Good morning, my name is Chelsea, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp’s First Quarter Fiscal Year 2017 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, everybody. Welcome to our first quarter conference call. Of course, I have with me, Matt Farabaugh, our CFO and Senior Vice President. We’ll start with some introductory remarks and we'll then go to questions. And remember, a transcript of Matt's comments is already posted on our website. There is a lot of detail on those comments, you may want to confirm and check the information on the website. Go ahead Matt let's get started with the financial commentary.

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 28, 2016, various factors that could affect the 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 fiscal year 2017 first quarter ended May 29, 2016, P&L, which are not specifically addressed in the earnings release. During the fiscal year 2017 first quarter, North American sales were 53% of total sales, European sales were 8% of total sales, and Asian sales were 39% of total sales, compared to 48%, 6%, and 46% respectively for the 2016 fiscal year first quarter, and 49%, 7%, and 44% respectively for the 2016 fiscal year fourth quarter. Sales of Park’s high-performance non-FR-4 electronics materials were 94% of total electronics material sales in the 2017 fiscal year first quarter and 93% and 94% in 2016 fiscal year first and fourth quarters respectively. Park’s electronic sales were $23.8 million or 76% of total sales in the 2016 fiscal year first quarter, compared to $28.1 million or 74% of total sales and $26.9 million or 75% of total sales in the 2016 fiscal year first and fourth quarters respectively. Park’s aerospace sales were $7.7 million or 24% of total sales in the 2017 fiscal year first quarter, compared to 9.7 or 26% of total sales and 8.8 or 25% of…

Okay, thanks Matt. This is Brian here and I’ll try to give a little perspective on the quarter, topline in particular and then we’ll talk about some other updates and events. I just want to remind you that we had -- our last call was probably less than 2 months ago, our fourth quarter call would have been I think the beginning of May, so there isn’t a lot of new news for you in terms of the updates, but I will do what I think is warranted in terms of updates. Okay, first of all let’s talk about the quarter’s -- Q1 in terms of revenues, electronics weak and mostly in Asia for us electronics is really an Asia story, big driver for Park and when we talk Asia, we’re really talking very much China, not all China, but we’re very Asia centric, very China centric in terms of electronics not only in terms of circuit board manufacturing, board shops, but also OEM, the OEMs are starting to dominate in Asia. When the industry transitioned from a Western talking electronics manufacturing, Western market to an Asian market the first step was circuit boards and assemblies were being produced in Asia to pour Western OEMs, now the OEMs also tend to be Asian. So, the China economy isn’t so great, I’m sure I’m not giving you any new news flash there, there are some trade skirmishes that haven’t helped either, or specific items that have become difficult for some of the Asian companies to get for the manufacturing. So that hasn’t been a real plus either, so for us in terms of electronics topline we really need to think Asia and again you know a big portion of Asia is going to be China in terms of the market. Aerospace,…

Certainly. [Operator Instructions]. And our first question comes from the line of Sean Hannan with Needham & Company. Your line is now open.

Thanks for taking my question, and good morning. Just to clarify, in terms of talking about aerospace getting beyond the inventory burn off, as well as starting to get some of the benefit of some of these other programs that have been won. When you talked, Brian, about ‘18 starting to be a better year, are we talking on a calendar or a fiscal basis?

We’re talking GE now and we’re talking calendar. So, in calendar ’16 and ’17, this year and next year calendar, the burn down will continue based upon the plan. But as that burn down tapers off at the end of next year, that’s when some of these programs, especially A320 start to really ramp up, so we’ll see a pretty steep ramp up, but we’re talking GE at the end of next year.

So if we then combine that with the other programs or business that you have within aerospace, how do we think about next year? Is it necessarily going to follow a similar pattern? Or should there be some other programs that start to come in a little bit earlier?

I guess fiscal year calendar year probably doesn’t matter, you know where we’re talking about similar period, so --.

No, calendar ’17.

Okay, calendar ’17, that’s fine. Yes, I would think that we’ll see improvement in ’17 for one thing I think that burn down would be tapering off toward the end of the year and we’ll start to see some of that -- not GE we’re talking about, some of those programs start to move up toward the end of the year. So maybe the second half of the year will be a better story. But the other programs we’re working on should have some impact as well. Now this large program with this other large aerospace company that we’re talking about, we’ve gone through doing this, we’re going through the screening rather, we gave them response to the 10-year -- 12-year RFQ. I don’t think that’s going to be an impact revenue wise in ’17, that’s going to be a couple of years out, I would think anywhere maybe two-three years out. But there are other programs that we’re working on, which aren’t as significant. It’s not like we’re going to point to one program and showing that see look, this is what really would cause a difference. But it's a number of programs that we’re working on that should have a positive impact as we go, not only next year, but even later on this year. Scorpion program is starting to be more significant revenue wise as well, you remember the first go around it was just one prototype, one flying prototype, it was not confirming prototype, call it demo unit. This is quite different. These are now confirming prototypes, which means that they have to be made the way that the airplane will be certified, a lot more engineering work is involved and a lot more units are involved, that's all good for us and it seems like Textron is turning to us more and more for that work. And there are many other programs we're not going to enumerate here, but these are the things that we're working on really every day and let me answer the question this way, if I could. I would be quite disappointed if we don't see some real movement in the top-line later on this year and next year even though GE is going not to be a big contributor to that.

Interesting, so at least on a sequential basis we think there could be some stabilization where the GE revenues are today obviously they're down on a year-over-year basis, but perhaps some stabilization here with them in an incrementally back end of this calendar year and then into '17 calendar, we could see incremental contributions from other player, is that a fair characterization?

Yes, and if it doesn't end up being coming true, I for one will be very disappointed. I just want to remind you that I think I've mentioned that Q2 of this year we expect aerospace to be better than Q1 and that's based upon visibility, specific visibility we have into the quarter.

Okay that's helpful. Now, let me see if I can switch gears for a quick moment here on electronic side, the weakness that you had seen and particularly driven by China, is there or a viewpoint that China was a big part of that, can you talk a little bit, any observations you can share of how you saw demand flow month-to-month and what you're seeing thus far in the current quarter, we've got about four weeks in now?

We have four weeks in. Yes, so good question, maybe we should go back because I remember we saw quite a big jump in demand and our revenues in January and February of this year. Our revenues and our bookings are kind of tied very closely with electronics, it’s lead times are very short, quite a big jump in January and February, we didn't really see that coming and then in March it kind of fell off a cliff, it just went down. This is what we've talked about during our last quarter's call, it went up -- came back a little bit in April, but not nearly to the level of January and February, right. Then -- and during our quarter's call we're saying, well let's see what happens in May because it's going to be all about May for the first quarter and May did not recover. May was just kind of bumping along and June is bumping along as well. Now I mentioned I just wanted remind you that I had mentioned earlier we expect electronics to be up somewhat in Q2 versus Q1 but that’s not based upon the first four weeks that we've had so far shown, that's based upon the frequent intimate discussions with our customers in Asia and the OEM in Asia.

So in other words in four weeks, if you’re not necessarily tracking that way, but you're having robust conversations with clients that suggest we should see some acceleration in the quarter?

Yes, that's right, I would say some growth in the quarter. And you know we spent a lot time talking to -- discussing with our clients and OEMs in the last couple of weeks, especially in Asia what I think would happen, not just -- I shouldn’t say that, it's in North America as well. And partly in anticipation for this call, because I know -- we knew you'd be interested. So obviously we're interested as well but for us we're very flexible we can make adjustments pretty quickly in terms of our manufacturing plans and manufacturing capability. But I thought that you and others would be interested in our perspective on the second quarter, so we spent a little more time I think talking to our OEMs and customers about the second quarter over the last couple of weeks.

Last question here and I'll hop back into the queue. So Meteorwave, it sounds like you've got some good data points within the industry in terms of perhaps getting some reinvigorated sales on the electronics and can you talk a little bit more to your hope or expectations for that as we move forward and how that can potentially contribute to your electronics side of the portfolio. Thanks.

Okay, so we talked about this, very well-known test that was done by one of the major Asian electronic companies where there is Meteorwave 4000 products fared better than anybody else’s product and that is quite widely known, we’ve been congratulated by others that we weren’t even aware that -- didn’t know that they were aware of this test. Those things make a difference because not only is it well known generally, it’s also well known by the people who make decisions within the OEM community. I think we mentioned last time that Meteorwave has been approved on some large or next generation Huawei programs and those should ramp up later this year. So, I think we’d like to see a little more traction with Meteorwave and you said it, but it’s quite -- I think it’s going pretty well in Asia, there is a lot Meteorwave activity in Asia. Very competitive market of course, that’s where everybody is really focused, our competitors are talking about, so we really have to have the -- we have to offer something unusual, something different in our performance in order to really play in that market. It’s clear that if we’re just like everybody else, it’s going to be pretty difficult for us to have a meaningful business because then we’ll just end up competing on price and that really doesn’t provide much of a future for our company. So, Sean I don’t know if that helps with color, is there something else you want me to comment on, please let me know.

Okay, that’s fine; we can take offline. Thank you.

Thank you and our next question comes from the line of Morris Ajzenman from Griffin Securities. Your line is now open.

Just a follow-up to the previous question here on the electronics side, you have Asia approximately 39% of sales and you spoke about the weakness in this quarter and particularly in China, those comments how would that relate to North America with 53% of sales? How would you put that in context if you want to put some sort of wordage [ph] on that this part quarter, how they progress?

Morris, so North America has become less of a driver for electronics, the reason you see a big percentage of, a bigger percentage rather of revenues in North America is really aerospace related because a large majority of our aerospace revenues are from North America. North America has been more or less stable electronics -- from an electronics perspective but it’s not the big story for Park, the electronics in North America are not going to be a big contributor in the future. There aren’t that many competitors left in North America, I think Park is I think it’s pretty safe, well regarded in North America, hopefully and highly up, but it’s not the growth market, not the big market for us which, it’s probably more of a niche story. But North America really isn’t moving up and down very much. You know you see these swings in our topline and our P&L, it’s going to be Asian electronics that’s driving it.

Alright then back to Asia again you had some weakness, it’s gone off the wild end -- [indiscernible] trade skirmishes, are these issues going to be continue into the second quarter or is that part of what you might see as an improvement in the trends going?

First skirmishes, I don’t really know about that, it seems like the environment or the climate is a little bit tense between China and U.S. right now in terms of trade activity, trade issues, the election probably does soften the environment very much, it probably does the opposite, but there has been some, say some embargos and we hear that some of the Asian OEMs have had some difficulty getting Western components which they need to build product, so that hasn’t helped very much. I am not saying that’s the major issue, I am not saying that. I think that it’s just that the economy is not really what we’d like, not really what the Asians would like and it’s effecting different OEMs differently. Some OEMs will side look, they’re just going to pull right through it, you know they’re just going to keep going. But some do not, some decide to adjust their business levels take more, I guess more of a short-term orientation as compared to long-term.

Okay, on a different front, The Journal picked up a story today that China put into its first flight, it’s a new ARJ 21 regional jet, they had that first flight I think yesterday or the day before. How does this bode as far as orders going into the remainder of the year from -- as it relates to the engine orders from GE?

Yes. So that’s a GE program, that’s a Park program. I think that I saw that as well, that’s good news. I think that flight was quite delayed. I don’t think it’s going to have an impact this year though, because I believe that GE has some inventory, I think their ramp will be quite slow. The Comac program that’s really more significant for Park, this is C919, that’s the major program the Chinese are working on to complete single-aisle to compete against Boeing and Airbus to 737, the A320, that’s a big deal, but that’s still several years out. We’re doing some NPI work, new product introduction work but that won’t go into production, if the Chinese are successful for a few years. The ARJ, I think is small volume and will not impact us this year. And even when it getting to -- a little bit ramps up it’s still a smaller program, it’s nowhere near like a 747 program for Park or the A320 program or some of the other Boeing programs we’re working on.

One last question, this one is for Matt. SG&A as a percent of sales 16.9%, that’s the highest it’s been for a couple of years running here -- that I’m looking here. I presume it’s partially reflection of revenues being weak, but any comments to that?

Yes. It’s a large part of that is the revenues are down and a lot of our SG&A is more of fixed in nature. We had a few things that were up a little bit this quarter versus last quarter.

Thank you.

Thank you. [Operator Instructions]. And our next question comes from the line of Adam Mielnik with Royce and Associates. Your line is now open.

Just on the inventory, the customers destocking, you mentioned that you can make quick changes in manufacturing plans and I know you’ve talked about this a little bit before. But, could you talk about what impact that’s had on your supply China if any?

Are you referring to electronics or aerospace?

I guess, you could talk maybe on the GE volumes for instance because like what kind of impact that had on your supply chain, but you can talk in another areas as well.

Okay, so good question. The mentality between aerospace and electronic is quite different. Aerospace people think long-term, electronics people think very short-term and of course that includes supply chain. So our supply chain isn’t concerned about the fact that business is down now. They’re really excited about being able to participate in the 10-year RFQ. When we respond to the 10-year RFQ, we have all our supply chain lined up, everybody’s lined up. We have to -- these responses take a lot of effort. So every supplier of every component is already lined up and that’s what they’re looking at, they’re looking at the significant volume that they’re going to see, that they expect to see any way through this 10-year RFQ over the next I guess 10.5 years. They’re also -- they’ve been around long enough to know that business goes up and down, but again their attitude is going to be more long-term. Electronics that’s different, it’s much more short-term orientation, but like us, in electronic for use to ups and downs and adjusting our manufacturing plans to accommodate, so we can do very responsive. Our supply chain is good at that as well, because they’re used to that as well. So I think that, I don’t know if this has been what you’re really getting out, but I think we’re doing pretty well with our supply chain, I think we have good relations and they are there to support what we’re trying to do.

I guess in terms of commenting on that could you have an impact on profitability in terms of managing supply chain?

I didn’t follow that last question, sorry.

Just tie that into profitability a little bit, just in terms of have your managing those changes and the --.

Our profitability you mean, Park’s profitability? Okay, if you’re asking whether our prices are going up in connection with lower revenue lower volume, lower purchase amounts with our suppliers, the answer is no.

And moving on specifically to the electronics business, you’ve been dealing with commoditization in some areas and you’ve been moving away from some lower margin business which you talked about in the annual report. And that has potential for a negative topline impact, but should improve profitability going forward. Could you talk about what you’ve seen in that so far, and I guess how that’s been progressing?

This has been a long process to commoditization, these return. If you go back many years, Matt talked about a high performance percentage, it would have been, well at one point it would have been a zero. But even 50 years ago, it probably would have been I don’t know 20%, maybe less. I think Park is always been way ahead of our competitors in that area. Now we’re at 94%, so it's essentially everything. The rest of it, the non-high performance, especially done as an accommodation to customers. But we’ve talked about this I think in a number of calls now that within that high performance there is segmentation, there is lower aspect of high performance and higher end aspect of high performance and we keep getting pushed or driven toward the very highest end of high performance, because that’s where we’re able to compete. Even the lower aspect of high performance has become commoditized and very price sensitive and that’s where we have lost market share. But we’re just not going to chase an old product based on the price, we just don’t see any future in doing that, we’d rather move to the new products where we have a future and what we get we can protect. So, it's been really a long process. So I think maybe 15 years now. For us, we need to do to be successful is and I feel a little wind at our sails, but that’s not something we could control. And we need to see our new products get more and more introduced and more and more adopted into the market with the highest end applications. That’s what we need to do, that’s what where we’re focused on, that’s what our mission is and you haven’t asked I don’t think, but you did asked, well how are we doing? I would say we’re doing okay, but we need to do better, maybe give us a B, or B- and we need an A+. Electronics is a very, very difficult, a very competitive market. Park I think has a reputation, we’ve been in this market for long time. So we’re thought of very highly as a high end technology company, I believe you can ask others what they think, I think that’s what they would tell you. But the reputation is nice. Now we have to actually have turn that reputation into realities and we are to some extent I think we need to do more and do better to be successful.

And just on your part maybe on the lower end of high performance business in electronics. Have you guys been stepping away from some of the business more I guess aggressively I guess you can say in recent quarters? Or is that kind of where it's been for a little while over a year, you have some attrition and you’re getting rid of some of that business, but it's not accelerating?

So let me clarify. First of all let me answer the last part of your question first. I think it's been more of a long process. But we don’t really step away from any business. We never say to our customer we’re going to discontinue their product. It's kind of a self-actuating strategy which we also don’t reduce our prices. So when our product at the lower end becomes commoditized there are a lot of other alternatives that a customer will have and at some point they will select the alternative and then we lose the market share. But we don’t go to a customer and say look we’re not interested in this anymore, it's not part of our culture. Our culture is not to do it. Our culture is we have a customer, we’re here to serve you and we’ll do whatever you need. So it's not that we turn away from a customer, or turn away from a product, it's more of the customer move on to more commoditized products when that lower end of the high performance product line for Park becomes more commoditized. So, again --.

You’re not stepping away, it’s -- that business goes away on its own?

Exactly right, let's call the self-actuating strategy, based upon our policy about pricing. We don’t chase price down onto this -- the gutter if you will.

Okay, all right. That makes sense. Thank you.

Okay. I just wanted to add in response to I guess to Morris’s question about SG&A, SG&A is going to move up and down from quarter-to-quarter, I think in the first quarter we had some trade shows which drive SG&A up, so these things move up and down, it's not going to be exactly the same quarter-to-quarter, but I think we're in a range that will probably continue to see for the next few quarters.

Thank you and we have a follow-up question from the line of Sean Hannan with Needham & Company. Your line is now open.

Just quick for a sanity check here, can you remind us or update us on what you view your rough mix today in terms of the end market exposure on -- obviously you don't get the explicit insight in terms of where your product ultimately ends up in the OEM, but I know that there is a lot of datacom, telecom concentration, don't know if there is anything that's changed there and just looking to see if we can get us any check update? Thanks.

No I think it's a pretty much the same and our biggest component is going to be infrastructure, telecom, internet infrastructure, these are the big boxes, servers, routers, storage, switching. Also wireless is going to be important for us, both the wired and wireless portion of wireless. And then for that enterprise I guess would say military significant probably mostly in North American, I think that's probably for North America anyway Sean it's more North America electronics it's more, that's a significant component of what we do, military aerospace. I am talking electronic products not our aerospace product line. So we talk electronics versus aerospace. I hope this is understood. We don't -- the electronics materials we're selling to military that's considered electronics, not aerospace in terms how we breakdown our revenues, so I don't -- anyway maybe I am just rambling here a little bit Sean, but I think not really a big change.

Thank you. And I am not further questions at this time. I would now like to turn the call back to Mr. Brian Shore for closing remarks.

Okay, thank you operator. This is Brian again. Thank you everybody for listening in our first quarter call. Matt and I are here in the Park's office today, so if you have any follow-up questions, please feel free to us a call. Thank you again and have a nice summary everybody. Take care.

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