Good morning. My name is Kelly, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp’s Second 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 Shore. Welcome to our second quarter conference call. I have with me as always Matt Farabaugh, our CFO and Senior Vice President. Matt will start with some comments regarding the financials and then I’ll add some comments on my own. Matt’s comments are already posted on our website. There’s a lot of detail on Matt’s comments, so, you also can refer to the website to review the details. Okay. Matt, go ahead.

Okay. Thanks Brian. Certain statements we may make during the course of this call, 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 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 second quarter ended August 28, 2016 P&L, which are not specifically addressed in the earnings release. During the fiscal year 2017 second quarter, North American sales were 55% of total sales, European sales were 7% of total sales, and Asian sales were 38% of total sales, compared to 56%, 6%, and 38% respectively for the 2016 fiscal year second quarter; and 53%, 8%, and 39% respectively for the 2017 fiscal year first quarter. Sales of Park’s high performance non-FR-4 electronics materials were 93% of total electronic material sales in the 2017 fiscal year second quarter, 93% in the 2016 fiscal year second quarter, and 94% in the 2017 fiscal year first quarter. Park’s electronics sales were $20.2 million or 70% of total sales in the 2017 fiscal year second quarter compared to $26.2 million or 69% of total sales in the 2016 fiscal year second quarter, and $23.8 million or 76% of total sales in the 2017 fiscal year first quarter. Park’s aerospace sales were $8.8 million or 30% of total sales in the 2017 fiscal year second quarter, compared to $11.8…

Okay. Thank you, Matt. This is Brian again. So, let me go through some additional comments about the quarter and also about the business. So, the revenue and bottom line shortfall, it’s all electronics, it’s an electronic story, so let’s talk about electronics first, what the problem is, and what we are doing about it. The electronics revenues, as you know, were off even from the first quarter which was weak. So, the market is not great, programs are falling off, and the problem is we’re replacing those items by getting on new programs as quickly as we need to. And there’s really two answers for electronics, one is in Asia; the other one is in North America. So, we have to break it down, because the markets are quite different and the answers are quite different for us. In Asia, we’ve talked about this, I think last call or call before, there was -- let’s call a contest, very well-publicized contest in Asia of all the leading materials in the world. Our entry was Meteorwave 4000, which is the top of our line, and we won; we’re the only one who passed the test the first time, it’s called CAF 1,000 hour; we won. Now some others I think were given a second chance, maybe they were able to pass the test the second or third time. But this is all of top materials in the world. So, we felt -- and that’s very publicized, well publicized, everyone knows about it. So, we felt okay, this is really good, this is what we wanted. We wanted to develop the best products that would give us something different, something unique which I always felt was needed for Park, which we didn’t want to be like everybody else. But the harsh…

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

So, thanks for all the commentary Brain; it’s always very helpful. A question here to start with at least on the aerospace side, you’ve laid out a few thoughts to think about just the future. We’ve obviously heard more of a focus for bigger pieces that should be in play by the time we get to 2020, 2021. In some prior calls, you’ve expressed optimism for some material revenue growth that we should see in 2017 and 2018 for aerospace, just trying to understand how that may still play in the picture at present. If you can give any color around that would be helpful? Thanks.

There’s a couple of ways to answer that question I guess. First of all, GE is a big dog right now, the aerospace, so that drives a lot. So, if you look at 2017 compared to 2016 just assume again nothing else changes which is not really an assumption we would like. Calendar year -- sorry, we aren’t focusing on calendar here, 2017 is going to be -- would be bigger, higher, bigger revenue and higher revenue than 2016, and then in 2018 as well. With GE, we’re ramping up to that high number over -- year-over-year; it doesn’t just spike up in 2020, 2021. The reason I use those years though is that’s when that new program would really start to leg on. It takes three years to do the qualification. So, like I said, we have this detailed technical meeting in a few weeks to review the qualification plan. That’s a pretty serious nuts and bolts kind of discussion; it could take few days to agree upon a qualification plan. Once it’s agreed upon, it’s about three years to get qualified. So, that program doesn’t go anywhere until we get qualified. But meanwhile, GE Aviation where we’re already qualified, the MRAS portion in particular with the thrust reversers and the sales, that’s going up every year. We had to setback this year because of the inventory problem, but that setback is now supposedly going to be reversed based on what we were just told by GE Aviation starting next year, and then we are back to normal, which is not -- no more inventory impact, just normal supplying into the GE Aviation needs, right? And those programs go up every year. Again, the big driver for us with GE Aviation is the A320neo program. The Boeing 747 is…

Okay. And I just want to make sure I am interpreting correctly how to layer in the variables of growth. So, if I understand correctly, okay, we start with at least as we think about in the next few years, I don't how many people are modeling out through 2021, but at least the next few years, solid the base business, maybe it grows, maybe it doesn't, hopefully it does. We work through then separately the inventory issue over at GE; we start to get some of that layering in as a growth factor next year; incrementally momentum perhaps in the next -- through the course of the next two to three years with the Airbus 320neo -- A320neo. And then incremental to that should be maybe a couple of singles here and there for some of the early stages of some of these other programs that you're discussing and referencing here in the call.

So, I would agree with that. I wish we could quantify it, but I think that would be risky because we don't know. One thing we can quantify though [indiscernible] do this is the difference between this year and next year for the MRAS portion of GE Aviation. That's the part we're more confident about based on what they've told us. It should be about $7 million better next year. That does not take into account the GE Aviation portion which is the opportunistic portion that is harder to quantify. So, there is a lot of breakdown here. When we talk GE totally, we're talking about thrust reversers and the cells, that's the real core business where we have a lot of visibility; we have the rest of the GE Aviation activities; there are many different things we're working on. Some have already started to ramp up that's smaller and less predictable. So, when I say 7, I'm talking about the known portion of it, approximately 7 million. That's based on what we know, approximately 7. And then the unknown portion should be a positive because this year the unknown portion is very small because again these programs we're just starting on. So, I don't know how to quantify it; it's meaningful but hard to quantify. So, we would probably add to that 7 some other number that we don't know. And just talking about the GE Aviation universe and the other things we're working on, like I said hard to quantify. But I agree with your comments and assessment. Maybe not all singles, I would say couple of doubles, maybe even some triples. That program with that big aerospace company, big aircraft company; as I said, our understanding is a couple few million dollars a year, but we think that leads to bigger things potentially anyway.

And then, just a third question if I may, switching to the electronics side. So, this has really been a tough state and you guys have certainly been wedded to specific markets in communications and infrastructure. It's for the most part been a business that's continued to slide and really only moved in one direction that's down. I think if my math is correct that 25% year-over-year, it's down over 50% from the last five years. You have some optimism around some new opportunities; I don't get the sense that that necessarily brings your business really moving in a true growth trajectory in the big picture. So, I guess my big question here is strategically what are you thinking about in terms of how you are working with this market? Is there some discussion at your level or at the Board level in pushing perhaps to try and become more exposed to other types of growth submarkets within the PCB landscape, such as automotive or is this a business that you can create some value in order to fund the aerospace side and maybe you sell it? Can you share any thoughts around this, because it just doesn't seem to be moving in the direction I think you or a lot of other folks would like to see?

I agree with that. It's a disappointment; it's been a struggle; we've hung in there and hung in there. I don't think we're really looking into getting into other markets because the other markets are lower margin, more commoditized. And that becomes very difficult for Park. It's just not what we are set up to do. The comments that I made are what we are doing in Asia, it's getting more in the game, which comes with some difficulty to Park. It's not how we've done business. And I'm concerned about what that means for our future because okay, we can get in the game, make deals, we have already made some deals, but how does that distinguish us from the other guys who are out there and very aggressive; that would be maybe a longer term question. In the U.S., I think it's a little more straightforward. We need to size the operations based upon the market opportunity. Like I said, we have something finished, ready to go, pull the trigger. But then, I guess it's good news to say we got some opportunities that we didn't really expect to see come our way and they look like they are potentially significant. So, we want to sit on any restructuring until those things pan out. In other words, we still may do a restructuring but it may be different based upon what the needs will be based upon these opportunities. But I agree, Sean and I've never been a guy that’s good at kind of just blowing smoke. I agree it's not a real optimistic story; it's been disappointing; we've hung in there. It's not that we need electronics to fund aerospace anymore; it's more the opposite. The aerospace is generating better returns than electronics already. Electronics, obviously the…

Alright. Thank you very much for the color, Brian. And best wishes to the team.

You’re welcome.

Thank you. [Operator Instructions] Our next question comes from the line of Leonard Cooper. Your line is open.

I had some chicken soup as I have cough. While waiting for you to answer the last question, I think I’ve answered the question I was going to ask. I was wondering whether in the self-driving automobiles, if there was any opportunity for Park?

Well, I think the answer is yes. That’s really RF area which is not as an often our leading area, not our specialty. So, we’re seeing small opportunities in the RF area. And it’s certainly an area that we continue to work on, not only with our PTFE thermoplastic products but also our thermoset products. And the reason is that -- and when we get to the very high end of thermoset products, what we call digital products, and maybe that’s not the right way to distinguish between digital and RF. The high end of our digital products, they have the ability to work in the RF area. So, I wouldn’t say that’s a big, big opportunity for us, but it’s an area that we’re working on.

Thank you. And I’m showing no further questions at this time. I’d like to turn the call back to Mr. Shore for closing remarks.

Thank you operator very much. Matt and I are here in Melville office today. So, feel free to give us call. Otherwise, have a very nice day. And we look forward to talking to you soon. Thanks again, bye.

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