UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended February 27, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ________ to _______
Commission file number 1-4415
PARK AEROSPACE CORP.,
(Exact Name of Registrant as Specified in Its Charter)
New York
(State or Other Jurisdiction of
Incorporation of Organization)
1400 Old Country Road, Westbury, New
York
(Address of Principal Executive Offices)
11-1734643
(I.R.S. Employer
Identification No.)
11590
(Zip Code)
Registrant’s telephone number, including area code (631) 465-3600
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Common Stock, par value $.10 per
share
PKE
Name of Each Exchange on Which
Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)
of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File
required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large
accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large Accelerated Filer
Emerging Growth Company
Smaller Reporting Company
Non-Accelerated Filer
Accelerated Filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on attestation to its management’s
assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates
computed by reference to the price at which the common equity was last sold, or the average bid and asked
prices of such common equity, as of the last business day of the registrant's most recently completed
second fiscal quarter.
Common Stock, par value $.10 per share
$306,026,570
Title of Class
Aggregate Market Value
As of Close of Business On
August 27, 2021
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the
latest practicable date.
Common Stock, par value $.10 per share
Title of Class
Shares Outstanding
20,458,210
As of Close of Business On
May 2, 2022
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held July 19, 2022 incorporated by reference
into Part III of this Report.
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TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Business............................................................................................
Risk Factors......................................................................................
Unresolved Staff Comments.............................................................
Properties..........................................................................................
Legal Proceedings.............................................................................
Mine Safety Disclosures....................................................................
Executive Officers of the Registrant..................................................
Market for the Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities......................................................................................
Selected Financial Data....................................................................
Management’s Discussion and Analysis of Financial Condition and
Results of Operations....................................................................
Item 7A.
Quantitative and Qualitative Disclosures About Market
Risk...............................................................................................
Financial Statements and Supplementary Data................................
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...............................................................
Controls and Procedures...................................................................
Other Information..............................................................................
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Page
4
12
17
17
18
18
18
20
22
23
36
37
65
65
66
Item 10.
Directors, Executive Officers and Corporate
Item 11.
Item 12.
Governance...................................................................................
Executive Compensation...................................................................
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters..................................................
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67
67
Item 13.
Certain Relationships and Related Transactions, and Director
Independence...............................................................................
Principal Accountant Fees and Services..........................................
67
67
Item 14.
PART IV
Item 15.
Exhibits and Financial Statement Schedule....................................
Item 16.
Form 10-K Summary……………………………………………………
FINANCIAL STATEMENT SCHEDULE
Schedule II – Valuation and Qualifying Accounts...............................................
EXHIBIT INDEX…………………………………………………………………………….
SIGNATURES............................................................................................................
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PART I
ITEM 1.
BUSINESS.
General
Park Aerospace Corp. (“Park”), and its subsidiaries (unless the context otherwise
requires, Park and its subsidiaries are hereinafter called the “Company”), is an aerospace
company which develops and manufactures solution and hot-melt advanced composite
materials used to produce composite structures for the global aerospace markets. Park’s
advanced composite materials include film adhesives (undergoing qualification) and lightning
strike materials. Park offers an array of composite materials specifically designed for hand lay-
up or automated fiber placement (AFP) manufacturing applications. Park’s advanced composite
materials are used to produce primary and secondary structures for jet engines, large and
regional transport aircraft, military aircraft, Unmanned Aerial Vehicles (UAVs commonly referred
to as “drones”), business jets, general aviation aircraft and rotary wing aircraft. Park also offers
specialty ablative materials for rocket motors and nozzles and specially designed materials for
radome applications. As a complement to Park’s advanced composite materials offering, Park
designs and fabricates composite parts, structures and assemblies and low-volume tooling for
the aerospace industry. Target markets for Park’s composite parts and structures (which
include Park’s proprietary composite SigmaStrut™ and AlphaStrut™ product lines) are, among
others, prototype and development aircraft, special mission aircraft, spares for legacy military
and civilian aircraft and exotic spacecraft. Park’s core capabilities are in the areas of polymer
chemistry formulation and coating technology.
On January 5, 2022 Park announced that it entered into a Business Partner Agreement
with ArianeGroup SAS of Les Mureaux, France. Under the Business Partner Agreement,
ArianeGroup SAS appointed Park as its exclusive North American distributor of ArianeGroup’s
RAYCARB C2®B NG proprietary product. RAYCARB C2®B NG is used to produce ablative
composite materials for critical rocketry and missile systems.
Park is a long-term customer of ArianeGroup and uses ArianeGroup’s RAYCARB C2®B
NG product in the production of many of Park’s key ablative materials which Park supplies into
critical rocket and missile programs. Park will continue to purchase RAYCARB C2®B NG for its
own programs, and, through the Business Partner Agreement, Park is now taking on the new
role of ArianeGroup’s exclusive North American distributor for its RAYCARB C2®B product.
In December 2019, an outbreak of a novel strain of coronavirus originated in Wuhan,
China (“COVID-19”) and has since spread worldwide, including to the United States (the “U.S.”),
posing public health risks
that have reached pandemic proportions (the “COVID-19
Pandemic”). The COVID-19 Pandemic poses a threat to the health and economic wellbeing of
the Company’s employees, suppliers, customers and original equipment manufacturers
(“OEMs”), as well as the end users of aircraft manufactured by OEMs served by the Company.
Park’s manufacturing operations were deemed essential by the Federal Government of the
United States and by the State of Kansas, and the Company continued to actively work with
federal, state and local government officials to ensure that we continue to satisfy their
requirements for continuing our manufacturing operations. The continued operation of the
Company’s Kansas facility is critically dependent on maintaining the wellbeing of the employees
that staff the facility. The Company provided all employees at its manufacturing facility with
detailed health and safety literature on COVID-19. In addition, the Company’s procurement and
safety teams updated and developed new safety-oriented guidelines to support daily operations,
and the Company provides appropriate personal protection equipment to its employees. The
COVID-19 Pandemic impacted Park financially. See “Management’s Discussion and Analysis of
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Financial Condition and Results of Operations” included in Item 7 of Part II of this Report. The
Company believes its balance sheet and financial condition to be very strong, and the Company
believes it is well positioned to weather the impact of the Pandemic. As a result of the
pandemic, global passenger air travel decreased dramatically, precipitating production rate cuts
for many commercial aerospace programs and business jet/general aviation programs which
the Company supports. The military aerospace end market has not experienced this same
production rate decline but would also be at risk as it relates to uncertainty about suppliers and
employee health.
The Company's manufacturing and research and development facilities are located in
Kansas.
Park was founded in 1954 by Jerry Shore, who was the Company’s Chairman of the
Board until July 14, 2004.
The Company makes available free of charge on its website, www.parkaerospace.com,
its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and all amendments to those reports as soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and Exchange Commission. None of the
information on the Company's website shall be deemed to be a part of this Report.
AEROGLIDE®, COREFIX®, ELECTROGLIDE® and RADARWAVE® are registered
trademarks of Park Aerospace Corp., and ALPHASTRUT™, PEELCOTE™ and
SIGMASTRUT™ are common law trademarks of Park Aerospace Corp. Trademark applications
for AEROADHERE™ and ELECTROVEIL™ are pending.
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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 at its facility located at the Newton, Kansas Airport. The Company’s aerospace
composite structures and assemblies and low-volume tooling are also developed and
manufactured at its facility located in Newton, Kansas.
Park offers a wide range of aerospace composite materials manufacturing capability, as
well as composite structures design, assembly and production capability, all in its Newton facility.
Park offers composite aircraft and space vehicle structures design and assembly services, in
addition to “build-to-print” services. The Company believes that the ability to manufacture and
develop both composite materials and structures at a single location can facilitate the needs of the
aircraft and space vehicle industries.
Park is the exclusive North American distributor of ArianeGroup’s RAYCARB C2®B NG
proprietary product. RAYCARB C2®B NG is used to produce ablative composite materials for
critical rocketry and missile systems.
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 properties. 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 parts fabrication processes for continuous fiber
reinforced thermoplastics require much higher temperatures and pressures and are, therefore,
typically more capital intensive than parts fabrication processes for most thermoset materials.
The Company works with aerospace 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 requirements of the customer’s application and processing methods. Such customers
sometimes work with a supplier to develop the specific resin system and reinforcement
combination to match the application. Composite structure fabrication methods 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 automated fabrication processes required different material formats but similar materials
to hand lay-up. After the lay-up process is completed, the material is cured by the addition of
heat and pressure. Cure and consolidation processes typically include vacuum bag/oven curing,
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high pressure autoclave and press forming. After the structure has been cured, final finishing
and trimming, and assembly of the structure, is performed by the fabricator or the Company.
Products
The aerospace composite materials products manufactured by the Company are
thermoset curing prepregs. The Company has developed proprietary resin
primarily
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, materials and process engineering 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, 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 fabrics and prepregs with carbonized rayon
fabric reinforcements that are used mainly in the rocket motor industry.
The Company’s composite structures and assemblies are manufactured with carbon,
fiberglass and other reinforcements impregnated with formulated resins. The Company also
provides low-volume tooling in connection with its manufacture and sale of composite structures
and assemblies.
Park is the exclusive North American distributor of ArianeGroup’s RAYCARB C2®B NG
proprietary product. RAYCARB C2®B NG is used to produce ablative composite materials for
critical rocketry and missile systems.
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. A radome is a protective cover over an electrical antenna or signal generator,
designed to minimize signal loss and distortion. Radomes are used in military aircraft, 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. The Company’s aerospace
composite structures and assemblies are marketed primarily by sales personnel.
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
7
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.
End markets include military aircraft, 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. The Company’s aerospace
composite structures and assemblies are marketed primarily by sales personnel.
During the Company’s 2022, 2021 and 2020 fiscal years, 49.5%, 27.9% and 48.2%,
respectively, of the Company’s total worldwide net sales were to affiliate and non-affiliate subtier
suppliers of General Electric Company, a leading manufacturer of aerospace engines. Sales to
AAE Aerospace were 20.7% of the Company’s total worldwide sales in the 2021 fiscal year.
During the 2022, 2021 and 2020 fiscal years, sales to no other customer of the Company
equaled or exceeded 10% of the Company’s total worldwide sales. In April 2019, Middle River
Aircraft Systems, the General Electric Company subsidiary that used the Company’s products to
manufacture aircraft nacelles, was sold to ST Engineering Aerospace. The aircraft nacelles
manufactured with the Company’s products continue to be sold by ST Engineering Aerospace
to affiliates of General Electric Company. 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.
Manufacturing
The Company’s manufacturing facilities for aerospace composite materials and for
composite structures and assemblies are located in Newton, Kansas. On August 19, 2019, the
Company broke ground on the expansion of its facilities located in Newton, Kansas, which
included the construction of a redundant manufacturing facility located adjacent to the existing
facility. The 90,000 square feet expansion essentially doubled the size of the Company’s
existing Newton, Kansas facilities. The new facility was originally conceived of as a redundant
manufacturing facility for Park’s major aerospace customer and the large aerospace OEMs it
supports, but it will also support additional manufacturing capacity. The expansion includes
enhanced and upgraded hot-melt film and tape lines and mixing and delivery systems, an
expanded production lab, a new R&D lab, additional freezer and storage space and additional
infrastructure to support the expanded operation. See Note 10 of the Notes to Consolidated
Financial Statements included in Item 8 of Part II of this Report. See “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.
8
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 most of 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.
Once the manufacturing process 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 form.
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. The Company believes its Newton Kansas 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.
Materials and Sources of Supply
The Company designs and manufactures its aerospace composite materials to its own
specifications and to the specifications of its customers. Product development efforts are
focused on developing prepreg materials that meet the specifications of the customers. The
materials used in the manufacture of these engineered materials include graphite and carbon
fibers and fabrics, carbonized rayon, aramids, such as Kevlar® ("Kevlar" is a registered
trademark of E.I. du Pont de Nemours & Co.) and Twaron® (“Twaron” is a registered trademark
of Teijin Twaron B.V. LLC), quartz, fiberglass, polyester, specialty chemicals, resins, films,
plastics, adhesives and certain other synthetic materials. The Company purchases these
materials from several suppliers. Substitutes for many of these materials are not readily
available. The qualification and certification of aerospace composite materials for certain FAA
certified aircraft typically include specific requirements for raw material supply and may restrict
the Company’s flexibility in qualifying alternative sources of supply for certain key raw materials.
The Company continues to work to determine acceptable alternatives for several raw materials.
Competition
The Company has many competitors in the aerospace composite materials, structures
and assemblies markets, ranging in size from large international corporations to small regional
producers. Several of the Company’s largest competitors are vertically integrated, producing
raw materials, such as carbon fiber and woven fabric, as well as composite structures and
assemblies. Some of the Company’s competitors may also serve as a supplier to the Company.
9
The Company competes for business primarily on the basis of responsiveness, product
performance and consistency, product qualification, FAA data base design allowables and
innovative new product development.
Backlog
The Company considers an item as backlog when it receives a purchase order
specifying the number of units to be purchased, the purchase price, specifications and other
customary terms and conditions. At April 25, 2022, the unfilled portion of all purchase orders
received by the Company, and believed by it to be firm, was $25,895,809, compared to
$21,326,751 at April 26, 2021. A major portion of the Company’s backlog consists of composite
materials.
Various factors contribute to the size of the Company’s backlog. Accordingly, the
foregoing information may not be indicative of the Company’s results of operations for any
period subsequent to the fiscal year ended February 27, 2022.
Patents and Trademarks
The Company holds several patents and trademarks or licenses thereto. In the
Company’s opinion, some of these patents and trademarks are important to its products.
Generally, however, the Company does not believe that an inability to obtain new; or to defend
existing, patents and trademarks would have a material adverse effect on the Company.
The Company’s Workforce
At February 27, 2022, the Company had 110 employees. The Company’s success and
future depends on the skills, experience, industry knowledge, passion and dedication of its work
force. The Company places significant focus and attention on attracting, developing and
retaining its employees, as well as ensuring its work force reflects Park’s principles of integrity
and humility. These principles ensure that every Park employee is held to his or her word, and
that every Park employee continuously strives to excel. These two principles guide Park’s
actions, and the Company believes, foster a healthy work environment where all Park
employees are treated with dignity and respect, irrespective of their backgrounds. The
Company also believes that its principles are critical to fostering and maintaining what it calls
Park’s “niche” culture of doing what others are unwilling or unable to do.
Employee health and safety is a top priority. Park’s safety performance has been an
important focus of the Company. Safety performance is maintained by the Company ensuring
appropriate safety equipment is installed and operational at all times and undertaking thorough
reviews of any safety incidents that do occur.
The Company takes a comprehensive approach to developing its workforce, including by
striving to use a fair recruiting process to select talented individuals. Park also believes that fair
compensation, opportunities for career development, employee engagement, and a singular
focus on the principles of integrity and humility, have organically cultivated a workforce that is
diverse at all levels. Park believes that principle-based approach to hiring and retention makes
the Company a desirable workplace for employees of all backgrounds while improving business
performance by maintaining the Company’s “niche” culture.
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Environmental Matters
Aviation is one of the fastest growing sources of the greenhouse gas emissions. Air
travel is also considered to be one of the most carbon intensive activity an individual can make.
As air travel rebounds from the COVID-19 Pandemic and gradually returns to its aggressive pre-
pandemic growth trajectory, aircraft fuel efficiency will return to being an increasingly important
factor in addressing the reduction of greenhouse gas. Park’s composite material products and
the aircraft parts that are crafted using such products, enable aircraft to operate on substantially
less fuel than would be the case using comparable aluminum-crafted aircraft parts. This
reduced fuel consumption creates economic savings for end-users of applicable aircraft, while
also substantially reducing the carbon based emissions of such aircraft.
The Company is subject to stringent environmental regulation of its use, storage,
treatment, disposal of hazardous materials and the release of emissions into the environment.
The Company believes that it currently is in substantial compliance with the applicable Federal,
state and local environmental laws and regulations to which it is subject and that continuing
compliance therewith will not have a material effect on its capital expenditures, earnings or
competitive position. The Company does not currently anticipate making material capital
expenditures for environmental control facilities for its existing manufacturing operations during
the remainder of its current fiscal year or its succeeding fiscal year. However, developments,
such as the enactment or adoption of even more stringent environmental laws and regulations,
could conceivably result in substantial additional costs to the Company.
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 the waste sites by various companies which contracted with the
subsidiaries to provide waste disposal services. Neither the Company nor any of its subsidiaries
has 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. Management believes the ultimate disposition of known environmental
matters will not have a material adverse effect on the liquidity, capital resources, business,
consolidated results of operations or financial position of the Company.
See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Environmental Matters” included in Item 7 of Part II of this Report and Note 11 of
the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Report.
Factors That May Affect Future Results
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective information about
their companies without fear of litigation so long as those statements are identified as forward-
looking and are accompanied by meaningful cautionary statements identifying important factors
that could cause actual results to differ materially from those projected in the statement. Certain
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portions of this Report which do not relate to historical financial information may be deemed to
constitute forward-looking statements that are subject to various factors which could cause
actual results to differ materially from Park's expectations or from results which might be
projected, forecasted, estimated or budgeted by the Company in forward-looking statements.
Generally, forward-looking statements can be identified by the use of words such as
“expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “goal,” “intend,” “plan,” “may,”
“will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue” and similar expressions or
the negative or other variations thereof. Such forward-looking statements are based on current
expectations that involve a number of uncertainties and risks that may cause actual events or
results to differ materially from the Company’s expectations.
The factors described under “Risk Factors” in Item 1A of this Report could cause the
Company's actual results to differ materially from any such results which might be projected,
forecasted, estimated or budgeted by the Company in forward-looking statements.
ITEM 1A. RISK FACTORS.
The business of the Company faces numerous risks, including those set forth below or
those described elsewhere in this Form 10-K Annual Report or in the Company's other filings
with the Securities and Exchange Commission. The risks described below are not the only risks
that the Company faces, nor are they necessarily listed in order of significance. Other risks and
uncertainties may also affect the Company’s business. Any of these risks may have a material
adverse effect on the Company's business, financial condition, results of operations or cash
flow.
COVID-19 Pandemic
The COVID-19 Pandemic continues to have an unprecedented impact on the U.S.
economy. These impacts include, but are not limited to, the potential adverse effect of the
COVID-19 Pandemic on the economy, the Company’s vendors, employees, customers and
OEMs, as well as end-users of the Company’s products, including the commercial and business
aircraft industries. The pandemic has adversely impacted global economic conditions, the
Company’s business, results of operations and cash flows. Continued impacts of the pandemic
may further adversely impact the same, and may require actions in response, including but not
limited to expense reductions, in an effort to mitigate such impacts. The extent of the impact of
the COVID-19 Pandemic on the Company’s business and financial results continues to depend
largely on future developments, including the duration of the spread of the outbreak, re-
emergence of variants, the impact on capital and financial markets and the related impact on
the financial circumstances of the Company’s customers and OEMs, as well as end-users of the
Company’s products, including the commercial and business aviation industries, all of which are
highly uncertain and cannot be predicted. This situation is changing rapidly, and additional
impacts may arise that the Company is not aware of currently.
Geopolitical Events
The Company's operating results could be negatively affected if the Company were
unable to attain the raw materials required in its manufacturing process. The Company’s
suppliers of raw material, supplies and equipment could be impacted by geopolitical events,
such as the war in Ukraine, thus interrupting the Company’s supply chain. Additionally, the
Company’s customers may experience interruptions from other suppliers that could cause a
customer to delay or cancel orders.
12
The Company's business could suffer if the Company is unable to develop new products
on a timely basis.
The Company's operating results could be negatively affected if the Company were
unable to maintain and increase its technological and manufacturing capability and expertise to
develop new products on a timely basis. Although the Company believes that it has certain
technological and other advantages over its competitors, maintaining such advantages will
require the Company to continue investing in research and development and sales and
marketing. There can be no assurance that the Company will be able to make the technological
advances necessary to maintain such competitive advantages or that the Company can recover
major research and development expenses.
The industries in which the Company operates are very competitive.
Certain of the Company's principal competitors are substantially larger and have greater
financial resources than the Company, and the Company's operating results will be affected by
its ability to maintain its competitive positions in these industries. The aerospace composite
materials and composite structures and assemblies industries are intensely competitive, and the
Company competes worldwide in the markets for such products.
The Company is vulnerable to an increase in inflation.
Changes in the cost raw materials, supplies, labor, utilities or services could materially
increase the Company's cost of operations. The Company is experiencing inflation in raw
material and other costs. The impact of inflation on the Company’s profits has been partially
mitigated by the Company’s ability to adjust pricing for a large portion of its sales to pass the
impact of inflation through to its customers. Significant increases in the cost of materials,
supplies, labor, utilities or services purchased by the Company could also materially increase
the Company’s cost of operations and could have a material adverse effect on the Company’s
business and results of operations if the Company were unable to pass such increases through
to its customers.
The Company is vulnerable to disruptions and shortages in the supply of, and increases
in the prices of, certain raw materials.
There are a limited number of qualified suppliers of the principal materials used by the
Company in its manufacture of aerospace composite materials and composite structures and
assemblies. The Company has qualified alternate sources of supply for many, but not all, of its
raw materials, but certain raw materials are produced by only one supplier. In some cases,
substitutes for certain raw materials are not always readily available, and in the past there have
been shortages in the market for certain of these materials. Raw material substitutions for
certain aircraft related products may require governmental (such as FAA) approval. While the
Company considers its relationships with its suppliers to be strong, a shortage of these
materials or a disruption of the supply of these materials caused by a natural disaster or
otherwise could materially increase the Company’s cost of operations and could materially
adversely affect the business and results of operations of the Company. Likewise, significant
increases in the cost of materials purchased by the Company could also materially increase the
Company’s cost of operations and could have a material adverse effect on the Company’s
business and results of operations if the Company were unable to pass such increases through
to its customers. The COVID-19 Pandemic and other factors have negatively impacted, and
may continue to negatively impact, the Company’s suppliers. If, due to such impact, one or
more of the Company’s suppliers is required to temporarily close manufacturing facilities, the
13
Company’s ability to procure raw materials for its manufacturing processes may become limited
and this could ultimately limit the Company’s ability to manufacture its products.
The Company's customer base is highly concentrated, and the loss of one or more
customers could adversely affect the Company's business.
A loss of one or more key customers could adversely affect the Company's profitability.
The Company's customer base is concentrated, in part, because the Company's business
strategy has been to develop long-term relationships with a select group of customers. During
the Company's fiscal years ended February 27, 2022, February 28, 2021 and March 1, 2020,
the Company's ten largest customers accounted for approximately 77%, 71% and 76%,
respectively, of net sales. The Company expects the sales to a relatively small number of
customers will continue to account for a significant portion of its net sales for the foreseeable
future. “Customers and End Markets” in Item 1 of Part I of this Report. The COVID-19 Pandemic
has negatively impacted, and may continue to negatively impact, the Company’s customers. If
one or more of the Company’s customers is further negatively impacted by the COVID-19
Pandemic the Company’s customer base could become more concentrated.
The Company's business is dependent on the aerospace industry, which is cyclical in
nature.
The aerospace industry is cyclical and has experienced downturns. The downturns can
occur at any time as a result of events that are industry specific or macroeconomic, and in the
event of a downturn, the Company may have no way of knowing if, when and to what extent
there might be a recovery. Deterioration in the market for aerospace products has often
reduced demand for, and prices of, advanced composite materials, structures and assemblies.
A potential future reduction in demand and prices could have a negative impact on the
Company’s business and operating results.
In addition, the Company is subject to the effects of general regional and global
economic and financial conditions. The COVID-19 Pandemic has negatively impacted, and may
continue to negatively impact, the aerospace industry, and the commercial aerospace industry
in particular. Commercial airlines have instituted cost reduction initiatives including limiting
capacity, reducing workforces, limiting discretionary operational expenditures and delaying
capital expenditures. If commercial airlines continue to be negatively impacted by the COVID-19
Pandemic, including due to temporary or permanent reductions in commercial airline passenger
traffic, orders for Company products could be negatively impacted.
The Company relies on short-term orders from its customers.
A variety of conditions, both specific to the individual customer and generally affecting
the customer’s industry, can cause a customer to reduce or delay orders previously anticipated
by the Company, which could negatively impact the Company’s business and operating results.
While some customers place orders based on long-term pricing agreements, such agreements
are typically requirements-based and do not set forth minimum purchase obligations. As a
result, the Company must continually communicate with its customers to validate forecasts and
anticipate the future volume of purchase orders.
The Company’s customers may require the Company to undergo a lengthy and
expensive qualification process with respect to its products, with no assurance of sales.
Any delay or failure in such qualification process could negatively affect the Company’s
business and operating results.
14
The Company’s customers frequently require that the Company’s products undergo an
extensive qualification process, which may include testing for performance, structural integrity
and reliability. This qualification process may be lengthy and does not assure any sales of the
product to that customer. The Company devotes substantial resources, including design,
engineering, sales, marketing and management efforts, and often substantial expense, to
qualifying the Company’s products with customers in anticipation of sales. Any delay or failure in
qualifying any of its products with a customer may preclude or delay sales of those products to
the customer, which may impede the Company’s growth and cause its business to suffer.
In addition, the Company engages in product development efforts with OEMs. The
Company will not recover the cost of this product development directly even if the Company
actually produces and sells any resulting product. There can be no guarantee that such efforts
will result in any sales.
Consolidation among the Company’s customers could negatively impact the Company’s
business.
A number of the Company’s customers have combined in recent years and consolidation
of other customers may occur. If an existing customer is not the controlling entity following a
combination, the Company may not be retained as a supplier. While there is potential for
increasing the Company’s position with the combined customer, the Company’s revenues may
decrease if the Company is not retained as a supplier. The COVID-19 Pandemic could result in
further consolidation among the Company’s customers. One or more of the Company’s
customers could be acquired due to financial difficulty, distress or insolvency, fluctuations in the
market price of its securities, or other factors resulting from the COVID-19 Pandemic.
The Company is subject to a variety of environmental regulations.
The Company’s production processes require the use, storage, treatment and disposal
of certain materials which are considered hazardous under applicable environmental laws, and
the Company is subject to a variety of regulatory requirements relating to the handling of such
materials and the release of emissions and effluents into the environment, non-compliance with
which could have a negative impact on the Company’s business or results of operations. Other
possible developments, such as the enactment or adoption of additional environmental laws,
could result in substantial costs to the Company.
If the Company’s efforts to protect its proprietary information are not sufficient, the
Company may be adversely affected.
The Company’s business relies upon proprietary information, trade secrets and know-
how in its product formulations and its manufacturing and research and development activities.
The Company takes steps to protect its proprietary rights and information, including the use of
confidentiality and other agreements with employees and consultants and in commercial
relationships, including with suppliers and customers. If these steps prove to be inadequate or
are violated, the Company’s competitors might gain access to the Company’s trade secrets, and
there may be no adequate remedy available to the Company.
The Company depends upon the experience and expertise of its senior management
team and key technical employees, and the loss of any key employee may impair the
Company’s ability to operate effectively.
The Company’s success depends, to a certain extent, on the continued availability of its
senior management team and key technical employees. Each of the Company’s executive
15
officers, key technical personnel and other employees could terminate his or her employment at
any time. The loss of any member of the Company’s senior management team might
significantly delay or prevent the achievement of the Company’s business objectives and could
materially harm the Company’s business and customer relationships. In addition, because of the
highly technical nature of the Company’s business, the loss of any significant number of the
Company’s key technical personnel could have a material adverse effect on the Company. The
Company competes for manufacturing and engineering talent in a competitive labor market.
Personnel turnover and training costs could negatively impact the Company’s operations. The
COVID-19 Pandemic could place the continued availability of its senior management team and
key employees at risk. Certain members of the Company’s senior management team and key
employees do not reside near their place of work and rely heavily on commercial airline travel,
which may be restricted.
The Company’s business and operations may be adversely affected by cybersecurity
breaches or other information technology system or network intrusions.
The Company depends on information technology and computerized systems to
communicate and operate effectively, some of which are connected to networks of third parties
that are not under the Company’s direct control. The Company stores sensitive data on its
servers and databases including proprietary business information, intellectual property and
confidential employee or other personal data pertaining to the Company’s business, customers,
suppliers, OEMs, employees and other third parties. Attempts by others to gain unauthorized
access to the Company’s information technology systems and data have become more frequent
and sophisticated. These attempts, which might be related to industrial or foreign government
espionage, activism, or other motivations,
introducing malware and
“ransomware” to the Company’s computers and networks, performing reconnaissance,
impersonating authorized users, and stealing, corrupting or restricting the Company’s access to
data, among other activities.
include covertly
As with most companies, the Company has experienced cyber-attacks, attempts to
breach the Company’s systems and other similar incidents, none of which, has resulted in loss
of data or materially affected the Company’s business, operations or financial results. The
Company has addressed past cybersecurity breaches by working with leading providers of
incident response, risk management and digital forensics services. In coordination with such
service providers, Park also continues to update its infrastructure, security tools (including
firewalls and anti-virus software), and employee training and processes, to protect against
security incidents and to prevent their recurrence. While Company personnel have been tasked
to detect and investigate such incidents, cybersecurity attacks and other data security breaches
can and are expected to occur in the future and the Company may be unable to implement
adequate preventive or remediation measures, as breach and disruption techniques change
frequently and are generally not detected until after an incident has occurred.
The unauthorized use of the Company’s intellectual property and/or confidential or
personal information or any material disruption in the systems that store such information could
materially harm the Company’s competitive position, reduce the value of the Company’s
investment in research and development (through the loss of trade secrets or other proprietary
and competitively sensitive information) and other strategic initiatives, compromise personally
identifiable information regarding customers or employees, delay the Company’s ability to
access its information systems at critical times, cause operational disruptions and delays,
jeopardize the security of the Company’s facilities or otherwise materially and adversely affect
the Company’s business or financial results. Any intrusion may also result in material fines,
penalties, governmental investigations and proceedings, litigation, diminished competitive
advantages through reputational damages and increased operational expenses (including
16
remediation and damage expenses). Many victims of cyber-attacks also are forced to pay
significant ransoms or incur significant expenses to recover critical business systems and data.
Additionally, the Company may incur additional costs to comply with its customers’, including
the U.S. Government’s, requirements for data security and increased cybersecurity protections
and standards. The Company may be similarly harmed if any of the foregoing incidents occur at
third parties that are connected to the Company’s networks and that are not under the
Company’s direct control.
Acquisitions, mergers, business combinations or joint ventures may entail certain
operational and financial risks.
The Company may acquire businesses, product lines or technologies that expand or
complement those of the Company. It may also enter into mergers, business combinations or
joint ventures for similar purposes. The integration and management of an acquired company or
business may strain the Company's management resources and technical, financial and
operating systems. In addition, implementation of acquisitions can result in large one-time
charges and costs. A given acquisition, if consummated, may materially affect the Company's
business, financial condition and results of operations.
The Company’s securities may fluctuate in value.
The market price of the Company’s securities can be subject to fluctuations in response
to quarter-to-quarter variations in operating results, changes in analyst earnings estimates,
market conditions in the aerospace composite materials and composite structures and
assemblies industries, as well as general economic conditions and other factors external to the
Company. The COVID-19 Pandemic has exacerbated fluctuations in the market price of most
securities, including aerospace companies.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
Set forth below are the locations of the significant properties owned and leased by the
Company, the business use of the properties and the size of each such property. The Newton,
Kansas property is used principally as a manufacturing facility. The lease for our Newton,
Kansas location is a ground lease.
Location
Westbury, NY
Newton, KS
Owned or
Leased
Leased
Leased
Use
Administrative Offices
Advanced Composite Materials, Parts and Assemblies
Size (Square
Footage)
2,000
183,500
The Company believes its facilities and equipment to be in good condition and
reasonably suited and adequate for its current needs. The Company’s manufacturing facilities
have the capacity to substantially increase their production levels.
During the 2022 fiscal year, the Company completed the closure of its dormant Park
Aerospace Technologies Asia PTE, LTD facility located in Singapore.
17
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 Company estimates the
total cost of the additional facility to be approximately $19.5 million. The expansion construction
is complete and is undergoing customer qualifications, which are expected to be completed in
the second half of the calendar year 2022. As of February 27, 2022, the Company had
$635,000 in equipment purchase obligations and $18.7 million of construction-in-progress
related to the additional facility.
ITEM 3. LEGAL PROCEEDINGS.
No material pending legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Name
Title
Age
Brian E. Shore
P. Matthew Farabaugh
Mark A. Esquivel
Chief Executive Officer and
Chairman of the Board of Directors
70
Senior Vice President and Chief
Financial Officer
President and Chief Operating
Officer
61
49
Mr. Brian Shore has served as a Director of the Company since 1983 and as Chairman
of the Board of Directors since July 2004. He was elected a Vice President of the Company in
January 1993, Executive Vice President in May 1994, President in March 1996, and Chief
Executive Officer in November 1996. He was President until July 28, 2014. Mr. Shore also
served as General Counsel of the Company from April 1988 until April 1994.
Mr. Farabaugh was elected Senior Vice President and Chief Financial Officer on March
10, 2016. He had been Vice President and Chief Financial Officer of the Company since April
2012 and Vice President and Controller of the Company since October 2007. Prior to joining the
Company, Mr. Farabaugh was Corporate Controller of American Technical Ceramics, a publicly
traded international company and a manufacturer of electronic components, located in
Huntington Station, New York, from 2004 to September 2007 and Assistant Controller from
2000 to 2004. Prior thereto, Mr. Farabaugh was Assistant Controller of Park Aerospace Corp.
18
from 1989 to 2000. Prior to joining Park in 1989, Mr. Farabaugh had been a senior accountant
with KPMG.
Mr. Esquivel was promoted to President and Chief Operating Officer of the Company on
November 2, 2020, after having been elected Executive Vice President and Chief Operating
Officer of the Company on May 7, 2019, and having been elected Senior Vice President and
Chief Operating Officer in December 2018. He had been Senior Vice President – Aerospace of
the Company since October 2017 and Vice President – Aerospace of the Company and
President of the Company’s Park Aerospace Technologies Corp. business unit in Newton,
Kansas since April 2015. Mr. Esquivel has been employed by the Company and its subsidiaries
in various positions since 1994. He was Vice President of Aerospace Composite Structures of
Park Aerospace Technologies Corp. from March 2012 to April 2015 and President of Park
Aerospace Technologies Corp. from June 2010 to March 2012. Prior to June 2010, Mr.
Esquivel was Vice President and General Manager of the Company’s former Neltec, Inc.
business unit located in Tempe, Arizona, and was responsible for the day-to-day operations of
Neltec, Inc. since his appointment to that position in September 2008, having held various
positions since he originally joined Neltec, Inc. in 1994.
There are no family relationships between the directors or executive officers of the
Company.
Each executive officer of the Company serves at the pleasure of the Board of Directors
of the Company.
19
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The Company’s Common Stock is listed and trades on the New York Stock Exchange
(trading symbol PKE). The Common Stock also trades on the Chicago Stock Exchange. The
following table sets forth, for each of the quarterly periods indicated, the high and low sales
prices for the Common Stock as reported on the New York Stock Exchange Composite Tape
and dividends declared on the Common Stock.
For the Fiscal Year Ended
February 27, 2022
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
For the Fiscal Year Ended
February 28, 2021
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Stock Price
High
Low
$
15.57
16.20
15.11
13.74
$
13.03
14.40
12.74
12.73
Stock Price
High
Low
$
14.49
13.78
13.85
15.01
$
9.14
10.51
10.55
12.63
Dividends
Declared
$
0.10
0.10
0.10
0.10
Dividends
Declared
$
0.10
0.10
0.10
0.10
As of May 4, 2022, there were 471 holders of record of Common Stock.
The Company expects, for the foreseeable future, to continue to pay regular cash
dividends.
20
The following table provides information with respect to shares of the Company’s
Common Stock acquired by the Company during each month included in the Company’s 2022
fiscal year fourth quarter ended February 27, 2022:
Period
November 29 -
December 27
December 28 -
January 27
January 28 -
February 27
Total
(a)
Total Number
of Shares (or
Units)
Purchased
Average Price
Paid Per
Share (or
Unit)
Total Number of
Shares (or Units)
Purchased As
Part of Publicly
Announced
Plans or
Programs
Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or
Programs
0
$
-
0
0
0
$
-
$
-
$
-
0
0
0
0
1,394,015 (a)
pursuant
Aggregate number of shares available to be purchased by the
Company
authorizations
share
announced on January 8, 2015 and March 10, 2016. Pursuant
to such authorizations,
the Company is authorized to
purchase its shares from time to time on the open market or
in privately negotiated transactions.
purchase
to
In 2021, the Company purchased 137,397 shares at an aggregate purchase price of
$1,644,000. As a result of the authorizations announced on January 8, 2015 and March 10,
2016, the Company is authorized to purchase up to a total of 1,394,015 shares of its common
stock, representing approximately 6.8% of the Company’s 20,458,210 total outstanding shares
as of the close of business on February 27, 2022.
As previously announced by the Company, shares purchased by the Company will be
retained as treasury stock and will be available for use under the Company’s stock option plan
and for other corporate purposes.
21
Stock Performance Graph
The graph set forth below compares the annual cumulative total return for the
Company’s five fiscal years ended February 27, 2022 among the Company, the New York Stock
Exchange Market Index (the “NYSE Index”), and the Nasdaq US Small Cap Aerospace and
Defense Index (the “Nasdaq Index”). The returns of each company in the Nasdaq Index have
been weighted according to the company’s stock market capitalization. The graph has been
prepared based on an assumed investment of $100 on February 26, 2017 and the reinvestment
of dividends (where applicable).
$200.00
$200.00
$180.00
$180.00
$160.00
$160.00
$140.00
$140.00
$120.00
$120.00
$100.00
$100.00
$80.00
$80.00
$60.00
$60.00
$40.00
$40.00
$20.00
$20.00
$-
$-
2017
2017
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
Park Aerospace Corp.
Park Aerospace Corp.
NYSE Index
NYSE Index
NASDAQ US Small Cap Aerospace and Defense Index
NASDAQ US Small Cap Aerospace and Defense Index
Park Aerospace Corp.
NYSE Index
NASDAQ US Small Cap Aerospace and Defense Index
2017
100.00
100.00
100.00
$
$
$
2018
105.84
114.51
118.00
$
$
$
2019
135.36
116.08
147.36
$
$
$
2020
117.52
116.05
144.17
$
$
$
2021
121.37
144.05
178.60
$
$
$
2022
122.52
161.00
171.52
$
$
$
ITEM 6. NOT APPLICABLE.
22
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General:
Park Aerospace Corp. (“Park” or the “Company”) is an aerospace company which
develops and manufactures solution and hot-melt advanced composite materials used to
produce composite structures for the global aerospace markets. Park’s advanced composite
materials include film adhesives (undergoing qualification) and lightning strike materials. Park
offers an array of composite materials specifically designed for hand lay-up or automated fiber
placement (AFP) manufacturing applications. Park’s advanced composite materials are used to
produce primary and secondary structures for jet engines, large and regional transport aircraft,
military aircraft, Unmanned Aerial Vehicles (UAVs commonly referred to as “drones”), business
jets, general aviation aircraft and rotary wing aircraft. Park also offers specialty ablative
materials for rocket motors and nozzles and specially designed materials for radome
applications. As a complement to Park’s advanced composite materials offering, Park designs
and fabricates composite parts, structures and assemblies and low volume tooling for the
aerospace industry. Target markets for Park’s composite parts and structures (which include
Park’s proprietary composite SigmaStrut™ and AlphaStrut™ product lines) are, among others,
prototype and development aircraft, special mission aircraft, spares for legacy military and
civilian aircraft and exotic spacecraft.
The Company’s fiscal year is the 52- or 53-week period ending the Sunday nearest to
the last day of February. The 2022, 2021 and 2020 fiscal years ended on February 27, 2022,
February 28, 2021 and March 1, 2020, respectively. The 2022, 2021 and 2020 fiscal years each
consisted of 52 weeks. Unless otherwise indicated in this Discussion and Analysis, all
references to years and quarters in this Discussion and Analysis are to the Company’s
fiscal years and fiscal quarters and all annual and quarterly information in this
Discussion and Analysis is for such fiscal years and quarters, respectively.
2022 Financial Overview
In 2019, the Company announced the major expansion of its aerospace manufacturing,
development and design facilities located at the Newton City-County Airport in Newton,
Kansas. This expansion includes the construction of a manufacturing facility located adjacent to
Park’s existing Newton, Kansas facilities. This facility, which was constructed in part to support
a major aerospace customer, includes approximately 90,000 square feet of manufacturing and
office space, and essentially doubled the size of Park’s existing Newton, Kansas manufacturing
footprint. The total cost of the expansion will be approximately $19.5 million. The expansion
construction is complete and is undergoing customer qualifications, which are expected to be
complete in the second half of the 2022 fiscal year. The expansion includes new resin mixing
and delivery systems, new hot-melt film and tape manufacturing lines, space to accommodate
an additional hot-melt tape line or solution treating line, space to accommodate a confidential
joint development project with a major aerospace customer, additional slitting capability,
significant additional freezer and storage space, an expanded production lab, a new R&D lab
and additional office space. Through February 27, 2022, the Company had incurred $18.7
million of costs for the expansion.
In December 2019, a novel strain of coronavirus was reported in Wuhan, China and has
since spread worldwide, including to the United States, posing public health risks that have
reached pandemic proportions (the “COVID-19 Pandemic”).
23
The COVID-19 Pandemic and resultant global economic crisis had significant impacts on
the Company’s results of operations and cash flow for 2021, and to a lesser degree for 2022.
The COVID-19 Pandemic and crisis had significant impacts on the markets the Company sells
into, particularly the commercial and business aircraft markets. As a result, the Company has
experienced a significant reduction in sales and backlog.
Even as the COVID-19 Pandemic subsides, the Company may continue to experience
adverse impacts to its business as a result of the potential continuing impact of the economic
crisis on the markets the Company serves.
The Company's total net sales worldwide in 2022 were 16% higher than in 2021 due
primarily to the higher sales to commercial aerospace and business aircraft customers due to
the decreasing impacts of the Pandemic on those markets partially offset by lower military sales
during 2022.
The Company’s gross profit margin, measured as a percentage of sales, increased to
33.4% in 2022 from 28.5% in 2021. Higher sales and production levels combined with the fixed
nature of certain overhead costs led to higher gross margins.
The Company recorded restructuring charges of $259,000 and $1.6 million in 2022 and
2021, respectively, related to the closure of the Company’s Park Aerospace Technologies Asia,
Pte, Ltd. facility located in Singapore.
The Company’s earnings from continuing operations in 2022 were 107% higher than in
2021, primarily as a result of the aforementioned increases in sales and gross profit. The
Company’s net earnings from continuing operations in 2022 were 63% higher than in 2021,
primarily due to higher sales and lower restructuring charges, partially offset by lower interest
income.
The Company is experiencing inflation in raw material and other costs. The impact of
inflation on the Company’s profits has been partially mitigated by the Company’s ability to adjust
pricing for a large portion of its sales to pass the impact of inflation through to its customers.
With the recovery of the aerospace markets, some companies in the aerospace supply
chain may not be fully prepared to ramp up their production as quickly as needed, which may
create a risk to the Company of not getting enough raw materials on a timely basis to fully
support the Company’s customers’ demands. Additionally, some shipments from overseas
suppliers are experiencing transportation delays due to a lack of available containers and a
backlog at incoming ports of entry. Delays of overseas shipments of raw materials are having an
impact on the Company’s production levels. Delays in raw material shipments continue to
represent a risk to the Company.
Programs that the Company supplies into may also be experiencing supply chain issues
from other suppliers to the programs. The Company’s sales could be impacted by delays and
reductions in its customer’s production schedules caused by other suppliers in the chain.
The tight labor market has created challenges in hiring personnel. Although the
Company feels very positive about its workforce, high wage inflation creates challenges in hiring
to add to the Company’s employee base. The Company is making adjustments to pay levels
and benefits to stay competitive with the labor market. Additionally, the Company has a
“Customer Flexibility Program” whereby employees can cross train on different equipment and
processes to earn extra pay for attaining the added skills.
24
The war in Ukraine has not had a material impact on the Company’s results of
operations, and is not expected to have a material impact. The Company does not have any
significant customers in Russia or Ukraine. The Company continues to evaluate the impact the
war in Ukraine may have on the Company’s customers and on the Company’s supply chain.
The Company has a number of long-term contracts pursuant to which certain of its
customers, some of which represent a substantial portion of the Company’s revenue, place
orders. Long-term contracts with the Company’s customers are primarily requirements based
and do not guarantee quantities. An order forecast is generally agreed concurrently with pricing
for any applicable long-term contract. This order forecast is then typically updated periodically
during the term of the underlying contract. Purchase orders are generally received in excess of
three months in advance of delivery.
Results of Operations:
2022 Compared to 2021
(Amounts in thousands, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring charges
Earnings from continuing operations
Interest and other income
Earnings from continuing operations before
income taxes
Income tax provision
Net earnings from continuing operations
Loss from discontinued operations,
net of tax
Net earnings
Earnings (loss) per share:
Basic:
Continuing operations
Discontinued operations
Basic earnings per share
Diluted:
Continuing operations
Discontinued operations
Diluted earnings per share
Net Sales
Year Ended
February 27,
2022
February 28,
2021
$
53,578
35,661
17,917
6,249
259
11,409
375
$
46,276
33,085
13,191
6,113
1,570
5,508
1,777
Increase / (Decrease)
$
7,302
2,576
4,726
136
(1,311)
5,901
(1,402)
16%
8%
36%
2%
-84%
107%
-79%
62%
59%
63%
11,784
3,320
8,464
7,285
2,093
5,192
4,499
1,227
3,272
-
8,464
$
(328)
4,864
$
328
3,600
$
-100%
74%
$
$
$
$
$
$
0.25
(0.01)
0.24
0.25
(0.01)
0.24
0.16
0.01
0.17
0.16
0.01
0.17
64%
-100%
71%
64%
-100%
71%
$
$
$
$
$
$
0.41
-
0.41
0.41
-
0.41
The Company's total net sales worldwide in 2022 were 16% higher than in 2021 due
primarily to the higher sales to commercial aerospace and business aircraft customers resulting
from the decreasing impacts of the Pandemic on those markets, partially offset by lower military
sales during 2022.
Gross Profit
The Company’s gross profit margin, measured as a percentage of sales, increased to
33.4% in 2022 from 28.5% in 2021. Higher sales and production levels combined with the fixed
nature of certain overhead costs led to higher gross margins.
25
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $136,000, or 2%, during 2022
compared to 2021. Such expenses, measured as percentages of sales, were 11.7% and 13.2%
during 2022 and 2021, respectively.
Selling, general and administrative expenses in 2022 included $285,000 of stock option
expenses compared to $191,000 of such expenses in 2021.
Restructuring Charges
The Company recorded restructuring charges of $259,000 in 2022 compared to $1.6
million in 2021 related to the closure of the Company’s Park Aerospace Technologies Asia, Pte,
Ltd. facility located in Singapore.
Earnings from Continuing Operations
For the reasons set forth above, the Company’s earnings from continuing operations
were $11.4 million for 2022, including the pretax charges of $259,000 for the closure of the
facility located in Singapore. The Company’s earnings from continuing operations were $5.5
million for 2021, including the pretax charges of $1.6 million for the closure of the facility located
in Singapore.
Interest and Other Income
Interest and other income were $375,000 and $1.8 million for 2022 and 2021,
respectively. The decrease from 2021 was due primarily to lower average invested cash during
the period and lower weighted average interest rates. During 2022 and 2021, the Company
earned interest income principally from its investments, which were primarily in short-term
instruments and money market funds.
Income Tax Provision
The Company’s effective income tax rate of 28.2% for 2022 was due primarily to the
U.S. Federal rate and state income taxes. The Company’s effective income tax rate was higher
in 2021, due to unfavorable adjustments to valuation allowances on state tax credits and a
higher state effective tax rate in 2021.
Net Earnings from Continuing Operations
The Company’s net earnings from continuing operations for 2022 were $8.5 million,
including the pretax charges of $259,000 for the closure of the facility located in Singapore. The
Company’s net earnings from continuing operations for 2021 were $5.2 million, including the
pretax charges of $1.6 million for the closure of the facility located in Singapore.
Discontinued Operations
On December 4, 2018, the Company completed the sale of its Electronics Business,
including manufacturing facilities in Singapore, France, California and Arizona and R&D facilities
in Singapore and Arizona, to AGC Inc. for an aggregate purchase price of $145 million in cash,
subject to post-closing adjustments for changes in working capital compared to the target net
working capital, excluding cash in certain acquired subsidiaries and certain accrued and unpaid
taxes of certain acquired subsidiaries. See Note 12, “Discontinued Operations”, of the Notes to
26
Consolidated Financial Statements elsewhere in this Report for additional information on the
sale.
The operating results of the Electronics Business are classified, together with certain
costs related to the sale, as discontinued operations, net of tax, in the Consolidated Statements
of Operations.
The Company’s loss from discontinued operations was lower in 2022 compared to 2021
primarily as a result of exiting the facility in Fullerton California, previously used in the
electronics operations, at the beginning of the third fiscal quarter of 2021.
Basic and Diluted Earnings Per Share
Basic and diluted earnings per share from continuing operations for 2022 were $0.41,
including the pretax charges for the closure of the facility located in Singapore, compared to
basic and diluted earnings per share for 2021 of $0.25, including the pretax charges for the
closure of the facility located in Singapore. The net impact of the items described above was to
decrease basic and diluted earnings per share by $0.01 in 2022 and $0.07 in 2021.
2021 Compared to 2020
(Amounts in thousands, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring charges
Earnings from continuing operations
Interest and other income
Earnings from continuing operations before
income taxes
Income tax provision
Net earnings from continuing operations
Loss from discontinued operations,
net of tax
Net earnings
Earnings per share:
Basic:
Continuing operations
Discontinued operations
Basic earnings per share
Diluted:
Continuing operations
Discontinued operations
Diluted earnings per share
Net Sales
Year Ended
February 28,
2021
March 1,
2020
$
46,276
33,085
13,191
6,113
1,570
5,508
1,777
$
60,014
41,341
18,673
7,932
-
10,741
3,330
Increase / (Decrease)
$
(13,738)
(8,256)
(5,482)
(1,819)
1,570
(5,233)
(1,553)
7,285
2,093
5,192
14,071
3,866
10,205
(6,786)
(1,773)
(5,013)
$
(328)
4,864
$
(653)
9,552
325
(4,688)
$
$
$
$
$
$
$
0.50
(0.03)
0.47
0.50
(0.03)
0.47
(0.25)
0.02
(0.23)
(0.25)
0.02
(0.23)
$
$
$
$
$
$
0.25
(0.01)
0.24
0.25
(0.01)
0.24
-23%
-20%
-29%
-23%
100%
-49%
-47%
-48%
-46%
-49%
-50%
-49%
-50%
-67%
-49%
-50%
-67%
-49%
The Company's total net sales worldwide in 2021 were 23% lower than in 2020 due
primarily to the lower sales to commercial aerospace and business aircraft customers as a
result of the inverse impact of the COVID-19 Pandemic on those markets, partially offset by
higher military sales during 2021.
27
Gross Profit
The Company’s gross profit margin, measured as a percentage of sales, decreased to
28.5% in 2021 from 31.1% in 2020. Lower sales and production levels combined with the fixed
nature of certain overhead costs lead to lower gross margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $1.8 million, or 23%, during
2021 compared to 2020. Such expenses, measured as percentages of sales, were 13.2%
during both the 2021 and 2020 fiscal years. The decrease in such expenses in 2021 was due
primarily to decreased travel and entertainment, salaries and lower stock option expenses,
excluding stock option modification charges in 2020.
Selling, general and administrative expenses in 2021 included $0.2 million of stock
option expenses compared to $0.7 million of such expenses in 2020, including $0.2 million due
to the modification of previously granted stock options.
Restructuring Charges
The Company recorded restructuring charges of $1.6 million in the 2021 related to the
closure of the Company’s Park Aerospace Technologies Asia, Pte, Ltd. facility located
Singapore.
Earnings from Continuing Operations
For the reasons set forth above, the Company’s earnings from continuing operations
were $5.5 million for 2021, including the pretax charges of $1.6 million for the closure of the
facility located in Singapore. The Company’s earnings from continuing operations were $10.7
million in 2020, including a pre-tax stock option modification charge of $0.2 million resulting from
the special dividend of $1.00 per share paid in February 2020.
Interest and Other Income
Interest and other income were $1.8 million and $3.3 million for 2021 and 2020,
respectively. The decrease from 2020 was due primarily to lower average invested cash during
the period and lower weighted average interest rates. During 2021 and 2020, the Company
earned interest income principally from its investments, which were primarily in short-term
instruments and money market funds.
Income Tax Provision
The Company’s effective income tax rate of 28.7% for 2021 was due primarily to the
U.S. Federal rate and state income taxes. The Company’s effective income tax rate was lower
in 2020, due to favorable adjustments to valuation allowances on state tax credits and a lower
state effective tax rate in 2020.
Net Earnings from Continuing Operations
The Company’s net earnings from continuing operations for 2021 were $5.2 million,
including the pretax charges of $1.6 million for the closure of the facility located in Singapore.
The Company’s net earnings from continuing operations for 2020 were $10.2 million, including
28
the stock option modification pre-tax charge of $0.2 million in connection with the special
dividend of $1.00 per share paid in February 2020.
Discontinued Operations
On December 4, 2018, Park completed the previously announced sale of its Electronics
Business, including manufacturing facilities in Singapore, France, California and Arizona and
R&D facilities in Singapore and Arizona, to AGC Inc. for an aggregate purchase price of $145
million in cash, subject to post-closing adjustments for changes in working capital compared to
the target net working capital, excluding cash in certain acquired subsidiaries and certain
accrued and unpaid taxes of certain acquired subsidiaries. See Note 12, “Discontinued
Operations”, of the Notes to Consolidated Financial Statements elsewhere in this Report for
additional information on the sale.
The operating results of the Electronics Business are classified, together with certain
costs related to the sale, as discontinued operations, net of tax, in the Consolidated Statements
of Operations.
The Company’s loss from discontinued operations was lower in 2021 compared to 2020
primarily as a result of exiting the facility in Fullerton California, previously used in the
electronics operations, at the beginning of the Company’s third fiscal quarter of 2021.
Basic and Diluted Earnings Per Share
Basic and diluted earnings per share from continuing operations for 2021 were $0.25,
including the pretax charges for the closure of the facility located in Singapore, compared to
basic and diluted earnings per share for 2020 of $0.50, including the stock option modification
charge in connection with the special dividend paid in February 2020. The net impact of the
items described above was to decrease basic and diluted earnings per share by $0.07 in 2021
and $0.01 in 2020.
Liquidity and Capital Resources:
(Amounts in thousands)
February 27,
2022
February 28,
2021
Increase /
(Decrease)
Cash and marketable securities
Working capital
$
110,361
120,147
$
116,542
124,348
$
(6,181)
(4,201)
From continuing operations
(Amounts in thousands)
Net cash provided by operating
activities
Net cash (used in) provided by
investing activities
Net cash used in financing
activities
February 27,
2022
Fiscal Year Ended
February 28,
2021
March 1,
2020
Increase / (Decrease)
2022 vs. 2021
2021 vs. 2020
$
8,201
$
13,340
$
5,871
$
(5,139)
$
7,469
(29,556)
32,958
(42,511)
(62,514)
(7,429)
(9,785)
(28,304)
2,356
75,469
18,519
Cash and Marketable Securities
The Company believes it has sufficient liquidity to fund its operating activities for the 12
months from the date of the filing of this Form 10-K Annual Report and for the foreseeable
future thereafter.
29
The change in cash and marketable securities at February 27, 2022 compared to
February 28, 2021 was primarily the result of positive operating cash flow more than offset by
capital expenditures and regular quarterly dividends paid by the Company to its shareholders
during 2022 and a number of additional factors. The significant changes in cash provided by
operating activities were as follows:
accounts receivable increased by 9% at February 27, 2022 compared to February 28,
2021 due primarily to the increase in total net sales in the last month of 2022;
inventory decreased 3% due primarily to lower raw material purchases at the end of
February 2022;
prepaid expenses and other current assets decreased 9% due primarily to the decrease
in income tax receivable;
accounts payable decreased 23% due primarily to the lower raw material purchases and
lower capital expenditures at the end of February 2022;
accrued liabilities decreased 13% due primarily to the reduction of the restructuring
accrual related to the closure of the facility in Singapore;
income taxes payable decreased 25% at February 27, 2022 compared to February 28,
2021 due to the current tax provision in excess of the tax payments.
In addition, the Company paid $8.2 million in cash dividends during 2022 and 2021.
Working Capital
Working capital at February 27, 2022 was lower compared to February 28, 2021.
Decreases in cash and cash equivalents and marketable securities, decreases in inventories
and decreases in prepaid expenses and other current assets were partially offset by increases
in accounts receivable and decreases in accounts payable, accrued liabilities and income taxes
payable.
The Company's current ratio (the ratio of current assets to current liabilities) was 20.1 to
1 at February 27, 2022 compared to 16.6 to 1 at February 28, 2021.
Cash Flows
During 2022,
the Company's net earnings
from continuing operations, before
depreciation and amortization, stock-based compensation, amortization of bond premium, gain
on sale of fixed assets and non-cash restructuring, were $11.8 million. Such earnings were
decreased by changes in operating assets and liabilities of $3.6 million, resulting in $8.2 million
of cash provided by operating activities from continuing operations. During 2022, the Company
expended $4.4 million for the purchase of property, plant and equipment compared to $7.5
million during 2021, the Company in 2021 paid $1.6 million for the repurchase of the Company’s
stock, and the Company paid $8.2 million in cash dividends in 2022 and 2021.
Other Liquidity Factors
On December 22, 2017, the U.S. government enacted comprehensive tax reform
commonly referred to as the Tax Cuts and Jobs Act (“TCJA” or “Tax Act”) and significantly
30
revised U.S. corporate income tax by, among other things, lowering corporate income tax rates,
imposing a one-time transition tax on deemed repatriated earnings of non-U.S. subsidiaries, and
implementing a territorial tax system. As a result of the Tax Act, the Company recorded tax
payable to be paid in installments over eight years. The remaining balance of these installment
payments, as of February 27, 2022, was approximately $14.3 million to be paid over the next
four years.
The Company believes that its existing cash, cash equivalents and marketable
securities, and cash flow from operations will be sufficient to fund necessary capital
expenditures and operating cash requirements for at least the next twelve months from the date
of the filing of this Form 10-K Annual Report. The Company further believes that its balance
sheet and financial position to be very strong, and the Company believes it is well positioned to
weather the impact of the Pandemic on its business.
Contractual Obligations:
The Company's contractual obligations and other commercial commitments to make
future payments under contracts, such as lease agreements, consist only of operating lease
commitments, commitments to purchase raw materials and commitments to purchase
equipment, as described in Note 10 of the Notes to Consolidated Financial Statements included
elsewhere in this Report. The Company has no other long-term debt, capital lease obligations,
unconditional purchase obligations or other long-term obligations, standby letters of credit,
guarantees, standby repurchase obligations or other commercial commitments or contingent
commitments, other than two standby letters of credit in the total amount of $0.3 million to
secure the Company's obligations under its workers’ compensation insurance program.
Environmental Matters:
The Company is subject to various Federal, state and local government and foreign
government requirements relating to the protection of the environment. The Company believes
that, as a general matter, its policies, practices and procedures are properly designed to prevent
unreasonable risk of environmental damage and that its handling, manufacture, use and
disposal of hazardous or toxic substances are in accord with environmental laws and
regulations. However, mainly because of past operations of the Company’s former Electronics
Business and operations of predecessor companies, which were generally in compliance with
applicable laws at the time of the operations in question, the Company, like other companies
engaged in similar businesses, is a party to claims by government agencies and third parties
and has incurred remedial response and voluntary cleanup costs associated with environmental
matters. Additional claims and costs involving past environmental matters may continue to arise
in the future. It is the Company's policy to record appropriate liabilities for such matters when
remedial efforts are probable and the costs can be reasonably estimated.
In 2022, 2021 and 2020, the Company incurred approximately $13,000, $9,000 and
$41,000, respectively, for remedial response and voluntary cleanup costs and related legal fees,
and the Company received, or expects to receive, reimbursement pursuant to general liability
insurance coverage for approximately $13,000, $9,000 and $38,000, respectively, of such
amounts. While annual environmental remedial response and voluntary cleanup expenditures,
including legal fees, have generally been constant from year to year, and may increase over
time, the Company expects it will be able to fund such expenditures from cash flow from
operations. The timing of expenditures depends on a number of factors, including regulatory
approval of cleanup projects, remedial techniques to be utilized and agreements with other
parties. At February 27, 2022 and February 28, 2021, there were no amounts recorded in
accrued liabilities for environmental matters.
31
Management does not expect that environmental matters will have a material adverse
effect on the liquidity, capital resources, business, consolidated results of operations or
consolidated financial position of the Company. See Note 11 of the Notes to Consolidated
Financial Statements included in Item 8 of Part II of this Report for a discussion of the
Company's contingencies, including those related to environmental matters.
Critical Accounting Policies and Estimates:
The following information is provided regarding critical accounting policies that are
important to the Consolidated Financial Statements and that entail, to a significant extent, the
use of estimates, assumptions and the application of management's judgment.
General
The Company's Discussion and Analysis of its Financial Condition and Results of
Operations are based upon the Company's Consolidated Financial Statements, which have
been prepared in accordance with accounting principles generally accepted in the United
States. The preparation of these Consolidated Financial Statements requires the Company to
make estimates, assumptions and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and the related disclosure of contingent liabilities. On an
ongoing basis, the Company evaluates its estimates, including those related to sales
allowances, allowances for doubtful accounts, inventories, valuation of long-lived assets,
income taxes, restructurings, contingencies and litigation, and employee benefit programs. The
Company bases its estimates on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.
The Company believes the following critical accounting policies affect its more significant
judgments and estimates used in the preparation of its Consolidated Financial Statements.
Recently Adopted Accounting Pronouncement
See Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of
Part II of this Report for a discussion of the Company's recently adopted accounting
pronouncements.
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. The majority of the Company’s shipping
terms define the performance obligation to be satisfied upon shipment.
32
Sales Allowances and Product Warranties
to revenue
The Company records estimated reductions
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 such
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 the products
supplied by the Company. The Company is focused on manufacturing the highest quality
advanced composite materials, structures and assemblies and tooling possible and employs
stringent manufacturing process controls and works with raw material suppliers who have
technical
dedicated
requirements. The amounts of returns and allowances resulting from defective or damaged
products have averaged approximately 1.0% of sales for the Company’s last three fiscal years.
the Company’s specifications and
to complying with
themselves
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.
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.
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. In addition, the Company assesses the impairment of goodwill at least annually.
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.
Income Taxes
As part of the processes of preparing its consolidated financial statements, the Company
is required to estimate the income taxes in each of the jurisdictions in which it operates. This
process involves estimating the actual current tax expense together with assessing temporary
33
differences resulting from differing treatment of items for tax and accounting purposes. These
differences result in deferred tax assets and liabilities, which are included in the Company’s
Consolidated Balance Sheets. 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.
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
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 recognized on the liability for
unrecognized tax benefits are recorded as income tax expense.
is adjusted periodically due
tax benefits
Contingencies and Litigation
The Company is subject to a number of 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.
Employee Benefit Programs
The Company's obligations for workers' compensation claims prior to fiscal year 2019
are effectively self-insured, although the Company maintains individual and aggregate stop-loss
insurance coverage for such claims. Beginning in fiscal year 2019 workers compensation
claims were fully insured. The Company accrues its workers’ compensation liability based on
estimates of the total exposure of known claims using historical experience and projected loss
development factors less amounts previously paid out.
The Company has a non-contributory profit sharing retirement plan covering their regular
full-time employees. In addition, the Company has various bonus and incentive compensation
programs, most of which are determined at management's discretion.
34
The Company's reserves associated with these self-insured liabilities and benefit
programs are reviewed by management for adequacy at the end of each reporting period.
35
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk – The exposure to market risks for changes in interest rates relates to
the Company's short-term investment portfolio. The Company does not use derivative financial
instruments in its investment portfolio. The Company’s short-term investment portfolio is
managed in accordance with guidelines issued by the Company. These guidelines are designed
to establish a high quality fixed income portfolio of government and highly rated corporate debt
securities with a maximum weighted maturity of less than two years. Based on the average
anticipated maturity of the investment portfolio at the end of the 2022 fiscal year, the Company
does not believe that a hypothetical 10% fluctuation in short-term interest rates would have had
a material impact on the consolidated results of operations or financial position of the Company.
Commodities Risk – The Company is subject to fluctuations in the cost of raw materials
used to manufacture its materials and products. In particular, the Company is exposed to
market fluctuations in commodity pricing as the Company utilizes certain materials that are key
materials in certain of its products. The Company generally passes changes in the costs of its
raw material costs through to its customers. The Company currently does not use hedging
strategies to minimize the risk of price fluctuations on commodity-based raw materials; however,
the Company regularly reviews such strategies on an ongoing basis. See “Materials and
Sources of Supply” in Item 1 of this Report.
36
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's Financial Statements begin on the next page.
37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Park Aerospace Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Park Aerospace Corp. and
subsidiaries (the “Company”) as of February 27, 2022 and February 28, 2021 and the related
consolidated statements of operations, comprehensive earnings, shareholders’ equity, and cash
flows for each of the years in the three-year period ended February 27, 2022, and the related
notes (collectively referred to as the “financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company
as of February 27, 2022 and February 28, 2021, and the results of its operations and its cash
flows for each of the three years in the period ended February 27, 2022, in conformity with
accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether due to error or fraud. The
Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express
no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/ CohnReznick LLP
We have served as the Company’s auditor since 2014.
Parsippany, New Jersey
May 12, 2022
38
PARK AEROSPACE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Marketable securities (Note 2)
Accounts receivable, less allowance for doubtful
accounts of $104 and $89, respectively
Inventories (Note 3)
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net (Note 3)
Operating right-of-use assets (Note 10)
Goodwill and other intangible assets, net (Note 3)
Other assets (Note 4)
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Operating lease liabilities (Note 10)
Accrued liabilities (Note 3)
Income taxes payable
Total current liabilities
Long-term operating lease liabilities (Note 10)
Non-current income taxes payable (Note 4)
Deferred income taxes (Note 4)
Other liabilities (Note 4)
Total liabilities
Commitments and contingencies (Notes 10 and 11)
Shareholders' equity (Note 6):
Preferred stock, $1 par value per
shares-authorized, 500,000 shares;
issued, none
Common stock, $0.10 par value per
shares-authorized, 60,000,000 shares;
issued, 20,965,144 shares
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
February 27, 2022
February 28, 2021
$
12,811
97,550
$
41,595
74,947
8,339
4,657
3,082
126,439
7,633
4,794
3,372
132,341
24,333
203
9,790
122
160,887
$
21,130
103
9,797
141
163,512
$
$
2,534
53
1,494
2,211
6,292
$
3,300
33
1,708
2,952
7,993
174
12,621
1,671
4,497
25,255
86
14,303
778
4,411
27,571
-
-
2,096
169,665
(24,767)
(1,965)
145,029
2,096
170,038
(25,063)
(336)
146,735
Less treasury stock, at cost, 506,934 and 582,268 shares,
respectively
Total shareholders' equity
Total liabilities and shareholders' equity
(9,397)
135,632
160,887
$
(10,794)
135,941
163,512
$
See Notes to Consolidated Financial Statements.
39
PARK AEROSPACE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
February 27,
2022
Fiscal Year Ended
February 28,
2021
March 1,
2020
$
53,578
35,661
17,917
6,249
259
11,409
375
$
46,276
33,085
13,191
6,113
1,570
5,508
1,777
$
60,014
41,341
18,673
7,932
-
10,741
3,330
11,784
3,320
8,464
7,285
2,093
5,192
14,071
3,866
10,205
$
-
8,464
$
(328)
4,864
$
(653)
9,552
$
$
$
$
$
$
0.25
(0.01)
0.24
20,387
0.25
(0.01)
0.24
20,478
0.50
(0.03)
0.47
20,507
0.50
(0.03)
0.47
20,595
$
$
$
$
$
$
0.41
-
0.41
20,422
0.41
-
0.41
20,551
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring charges (Note 8)
Earnings from continuing operations
Interest and other income
Earnings from continuing operations
before income taxes
Income tax provision (Note 4)
Net earnings from continuing operations
Loss from discontinued
operations, net of tax (Note 12)
Net earnings
Earnings (loss) per share (Note 7)
Basic:
Continuing operations
Discontinued operations
Basic earnings per share
Basic weighted average shares
Diluted:
Continuing operations
Discontinued operations
Diluted earnings per share
Diluted weighted average shares
See Notes to Consolidated Financial Statements.
40
PARK AEROSPACE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Amounts in thousands)
Net earnings
Other comprehensive (loss) earnings, net of tax:
Unrealized gains on marketable securities:
Unrealized holding gains arising during the period
Less: reclassification adjustment for gains
included in net earnings
Unrealized losses on marketable securities:
Unrealized holding losses arising during the period
Less: reclassification adjustment for losses
included in net earnings
Other comprehensive (loss) earnings
Total comprehensive earnings
See Notes to Consolidated Financial Statements.
February 27,
2022
Fiscal Year Ended
February 28,
2021
March 1,
2020
$
8,464
$
4,864
$
9,552
108
(36)
421
(272)
990
(49)
(1,713)
(1,176)
(291)
12
(1,629)
6,835
$
23
(1,004)
3,860
$
40
690
10,242
$
41
PARK AEROSPACE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands, except share and per share amounts)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Earnings (Loss)
Treasury Stock
Shares
Amount
Balance, March 3, 2019
20,965,144
Net earnings
Unrealized gain on marketable
securities, net of tax
Stock options exercised
Stock-based compensation
Cash dividends ($1.40 per share)
-
-
-
-
-
Balance, March 1, 2020
20,965,144
Net earnings
Unrealized gain on marketable
securities, net of tax
Stock options exercised
Stock-based compensation
Purchase of treasury stock
Cash dividends ($.40 per share)
-
-
-
-
-
-
Balance, February 28, 2021
20,965,144
Net earnings
Unrealized loss on marketable
securities, net of tax
Stock options exercised
Stock-based compensation
Cash dividends ($.40 per share)
-
-
-
-
-
Balance, February 27, 2022
20,965,144
See Notes to Consolidated Financial Statements.
$
2,096
-
$
169,395
-
$
(2,605)
9,552
(22)
$
-
479,191
-
$
(9,853)
-
-
(259)
726
-
169,862
-
-
(15)
191
-
-
170,038
-
-
-
-
(28,721)
(21,774)
4,864
-
-
-
-
(8,153)
(25,063)
8,464
690
-
-
-
668
-
(1,004)
-
-
-
-
(336)
-
-
(658)
285
-
169,665
$
-
-
-
(8,168)
(24,767)
$
(1,629)
-
-
-
(1,965)
$
-
(32,870)
-
-
446,321
-
-
(1,450)
-
137,397
-
582,268
-
-
(75,334)
-
-
506,934
-
676
-
-
(9,177)
-
-
27
-
(1,644)
-
(10,794)
-
-
1,397
-
-
(9,397)
$
-
-
-
-
2,096
-
-
-
-
-
-
2,096
-
-
-
-
-
2,096
$
42
PARK AEROSPACE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Cash flows from operating activities:
Net earnings
Loss from discontinued operations, net of tax
Net earnings from continuing operations
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization
Stock-based compensation
Allowance for bad debt
Provision for deferred income taxes
Amortization of bond premium
Loss (gain) on sale of marketable securities
Loss on sale of fixed assets
Non-cash restructuring
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Other assets and liabilities
Accounts payable
Accrued liabilities
Income taxes payable
Net cash provided by operating activities - continuing operations
Net cash used in operating activities - discontinued operations
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of marketable securities
Proceeds from sales and maturities of
marketable securities
Net cash (used in) provided by investing activities - continuing operations
Net cash provided by investing activities - discontinued operations
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Dividends paid
Proceeds from exercise of stock options
Purchase of treasury stock
Net cash used in financing activities - continuing operations
Net cash used in financing activities - discontinued operations
Net cash used in financing activities
(Decrease) increase in cash and cash equivalents before
effect of exchange rate changes - continuing operations
(Decrease) in cash and cash equivalents before
effect of exchange rate changes - discontinued operations
(Decrease) increase in cash and cash equivalents before
effect of exchange rate changes
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See Notes to Consolidated Financial Statements.
43
February 27,
2022
$
8,464
-
8,464
Fiscal Year Ended
February 28,
2021
March 1,
2020
$
4,864
328
5,192
$
9,552
653
10,205
1,136
285
16
894
956
10
27
-
(722)
137
(550)
111
(766)
(214)
(1,583)
8,201
-
8,201
(4,372)
14
(59,422)
34,224
(29,556)
-
(29,556)
(8,168)
739
-
(7,429)
-
(7,429)
1,150
191
16
(56)
543
(10)
-
1,318
3,276
1,585
157
250
(1,435)
(1)
1,164
13,340
(328)
13,012
(7,493)
-
(83,941)
124,392
32,958
-
32,958
(8,153)
12
(1,644)
(9,785)
-
(9,785)
1,544
726
41
849
27
(15)
-
-
(1,614)
(1,112)
490
3,348
1,566
(1,211)
(8,973)
5,871
(653)
5,218
(6,846)
-
(104,600)
68,935
(42,511)
-
(42,511)
(28,721)
417
-
(28,304)
-
(28,304)
(28,784)
36,513
(64,944)
-
(328)
(653)
(28,784)
36,185
(65,597)
(28,784)
41,595
12,811
$
36,185
5,410
41,595
$
(65,597)
71,007
5,410
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended February 27, 2022
(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.
b.
c.
d.
e.
Principles of Consolidation – The consolidated financial statements include the
accounts of Park and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
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).
Use of Estimates – The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America
to make estimates and
requires management
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results may differ from those
estimates.
(“U.S. GAAP”)
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 2022, 2021 and 2020
fiscal years ended on February 27, 2022, February 28, 2021 and March 1, 2020,
respectively. Fiscal years 2022, 2021 and 2020 each consisted of 52 weeks.
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
44
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 2022, 2021 or 2020 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 $5,998 and $29,492 in
debt securities included in cash equivalents at February 27, 2022 and February
28, 2021, 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. $29,595 of the $110,360 of cash and marketable securities at
February 27, 2022 were owned by one of the Company’s wholly-owned foreign
subsidiaries.
Supplemental cash flow information:
Cash paid during the year for:
Income taxes, net of refunds
$
3,924
$
782
$
8,296
2022
Fiscal Year
2021
2020
At February 27, 2022 and February 28, 2021, the Company held $2,929 and
$12,446, respectively, of cash and cash equivalents in foreign financial
institutions.
45
g.
h.
i.
j.
k.
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.
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.
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.
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
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.
locations. There are no
the customers’
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.
46
l.
m.
n.
o.
p.
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. $1,318 of impairments of
long-lived assets was recognized in the 2021 fiscal year and no impairments of
long-lived assets were recognized in the 2022 or 2020 fiscal years.
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
2022 or 2021 fiscal years.
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.
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
$1,136, $1,150 and $1,544 for the 2022, 2021 and 2020 fiscal years,
respectively.
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).
47
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
taxing authority. The liability associated with
ultimate settlement with a
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.
Foreign Currency Translation – Assets and liabilities of foreign subsidiaries using
currencies other than the U.S. dollar as their functional currency are translated
into U.S. dollars at period-end exchange rates or historical exchange rates,
where applicable, and income and expense items are translated at average
exchange rates for the period. Gains and losses resulting from translation are
recorded as currency translation adjustments in comprehensive earnings and are
eliminated when foreign operations are sold or otherwise disposed of.
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.
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.
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.
48
q.
r.
s.
t.
2. MARKETABLE SECURITIES
The following is a summary of available-for-sale securities:
Total
February 27, 2022
Level 1
Level 2
U.S. Treasury and other
government securities
U.S. corporate debt securities
Total marketable securities
U.S. Treasury and other
government securities
U.S. corporate debt securities
Total marketable securities
$
$
62,612
34,938
97,550
$
$
62,612
34,938
97,550
-
$
-
$
-
Level 3
-
$
-
$
-
Total
February 28, 2021
Level 1
Level 2
Level 3
$
$
56,906
18,041
74,947
$
$
56,906
18,041
74,947
-
$
-
$
-
-
$
-
$
-
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:
February 27, 2022:
U.S. Treasury and other
government securities
Amortized
Cost Basis
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$
65,177
$
5
$
2,570
U.S. corporate debt securities
Total marketable securities
35,064
100,241
$
$
5
10
131
2,701
$
February 28, 2021:
U.S. Treasury and other
government securities
$
57,400
$
153
$
647
U.S. corporate debt securities
Total marketable securities
$
18,008
75,408
$
52
205
$
19
666
Gross realized gains on sale
Gross realized losses on sale
2022
Fiscal Year
2021
2020
$
26
$
155
$
90
$
36
$
145
$
75
The estimated fair values of such securities at February 27, 2022, by contractual
maturity, are shown below:
Due in one year or less
Due after one year through five years
49
$
$
58,582
38,968
97,550
3. OTHER CONSOLIDATED BALANCE SHEET DATA
Other consolidated balance sheet data consisted of the following:
February 27,
2022
February 28,
2021
Inventories:
Raw materials
Work-in-process
Finished goods
Property, plant and equipment:
Land, buildings and improvements
Machinery, equipment, furniture and fixtures
Less: accumulated depreciation and amortization
Goodwill and other intangible assets:
Goodwill
Other intangibles
Accrued liabilities:
Payroll and payroll related
Employee benefits
Workers' compensation
Professional fees
Restructuring (Notes 8 and 12)
Other
4.
INCOME TAXES
$
$
$
$
$
$
$
$
$
$
9,776
14
9,790
$
$
9,776
21
9,797
$
$
4,026
253
378
4,657
16,054
33,581
49,635
25,302
24,333
688
3
96
512
8
187
1,494
3,490
147
1,157
4,794
14,236
37,446
51,682
30,552
21,130
596
2
138
451
260
261
1,708
$
$
The income tax provision (benefit) for continuing operations includes the following:
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
2022
Fiscal Year
2021
2020
$
1,912
484
4
2,400
$
1,662
447
10
2,119
565
88
267
920
3,320
$
132
109
(267)
(26)
2,093
$
$
2,556
40
383
2,979
899
(12)
-
887
3,866
$
50
The income tax provision (benefit) for discontinued operations includes the following:
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
2022
-
$
-
-
-
-
-
-
-
$
-
Fiscal Year
2021
2020
$
(84)
(23)
-
(107)
-
-
-
-
$
(107)
$
(183)
(15)
-
(198)
-
(38)
-
(38)
(236)
$
State income tax benefits from loss carryforwards to future years were recognized as
deferred tax assets in the 2022, 2021 and 2020 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. In connection with sale of the
Electronics Business and the enactment of the Tax Act, the Company repatriated $0, $0, and
$100,216 in cash from its Singapore and French subsidiaries in the 2022, 2021 and 2020 fiscal
years, respectively.
The Company’s pre-tax earnings (loss) from continuing operations in the United States
and foreign locations are as follows:
2022
Fiscal Year
2021
2020
United States
Foreign
Earnings before income taxes
$
$
11,987
(203)
11,784
$
$
8,732
(1,447)
7,285
$
$
11,676
2,395
14,071
The Company’s pre-tax earnings (loss) from discontinued operations in the United
States and foreign locations are as follows:
2022
Fiscal Year
2021
2020
$
$
(435)
-
(435)
$
$
(887)
-
(887)
United States
Foreign
(Loss) earnings before income taxes
-
$
-
$
-
51
The Company’s effective income tax rate differs from the statutory U.S. Federal income
tax rate as a result of the following:
Statutory U.S. Federal tax rate
State and local taxes, net of
Federal benefit
Foreign tax rate differentials
Valuation allowance on deferred
tax assets
Adjustment on tax accruals
ASC 740-10 change
Foreign tax credits
Subpart F
Permanent differences and other
2022
21.0%
4.3%
2.7%
0.0%
(0.3%)
0.5%
0.0%
(1.0%)
1.0%
28.2%
Fiscal Year
2021
21.0%
5.9%
0.7%
0.0%
0.0%
0.9%
(0.1%)
1.1%
(0.8%)
28.7%
2020
21.0%
0.1%
(0.6%)
(0.1%)
(17.6%)
23.5%
(2.7%)
4.0%
(0.1%)
(27.5%)
The Company had state net operating loss carryforwards of approximately $2,030 and
$2,160 in the 2022 and 2021 fiscal years, respectively, and total net foreign operating loss
carryforwards of approximately $7,790 and $7,798 in the 2022 and 2021 fiscal years,
respectively. The Company utilized $64 of net operating loss in the 2020 fiscal year. The
Company has a valuation allowance against the remaining carryforwards. The state net
operating loss carryforwards will expire in 2023 through 2039.
The Company had available Kansas tax credits of $0 at the end of both the 2022 and
2021 fiscal years. Kansas credits of $191 were utilized in 2020 and a corresponding tax benefit
was recognized. The Company had Arizona tax credits of $991 in both the 2022 and 2021
fiscal years, for which no benefit has been provided.
The deferred tax asset valuation allowance of $3,587 as of February 27, 2022 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 2022 fiscal year, the
valuation allowance did not change. 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.
52
Significant components of the Company's deferred tax assets and liabilities from
continuing operations as of February 27, 2022 and February 28, 2021 were as follows:
Deferred tax assets:
Net operating loss carryforwards
Tax credits carryforward
Stock options
Other, net
Valuation allowance on deferred
tax assets
Total deferred tax assets, net of
valuation allowance
Deferred tax liabilities:
Depreciation
Undistributed earnings
Other
Total deferred tax liabilities
Net deferred tax asset (liability)
February 27,
2022
February 28,
2021
$
2,598
991
977
174
4,740
$
2,602
991
1,235
774
5,602
(3,587)
1,153
(3,587)
2,015
(2,492)
(2)
(556)
(3,050)
(1,897)
$
(2,045)
(4)
(702)
(2,751)
(736)
$
At February 27, 2022 and February 28, 2021, the Company had gross unrecognized tax
benefits and related interest of $4,537 and $4,452, respectively, included in other liabilities. If
any portion of the unrecognized tax benefits at February 27, 2022 were recognized, the
Company’s effective tax rate would decrease.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits for
continuing operations is as follows:
February 27,
2022
Unrecognized Tax Benefits
February 28,
2021
March 1,
2020
Balance, beginning of year
Tax positions - Discontinued Ops
$
4,117
-
$
4,164
(47)
$
937
-
in prior period
Gross decreases - tax positions
in prior period
Gross increases - current period
tax positions
Audit settlements
Balance, end of year
(39)
-
-
-
(32)
3,259
$
-
4,078
$
-
4,117
$
-
4,164
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.
53
A list of open tax years by major jurisdiction follows:
U.S. Federal
California
New York
Kansas
France
Singapore
2020-2022
2018-2022
2020-2022
2018-2022
2018-2022
2017-2022
The Company had approximately $460 and $335 of accrued interest and penalties as of
February 27, 2022 and February 28, 2021, 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.
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 27, 2022, 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 27, 2022, 475,150
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 27, 2022 was $607, which is expected to be recognized ratably
over a weighted average vesting period of 2.60 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.
54
The
following table represents the weighted average fair value and valuation
assumptions used for options granted in the 2022, 2021 and 2020 fiscal years:
2022
Fiscal Year
2021
2020
Weighted average fair value
per share of option grants
Risk-free interest rates
Expected stock price
volatility
Expected dividend yields
Estimated option terms
$2.76
0.74% - 1.85%
$2.12
0.23% - 0.42%
$3.97
2.24% - 2.26%
27.8% - 29.2%
2.73% - 3.07%
4.4 - 7.6 Years
26.9% - 30.0%
3.18% - 3.49%
4.3 - 7.6 Years
30.4% - 31.5%
2.43%
4.3 - 5.8 Years
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
2020 fiscal year. The estimated terms of the options are based on evaluations of the historical
and expected future employee exercise behavior.
During the 2020 fiscal year, the Company recorded non-cash charges of $208 related to
the modification of previously granted employee stock options resulting from the $1.00 per
share special cash dividend paid by the Company in February 2020.
Information with respect to stock option activity follows:
Outstanding
Options
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Term
(in years)
Balance, March 3, 2019
Granted
Exercised
Terminated or expired
Balance, March 1, 2020
Granted
Exercised
Terminated or expired
Balance, February 28, 2021
Granted
Exercised
Terminated or expired
Balance, February 27, 2022
Vested and exercisable, February 27, 2022
Expected to vest, February 27, 2022
540,709
114,450
(32,873)
(111,652)
510,634
132,100
(1,450)
(6,750)
634,534
147,750
(75,334)
(58,650)
648,300
391,275
609,402
$
13.49
15.44
11.64
15.95
$
12.45
12.55
8.02
13.01
$
12.47
13.82
9.81
13.96
12.96
12.47
12.47
$
$
$
Aggregate
Intrinsic
Value
$
70
$
597
$
730
5.38
3.32
5.38
$
$
$
428
450
701
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 2022, 2021 and 2020 fiscal years were $358, $8 and $124,
respectively.
55
A summary of the status of the Company’s non-vested options at February 27, 2022,
and changes during the fiscal year then ended, is presented below:
Non-vested, beginning of year
Granted
Vested
Terminated or expired
Shares Subject
to Options
Weighted
Average Grant
Date Fair Value
208,375
147,750
(60,400)
(38,700)
$
2.80
2.78
2.91
2.86
Non-vested, end of year
257,025
$
2.75
6.
SHAREHOLDERS’ EQUITY
Treasury Stock – On January 8, 2015, the Company announced that its Board of
Directors had authorized the Company’s purchase, on the open market and in privately
negotiated transactions, of up to 1,250,000 shares of its common stock, representing
approximately 6% of the Company’s 20,945,634 total outstanding shares as of the close of
business on January 7, 2015. This authorization superseded all prior Board of Directors’
authorizations to purchase shares of the Company’s common stock.
On March 10, 2016, the Company announced that its Board of Directors authorized the
Company’s purchase, on the open market and in privately negotiated transactions, of up to
1,000,000 additional shares of its common stock, in addition to the unused prior authorization to
purchase shares of the Company’s common stock announced on January 8, 2015. During the
2016 fiscal year, the Company purchased 599,832 shares pursuant to the above authorizations
at an aggregate purchase price of $12,187. In 2021, the Company purchased 137,397 shares
pursuant to the above authorization at an aggregate purchase price of $1,644. As a result, the
Company is authorized to purchase up to a total of 1,394,015 shares of its common stock,
representing approximately 6.8% of the Company’s 20,458,210 total outstanding shares as of
the close of business on February 27, 2022.
Reserved Common Shares – At February 27, 2022, 1,123,450 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 27, 2022
February 28, 2021
Unrealized losses on investments,
net of taxes of $1,629 and $1,004, respectively
Accumulated balance
$
$
(1,965)
(1,965)
$
$
(336)
(336)
7.
EARNINGS PER SHARE
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
56
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:
(Amounts in thousands, except per share amounts)
2022
Fiscal Year
2021
2020
Net earnings - continuing operations
Net (loss) earnings - discontinued operations
Net earnings
Weighted average common shares
outstanding for basic EPS
Net effect of dilutive options
Weighted average shares
outstanding for diluted EPS
Basic earnings per share - continuing operations
Basic (loss) earnings per share - discontinued operations
Basic earnings per share
Diluted earnings per share - continuing operations
Diluted (loss) earnings per share - discontinued operations
Diluted earnings per share
$
$
$
8,464
-
8,464
5,192
(328)
4,864
10,205
(653)
9,552
$
$
$
20,422
129
20,551
20,387
91
20,478
20,507
88
20,595
$
$
$
$
$
$
$
$
$
$
$
$
0.25
(0.01)
0.24
0.25
(0.01)
0.24
0.41
-
0.41
0.41
-
0.41
0.50
(0.03)
0.47
0.50
(0.03)
0.47
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 263,744,
387,975 and 132,000 for the 2022, 2021 and 2020 fiscal years, respectively.
8.
RESTRUCTURING CHARGES
The Company recorded restructuring charges of $259, $1,570 and $0 in the 2022, 2021
and 2020 fiscal years, respectively, related to the closure of the Company’s Park Aerospace
Technologies Asia PTE, LTD facility located in Singapore.
The following table sets forth the charges and accruals related to the restructuring:
Accrual
February 28,
2021
$
Current
Period
Charges
$
Facility lease costs
Asset impairment
Asset removal
Other
Total restructuring charges
252
-
-
-
252
$
$
Cash
Payments
(82)
$
-
(381)
(72)
(535)
$
Non-Cash
Charges
$
24
-
-
-
$
24
Accrual
February 27,
2022
-
$
-
-
-
$
-
Total
Expense
Accrued to
Date
$
252
1,318
154
43
1,767
$
(194)
-
381
72
259
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 $170 and $168 for fiscal years 2021 and 2020, respectively. The contribution for fiscal
year 2022 has not been determined or 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.
57
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 27, 2022, 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
27, 2022 are as follows:
Fiscal Year:
2023
2024
2025
2026
2027
Thereafter
Total undiscounted operating lease payments
Less imputed interest
Present value of operating lease payments
$
53
53
36
-
-
162
304
(77)
227
$
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. The above payment schedule does not include lease
payments of $119 in for the Company’s idle facility in Singapore that were previously accrued
on the consolidated balance sheets in accrued liabilities, this lease was terminated as of
February 27, 2022.
During the 2022 fiscal year, the Company’s operating lease expense was $62. Cash
payments of $51, 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 27, 2022:
Operating right-of-use assets
$
203
Operating lease liabilities
Long-term operating lease liabilities
Total operating lease liabilities
$
53
174
227
$
The Company’s weighted average remaining lease term for its operating leases is 7.22
years.
58
These non-cancelable leases have the following payment schedule:
Fiscal Year
Amount
2023
2024
2025
2026
2027
Thereafter
36
$
-
-
-
-
-
$
36
The above payment schedule does not include renewal options that have not been
committed to. An additional $112 would be included in the period 2023 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 $267, $328 and
$368 for the 2022, 2021 and 2020 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 Company estimates the
total cost of the additional facility to be approximately $19.5 million. The expansion construction
is complete and is undergoing customer qualifications, which are expected to be completed in
the second half of the 2022 calendar year. As of February 27, 2022, the Company had
$635,000 in equipment purchase obligations and $18.7 million of construction-in-progress
related to the additional facility.
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.
59
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 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.
60
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 2022 fiscal year.
The following table shows the summary operating results of the discontinued operations:
Fiscal Year Ended
February 27,
2022
February 28,
2021
March 1,
2020
-
$
-
-
-
$
-
-
-
$
-
-
234
-
-
-
-
-
-
8
427
(435)
-
(435)
(107)
941
(1,175)
288
(887)
(234)
$
-
$
(328)
$
(653)
Net sales
Cost of sales
Gross profit
Selling, general and
administrative expenses
Restructuring charges
(Loss) earnings from
discontinued operations
Other income
(Loss) earnings from
discontinued operations
before income taxes
Income tax (benefit) provision
Net (loss) earnings from
discontinued operations
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:
61
Sales:
North America
Asia
Europe
Total sales
Long-lived assets:
North America
Asia
Europe
Total long-lived assets
2022
Fiscal Year
2021
2020
$
$
$
51,307
700
1,571
53,578
43,874
625
1,777
46,276
56,264
1,378
2,372
60,014
$
$
$
$
$
34,448
-
-
34,448
$
31,170
1
-
31,171
$
$
$
24,942
1,650
-
26,592
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 49.5%, 27.9% and 48.2% of the Company’s total worldwide sales in the 2022,
2021 and 2020 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 2022, 2021 or 2020 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.
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 Adopted
In December 2019, the Financial Accounting Standards Board issued Accounting
Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting
for Income Taxes. The changes simplify the accounting for a number of topics, some of which
are narrow. Some of the proposed amendments eliminate specific exceptions to the general
principles of income tax accounting while other changes clarify a handful of narrow issues within
the broad topic of income tax accounting. The amendments in ASU 2019-12 are effective for
public business entities for fiscal years beginning after December 15, 2020, and interim periods
within those fiscal years. For all other entities, the requirements are effective for fiscal years
beginning after December 15, 2021 and interim periods within fiscal years beginning after
December 15, 2022. Early adoption is permitted for: (1) public business entities for periods for
62
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 Company
adopted this ASU in the first quarter of the 2022 fiscal year. The adoption of ASU 2019-12 did
not have a material impact on the Company’s consolidated financial statements and
disclosures.
63
PARK AEROSPACE CORP. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Amounts in thousands, except per share amounts)
Fiscal 2022:
Net sales
Gross profit
Net earnings from continuing operations
Net loss from discontinued operations
Net earnings
Basic earnings per share:
Basic net earnings per share from continuing operations
Basic net loss per share from discontinued operations
Basic earnings per share
Diluted earnings per share:
Diluted net earnings per share from continuing operations
Diluted net loss per share from discontinued operations
Diluted earnings per share
Weighted average common shares
outstanding:
Basic
Diluted
Fiscal 2021:
Net sales
Gross profit
Net earnings from continuing operations
Net loss from discontinued operations
Net earnings
First
Second
Third
Fourth
Quarter
$
13,594
5,472
$
13,618
4,411
$
13,864
3,836
$
12,502
4,198
2,745
-
2,745
2,022
-
2,022
1,741
-
1,741
1,956
-
1,956
$
0.13
-
$
0.10
-
$
0.09
-
$
0.10
-
0.13
0.10
0.09
0.10
$
0.13
-
$
0.10
-
$
0.08
-
$
0.10
-
0.13
0.10
0.08
0.10
20,383
20,710
20,397
20,485
20,450
20,503
20,458
20,508
$
12,213
3,674
$
9,250
2,638
$
10,372
2,553
$
14,441
4,326
1,972
(15)
1,957
1,151
(197)
954
1,037
(116)
921
1,032
-
1,032
Basic earnings (loss) per share:
Basic net earnings per share from continuing operations
Basic net loss per share from discontinued operations
$
0.10
-
$
0.06
(0.01)
$
0.05
-
$
0.05
-
Basic earnings per share
0.10
0.05
0.05
0.05
Diluted earnings (loss) per share:
Diluted net earnings per share from continuing operations
Diluted net loss per share from discontinued operations
$
0.10
-
$
0.06
(0.01)
$
0.05
-
$
0.05
-
Diluted earnings per share
0.10
0.05
0.05
0.05
Weighted average common shares
outstanding:
Basic
Diluted
20,402
20,460
20,381
20,433
20,381
20,434
20,382
20,587
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.
64
ITEM 9.
ACCOUNTING AND FINANCIAL DISCLOSURE.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
None.
ITEM 9A.
CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures.
The Company's management, with the participation of the Company's Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of February 27, 2022,
the end of the fiscal year covered by this annual report. Based on such evaluation, the
Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the
end of such fiscal year, the Company's disclosure controls and procedures were effective in
recording, processing, summarizing and reporting, on a timely basis, information required to be
disclosed by the Company in the reports that it files or submits under the Exchange Act and are
effective in ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated to the
Company’s management, including the Company’s Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Annual Report on Internal Control Over Financial Reporting.
Management of the Company is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. The Company’s internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles in the United States of America. The Company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company, (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company, and (iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial
reporting as of February 27, 2022. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
in Internal Control–Integrated Framework (2013). Based on management’s assessment and
those criteria, management concluded that the Company maintained effective internal control
over financial reporting as of February 27, 2022.
65
(c) Changes in Internal Control Over Financial Reporting.
There has not been any change in the Company’s internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the fourth fiscal quarter of the fiscal year to which this report relates that has materially
affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting.
ITEM 9B.
OTHER INFORMATION.
None.
66
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information called for by this Item (except for information as to the Company's
executive officers, which information appears elsewhere in this Report) is incorporated by
reference to the Company's definitive proxy statement for the 2022 Annual Meeting of
Shareholders to be filed pursuant to Regulation 14A.
ITEM 11.
EXECUTIVE COMPENSATION.
The information called for by this Item is incorporated by reference to the Company's
definitive proxy statement for the 2022 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information called for by this Item is incorporated by reference to the Company's
definitive proxy statement for the 2022 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
The information called for by this Item is incorporated by reference to the Company's
definitive proxy statement for the 2022 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
This information called for by this Item is incorporated by reference to the Company's
definitive proxy statement for the 2022 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
67
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) Documents filed as a part of this Report:
(1) Consolidated Financial Statements:
The following Consolidated Financial Statements of the Company
are included in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Earnings
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements (1-15)
(2) Financial Statement Schedule:
The following additional information should be read in conjunction
with the Consolidated Financial Statements of the Registrant
described in Item 15(a)(1) above:
Schedule II – Valuation and Qualifying Accounts
All other schedules have been omitted because they are not
applicable or not required, or the information is included elsewhere
in the financial statements or notes thereto.
(3) Exhibits:
The information required by this Item relating to Exhibits to this
Report is included in the Exhibit Index beginning on page 69 hereof.
Page
38
39
40
41
42
43
44
69
ITEM 16.
FORM 10-K SUMMARY
Not Applicable
68
Column A
Description
DEFERRED INCOME TAX ASSET
VALUATION ALLOWANCE:
52 weeks ended February 27, 2022
52 weeks ended February 28, 2021
52 weeks ended March 1, 2020
PARK AEROSPACE CORP. AND SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
Column B
Balance at
Beginning of
Period
Column C
Additions
Column D
Column E
Costs and
Expenses
Other
Reductions
Balance at End
of Period
$
$
$
3,587,000
3,175,000
2,755,000
$
-
$
412,000
$
420,000
$
-
$
-
$
-
$
-
$
-
$
-
$
$
$
3,587,000
3,587,000
3,175,000
Column A
Column B
Column C
Column D
Other
Column E
Description
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:
52 weeks ended February 27, 2022
52 weeks ended February 28, 2021
52 weeks ended March 1, 2020
(A) Uncollectible amounts, net of recoveries
Balance at
Beginning of
Period
Charged to
Cost and
Expenses
Accounts
Written Off (A)
Translation
Adjustment
Balance at End
of Period
$
$
$
89,000
73,000
32,000
$
$
$
15,000
16,000
41,000
$
-
$
-
$
-
$
-
$
-
$
-
$
$
$
104,000
89,000
73,000
69
Exhibit
Numbers
3.1
3.2
3.3
3.4
10.3
10.4
EXHIBIT INDEX
Description
Restated Certificate of Incorporation, dated March 28, 1989, filed with the
Secretary of State of the State of New York on April 10, 1989, as
amended by Certificate of Amendment of the Certificate of Incorporation,
increasing the number of authorized shares of Common stock from
15,000,000 to 30,000,000 shares, dated July 12, 1995, filed with the
Secretary of State of the State of New York on July 17, 1995, and by
Certificate of Amendment of the Certificate of Incorporation, amending
certain provisions relating to the rights, preferences and limitations of the
shares of a series of Preferred Stock, dated August 7, 1995, filed with the
Secretary of State of the State of New York on August 16, 1995
(Reference is made to Exhibit 3.01 of the Company's Annual Report on
Form 10-K for the fiscal year ended March 3, 2002, Commission File No.
1-4415, which is incorporated herein by reference.)....................................
Certificate of Amendment of the Certificate of Incorporation, increasing
the number of authorized shares of Common Stock from 30,000,000 to
60,000,000 shares, dated October 10, 2000, filed with the Secretary of
State of the State of New York on October 11, 2000 (Reference is made
to Exhibit 3.02 of the Company’s Annual Report on Form 10-K for the
fiscal year ended March 2, 2003, Commission File No. 1-4415, which is
incorporated herein by reference.)...............................................................
Certificate of Amendment of the Certificate of Incorporation, changing the
name of the Company from “Park Electrochemical Corp.” to “Park
Aerospace Corp.” filed with the New York Department of State on July 16,
2019 (Reference is made to Exhibit 3.1 of the Company’s Current Report
on Form 8-K dated July 22, 2019 Commission File No. 1-4415, which is
incorporated herein by reference.)…………….............................................
By-Laws, amended and restated as of July 16, 2019 (Reference is made
to Exhibit 3.2 of the Company’s Current Report on Form 8-K dated July
22, 2019 Commission File No. 1-4415, which is incorporated herein by
reference.)………………………………………………………………………..
Forms of Incentive Stock Option Contract for employees, Non-Qualified
Stock Option Contract for employees and Non-Qualified Stock Option
Contract for directors under the 2002 Stock Option Plan of the Company
(Reference is made to Exhibit 10.10 of the Company’s Annual Report on
Form 10-K for the fiscal year ended February 27, 2005, Commission File
No.1-4415, which is incorporated herein by reference.)………....................
2018 Stock Option Plan of the Company (Reference is made to Exhibit
99.1 of the Company’s Current Report on Form 8-K dated July 30, 2018,
Commission File No. 1-4415, which is incorporated herein by reference.
is a management contract or compensatory plan or
This exhibit
arrangement.)...............................................................................................
70
Exhibit
Numbers
10.5
Description
Forms of Incentive Stock Option Contract for employees, Non-Qualified
Stock Option Contract for employees and Non-Qualified Stock Option
Contract for directors under the 2018 Stock Option Plan of the Company
(Reference is made to Exhibit 10.1 and 10.2 of the Company’s Current
Report on Form 8-K dated April 30, 2019, Commission File No. 1-4415,
which is incorporated herein by reference.) ..............................................
14.1
Code of Ethics for Chief Executive Officer and Senior Financial Officers
adopted on May 6, 2004 (Reference is made to Exhibit 14.1 of the
Company’s Annual Report on Form 10-K for the fiscal year ended
February 29, 2004, Commission File No. 1-4415, which is incorporated
herein by reference.)....................................................................................
21.1
Subsidiaries of the Company.......................................................................
23.1
Consent of Independent Registered Public Accounting Firm……………….
31.1
31.2
32.1
32.2
101
Certification of principal executive officer pursuant to Exchange Act Rule
13a-14(a) or 15d-14(a)................................................................................
Certification of principal financial officer pursuant to Exchange Act Rule
13a-14(a) or 15d-14(a)................................................................................
Certification of principal executive officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of
2002............................................................................................................
Certification of principal financial officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002............................................................................................................
The following materials from the Company’s Annual Report on Form 10-K
for the year ended February 27, 2022, formatted in XBRL (eXtensible
Business Reporting Language): (i) Consolidated Balance Sheets at
February 27, 2022 and February 28, 2021, (ii) Consolidated Statements of
Operations for the years ended February 27, 2022, February 28, 2021 and
March 1, 2020, (iii) Consolidated Statements of Comprehensive Earnings
for the years ended February 27, 2022, February 28, 2021 and March 1,
2020, (iv) Consolidated Statements of Shareholders’ Equity for the years
ended February 27, 2022, February 28, 2021 and March 1, 2020 and (v)
Consolidated Statements of Cash Flows for the years ended February 27,
2022, February 28, 2021 and March 1, 2020 .*+
* Filed electronically herewith.
+ Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on
Exhibit 101 hereto are deemed not filed or part of a registration statement
71
or prospectus for purposes of Section 11 or 12 of the Securities Act of
1933, as amended, are deemed not filed for purposes of Section 18 of the
Securities and Exchange Act of 1934, as amended, and otherwise are not
subject to liability under those sections.
72
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 12, 2022 PARK AEROSPACE CORP.
By: /s/ Brian E. Shore
Brian E. Shore,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ Brian E. Shore
Brian E. Shore
Chairman of the Board, Chief Executive
Officer and Director (principal executive
officer)
/s/ P. Matthew Farabaugh
P. Matthew Farabaugh
Senior Vice President and Chief Financial
Officer (principal financial officer and
principal accounting officer)
/s/ Dale Blanchfield
Dale Blanchfield
/s/ Emily J. Groehl
Emily J. Groehl
/s/ Yvonne Julian
Yvonne Julian
/s/ Carl W. Smith
Carl W. Smith
/s/ D. Bradley Thress
D. Bradley Thress
/s/ Steven T. Warshaw
Steven T. Warshaw
Director
Director
Director
Director
Director
Director
73
May 12, 2022
May 12, 2022
May 12, 2022
May 12, 2022
May 12, 2022
May 12, 2022
May 12, 2022
May 12, 2022
EXHIBIT 21.1
SUBSIDIARIES OF PARK AEROSPACE CORP.
The following table lists all of Park's directly and indirectly owned subsidiaries
and the jurisdiction in which each such subsidiary is organized.
Name
Neluk, Inc.
New England Laminates Co., Inc.
ParkNelco SNC
Park Sales Corp.
Tin City Aircraft Works, Inc.
Park Aerospace Technologies Asia Pte. Ltd.
NW Orangethorpe, Inc.
Jurisdiction of
Incorporation
Delaware
New York
France
Delaware
Kansas
Singapore
New York
74
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form
S-8 (No. 333-231986) of our report dated May 12, 2022, on our audits of the consolidated
financial statements and consolidated financial statement schedule of Park Aerospace Corp.
and subsidiaries as of February 27, 2022 and February 28, 2021 and for each of the years in
the three-year period ended February 27, 2022, which report is included in the Annual Report
on Form 10-K of Park Aerospace Corp. for the year ended February 27, 2022.
/s/ CohnReznick LLP
Parsippany, New Jersey
May 12, 2022
75
Certification of Principal Executive Officer
Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)
EXHIBIT 31.1
I, Brian E. Shore, as Chief Executive Officer of Park Aerospace Corp., certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended February
27, 2022 of Park Aerospace Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and
in
financial statements
accordance with generally accepted accounting principles;
for external purposes
the preparation of
(c) evaluated the effectiveness of the registrant's disclosure controls and
the
procedures and presented
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
this report our conclusions about
in
(d) disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
76
(b)
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 12, 2022
/s/ Brian E. Shore
Name: Brian E. Shore
Title: Chief Executive Officer
77
Certification of Principal Financial Officer
Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)
EXHIBIT 31.2
I, P. Matthew Farabaugh, as Senior Vice President and Chief Financial Officer of Park
Aerospace Corp., certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended
February 27, 2022 of Park Aerospace Corp.;
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
(b)
(c)
(d)
designed such disclosure controls and procedures, or caused such
to be designed under our
disclosure controls and procedures
supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is
being prepared;
designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
78
5.
The registrant's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a)
(b)
all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 12, 2022
/s/ P. Matthew Farabaugh
Name: P. Matthew Farabaugh
Title: Senior Vice President and Chief Financial Officer
79
Certification of Principal Executive Officer Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.1
In connection with the Annual Report on Form 10-K of Park Aerospace Corp. (the
"Company") for the fiscal year ended February 27, 2022 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), Brian E. Shore, as Chief
Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his
knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Brian E. Shore
Name: Brian E. Shore
Title: Chief Executive Officer
Date: May 12, 2022
80
Certification of Principal Financial Officer Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.2
In connection with the Annual Report on Form 10-K of Park Aerospace Corp. (the
"Company") for the fiscal year ended February 27, 2022 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), P. Matthew Farabaugh, as
Senior Vice President and Chief Financial Officer of the Company, hereby certifies,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act
of 2002, that, to the best of his knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ P. Matthew Farabaugh
Name: P. Matthew Farabaugh
Title: Senior Vice President and Chief Financial Officer
Date: May 12, 2022
81