operator Instructions] Our first question comes from Sean Hannan of Needham & Company.

So Brian, your top 5 customers seem to be down maybe 9% quarter-over-quarter. It looks like everybody else was down, closer to 20% or so. I think you did a good job in terms of referencing what you've seen as dynamics on the electronics side of the business. If I make the right assumptions, it looks like GE really was the only perhaps closer-to-growth customer, certainly being on the aerospace side there. So I just wanted to verify that force, the magnitude perhaps, that GE was a grower for you. We've certainly heard some positive comments around them, from you just a moment ago. And then if we could also get a little bit more of a sense of how you expect they could contribute sequentially or through the course of this year. It seems that they would be on track for getting to be, perhaps, a 10% customer at some point down the road.

Not quite 10%. GE was up a little bit, but like you pointed out already, aerospace is quite a different story than electronics. Electronics is a special story for us, especially in the third quarter. Aerospace, I think Matt indicated aerospace is up a little bit as a whole. GE was kind of flat, as compared to the second quarter. There were -- difference with a company like -- a customer like GE, as compared to an electronics customer, is there's significant visibility over many years, based upon the nature of the business. It's not the electronics OEMs don't want to tell us. They just really don't know. It doesn't work that way. It's a very different dynamic. So when we talk optimistically about GE, we're not talking about the next month. We're talking about 3 years, 4 years, 5 years, 6 years down the road. And ironically, those expectations are probably more hard and firm than the expectation we might have from an electronics company 3 months down the road. But again, it's because of the nature of the business. The nature of the business is such that these -- they are long-term contracts and the production schedules and cycles, rather, for aircraft are quite long. The order patterns are quite long. The backlogs are quite large. So you could reference Boeing and Airbus and the other aircraft companies, just as an example. But I would say that GE, just to answer your question, was kind of -- was more or less flat in Q3, as compared to Q2. They're not quite at the 10% level, but the expectations and forecast that we have for GE are, well, they're quite encouraging, if you let me put it that way. Although, we're talking about a longer-term time frame than we would be if we're talking electronics.

Sure. Well, Brian, if we were to look really at the rest of -- or here at calendar 2015, I believe that there have been some prior thoughts that we should see growth with them, as well as within aerospace, as we progress through the course of the year. So I wanted to check on that assumption, if that still stands to be relatively valid. And any color you could perhaps provide around that?

So GE, like I said, is more predictable. So we're expecting some growth in calendar 2015. The big spikes will come maybe '17. So we'd see some growth in '15 and some growth in '16, then we see, let's call, spikes in '17, '18 and '19. That's based upon programs that are in place. These are meaningful forecasts, I would say. As far as aerospace in general is concerned, yes, Sean, I would very much hope that we can see some real revenue growth in aerospace outside GE. There are hundreds and hundreds of other customers out there that we're calling on. And I think maybe you or somebody asked this question last quarter about -- they asked me if I would be disappointed if we didn't see significant growth in aerospace this coming year, and I certainly would be. And we all have a lot of pressure on us, I mean internal pressure, but it's proper pressure. We paid a lot of dues over the last 5, 6 years in aerospace. We've made major investments. And my feeling is that we should see some really meaningful growth in aerospace is coming here. And if we don't, then I would say we failed. Give us an F.

Okay, all right, that's helpful color. Next question I have or topic is really more related to SG&A. This was a fairly contains number that came through in the quarter. Wanted to get a sense from you or Matt, the degree that this level is able to be maintained. Or how should we think about movements versus that November quarter number?

Correct. It was contained. A number of people took salary cuts during the quarter, so -- and we were careful. Now we didn't compromise Park's future. We don't cut back on R&D and that kind of thing, for instance. We're still pretty active with our marketing efforts, but we did try to control our SG&A, especially in the U.S., where business levels are very poor, in electronics anyway, not in aerospace, in electronics. So I would say that there's some level of growth in SG&A in the coming quarters, but not significant. We're not saying it's going to spike up, but maybe the third quarter level is not totally sustainable. And then maybe it shouldn't be. Maybe it's not healthy for Park to try to make it sustainable.

Okay, that's helpful. Last question here, and then I'll jump back in the queue. Can you talk a little bit, Brian, about the cost environment, both on the electronics side as well as on the aerospace side? Are there any variables that are impacting the business today? And to what degree can they be mitigated, managed? Or is there -- are there even some positives that may be helping you as well?

Sean, when you say costs, you're talking about raw material costs, or something else.

That's correct, raw material costs.

Okay. Raw material costs, really not much of an issue in electronics, nothing to write home about. Obviously, copper is our big story but right now nothing special, no impact copper-wise Q3 versus Q2, for instance. We'll have to see where copper goes, but right now, no significant impact out of copper. And the rest of raw materials, I think, are not really -- nothing significant to talk about. And aerospace is quite a bit more dynamic. We use -- even though the revenues are explored [ph] aerospace, electronics, we probably source, I don't know, maybe 5x or 10x more raw materials from different suppliers. It's a very different kind of business. And that's a -- that's definitely a dynamic situation, which requires a lot of management on a day-to-day basis. And that's something, you know what, we need to do better at. And I'm hoping that's an opportunity for us in the future, to do better at it. And when we -- our pricing with aerospace is different than electronics. Electronics pricing is really stuck in place for a long time. We don't move it. Aerospace, we get all these requotes all the time, so we tend to adjust our prices, but I think it's a bad pattern we're in. We really need to focus more on our raw material costs and our input costs. They just assume that, whatever they are, we're going to reprice our product accordingly. I think it's a lazy and not a good pattern for Park and mindset for Park to be in, so we need to work on that. And I do believe there is some opportunity for improvement there, too. The rest of the costs, the non-raw material costs, especially in electronics, I think we try to be screwed down pretty tight, I mean not to the point where it would compromise Park's ability to be an effective supplier for our customers, but we have our cost screwed on pretty tight. Although, we're always looking in at ways to optimize, especially out West, by -- what we've done out West, even though we have 2 locations for electronics, Arizona and California, we've really combined the operations. There are 2 locations, but it's 1 operation, with basically 1 overhead, 1 stay-out [ph] that covers the 2 locations. And there are opportunities to do more of that, we believe.

Our next question comes from Morris Ajzenman of Griffin Securities.

Question back on composites. You kind of spoke about the trend during the quarter, and you mentioned GE being flat sequentially. Can you just give us any color if there's any change in the purchase orders, either for GE or composites overall, in this quarter versus the past quarter?

Okay, Morris, go check out the transcript of Matt's comments. They're out posted on our website. But Matt did explain what our aerospace revenues were for the quarter. And I think they were $9.3 million, which was up a little bit from the prior quarter. So there's some movement in the right direction. GE, we already commented on. We have a lot of visibility with GE. That's kind of a long-term situation. And the rest of the opportunities, we certainly -- let me say this. I think our sales guys and even some of our folks in Kansas have gotten the message, so they're out there hitting the pavement pretty hard. And we're doing, just from a quoting perspective, I see all the quotes, actually. The volume is quite a bit higher. This is anecdotal. It's not a scientific report for you, but the volume of quoting is quite a bit higher than it had been. So that would normally be an indication and function of the sales guys out there in the market pretty aggressively, looking for business. And that's why, in response to Sean's question, I'd say, yes, I'd be pretty disappointed if we don't see a meaningful up in the current calendar year in aerospace. I think the opportunities are there. The opportunities for GE are long term and more definable, more predictable. There are opportunities for the hundreds of other customers, and some are small. It's not all the big OEMs. Some are small, but there are opportunities with them. They are there, and I think that we just haven't done an effective job in the past of going after those opportunities. Now if we want to be -- look, we want to be fair to ourselves and say, okay, fine, until about a year ago, we were still going through a transition startup and we're working through those difficulties, but that's all behind us. We don't have that excuse anymore, so it's time for us to go out and get the business. I don't have any quantification for you. I just have that anecdotal input, which hopefully is a little helpful.

[Operator Instructions] Our next question is from Leonard Cooper [ph], a private investor.

I hope all is well. You sound good. I have a question. Does GE presently have the facilities and personnel to provide the projected growth in businesses that you speak of? Will big investments be required by Park for facilities?

For Park. So Len [ph], we had spoken for several quarters about discussions we're having regarding building a redundant facility, based upon GE's request. This is really not only capacity, but redundancy because some of the big aerospace OEMs are a little uncomfortable being sole-sourced with a supplier that only has one location. For obvious reasons, there's a lot at stake. And the qualification process is very complex and time consuming. So if there is a supplier that an aircraft OEM is working with and they're a sole-source basis and that supplier is one facility and their building burns down or something like that, it's a real serious issue because it could take up to 2 years to qualify a new supplier, in some cases. In our case, it takes a long time because we're building these really complex materials that require very extensive testing. It's not something that can be qualified overnight. So that's the reason for the request for redundancy. But we're still waiting to hear back. We're prepared to proceed. And we've been going through a site selection process, but we're waiting to hear back. We need some more information from GE before we could proceed, before we can make a decision and move forward. I think it's highly likely that we'll do that. I thought the worry would have been started, but really the ball's -- we're kind of waiting for more information. Let me put it that way.

Okay, well, I understand the problem of redundancy, having been in the aerospace business before the moon landing. Another question: Does 3D printing affect Park?

Well, you've asked us before this. You're a smart person. I don't really think it does directly at this point, except to the extent that it might require more infrastructure, more data being processed, just like when you talk about the cloud. Well, maybe we're not directly working on a cloud equipment, but it requires more bandwidth in terms of the Internet service providers, and that would indirectly impact Park. It can be a benefit to Park's business.

[Operator Instructions] At this time, I'm showing no further questions. I would like to turn the call back to management for any further remarks.

Okay, well, thank you, operator. And thank you, everybody, for listening to our Third Quarter Conference Call. Again, I wish you all the very best in the new year. Matt and I are here today, so if you have any follow-up questions, please feel free to give us a call. Thank you. Have a good day.

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