See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended February 26, 2023
(Amounts in thousands, except share (unless otherwise stated), per share and option amounts)
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Park Aerospace Corp. and its subsidiaries (collectively, “Park” or the “Company”), is a global advanced materials company which develops and manufactures advanced composite materials, primary and secondary structures and assemblies and low-volume tooling for the aerospace markets.
|
a.
|
Principles of Consolidation – The consolidated financial statements include the accounts of Park and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
|
|
b.
|
Basis of Presentation – On July 25, 2018, the Company entered into a definitive agreement to sell its Electronics Business for $145,000 in cash. This transaction was completed on December 4, 2018. (See Note 12).
|
The Company has classified the operating results of its Electronics Business, together with certain costs related to the transaction, as discontinued operations, net of tax, in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, in accordance with Accounting Standards Codification (“ASC”) 205-20, Discontinued Operations. (See Note 12).
|
c.
|
Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.
|
|
d.
|
Accounting Period – The Company’s fiscal year is the 52- or 53-week period ending the Sunday nearest to the last day of February. The 2023, 2022 and 2021 fiscal years ended on February 26, 2023, February 27, 2022 and February 28, 2021, respectively. Fiscal years 2023, 2022 and 2021 each consisted of 52 weeks.
|
|
e.
|
Fair Value Measurements – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
|
Fair value measurements are broken down into three levels based on the reliability of inputs as follows:
Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves observable at commonly quoted intervals or current market) and contractual prices for the underlying financial instrument, as well as other relevant economic measures.
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
The fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and current liabilities approximate their carrying value due to their short-term nature. Certain assets and liabilities of the Company are required to be recorded at fair value on either a recurring or non-recurring basis. On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs. (See Note 2).
The Company’s non-financial assets measured at fair value on a non-recurring basis, for purposes of calculating impairment, include goodwill and any long-lived assets written down to fair value. To measure fair value of such assets, the Company uses Level 3 inputs consisting of techniques including an income approach and a market approach. The income approach is based on a discounted cash flow analysis and calculates the fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the discounted cash flow analysis require the exercise of significant judgment, including judgment about appropriate discount rates, terminal values, growth rates and the amount and timing of expected future cash flows. There were no transfers between levels within the fair value hierarchy during the 2023, 2022 or 2022 fiscal years.
|
f.
|
Cash and Cash Equivalents – The Company considers all money market securities and investments with contractual maturities at the date of purchase of 90 days or less to be cash equivalents. The Company had $0 and $5,998 in debt securities included in cash equivalents at February 26, 2023 and February 27, 2022, respectively, which were valued based on Level 2 inputs. Certain of the Company’s cash and cash equivalents are in excess of U.S. government insurance. $28,194 of the $105,440 of cash and marketable securities at February 26, 2023 were owned by one of the Company’s wholly-owned foreign subsidiaries.
|
Supplemental cash flow information:
|
|
Fiscal Year
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes, net of refunds
|
|
$ |
3,235 |
|
|
$ |
3,924 |
|
|
$ |
782 |
|
On February 9, 2023, the Company’s Board of Directors declared a special dividend of $1.00 per share payable April 6, 2023 to shareholders of record at the close of business on March 9, 2023. The total amount of this special dividend was approximately $20.5 million.
At February 26, 2023 and February 27, 2022, the Company held $773 and $2,929, respectively, of cash and cash equivalents in foreign financial institutions.
|
g.
|
Marketable Securities – All marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, included in comprehensive earnings. Realized gains and losses, amortization of premiums and discounts, and interest and dividend income are included in interest and other income, net. The cost of securities sold is based on the specific identification method.
|
|
h.
|
Inventories – Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The Company writes down its inventory for estimated obsolescence or unmarketability based upon the age of the inventory and assumptions about future demand for the Company's products and market conditions.
|
|
i.
|
Revenue Recognition – The Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services. We recognize revenue when all of the following criteria are met: (1) we have entered into a binding agreement, (2) the performance obligations have been identified, (3) the transaction price to the customer has been determined, (4) the transaction price has been allocated to the performance obligations in the contract, and (5) the performance obligations have been satisfied. Revenue is recognized in accordance with contracted shipping terms, which represents the Company’s performance obligation. Shipping and handling costs are treated as fulfillment costs.
|
|
j.
|
Sales Allowances and Product Warranties – The Company records estimated reductions to revenue for customer returns, allowances, and warranty claims. Provisions for such reductions are recorded in the period the sale is recorded and are derived from historical trends and other relevant information. The Company’s products are made to customer specifications and tested for adherence to specifications before shipment to customers. Composite structures and assemblies may be subject to “airworthiness” acceptance by customers after receipt at the customers’ locations. There are no future performance requirements other than the products’ meeting the agreed specifications. The Company’s basis for providing sales allowances for returns are known situations in which products may have failed due to manufacturing defects in products supplied by the Company. The amounts of returns and allowances resulting from defective or damaged products have been less than 1.0% of sales for each of the Company's last three fiscal years.
|
|
k.
|
Accounts Receivable – The Company’s accounts receivable are due from purchasers of the Company’s products. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are due within established payment terms and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than established payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the conditions of the general economy and the aerospace industry. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company writes off accounts receivable when they become uncollectible.
|
|
l.
|
Valuation of Long-Lived Assets – The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Important factors that could trigger an impairment review include, but are not limited to, significant negative industry or economic trends and significant changes in the use of the Company's assets or strategy of the overall business. $1,318of impairments of long-lived assets was recognized in the 2021 fiscal year and no impairments of long-lived assets were recognized in the 2023 or 2022 fiscal years.
|
|
m.
|
Goodwill and Other Intangible Assets – Goodwill is not amortized. Other intangible assets are amortized over the useful lives, which is 15 years, of the assets on a straight-line basis. The Company tests for impairment of intangible assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. With respect to goodwill, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value is less than the carrying value. If, based on that assessment, the Company believes it is more likely than not that the fair value is less than the carrying value, a one-step goodwill impairment test is performed. The Company assesses the impairment of goodwill at least annually. The Company conducts its annual goodwill impairment test as of the first day of the fourth quarter. The Company concluded that there was no impairment in the 2023 or 2022 fiscal years.
|
|
n.
|
Shipping Costs – Most of the costs for third-party shippers for transporting products to customers are paid for or reimbursed by customers. The Company records minimal shipping costs in selling, general and administrative expenses.
|
|
o.
|
Property, Plant and Equipment – Property, plant and equipment are stated at cost less accumulated depreciation and amortization. The Company capitalizes additions, improvements and major renewals and expenses maintenance, repairs and minor renewals as incurred. Depreciation and amortization are computed principally by the straight-line method over the estimated useful lives of the assets. Machinery, equipment, furniture and fixtures are generally depreciated over 10 years. Building and leasehold improvements are generally depreciated over 25-30 years or the term of the lease, if shorter. The depreciation and amortization expenses associated with property, plant and equipment were $1,129, $1,136 and $1,150 for the 2023, 2022 and 2021 fiscal years, respectively.
|
|
p.
|
Income Taxes – Deferred income taxes are provided for temporary differences in the reporting of certain items, such as depreciation and undistributed earnings of foreign subsidiaries, for income tax purposes compared to financial accounting purposes. In evaluating the Company’s ability to recover the deferred tax assets within the jurisdiction from which they arise, all positive and negative evidence is considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, tax planning strategies and results of recent acquisitions. If these estimates and assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's Consolidated Statements of Operations, or conversely to further reduce the existing valuation allowance, resulting in less income tax expense. The Company evaluates the realizability of the deferred tax assets and assesses the need for additional valuation allowances quarterly. (See Note 4).
|
Tax benefits are recognized for an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances and when new information becomes available. Such adjustments are recognized entirely in the period in which they are identified. The effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by the Company. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its liability for unrecognized tax benefits is adequate. Interest and penalties, if any, recognized on the liability for unrecognized tax benefits are recorded as income tax expense.
|
q.
|
Stock-Based Compensation – The Company accounts for stock options, the only form of equity compensation issued by the Company, as compensation expense based on the fair value of the options on the date of grant and recognizes such expense on a straight-line basis over the four-year service period during which the options become exercisable, net of forfeitures. The Company determines the fair value of such options using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates certain assumptions relating to risk-free interest rate, expected volatility, expected dividend yield and expected life of options, in order to arrive at a fair value estimate.
|
|
r.
|
Treasury Stock – The Company considers all shares of the Company’s common stock purchased by the Company as authorized but unissued shares on the trade date. The aggregate purchase price of such shares is reflected as a reduction to Shareholders’ Equity, and such shares are held in treasury at cost.
|
|
s.
|
Leases – The Company has operating leases related to land, office space, warehouse space and equipment. All of the Company’s leases have been assessed to be operating leases. Renewal options are included in the lease terms to the extent the Company is reasonably certain to exercise the option. The exercise of lease renewal options is at the Company’s sole discretion. The incremental borrowing rate represents the Company’s ability to borrow on a collateralized basis over a term similar to the lease term. The leases typically contain renewal options for periods ranging from one year to ten years and require the Company to pay real estate taxes and other operating costs. The latest land lease expiration is 2068 assuming exercise of all applicable renewal options by the Company. The Company’s existing leases are not subject to any restrictions or covenants which preclude its ability to pay dividends, obtain financing or exercise its available renewal options.
|
The following is a summary of available-for-sale securities:
|
|
February 26, 2023
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and other government securities
|
|
$ |
83,859 |
|
|
$ |
83,859 |
|
|
$ |
- |
|
|
$ |
- |
|
U.S. corporate debt securities
|
|
|
17,344 |
|
|
|
17,344 |
|
|
|
- |
|
|
|
- |
|
Total marketable securities
|
|
$ |
101,203 |
|
|
$ |
101,203 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
February 27, 2021
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and other government securities
|
|
$ |
62,612 |
|
|
$ |
62,612 |
|
|
$ |
- |
|
|
$ |
- |
|
U.S. corporate debt securities
|
|
|
34,938 |
|
|
|
34,938 |
|
|
|
- |
|
|
|
- |
|
Total marketable securities
|
|
$ |
97,550 |
|
|
$ |
97,550 |
|
|
$ |
- |
|
|
$ |
- |
|
The following tables show the amortized cost basis, gross unrealized gains and losses and gross realized gains and losses on the Company’s available-for-sale securities:
|
|
Amortized
Cost Basis
|
|
|
Gross
Unrealized Gains
|
|
|
Gross
Unrealized Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 26, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and other government securities
|
|
$ |
89,603 |
|
|
$ |
- |
|
|
$ |
5,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate debt securities
|
|
|
17,414 |
|
|
|
- |
|
|
|
70 |
|
Total marketable securities
|
|
$ |
107,017 |
|
|
$ |
- |
|
|
$ |
5,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 27, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and other government securities
|
|
$ |
65,177 |
|
|
$ |
5 |
|
|
$ |
2,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate debt securities
|
|
|
35,064 |
|
|
|
5 |
|
|
|
131 |
|
Total marketable securities
|
|
$ |
100,241 |
|
|
$ |
10 |
|
|
$ |
2,701 |
|
|
|
Fiscal Year
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains on sale
|
|
$ |
- |
|
|
$ |
26 |
|
|
$ |
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized losses on sale
|
|
$ |
5 |
|
|
$ |
36 |
|
|
$ |
145 |
|
The estimated fair values of such securities at February 26, 2023, by contractual maturity, are shown below:
Due in one year or less
|
|
$ |
30,625 |
|
Due after one year through five years
|
|
|
70,578 |
|
|
|
$ |
101,203 |
|
3.
|
OTHER CONSOLIDATED BALANCE SHEET DATA
|
Other consolidated balance sheet data consisted of the following:
|
|
February 26,
|
|
|
February 27,
|
|
|
|
2023
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
Inventories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$ |
5,376 |
|
|
$ |
4,026 |
|
Work-in-process
|
|
|
536 |
|
|
|
253 |
|
Finished goods
|
|
|
856 |
|
|
|
378 |
|
|
|
$ |
6,768 |
|
|
$ |
4,657 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land, buildings and improvements
|
|
$ |
15,889 |
|
|
$ |
16,054 |
|
Machinery, equipment, furniture and fixtures
|
|
|
32,741 |
|
|
|
33,581 |
|
|
|
|
48,630 |
|
|
|
49,635 |
|
Less: accumulated depreciation and amortization
|
|
|
24,379 |
|
|
|
25,302 |
|
|
|
$ |
24,251 |
|
|
$ |
24,333 |
|
|
|
|
|
|
|
|
|
|
Goodwill and other intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$ |
9,776 |
|
|
$ |
9,776 |
|
Other intangibles
|
|
|
7 |
|
|
|
14 |
|
|
|
$ |
9,783 |
|
|
$ |
9,790 |
|
|
|
|
|
|
|
|
|
|
Accrued liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll and payroll related
|
|
$ |
591 |
|
|
$ |
688 |
|
Employee benefits
|
|
|
3 |
|
|
|
3 |
|
Workers' compensation
|
|
|
92 |
|
|
|
96 |
|
Professional fees
|
|
|
428 |
|
|
|
512 |
|
Restructuring (Notes 8 and 12)
|
|
|
- |
|
|
|
8 |
|
Other
|
|
|
232 |
|
|
|
187 |
|
|
|
$ |
1,346 |
|
|
$ |
1,494 |
|
The income tax provision (benefit) for continuing operations includes the following:
|
|
Fiscal Year
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
(875 |
) |
|
$ |
1,912 |
|
|
$ |
1,662 |
|
State and local
|
|
|
822 |
|
|
|
484 |
|
|
|
447 |
|
Foreign
|
|
|
30 |
|
|
|
4 |
|
|
|
10 |
|
|
|
|
(23 |
) |
|
|
2,400 |
|
|
|
2,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
435 |
|
|
|
565 |
|
|
|
132 |
|
State and local
|
|
|
(111 |
) |
|
|
88 |
|
|
|
109 |
|
Foreign
|
|
|
- |
|
|
|
267 |
|
|
|
(267 |
) |
|
|
|
324 |
|
|
|
920 |
|
|
|
(26 |
) |
|
|
$ |
301 |
|
|
$ |
3,320 |
|
|
$ |
2,093 |
|
The income tax provision (benefit) for discontinued operations includes the following:
|
|
Fiscal Year
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(84 |
) |
State and local
|
|
|
- |
|
|
|
- |
|
|
|
(23 |
) |
Foreign
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
(107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
State and local
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Foreign
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(107 |
) |
State income tax benefits from loss carryforwards to future years were recognized as deferred tax assets in the 2023, 2022 and 2021 fiscal years.
Notwithstanding the U.S. taxation of the deemed repatriated foreign earnings as a result of the transition tax, the Company intends to indefinitely invest approximately $25 million of undistributed earnings outside of the U.S. If these future earnings are repatriated to the U.S., or if the Company determines that such earnings will be remitted in the foreseeable future, the Company may be required to accrue U.S. deferred taxes.
The Company’s pre-tax earnings (loss) from continuing operations in the United States and foreign locations are as follows:
|
|
Fiscal Year
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$ |
10,669 |
|
|
$ |
11,987 |
|
|
$ |
8,732 |
|
Foreign
|
|
|
363 |
|
|
|
(203 |
) |
|
|
(1,447 |
) |
Earnings before income taxes
|
|
$ |
11,032 |
|
|
$ |
11,784 |
|
|
$ |
7,285 |
|
The Company’s pre-tax earnings (loss) from discontinued operations in the United States and foreign locations are as follows:
|
|
Fiscal Year
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(435 |
) |
Foreign
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
(Loss) earnings before income taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(435 |
) |
The Company’s effective income tax rate differs from the statutory U.S. Federal income tax rate as a result of the following:
|
|
Fiscal Year
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory U.S. Federal tax rate
|
|
|
21.0 |
% |
|
|
21.0 |
% |
|
|
21.0 |
% |
State and local taxes, net of Federal benefit
|
|
|
3.8 |
% |
|
|
4.3 |
% |
|
|
5.9 |
% |
Foreign tax rate differentials
|
|
|
(0.4 |
%) |
|
|
2.7 |
% |
|
|
0.7 |
% |
NQSO Expirations and Cancellations
|
|
|
2.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
Adjustment on tax accruals
|
|
|
0.9 |
% |
|
|
(0.3 |
%) |
|
|
0.0 |
% |
ASC 740-10 change
|
|
|
(24.8 |
%) |
|
|
0.5 |
% |
|
|
0.9 |
% |
Foreign tax credits
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
(0.1 |
%) |
Subpart F
|
|
|
0.5 |
% |
|
|
(1.0 |
%) |
|
|
1.1 |
% |
Permanent differences and other
|
|
|
(0.4 |
%) |
|
|
1.0 |
% |
|
|
(0.8 |
%) |
|
|
|
2.7 |
% |
|
|
28.2 |
% |
|
|
28.7 |
% |
The Company had state net operating loss carryforwards of approximately $1,725 and $2,030 in the 2023 and 2022 fiscal years, respectively, and total net foreign operating loss carryforwards of approximately $7,791 and $7,790 in the 2023 and 2022 fiscal years, respectively. The Company has a valuation allowance against the remaining carryforwards. The state net operating loss carryforwards will expire in 2024 through 2040.
The Company had Arizona tax credits of $991 in both the 2023 and 2022 fiscal years, for which no benefit has been provided.
The deferred tax asset valuation allowance of $2,938 as of February 26, 2023 relates to foreign net operating losses and state tax credit carryforwards from continuing operations for which the Company does not expect to realize any tax benefit. During the 2023 fiscal year, the valuation allowance increased by $649, primarily related to the recognition of the Arizona tax credits. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities from continuing operations as of February 26, 2023 and February 27, 2022 were as follows:
|
|
February 26,
|
|
|
February 27,
|
|
|
|
2023
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$ |
1,949 |
|
|
$ |
2,598 |
|
Tax credits carryforward
|
|
|
991 |
|
|
|
991 |
|
Stock options
|
|
|
784 |
|
|
|
977 |
|
Other, net
|
|
|
590 |
|
|
|
174 |
|
|
|
|
4,314 |
|
|
|
4,740 |
|
Valuation allowance on deferred tax assets
|
|
|
(2,938 |
) |
|
|
(3,587 |
) |
Total deferred tax assets, net of valuation allowance
|
|
|
1,376 |
|
|
|
1,153 |
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(2,841 |
) |
|
|
(2,492 |
) |
Undistributed earnings
|
|
|
(2 |
) |
|
|
(2 |
) |
Other
|
|
|
(528 |
) |
|
|
(556 |
) |
Total deferred tax liabilities
|
|
|
(3,371 |
) |
|
|
(3,050 |
) |
Net deferred tax liability
|
|
$ |
(1,995 |
) |
|
$ |
(1,897 |
) |
At February 26, 2023 and February 27, 2022, the Company had gross unrecognized tax benefits and related interest of $1,751and $4,537, respectively, included in other liabilities. If any portion of the unrecognized tax benefits at February 26, 2023 were recognized, the Company’s effective tax rate would decrease. The change as of February 26, 2023 was due to $214,000 of additional tax due to tax deductions becoming unavailable related to stock options expiring unexercised in the 2023 fiscal year, offset by a reduction in uncertain tax positions of $2.8 million from the reduction of uncertain tax positions related to expiring statute of limitations of tax positions taken in prior years regarding the taxability of funds repatriated from the Company’s subsidiary in Singapore.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits for continuing operations is as follows:
|
|
Unrecognized Tax Benefits
|
|
|
|
February 26,
|
|
|
February 27,
|
|
|
February 28,
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
$ |
4,078 |
|
|
$ |
4,117 |
|
|
$ |
4,164 |
|
Tax positions - Discontinued Ops in prior period
|
|
|
- |
|
|
|
- |
|
|
|
(47 |
) |
Gross decreases - tax positions in prior period
|
|
|
(2,980 |
) |
|
|
(39 |
) |
|
|
- |
|
Gross increases - current period tax positions
|
|
|
326 |
|
|
|
- |
|
|
|
- |
|
Audit settlements
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance, end of year
|
|
$ |
1,424 |
|
|
$ |
4,078 |
|
|
$ |
4,117 |
|
The amount of unrecognized tax benefits may increase or decrease in the future for various reasons, including adding or subtracting amounts for current year tax positions, expiration of statutes of limitations on open income tax years, changes in the Company’s judgment about the level of uncertainty, status of tax examinations, and legislative changes. Changes in prior period tax positions are the result of a re-evaluation of the probability of realizing the benefit of a particular tax position based on new information. It is reasonably possible that none of the unrecognized tax benefits will be recognized within the next 12 months.
A list of open tax years by major jurisdiction follows:
U.S. Federal
|
|
|
2021 |
- |
2023 |
|
California
|
|
|
2020 |
- |
2023 |
|
New York
|
|
|
2021 |
- |
2023 |
|
Kansas
|
|
|
2021 |
- |
2023 |
|
France
|
|
|
2021 |
- |
2023 |
|
Singapore
|
|
|
2020 |
- |
2023 |
|
The Company had approximately $327 and $460 of accrued interest and penalties as of February 26, 2023 and February 27, 2022, respectively. The Company’s policy is to include applicable interest and penalties related to unrecognized tax benefits as a component of current income tax expense.
On August 16, 2022, the Inflation Reduction Act was signed into law. The Inflation Reduction Act includes various tax provisions, which are effective for tax years beginning on or after January 1, 2023. For tax years beginning after December 31, 2021, the Tax Cuts & Jobs Act of 2017 eliminated the option to deduct research and development expenditures as incurred and instead required taxpayers to capitalize and amortize them over five or 15 years beginning in 2022. The Company incurs research and development expenses in the U.S., as such, the research and development expense addback is in the U.S. tax return. The Company will continue to monitor the possible future impact of changes in tax legislation.
The Company has no ongoing examinations of its Federal returns. The audit of the New York state tax returns for the 2018 and 2019 fiscal years has been completed.
5. STOCK-BASED COMPENSATION
As of February 26, 2023, the Company had a 2018 Stock Option Plan (the “2018 Plan”) and no other stock-based compensation plan. The 2018 Plan was adopted by the Board of Directors of the Company on May 8, 2018 and approved by the shareholders of the Company at the Annual Meeting of Shareholders of the Company on July 24, 2018. Prior to the 2018 Plan, the Company had the 2002 Stock Option Plan (the “2002 Plan”) which had been approved by the Company’s shareholders and provided for the grant of stock options to directors and key employees of the Company. All options granted under the 2018 Plan and 2002 Plan have exercise prices equal to the fair market value of the underlying common stock of the Company at the time of grant, which, pursuant to the terms of such Plans, is the reported closing price of the common stock on the New York Stock Exchange on the date preceding the date an option is granted. Options granted under the Plans become exercisable 25% one year after the date of grant, with an additional 25% exercisable each succeeding anniversary of the date of grant, and expire 10 years after the date of grant. Options to purchase a total of 800,000 shares of common stock were authorized for grant under the 2018 Plan. At February 26, 2023, 365,600 shares of common stock of the Company were reserved for issuance upon exercise of stock options under the 2018 Plan.
The compensation expense for stock options includes an estimate for forfeitures and is recognized on a straight-line basis over the requisite service period.
The future compensation expense to be recognized in earnings before income taxes for options outstanding at February 26, 2023 was $584, which is expected to be recognized ratably over a weighted average vesting period of 2.65 years.
The Company records its stock-based compensation at fair value. The weighted average fair value for options was estimated at the dates of grants, using the Black-Scholes option pricing model.
The following table represents the weighted average fair value and valuation assumptions used for options granted in the 2023, 2022 and 2021 fiscal years:
|
|
Fiscal Year
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value per share of option grants
|
|
|
|
$2.66 |
|
|
|
|
|
$2.76 |
|
|
|
|
|
$2.12 |
|
|
Risk-free interest rates
|
|
|
2.69% |
- |
3.64% |
|
|
|
0.74% |
- |
1.85% |
|
|
|
0.23% |
- |
0.42% |
|
Expected stock price volatility
|
|
|
27.9% |
- |
28.3% |
|
|
|
27.8% |
- |
29.2% |
|
|
|
26.9% |
- |
30.0% |
|
Expected dividend yields
|
|
|
3.17% |
- |
3.32% |
|
|
|
2.73% |
- |
3.07% |
|
|
|
3.18% |
- |
3.49% |
|
Estimated option terms (in years)
|
|
|
5.4 |
- |
8.1 |
|
|
|
4.4 |
- |
7.6 |
|
|
|
4.3 |
- |
7.6 |
|
The risk-free interest rates are based on U.S. Treasury rates at the date of grant with maturity dates approximately equal to the estimated term of the options at the date of grant. Volatility factors are based on historical volatility of the Company’s common stock. The expected dividend yields are based on the regular quarterly cash dividend per share most recently declared by the Company and on the exercise price of the options granted during the 2023 fiscal year. The estimated terms of the options are based on evaluations of the historical and expected future employee exercise behavior.
Information with respect to stock option activity follows:
|
|
Outstanding Options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Term (in years)
|
|
|
Aggregate Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 1, 2020
|
|
|
510,634 |
|
|
$ |
12.45 |
|
|
|
|
|
|
$ |
597 |
|
Granted
|
|
|
132,100 |
|
|
|
12.55 |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,450 |
) |
|
|
8.02 |
|
|
|
|
|
|
|
|
|
Terminated or expired
|
|
|
(6,750 |
) |
|
|
13.01 |
|
|
|
|
|
|
|
|
|
Balance, February 28, 2021
|
|
|
634,534 |
|
|
$ |
12.47 |
|
|
|
|
|
|
$ |
730 |
|
Granted
|
|
|
147,750 |
|
|
|
13.82 |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(75,334 |
) |
|
|
9.81 |
|
|
|
|
|
|
|
|
|
Terminated or expired
|
|
|
(58,650 |
) |
|
|
13.96 |
|
|
|
|
|
|
|
|
|
Balance, February 27, 2022
|
|
|
648,300 |
|
|
$ |
12.96 |
|
|
|
|
|
|
$ |
428 |
|
Granted
|
|
|
134,100 |
|
|
|
12.08 |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(13,000 |
) |
|
|
10.67 |
|
|
|
|
|
|
|
|
|
Terminated or expired
|
|
|
(98,975 |
) |
|
|
13.13 |
|
|
|
|
|
|
|
|
|
Balance, February 26, 2023
|
|
|
670,425 |
|
|
$ |
12.80 |
|
|
|
5.80 |
|
|
$ |
2,159 |
|
Vested and exercisable, February 26, 2023
|
|
|
376,613 |
|
|
$ |
12.67 |
|
|
|
3.87 |
|
|
$ |
1,262 |
|
Expected to vest, February 26, 2023
|
|
|
640,256 |
|
|
$ |
12.67 |
|
|
|
5.80 |
|
|
$ |
2,145 |
|
The aggregate intrinsic values realized (the market value of the underlying shares on the date of exercise, less the exercise price, times the number of shares acquired) from the exercise of options during the 2023, 2022 and 2021 fiscal years were $23, $358 and $8, respectively.
A summary of the status of the Company’s non-vested options at February 26, 2023, and changes during the fiscal year then ended, is presented below:
|
|
Shares
Subject to
Options
|
|
|
Weighted
Average Grant
Date Fair Value
|
|
|
|
|
|
|
|
|
|
|
Non-vested, beginning of year
|
|
|
257,025 |
|
|
$ |
2.75 |
|
Granted
|
|
|
134,100 |
|
|
|
2.58 |
|
Vested
|
|
|
(80,925 |
) |
|
|
2.85 |
|
Terminated or expired
|
|
|
(16,387 |
) |
|
|
2.67 |
|
Non-vested, end of year
|
|
|
293,813 |
|
|
$ |
2.65 |
|
Treasury Stock – On May 18, 2022, the Company’s Board of Directors authorized the Company’s purchase, on the open market and in privately negotiated transactions, of up to 1,500,000 shares of its Common Stock. This represents approximately 7% of the Company’s 20,458,210 total outstanding shares as of the close of business on May 18, 2022. This authorization supersedes any unused prior Board of Directors’ authorizations to purchase shares of the Company’s Common Stock. As of February 26, 2023, the Company had not purchased any shares of the Company’s Common stock pursuant to the above authorization.
Reserved Common Shares – At February 26, 2023, 1,036,025 shares of common stock were reserved for issuance upon exercise of stock options.
Accumulated Other Comprehensive Earnings (Loss) – Accumulated balances related to each component of other comprehensive earnings were as follows:
|
|
February 26, 2023
|
|
|
February 27, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investments, net of taxes of $2,279 and $1,629, respectively
|
|
$ |
(4,244 |
) |
|
$ |
(1,965 |
) |
Accumulated balance
|
|
$ |
(4,244 |
) |
|
$ |
(1,965 |
) |
Basic earnings per share are computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are computed by dividing net earnings by the sum of (a) the weighted average number of shares of common stock outstanding during the period and (b) the potential common stock equivalents outstanding during the period. Stock options are the only common stock equivalents, and the number of dilutive options is computed using the treasury stock method.
The following table sets forth the calculation of basic and diluted earnings per share:
|
|
Fiscal Year
|
|
(Amounts in thousands, except per share amounts)
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings - continuing operations
|
|
$ |
10,731 |
|
|
$ |
8,464 |
|
|
$ |
5,192 |
|
Net (loss) earnings - discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
(328 |
) |
Net earnings
|
|
$ |
10,731 |
|
|
$ |
8,464 |
|
|
$ |
4,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic EPS
|
|
|
20,465 |
|
|
|
20,422 |
|
|
|
20,387 |
|
Net effect of dilutive options
|
|
|
44 |
|
|
|
129 |
|
|
|
91 |
|
Weighted average shares outstanding for diluted EPS
|
|
|
20,509 |
|
|
|
20,551 |
|
|
|
20,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share - continuing operations
|
|
$ |
0.52 |
|
|
$ |
0.41 |
|
|
$ |
0.25 |
|
Basic (loss) earnings per share - discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
(0.01 |
) |
Basic earnings per share
|
|
$ |
0.52 |
|
|
$ |
0.41 |
|
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share - continuing operations
|
|
$ |
0.52 |
|
|
$ |
0.41 |
|
|
$ |
0.25 |
|
Diluted (loss) earnings per share - discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
(0.01 |
) |
Diluted earnings per share
|
|
$ |
0.52 |
|
|
$ |
0.41 |
|
|
$ |
0.24 |
|
Potentially dilutive stock options, which were not included in the computation of diluted earnings per share because either the effect would have been antidilutive or the options’ exercise prices were greater than the average market price of the common stock, were 441,781, 263,744 and 387,975 for the 2023, 2022 and 2021 fiscal years, respectively.
The Company recorded restructuring charges of $0, $259and $1,570 in the 2023, 2022 and 2021 fiscal years, respectively, related to the closure of the Company’s Park Aerospace Technologies Asia Pte. Ltd. facility located in Singapore.
9.
|
EMPLOYEE BENEFIT PLANS
|
Profit Sharing Plan – The Company has a non-contributory profit sharing retirement plan covering substantially all full-time employees in the United States. The plan may be modified or terminated at any time, but in no event may any portion of the contributions revert back to the Company. The Company's estimated contributions are accrued at the end of each fiscal year and paid to the plan in the subsequent fiscal year. The Company’s contributions to the plan were $157and $170 for fiscal years 2022 and 2021, respectively. The contribution for fiscal year 2023 has not been paid. Contributions are discretionary and may not exceed the amount allowable as a tax deduction under the Internal Revenue Code.
Savings Plan – The Company also sponsors a 401(k) retirement savings plan but has no financial obligations to plan participants in the form of matching contributions or otherwise.
10.
|
LEASES AND COMMITMENTS
|
The Company has operating leases related to land, office space, warehouse space and equipment. All of the Company’s leases have been assessed to be operating leases. Renewal options are included in the lease terms to the extent the Company is reasonably certain to exercise the option. The exercise of lease renewal options is at the Company’s sole discretion. The amounts disclosed in our consolidated balance sheet as of February 26, 2023, pertaining to the right-of-use assets and lease liabilities, are measured on our current expectations of exercising our available renewal options. The incremental borrowing rate represents the Company’s ability to borrow on a collateralized basis over a term similar to the lease term. The leases typically contain renewal options for periods ranging from one year to 10 years and require the Company to pay real estate taxes and other operating costs. The latest land lease expiration is 2068 assuming exercise of all applicable renewal options by the Company. The Company’s existing leases are not subject to any restrictions or covenants which preclude its ability to pay dividends, obtain financing or exercise its available renewal options.
Future minimum lease payments under non-cancellable operating leases as of February 26, 2023 are as follows:
Fiscal Year:
|
|
|
|
|
2024
|
|
$ |
53 |
|
2025
|
|
|
36 |
|
2026
|
|
|
- |
|
2027
|
|
|
- |
|
2028
|
|
|
- |
|
Thereafter
|
|
|
162 |
|
Total undiscounted operating lease payments
|
|
|
251 |
|
Less imputed interest
|
|
|
(69 |
) |
Present value of operating lease payments
|
|
$ |
182 |
|
The above payment schedule includes renewal options that the Company is reasonably likely to exercise. Leases with an initial term of 12 months or less are not recorded on the Company’s balance sheet. The Company recognizes lease expense for leases on a straight-line basis over the terms of the leases.
During the 2023 fiscal year, the Company’s operating lease expense was $62. Cash payments of $53, pertaining to operating leases, are reflected in the consolidated cash flow statement under cash flows from operating activities.
The following table sets forth the right-of-use assets and operating lease liabilities as of February 26, 2023:
Operating right-of-use assets
|
|
$ |
150 |
|
|
|
|
|
|
Operating lease liabilities
|
|
$ |
53 |
|
Long-term operating lease liabilities
|
|
|
129 |
|
Total operating lease liabilities
|
|
$ |
182 |
|
The Company’s weighted average remaining lease term for its operating leases is 7.54 years. The Company’s weighted average borrowing rate for its operating leases is 4.46%.
These non-cancelable leases have the following payment schedule:
Fiscal Year
|
|
Amount
|
|
|
|
|
|
|
2024
|
|
$ |
36 |
|
2025
|
|
|
- |
|
2026
|
|
|
- |
|
2027
|
|
|
- |
|
2028
|
|
|
- |
|
Thereafter
|
|
|
- |
|
|
|
$ |
36 |
|
The above payment schedule does not include renewal options that have not been committed to. An additional $53 would be included in the period 2024 to 2025 if the Company included renewal periods that the Company deems likely to renew.
Rental expenses, inclusive of real estate taxes and other costs, were $242, $267 and $328 for the 2023, 2022 and 2021 fiscal years, respectively.
In December 2018, the Company entered into a Development Agreement with the City of Newton, Kansas and the Board of County Commissioners of Harvey County, Kansas. Pursuant to this agreement, the Company agreed to construct and operate a redundant manufacturing facility of approximately 90,000 square feet for the design, development and manufacture of advanced composite materials and parts, structures and assemblies for aerospace. The Company further agreed to equip the facility through the purchase of machinery, equipment and furnishings and to create additional new full-time employment of specified levels during a five-year period. In exchange for these agreements, the City and the County agreed to lease to the Company three acres of land at the Newton, Kansas Airport, in addition to the eight acres previously leased to the Company by the City and County. The City and County further agreed to provide financial and other assistance toward the construction of the additional facility as set forth in the Development Agreement. The total cost of the additional facility was approximately $19.8 million, and the expansion is complete. As of February 26, 2023, the Company had $99in equipment purchase obligations.
11. CONTINGENCIES
Litigation
The Company is subject to a small number of immaterial proceedings, lawsuits and other claims related to environmental, employment, product and other matters. The Company is required to assess the likelihood of any adverse judgments or outcomes in these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy in dealing with these matters. The Company believes that the ultimate disposition of such proceedings, lawsuits and claims will not have a material adverse effect on the liquidity, capital resources, business or consolidated results of operations or financial position of the Company.
Environmental Contingencies
The Company and certain of its subsidiaries have been named by the Environmental Protection Agency (the “EPA”) or a comparable state agency under the Comprehensive Environmental Response, Compensation and Liability Act (the “Superfund Act”) or similar state law as potentially responsible parties in connection with alleged releases of hazardous substances at three sites.
Under the Superfund Act and similar state laws, all parties who may have contributed any waste to a hazardous waste disposal site or contaminated area identified by the EPA or comparable state agency may be jointly and severally liable for the cost of cleanup. Generally, these sites are locations at which numerous persons disposed of hazardous waste. In the case of the Company’s subsidiaries, generally the waste was removed from their manufacturing facilities and disposed at waste sites by various companies which contracted with the subsidiaries to provide waste disposal services. Neither the Company nor any of its subsidiaries have been accused of or charged with any wrongdoing or illegal acts in connection with any such sites. The Company believes it maintains an effective and comprehensive environmental compliance program.
The insurance carriers which provided general liability insurance coverage to the Company and its subsidiaries for the years during which the Company’s subsidiaries’ waste was disposed at these sites have in the past reimbursed the Company and its subsidiaries for 100% of their legal defense and remediation costs associated with two of these sites.
The Company does not record environmental liabilities and related legal expenses for which the Company believes that it and its subsidiaries have general liability insurance coverage for the years during which the Company’s subsidiaries’ waste was disposed at two sites for which certain subsidiaries of the Company have been named as potentially responsible parties. Pursuant to such general liability insurance coverage, three insurance carriers reimburse the Company and its subsidiaries for 100% of the legal defense and remediation costs associated with the two sites.
Included in selling, general and administrative expenses are charges for actual expenditures and accruals, based on estimates, for certain environmental matters described above. The Company accrues estimated costs associated with known environmental matters, when such costs can be reasonably estimated and when the outcome appears probable. The Company believes that the ultimate disposition of known environmental matters will not have a material adverse effect on the Company’s consolidated results of operations, cash flows or financial position.
12. DISCONTINUED OPERATIONS
On July 25, 2018, the Company entered into a definitive agreement to sell its Electronics Business to AGC Inc. for $145,000 in cash, subject to post-closing adjustments for changes in working capital compared to target net working capital, excluding cash in certain acquired subsidiaries and certain accrued and unpaid taxes of certain acquired subsidiaries. The net cash proceeds from the sale were approximately $124,156, net of transaction costs of approximately $7,657 and taxes of approximately $13,187. The net gain on the Sale was estimated to be $102,145. The net gain on the sale was calculated as the sum of the gains on the sale of each of the Electronics Business subsidiaries as determined by the total consideration allocation between the subsidiaries, less the respective tax bases and deductible transaction costs for each of the subsidiaries. The total consideration allocation for Nelco Products Pte. Ltd. (Singapore), Neltec, Inc. (US), and Neltec SA (France), was 82%, 16%, and 2%, respectively, as agreed upon by the Company and AGC Inc. The Company completed this transaction on December 4, 2018.
The Company has classified the operating results of its former Electronics Business, together with certain costs related to the transaction, as discontinued operations, net of tax, in the Consolidated Statements of Operations. The Company has income in the U.S., Singapore and France, the blended tax rates for discontinued operations for the 2021 and 2020 fiscal years were negative 24.7% and negative 26.4%, respectively. The Company had no income from discontinued operations in the 2023 fiscal year.
The following table shows the summary operating results of the discontinued operations:
|
|
Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 26,
|
|
|
February 27,
|
|
|
February 28,
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Cost of sales
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Gross profit
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Selling, general and administrative expenses
|
|
|
- |
|
|
|
- |
|
|
|
8 |
|
Restructuring charges
|
|
|
- |
|
|
|
- |
|
|
|
427 |
|
(Loss) earnings from discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
(435 |
) |
Other income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
(Loss) earnings from discontinued operations before income taxes
|
|
|
- |
|
|
|
- |
|
|
|
(435 |
) |
Income tax (benefit) provision
|
|
|
- |
|
|
|
- |
|
|
|
(107 |
) |
Net (loss) earnings from discontinued operations
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(328 |
) |
13. GEOGRAPHIC REGIONS
The Company’s products are sold to customers in North America, Asia and Europe. The Company’s manufacturing facilities are located in Kansas. Sales are attributed to geographic regions based upon the region in which the materials were delivered to the customer. Sales between geographic regions were not significant.
Financial information regarding the Company’s continuing operations by geographic region is as follows:
|
|
Fiscal Year
|
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$ |
50,044 |
|
|
$ |
51,307 |
|
|
$ |
43,874 |
|
Asia
|
|
|
786 |
|
|
|
700 |
|
|
|
625 |
|
Europe
|
|
|
3,225 |
|
|
|
1,571 |
|
|
|
1,777 |
|
Total sales
|
|
$ |
54,055 |
|
|
$ |
53,578 |
|
|
$ |
46,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$ |
34,292 |
|
|
$ |
34,448 |
|
|
$ |
31,170 |
|
Asia
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
Europe
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total long-lived assets
|
|
$ |
34,292 |
|
|
$ |
34,448 |
|
|
$ |
31,171 |
|
14. CUSTOMER AND SUPPLIER CONCENTRATIONS
As a result of the sale of the Electronics Business, the Company now operates in a single segment. As such, segment reporting is no longer provided.
Customers – Net sales to affiliate and non-affiliate subtier suppliers of General Electric Company were 41.2%, 49.5% and 27.9% of the Company’s total worldwide sales in the 2023, 2022 and 2021 fiscal years, respectively. Net sales to AAE Aerospace were 20.7% of the Company’s total worldwide sales in the 2021 fiscal year.
While no other customer accounted for 10% or more of the Company's total worldwide net sales in the 2023, 2022 or 2021 fiscal years, the loss of a major customer or of a group of customers could have a material adverse effect on the Company's business or consolidated results of operations or financial position.
Suppliers – Suppliers ArianeGroup and Huntsman Advanced Materials accounted for 20.2% and 10.9% of the Company’s accounts payable balance, respectively, in the 2023 fiscal year. No suppliers accounted for more than 10% of the Company’s accounts payable balance in the 2022 or 2021 fiscal years.
Sources of Supply – The principal materials used in the manufacture of the Company's advanced composite materials, aerospace grade reinforcements, thermoset resins and base chemicals. Although there is a limited number of qualified suppliers of these materials, the Company has nevertheless identified alternate sources of supply for many of such materials. While the Company has not experienced significant problems in the delivery of these materials and considers its relationships with its suppliers to be strong, a disruption of the supply of material from a principal supplier could adversely affect the Company's business. Furthermore, substitutes for these materials are not readily available, and an inability to obtain essential materials, if prolonged, could materially adversely affect the Company’s business.
15. ACCOUNTING PRONOUNCEMENTS
Recently Issued
In March 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2023-01, Leases (Topic 842): Common Control Arrangements. The changes requires all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. The amendments in ASU 2023-01 are effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for: (1) public business entities for periods for which financial statements have not yet been issued, and (2) all other entities for periods for which financial statements have not yet been made available for issuance. The adoption of ASU 2023-101 will not have a material impact on the Company’s consolidated financial statements and disclosures.
PARK AEROSPACE CORP. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Amounts in thousands, except per share amounts)
|
|
Quarter
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
12,783 |
|
|
$ |
13,875 |
|
|
$ |
13,867 |
|
|
$ |
13,530 |
|
Gross profit
|
|
|
4,092 |
|
|
|
4,086 |
|
|
|
4,444 |
|
|
|
3,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
1,910 |
|
|
|
1,885 |
|
|
|
2,230 |
|
|
|
4,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
$ |
0.11 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
$ |
0.11 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,458 |
|
|
|
20,461 |
|
|
|
20,471 |
|
|
|
20,471 |
|
Diluted
|
|
|
20,504 |
|
|
|
20,503 |
|
|
|
20,510 |
|
|
|
20,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
13,594 |
|
|
$ |
13,618 |
|
|
$ |
13,864 |
|
|
$ |
12,502 |
|
Gross profit
|
|
|
5,472 |
|
|
|
4,411 |
|
|
|
3,836 |
|
|
|
4,198 |
|
Net earnings
|
|
|
2,745 |
|
|
|
2,022 |
|
|
|
1,741 |
|
|
|
1,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.13 |
|
|
|
0.10 |
|
|
|
0.09 |
|
|
|
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
0.13 |
|
|
|
0.10 |
|
|
|
0.08 |
|
|
|
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,383 |
|
|
|
20,397 |
|
|
|
20,450 |
|
|
|
20,458 |
|
Diluted
|
|
|
20,710 |
|
|
|
20,485 |
|
|
|
20,503 |
|
|
|
20,508 |
|
Earnings per share are computed separately for each quarter. Therefore, the sum of such quarterly per share amounts may differ from the total for each year.