Park Electrochemical Corp. (“Park”), through its subsidiaries (unless
the context otherwise requires, Park and its subsidiaries are hereinafter called
the “Company”), is a global advanced materials company which designs,
develops and manufactures advanced composite materials, primary and secondary
structures and assemblies and low-volume tooling for the aerospace markets and
high-technology digital and radio frequency (“RF”)/microwave printed
circuit materials principally for the telecommunications and internet infrastructure,
enterprise and military markets. Park’s core capabilities are in the areas
of polymer chemistry formulation and coating technology.
Park operates through fully integrated business units in Asia, Europe and North
America. The Companys manufacturing facilities are located in Kansas, Singapore,
France, Arizona and California. The Company also maintains research and development
facilities in Arizona, Kansas and Singapore.
Park was founded in 1954 by Jerry Shore, who was the Company’s Chairman
of the Board until July 14, 2004.
The sales and long-lived assets of the Company’s operations by geographic
area for the last three fiscal years are set forth in Note 13 of the Notes to
Consolidated Financial Statements in Item 8 of Part II of this Report. The Company’s
foreign operations are conducted principally by the Company’s subsidiaries
in Singapore and France. The Company’s foreign operations are subject
to the impact of foreign currency fluctuations. See Note 1 of the Notes to Consolidated
Financial Statements in Item 8 of Part II of this Report.
AEROGLIDE®, COREFIX®, EASYCURE E-710®, ELECTROGLIDE®, LD®,
MERCURYWAVE®, METEORWAVE®, NELCO®, RTFOIL®, SI® and TIN
CITY AIRCRAFT WORKS® are registered trademarks of Park Electrochemical Corp.,
and ALPHASTRUT™, ELECTROVUE™, EF™, EP™, M-PLY™,
NELTEC™, PEELCOTE™, POWERBOND™ and SIGMASTRUT™ are common
law trademarks of Park Electrochemical Corp.
Aerospace Composite Materials, Structures and Assemblies
Aerospace Composite Materials, Structures and Assemblies - Operations
The Company designs, develops and manufactures engineered, advanced composite
materials and advanced composite structures and assemblies and low-volume tooling
for the aerospace markets and prototype tooling for such structures and assemblies.
The Company’s aerospace composite materials are designed, developed and
manufactured by the Company’s Park Aerospace Technologies Corp. (“PATC”)
business unit located at the Newton, Kansas Airport and by the Company’s
Nelco Products Pte. Ltd. business unit in Singapore. The Company’s aerospace
composite structures and assemblies and low-volume tooling are also developed
and manufactured by the Company’s PATC business unit.
PATC offers a full range of aerospace composite materials manufacturing capability,
as well as composite structures design, assembly and production capability,
all in its Newton facility. PATC offers composite aircraft and space vehicle
structures design and assembly services, in addition to “build-to-print”
services. The Company believes that the ability of its PATC facility to offer
such a wide and comprehensive array of composite materials and structures manufacturing
and development technology and capability to the aircraft and space vehicle
industries provides attractive benefits and advantages to those industries.
Aerospace Composite Materials, Structures and Assemblies – Industry Background
The aerospace composite materials manufactured by the Company and its competitors
are used primarily to fabricate light-weight, high-strength structures with
specifically designed performance characteristics. Composite materials are typically
highly specified combinations of resin formulations and reinforcements. Reinforcements
can be unidirectional fibers, woven fabrics, or non-woven goods such as mats
or felts. Resin formulations are typically highly proprietary, and include various
chemical and physical mixtures. The Company produces resin formulations using
various epoxies, polyesters, phenolics, cyanate esters, polyimides and other
complex matrices. The reinforcement combined with the resin is referred to as
a “prepreg”. Aerospace composite materials can be broadly categorized
as either thermosets or thermoplastics. While both material types require the
addition of heat to form a consolidated laminate, thermoplastics can be reformed
using additional heat. Once fully cured, thermoset materials cannot be further
reshaped. The Company believes that the demand for thermoset advanced materials
is greater than that for thermoplastics due to the fact that fabrication processes
for thermoplastics require much higher temperatures and pressures and are, therefore,
typically more capital intensive than the fabrication processes for thermoset
materials.
The Company works with aerospace original equipment manufacturers (“OEMs”),
such as general aviation aircraft manufacturers and commercial aircraft manufacturers,
and certain tier 1 suppliers to qualify its aerospace composite materials or
structures and assemblies for use on current and upcoming programs. The Company’s
customers typically design and specify a material specifically to meet the needs
of the structure’s end use and the customers’ processing methods.
Such customers sometimes work with a supplier to develop the specific resin
system and reinforcement combination to match the application. The Company’s
customers’ processing, or the Company’s processing, may include
hand lay-up, resin infusion or more advanced automated lay-up processes. Automated
lay-up processes include automated tape lay-up, automated fiber placement and
filament winding. These fabrication processes significantly alter the material
form purchased. After the lay-up process is completed, the material is cured
by the addition of heat and pressure. Cure processes typically include vacuum
bag oven curing, high pressure autoclave, press forming and before-press curing.
After the structure has been cured, final finishing and trimming, and assembly
of the structure, is performed by the fabricator or the Company.
5
Aerospace Composite Materials, Structures and Assemblies – Products
The aerospace composite materials products manufactured by the Company are
primarily thermoset curing prepregs. The Company has developed proprietary resin
formulations to suit the needs of the markets in which it participates by analyzing
the needs of the markets and working with its customers. The complex process
of developing resin formulations and selecting the proper reinforcement is accomplished
through a collaborative effort of the Company’s research and development
and technical sales and marketing resources working with the customers’
technical staff. The Company focuses on developing a thorough understanding
of its customers’ businesses, product lines, processes and technical challenges.
The Company develops innovative solutions which utilize technologically advanced
materials and concepts for its customers.
The Company’s aerospace composite materials products include prepregs
manufactured from proprietary formulations using modified epoxies, phenolics,
polyesters, cyanate esters and polyimides combined with woven, non-woven and
unidirectional reinforcements. Reinforcement materials used to produce the Company’s
products include polyacrylonitrile (“PAN”) based carbon fiber, E-glass
(fiberglass), S2 glass, quartz, carbonized rayon, aramids, such as Kevlar®
(“Kevlar” is a registered trademark of E.I. du Pont de Nemours &
Co.), Twaron® (“Twaron” is a registered trademark of Teijin
Twaron B.V. LLC), polyester and other synthetic materials. The Company also
sells certain specialty prepregs, such as Raycarb C2, a carbonized rayon fabric
produced by Airbus Safran Launchers SAS (formerly Herakles, formerly Snecma
Propulsion Solide) and used mainly in the rocket motor industry, and Enka AS,
a proprietary commercial rayon fabric produced by Highland Industries, Inc.
and used in the aerospace industry as the base white material for carbon phenolic
applications.
The Company’s composite structures and assemblies are manufactured with
carbon, fiberglass and other reinforcements impregnated with formulated resins.
Certain of these impregnated reinforcements, or prepregs, are also manufactured
by PATC. The Company also provides low-volume tooling in connection with its
manufacture and sale of composite structures and assemblies.
Aerospace Composite Materials, Structures and Assemblies – Customers
and End Markets
The Company’s aerospace composite materials, structures and assemblies
customers include manufacturers of turbofan engines, aircraft primary and secondary
structures and radomes, including military aircraft, unmanned aerial vehicles
(“UAVs”), business jets and turboprops, large and regional transport
aircraft and helicopters, space vehicles, rocket motors and specialty industrial
products. The Company’s aerospace composite materials are marketed primarily
by sales personnel and, to a lesser extent, by independent distributors and
independent sales representatives, and the Company’s aerospace composite
structures and assemblies are marketed primarily by sales personnel.
During the Company’s 2018 fiscal year, 11.0% of the Company’s total
worldwide sales were to General Electric Company, a leading manufacturer of
aerospace engines. During the Company’s 2017 and 2016 fiscal years, the
Company did not have sales to any aerospace composite materials, structures
and assemblies customer that equaled or exceeded 10% of the Company’s
total worldwide sales. During the 2018 fiscal year, sales to no other aerospace
composite materials, structures and assemblies customer of the Company equaled
or exceeded 10% of the Company’s total worldwide sales.
Although the Company’s aerospace composite material, structures and assemblies
business is not dependent on any single customer, the loss of a major customer
or of a group of customers could have a material adverse effect on the Company’s
business or its consolidated results of operations or financial position.
The Company’s aerospace customers include fabricators of aircraft composite
structures and assemblies. The Company’s aerospace composite materials
are used by such fabricators and by the Company to produce primary and secondary
structures, aircraft interiors and various other aircraft components. The Company’s
customers for aerospace materials, and the Company itself, produce structures
and assemblies for commercial aircraft and for the general aviation and business
aviation, kit aircraft, special mission, UAVs and military markets. Many of
the Company’s composite materials are used in the manufacture of aircraft
certified by the Federal Aviation Administration (the “FAA”).
Customers for the Company’s rocket motor materials include United States
defense prime contractors and subcontractors. These customers fabricate rocket
motors for heavy lift space launchers, strategic defense weapons, tactical motors
and various other applications. The Company’s materials are used to produce
heat shields, exhaust gas management devices and insulative and ablative nozzle
components. Rocket motors are primarily used for commercial and military space
launch, and for tactical and strategic weapons. The Company also has customers
for these materials outside of the United States.
The Company also sells composite materials for use in RF electrical applications.
Customers buying these materials typically fabricate antennas and radomes engineered
to preserve electrical signal integrity. A radome is a protective cover over
an electrical antenna or signal generator. The radome is designed to minimize
signal loss and distortion.
Aerospace Composite Materials, Structures and Assemblies – Manufacturing
The Company’s manufacturing facilities for aerospace composite materials
are currently located in Newton, Kansas and in Singapore, and its manufacturing
facility for composite structures and assemblies is also located in Newton,
Kansas. See “Aerospace Composite Materials, Structures and Assemblies
– Operations” elsewhere in this Report.
The process for manufacturing composite materials, structures and assemblies
is capital intensive and requires sophisticated equipment, significant technical
know-how and very tight process controls. The key steps used in the manufacturing
process include resin mixing, resin film casting and reinforcement impregnation
via hot-melt process or a solution process.
Prepreg is manufactured by the Company using either solvent (solution) coating
methods on a treater or by hot melt impregnation. A solution treater is a roll-to-roll
continuous process machine which sequences reinforcement through tension controllers
and combines solvated resin with the reinforcement. The reinforcement is dipped
in resin, passed through a drying oven which removes the solvent and advances
(or partially cures) the resin. The prepreg material is interleafed with a carrier
and cut to the roll lengths desired by the customer. The Company also manufactures
prepreg using hot melt impregnation methods which use no solvent. Hot melt prepreg
manufacturing is achieved by mixing a resin formulation in a heated resin vessel,
casting a thin film on a carrier paper, and laminating the reinforcement with
the resin film.
The Company also completes additional processing services, such as slitting,
sheeting, biasing, sewing and cutting, if needed by the customer. Many of the
products manufactured by the Company also undergo extensive testing of the chemical,
physical and mechanical properties of the product. These testing requirements
are completed in the laboratories and facilities located at the Company’s
manufacturing facilities.
The Company’s laboratories have been approved by several aerospace OEMs,
and the Company has achieved certification pursuant to the National Aerospace
and Defense Contractors Accreditation Program (“NADCAP”) for both
non-metallic materials manufacturing and testing and composites fabrication.
After all the processing has been completed, the product is tested and packaged
for shipment to the customer. The Company typically supplies final product to
the customer in roll or sheet form. The Company’s PATC facility has received
accreditation by NADCAP for composite structures manufacturing and for composite
materials manufacturing, and the Company believes that the PATC facility is
one of the few facilities in the world with NADCAP accreditation for manufacturing
both composite materials and composite structures. The Company has also received
AS9100C certification for its quality management system for the manufacture
of advanced composite materials and design and manufacturing of structures for
aircraft and aerospace industries.
Electronics Materials
Electronics Materials - Operations
The Company is also a leading global designer and manufacturer of advanced
electronics materials used to fabricate complex multilayer printed circuit boards
and other electronic interconnection systems, such as multilayer back-planes,
wireless packages, high-speed/low-loss multilayers and high density interconnects
(“HDIs”). The Company’s multilayer printed circuit materials
consist of copper-clad laminates and prepregs, which is an acronym for pre-impregnated
material. The Company has long-term relationships with its major customers,
which include leading independent printed circuit board fabricators, electronic
manufacturing service companies, electronic contract manufacturers and major
electronic original equipment manufacturers ("OEMs"). Multilayer printed
circuit boards and interconnect systems are used in virtually all advanced electronic
equipment to direct, sequence and control electronic signals between semiconductor
devices (such as microprocessors and memory and logic devices), passive components
(such as resistors and capacitors) and connection devices (such as infra-red
couplings, fiber optics, compliant pin and surface mount connectors). Examples
of end uses of the Company’s digital printed circuit materials include
high speed routers and servers, telecommunications switches, storage area networks,
supercomputers, satellite switching equipment and wireless local area networks
("LANs"). The Companys RF/microwave printed circuit materials are
used primarily for military avionics, antennas, power amplifiers and other components
for cellular telephone base stations, automotive adaptive cruise control systems
and avionic communications equipment. The Company has developed long-term relationships
with major customers as a result of its leading edge products, extensive technical
and engineering service support and responsive manufacturing capabilities.
Park believes it founded the modern day printed circuit industry in 1957 by
inventing a composite material consisting of an epoxy resin substrate reinforced
with fiberglass cloth which was laminated together with sheets of thin copper
foil. This epoxy-glass copper-clad laminate system is still used to construct
the large majority of today’s advanced printed circuit products. The Company
also believes that in 1962 it invented the first multilayer printed circuit
materials system used to construct multilayer printed circuit boards. The Company
also pioneered vacuum lamination and many other manufacturing technologies used
in the industry today. The Company believes it is one of the industry’s
technological leaders.
The Company believes that it is one of only a few significant independent manufacturers
of high performance multilayer printed circuit materials in the world. The Company
was the first manufacturer in the printed circuit materials industry to establish
manufacturing presences in the three major global markets of North America,
Europe and Asia, with facilities established in Europe in 1969 and Asia in 1986.
Electronics Materials – Industry Background
The electronics materials manufactured by the Company and its competitors are
used primarily to construct and fabricate complex multilayer printed circuit
boards and other advanced electronic interconnection systems. Multilayer printed
circuit materials consist of prepregs and copper-clad laminates. Prepregs are
chemically and electrically engineered thermosetting or thermoplastic resin
systems which are impregnated into and reinforced by a specially manufactured
fiberglass cloth product or other woven or non-woven reinforcing fiber. This
insulating dielectric substrate generally is 0.125 inch to 0.001 inch in thickness.
While these resin systems historically have been based on epoxy resin chemistry,
in recent years, increasingly demanding OEM requirements have driven the industry
to utilize proprietary enhanced epoxies as well as other higher performance
resins, such as phenolic, bismalimide triazine ("BT"), cyanate ester,
standard and enhanced non-Methylene Dianiline (“MDA”) polyimide,
allylated polyphenylene ether (“APPE”) or polytetrafluoroethylene
("PTFE"). One or more plies of prepreg are laminated together to form
an insulating dielectric substrate to support the copper circuitry patterns
of a multilayer printed circuit board. Copper-clad laminates consist of one
or more plies of prepreg with each ply laminated on the top and bottom with
specialty thin copper foil. Copper foil is specially formed in thin sheets which
may vary from 0.0056 inch to 0.0002 inch in thickness and normally have a thickness
of 0.0014 inch or 0.0007 inch. The Company supplies both copper-clad laminates
and prepregs to its customers, which use these products as a system to construct
multilayer printed circuit boards.
96.3 %