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 26, 2023
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.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial
statements of the registrant included in the filing reflect the correction of an error to previously issued
financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery
analysis of incentive-based compensation received by any of the registrant’s executive officers during the
relevant recovery period pursuant to §240.10D-1(b).
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
Title of Class
Aggregate Market Value
$240,332,005
As of Close of Business On
August 26, 2022
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
20,471,210
As of Close of Business On
May 5, 2023
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held July 18, 2023 incorporated by reference
into Part III of this Report.
2
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......................................................................................
[Reserved]…………….......................................................................
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
11
15
16
16
16
17
19
21
22
34
35
62
62
63
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..................................................
64
64
64
Item 13.
Certain Relationships and Related Transactions, and Director
Independence...............................................................................
Principal Accountant Fees and Services..........................................
64
64
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............................................................................................................
65
65
66
67
70
3
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 and lightning strike protection 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.
The Company's manufacturing and research and development facilities are located in
Newton, 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 reports 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.
4
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,
5
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
6
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 2023, 2022 and 2021 fiscal years, 41.2%, 49.5% and 27.9%,
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 2023, 2022 and 2021 fiscal years, sales to no other customer of the Company
equaled or exceeded 10% of the Company’s total worldwide sales. 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. The expansion includes space for additional
machinery and equipment. 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.
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
7
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 and film
adhesives 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.
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.
8
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 24, 2023, the unfilled portion of all purchase orders
received by the Company, and believed by it to be firm, was $29,035,974, compared to
$25,895,809 at April 25, 2022. 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 26, 2023.
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 26, 2023, 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.
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
9
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
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,”
10
“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.
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.
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
11
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. If one or more of the Company’s suppliers is required to temporarily close
manufacturing facilities, the 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 26, 2023, February 27, 2022 and February 28,
2021, the Company's ten largest customers accounted for approximately 71%, 77% and 71%,
respectively, of net sales. The Company expects sales to a relatively small number of
customers will continue to account for a significant portion of its net sales for the foreseeable
future. See “Customers and End Markets” in Item 1 of Part I of this Report.
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.
12
In addition, the Company is subject to the effects of general regional and global
economic and financial conditions.
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.
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 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.
13
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
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 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
introducing malware and
espionage, activism, or other motivations,
“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
14
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
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 Company’s Stock is included in certain market indices. Funds that are based on the
indices the Company’s stock is included in are required to own the Company’s stock. A change
in any index the Company is included in could create sudden movement in the Company’s stock
price.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
15
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 the Newton,
Kansas location is a ground lease.
Location
Westbury, NY
Newton, KS
Owned or
Leased
Use
Leased
Leased
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.
In December 2018, the Company entered into a Development Agreement with the City
of Newton, Kansas and the Board of County Commissioners of Harvey County, Kansas.
Pursuant to this agreement, the Company agreed to construct and operate a redundant
manufacturing facility of approximately 90,000 square feet for the design, development and
manufacture of advanced composite materials and parts, structures and assemblies for
aerospace. The Company further agreed to equip the facility through the purchase of
machinery, equipment and furnishings and to create additional new full-time employment of
specified levels during a five-year period. In exchange for these agreements, the City and the
County agreed to lease to the Company three acres of land at the Newton, Kansas Airport, in
addition to the eight acres previously leased to the Company by the City and County. The City
and County further agreed to provide financial and other assistance toward the construction of
the additional facility as set forth in the Development Agreement. The total cost of the additional
facility was approximately $19.8 million, and the expansion is complete. As of February 26,
2023, the Company had $99,000 in equipment purchase obligations related to the additional
facility.
Pursuant to the Development Agreement, the City provided a sales tax exemption for
materials the Company purchased for the facility, subject to issuance of Industrial Revenue
Bonds (“IRBs”). On June 7, 2022, the City issued IRB Series 2022, in an aggregate principal
amount not to exceed $18,500,000, pursuant to a Trust Indenture between the City and Security
Bank of Kansas City. The Company simultaneously entered into a Bond Purchase Agreement
with the City, whereby the Company agreed to buy the IRBs at a purchase price equal to the par
amount of the IRBs issued. The Company redeemed the IRBs in August 2022. Neither the
purchase nor redemption of the IRBs had an impact on the Company’s Consolidated
Statements of Operations.
ITEM 3. LEGAL PROCEEDINGS.
No material pending legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
16
EXECUTIVE OFFICERS OF THE REGISTRANT.
Name
Title
Age
Brian E. Shore
Chief Executive Officer and
Chairman of the Board of Directors
71
P. Matthew Farabaugh
Mark A. Esquivel
Cory Nickel
Senior Vice President and Chief
Financial Officer
President and Chief Operating
Officer
Senior Vice President and General
Manager
62
50
51
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.
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.
Mr. Nickel was elected Senior Vice President and General Manager of the Company on
August 15, 2022. He was appointed as Vice President and General Manager of the Company in
October 2020. Mr. Nickel originally joined Park Aerospace Corp. in 2011 as a Solution Treater
Operator, an entry level position. He was promoted to Second Shift Production Supervisor in
2012, Production Manager in 2013, Materials Manufacturing Manager in 2014, Production
Control Manager in 2015 and Operations Manager in 2017. Prior to joining Park, Mr. Nickel
17
served as a local High School Science Teacher with a focus on chemistry, physics and
manufacturing technology.
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.
18
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 26, 2023
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Stock Price
High
Low
$
14.21
13.19
13.82
16.54
$
11.27
11.40
10.08
10.80
Dividends
Declared
$
0.10
0.10
0.10
1.10
(a)
For the Fiscal Year Ended
February 27, 2022
Stock Price
High
Low
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
15.57
16.20
15.11
13.74
$
13.03
14.40
12.74
12.73
Dividends
Declared
$
0.10
0.10
0.10
0.10
(a) On February 9, 2023, the Company’s Board of Directors declared a special
dividend of $1.00 per share payable April 6, 2023 to shareholders of record at the
close of business on March 9, 2023. The total amount of this special dividend was
approximately $20.5 million. The Company expects, for the foreseeable future, to
continue to pay regular cash dividends.
As of May 5, 2023, there were 459 holders of record of Common Stock.
The Company expects, for the foreseeable future, to continue to pay regular cash
dividends.
19
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 2023
fiscal year fourth quarter ended February 26, 2023:
Period
November 28 -
December 26
December 27 -
January 26
January 27 -
February 26
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
1,500,000 (a)
Aggregate number of shares available to be purchased by the
Company pursuant
to a share purchase authorization
announced on May 23, 2022. Pursuant to such authorization,
the Company is authorized to purchase its shares from time
in privately negotiated
to time on the open market or
transactions.
On May 18, 2022, the Company’s Board of Directors authorized the Company’s
purchase, on the open market and in privately negotiated transactions, of up to 1,500,000
shares of its Common Stock. This represents approximately 7% of the Company’s 20,458,210
total outstanding shares as of the close of business on May 18, 2022. This authorization
supersedes any unused prior Board of Directors’ authorizations to purchase shares of the
Company’s Common Stock. As of February 26, 2023, the Company had not purchased any
shares of the Company’s Common stock pursuant to the above authorization.
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.
20
Stock Performance Graph
The graph set forth below compares the annual cumulative total return for the
Company’s five fiscal years ended February 26, 2023 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, 2018 and the reinvestment
of dividends (where applicable).
$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
$-
$-
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
Park Aerospace Corp.
NYSE Index
NASDAQ US Small Cap Aerospace and Defense Index
2023
2023
Park Aerospace Corp.
NYSE Index
NASDAQ US Small Cap Aerospace and Defense Index
Park Aerospace Corp.
NYSE Index
NASDAQ US Small Cap Aerospace and Defense Index
2018
100.00
100.00
100.00
$
$
$
2019
127.88
101.37
124.89
$
$
$
2020
111.03
101.35
122.18
$
$
$
2021
114.66
125.80
151.36
$
$
$
2022
115.76
140.61
145.36
$
$
$
2023
140.61
135.31
146.64
$
$
$
ITEM 6. [RESERVED].
21
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 and lightning strike protection 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 2023, 2022 and 2021 fiscal years ended on February 26, 2023,
February 27, 2022 and February 28, 2021, respectively. The 2023, 2022 and 2021 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.
2023 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 was approximately $19.8 million. The expansion is
complete and 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 26,
2023, the Company had incurred $19.6 million of costs for the expansion.
On February 9, 2023, the Company’s Board of Directors declared a special dividend of
$1.00 per share payable April 6, 2023 to shareholders of record at the close of business on
March 9, 2023. The total amount of this special dividend was approximately $20.5 million.
The Company's total net sales worldwide in 2023 were 1% higher than in 2022. Sales in
2023, to each of the markets the Company serves, were relatively even with the prior year sales
levels.
22
The Company’s gross profit margin, measured as a percentage of sales, decreased to
30.5% in 2023 from 33.4% in 2022. Higher costs for raw materials, supplies, freight, utilities,
costs related to the new equipment trials and qualifications and higher waste costs from
increased change-over resulting from supply chain challenges and uncertainties led to the
decrease in gross margins.
The Company’s earnings from operations in 2023 were 13% lower than in 2022,
primarily as a result of higher costs for raw materials, supplies, freight, utilities, costs related to
the new equipment trials and qualifications and higher waste costs from increased change-over
resulting from supply chain challenges and uncertainties . The Company’s net earnings from
continuing operations in 2023 were 27% higher than in 2022, primarily due to higher interest
income and a reduction in uncertain tax positions, partially offset by the cost and expense
increases mentioned above.
The Company is experiencing inflation in raw materials, supplies, freight costs and other
costs and expenses. 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 have not been fully prepared to ramp up their production as quickly as needed, which has
created a risk to the Company of not getting enough raw materials on a timely basis to fully
support the Company’s customers’ demands. Delays of shipments of raw materials have
impacted the Company’s production level and have caused inefficiencies in the Company’s
manufacturing operations. The Company continues to experience supply chain challenges.
Programs that the Company supplies into are, in some cases, experiencing supply chain
issues from other suppliers to the programs. The Company’s sales could be impacted by supply
chain challenges its customers are experiencing from other suppliers.
The tight labor market has created challenges in hiring personnel. Although the
Company feels very positive about its workforce, staffing to proper levels continues to pose
challenges for the Company. The Company’s cross-training “Customer Flexibility Program”
continues to help the Company to deal with the staffing shortages.
The war in Ukraine has not had a negative material impact on the Company’s results of
operations, but the Company has a potential for an increase in future sales due to increases in
spending worldwide on missile defense systems and other defense programs. The Company
does not have any significant customers in Russia or Ukraine. The Company has experienced
some increases to raw material costs from overseas suppliers due to the impacts of the war in
Ukraine.
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.
23
Results of Operations:
2023 Compared to 2022
(Amounts in thousands, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring charges
Earnings from operations
Interest and other income
Earnings before income taxes
Income tax provision
Net earnings
Earnings per share:
Basic earnings per share
Year Ended
February 26,
2023
February 27,
2022
Increase / (Decrease)
$
54,055
$
53,578
$
477
37,582
16,473
6,519
-
9,954
1,078
11,032
35,661
17,917
6,249
259
11,409
375
11,784
1,921
(1,444)
270
(259)
(1,455)
703
(752)
301
10,731
$
3,320
8,464
$
(3,019)
2,267
$
$
0.52
$
0.41
$
0.11
1%
5%
-8%
4%
-100%
-13%
187%
-6%
-91%
27%
27%
27%
Diluted earnings per share
$
0.52
$
0.41
$
0.11
Net Sales
The Company’s total net sales worldwide in 2023 were 1% higher than in 2022. Sales in
2023, to each of the markets the Company serves, were relatively even with the prior year sales
levels.
Gross Profit
The Company’s gross profit margin, measured as a percentage of sales, decreased to
30.5% in 2023 from 33.4% in 2022. Higher costs for raw materials, supplies, freight, utilities,
costs related to the new equipment trials and qualifications and higher waste costs from
increased change-over resulting from supply chain challenges and uncertainties led to a
decrease in gross margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $270,000, or 4%, during 2023
compared to 2022. Such expenses, measured as percentages of sales, were 12.1% and 11.7%
during 2023 and 2022, respectively.
Selling, general and administrative expenses in 2023 included $369,000 of stock option
expenses compared to $285,000 of such expenses in 2022.
24
Restructuring Charges
Restructuring charges were nil in 2023 compared to $259,000 in 2022 related to the
closure of the Company’s Park Aerospace Technologies Asia, Pte. Ltd. facility located in
Singapore.
Earnings from Operations
For the reasons set forth above, the Company’s earnings from operations were $10.0
million for 2023. 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.
Interest and Other Income
Interest and other income were $1.1 million and $375,000 for 2023 and 2022,
respectively. The increase from 2022 was due primarily higher weighted average interest rates.
During 2023 and 2022, 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 2.7% for 2023 was due primarily to the U.S.
Federal rate and state income taxes, including $214,000 of additional tax due to tax deductions
becoming unavailable related to stock options expiring unexercised in the 2023 fiscal year,
offset by a reduction in uncertain tax positions related to the expiring statute of limitations of tax
positions taken in prior years regarding the taxability of funds repatriated from the Company’s
subsidiary in Singapore of $2.8 million. The Company’s effective income tax rate of 28.2% was
higher in 2022, due to the lack of the uncertain tax position reduction as occurred in 2023.
Net Earnings from Operations
The Company’s net earnings from continuing operations for 2023 were $10.7 million,
including the reduction in uncertain tax positions of $2.8 million and $214,000 of additional tax
due to tax deductions becoming unavailable as a result of stock options expiring unexercised.
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.
Basic and Diluted Earnings Per Share
Basic and diluted earnings per share for 2023 were $0.52, including the additional tax
due to tax deductions becoming unavailable as a result of stock options expiring unexercised
and the reduction in uncertain tax positions, compared to basic and diluted earnings per share
for 2022 of $0.41, including the pretax charges for the closure of the facility located in
Singapore. The net impact of the items described above was to increase basic and diluted
earnings per share by $0.13 in 2023 and decrease basic and diluted earnings per share by
$0.01 in 2022.
25
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
Increase / (Decrease)
$
53,578
$
46,276
$
7,302
35,661
17,917
6,249
259
11,409
375
11,784
3,320
8,464
33,085
13,191
6,113
1,570
5,508
1,777
7,285
2,093
5,192
2,576
4,726
136
(1,311)
5,901
(1,402)
4,499
1,227
3,272
16%
8%
36%
2%
-84%
107%
-79%
62%
59%
63%
$
-
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.
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.
26
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
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.
27
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.
Liquidity and Capital Resources:
(Amounts in thousands)
February 26,
2023
February 27,
2022
Increase /
(Decrease)
Cash and marketable securities
Working capital
$
105,440
96,455
$
110,361
120,147
$
(4,921)
(23,692)
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 26,
2023
Fiscal Year Ended
February 27,
2022
February 28,
2021
Increase / (Decrease)
2023 vs. 2022
2022 vs. 2021
$
6,491
$
8,201
$
13,340
$
(1,710)
$
(5,139)
(7,018)
(8,047)
(29,556)
32,958
22,538
(62,514)
(7,429)
(9,785)
(618)
2,356
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.
The change in cash and marketable securities at February 26, 2023 compared to
February 27, 2022 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 2023 and a number of additional factors. The significant changes in cash provided by
operating activities were as follows:
accounts receivable increased by 20% at February 26, 2023 compared to February 27,
2022 due primarily to the increase in total net sales in the last month of 2023;
inventory increased 45% due primarily to higher raw material purchases at the end of
February 2023, higher material costs and an increase of C2B material inventoried in
support of the distributor agreement with ArianeGroup;
prepaid expenses and other current assets decreased 8% due primarily to the decrease
in income tax receivable;
28
accounts payable increased 79% due primarily to the higher raw material purchases at
the end of February 2023;
accrued liabilities decreased 10% due primarily to the reduction of payroll and services
accruals; and
income taxes payable decreased 12% at February 26, 2023 compared to February 27,
2022 due to the current tax provision in excess of the tax payments.
In addition, the Company paid $8.2 million in cash dividends during 2023 and 2022.
In February 2023, the Company declared a special dividend of $1.00 per share. The
Company recorded a dividend payable of $20.5 million at the end of 2023.
Working Capital
Working capital at February 26, 2023 was lower compared to February 27, 2022.
Decreases in cash and cash equivalents and marketable securities and increases in accounts
payable and dividends payable were partially offset by increases in accounts receivable,
inventories and prepaid expenses and other current assets.
The Company's current ratio (the ratio of current assets to current liabilities) was 4.4 to 1
at February 26, 2023 compared to 20.1 to 1 at February 27, 2022.
Cash Flows
During 2023,
the Company's net earnings
from continuing operations, before
depreciation and amortization, stock-based compensation, amortization of bond premium and
gain on sale of fixed assets, were $12.6 million. Such earnings were decreased by changes in
operating assets and liabilities of $6.1 million, resulting in $6.5 million of cash provided by
operating activities from continuing operations. During 2023, the Company expended $1.0
million for the purchase of property, plant and equipment compared to $4.4 million during 2022
and the Company paid $8.2 million in cash dividends in 2023 and 2022.
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
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 taxes
payable to be paid in installments over eight years. The remaining balance of these installment
payments, as of February 26, 2023, was approximately $12.6 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 consolidated
balance sheet and financial position are very strong.
29
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 $0.1 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 2023, 2022 and 2021, the Company incurred approximately $14,000, $13,000 and
$9,000, 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 $14,000, $13,000 and $9,000, 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 26, 2023 and February 27, 2022, there were no amounts recorded in
accrued liabilities for environmental matters.
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.
30
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.
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.
31
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
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
to changing
associated with unrecognized
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
32
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.
33
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 2023 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.
34
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's Financial Statements begin on the next page.
35
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 26, 2023 and February 27, 2022 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 26, 2023, 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 26, 2023 and February 27, 2022, and the results of its operations and its cash
flows for each of the three years in the period ended February 26, 2023, 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.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements
that were communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the financial statements and (2) involved
our especially challenging, subjective, or complex judgments. We determined that there are no
critical audit matters.
/s/ CohnReznick LLP
We have served as the Company’s auditor since 2014.
Parsippany, New Jersey
May 12, 2023
36
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 $120 and $104, respectively
Inventories (Note 3)
Prepaid expenses and other current assets
Total current assets
February 26, 2023
February 27, 2022
$
4,237
101,203
$
12,811
97,550
9,989
6,768
2,844
125,041
8,339
4,657
3,082
126,439
Property, plant and equipment, net (Note 3)
Operating right-of-use assets (Note 10)
Goodwill and other intangible assets, net (Note 3)
Other assets
Total assets
24,251
150
9,783
108
159,333
$
24,333
203
9,790
122
160,887
$
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Operating lease liabilities (Note 10)
Accrued liabilities (Note 3)
Dividend payable
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
$
4,545
53
1,346
20,471
2,171
28,586
$
2,534
53
1,494
-
2,211
6,292
129
10,938
1,995
1,751
43,399
174
12,621
1,671
4,497
25,255
-
-
2,096
169,932
(42,694)
(4,244)
125,090
2,096
169,665
(24,767)
(1,965)
145,029
Less treasury stock, at cost, 493,934 and 506,934 shares,
respectively
Total shareholders' equity
Total liabilities and shareholders' equity
(9,156)
115,934
159,333
$
(9,397)
135,632
160,887
$
See Notes to Consolidated Financial Statements.
37
PARK AEROSPACE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
Fiscal Year Ended
February 26,
2023
February 27,
2022
February 28,
2021
$
54,055
$
53,578
$
46,276
37,582
16,473
6,519
-
9,954
1,078
11,032
301
10,731
35,661
17,917
6,249
259
11,409
375
11,784
3,320
8,464
33,085
13,191
6,113
1,570
5,508
1,777
7,285
2,093
5,192
-
10,731
$
$
-
8,464
$
(328)
4,864
$
$
$
$
$
$
0.52
-
0.52
20,465
0.52
-
0.52
20,509
0.41
-
0.41
20,422
0.41
-
0.41
20,551
0.25
(0.01)
0.24
20,387
0.25
(0.01)
0.24
20,478
$
$
$
$
$
$
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.
38
PARK AEROSPACE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Amounts in thousands)
Net earnings
Other comprehensive loss, 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:
Fiscal Year Ended
February 26,
2023
February 27,
2022
February 28,
2021
$
10,731
$
8,464
$
4,864
240
(7)
108
(36)
421
(272)
Unrealized holding losses arising during the period
(2,567)
(1,713)
(1,176)
Less: reclassification adjustment for losses
included in net earnings
Other comprehensive loss
Total comprehensive earnings
55
12
23
(2,279)
8,452
$
(1,629)
6,835
$
(1,004)
3,860
$
See Notes to Consolidated Financial Statements.
39
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 1, 2020
20,965,144
$
2,096
$
169,862
$
(21,774)
$
668
446,321
$
(9,177)
Net earnings
Unrealized gain on marketable
securities, net of tax
Stock options exercised
Stock-based compensation
Purchase of treasury stock
Cash dividends ($.40 per share)
-
-
-
-
-
-
-
Balance, February 28, 2021
20,965,144
-
-
-
-
-
-
-
-
(15)
191
-
-
-
2,096
-
170,038
Net earnings
Unrealized loss on marketable
securities, net of tax
Stock options exercised
Stock-based compensation
Cash dividends ($.40 per share)
-
-
-
-
-
-
-
-
-
-
-
-
(658)
285
-
Balance, February 27, 2022
20,965,144
2,096
169,665
Net earnings
Unrealized loss on marketable
securities, net of tax
Stock options exercised
Stock-based compensation
Cash dividends ($1.40 per share)
-
-
-
-
-
-
-
-
-
-
-
-
(102)
369
-
4,864
-
-
-
-
(8,153)
-
(25,063)
8,464
-
-
-
(8,168)
(24,767)
10,731
-
-
-
(28,658)
-
(1,004)
-
-
-
-
-
(336)
-
(1,629)
-
-
-
(1,965)
-
(2,279)
-
-
-
-
-
(1,450)
-
137,397
-
-
582,268
-
-
(75,334)
-
-
506,934
-
-
(13,000)
-
-
-
-
27
-
(1,644)
-
-
(10,794)
-
-
1,397
-
-
(9,397)
-
-
241
-
-
Balance, February 26, 2023
20,965,144
$
2,096
$
169,932
$
(42,694)
$
(4,244)
493,934
$
(9,156)
See Notes to Consolidated Financial Statements.
40
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
(Gain) 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 - continuing operations
Decrease in cash and cash equivalents - discontinued operations
(Decrease) increase in cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of non-cash activities:
Dividend payable included in current liabilities
See Notes to Consolidated Financial Statements.
41
February 26,
2023
Fiscal Year Ended
February 27,
2022
February 28,
2021
$
10,731
-
10,731
$
8,464
-
8,464
$
4,864
328
5,192
1,136
369
16
322
42
5
(8)
-
(1,665)
(2,112)
238
(2,723)
2,011
(148)
(1,723)
6,491
-
6,491
(1,047)
8
(49,758)
43,779
(7,018)
-
(7,018)
(8,186)
139
-
(8,047)
-
(8,047)
(8,574)
-
(8,574)
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)
(28,784)
-
(28,784)
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)
36,513
(328)
36,185
(8,574)
12,811
4,237
$
(28,784)
41,595
12,811
$
36,185
5,410
41,595
$
$
20,471
$
-
$
-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended February 26, 2023
(Amounts in thousands, except share (unless otherwise stated), per share and option
amounts)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Park Aerospace Corp. and its subsidiaries (collectively, “Park” or the “Company”), is a
global advanced materials company which develops and manufactures advanced composite
materials, primary and secondary structures and assemblies and low-volume tooling for the
aerospace markets.
a.
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 2023, 2022 and 2021
fiscal years ended on February 26, 2023, February 27, 2022 and February 28,
2021, respectively. Fiscal years 2023, 2022 and 2021 each consisted of 52
weeks.
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.
42
Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. Level 2 inputs
include quoted prices for similar assets or liabilities in active markets, inputs
other than quoted prices that are observable for the asset or liability (e.g., interest
rates and yield curves observable at commonly quoted intervals or current
market) and contractual prices for the underlying financial instrument, as well as
other relevant economic measures.
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable
inputs are used to measure fair value to the extent that observable inputs are not
available, thereby allowing for situations in which there is little, if any, market
activity for the asset or liability at the measurement date.
The fair value of the Company’s cash and cash equivalents, accounts receivable,
accounts payable and current liabilities approximate their carrying value due to
their short-term nature. Certain assets and liabilities of the Company are required
to be recorded at fair value on either a recurring or non-recurring basis. On a
recurring basis, the Company records its marketable securities at fair value using
Level 1 or Level 2 inputs. (See Note 2).
The Company’s non-financial assets measured at fair value on a non-recurring
basis, for purposes of calculating impairment, include goodwill and any long-lived
assets written down to fair value. To measure fair value of such assets, the
Company uses Level 3 inputs consisting of techniques including an income
approach and a market approach. The income approach is based on a
discounted cash flow analysis and calculates the fair value by estimating the
after-tax cash flows attributable to a reporting unit and then discounting the after-
tax cash flows to a present value using a risk-adjusted discount rate.
Assumptions used in the discounted cash flow analysis require the exercise of
significant judgment, including judgment about appropriate discount rates,
terminal values, growth rates and the amount and timing of expected future cash
flows. There were no transfers between levels within the fair value hierarchy
during the 2023, 2022 or 2022 fiscal years.
f.
Cash and Cash Equivalents – The Company considers all money market
securities and investments with contractual maturities at the date of purchase of
90 days or less to be cash equivalents. The Company had $0 and $5,998 in debt
securities included in cash equivalents at February 26, 2023 and February 27,
2022, respectively, which were valued based on Level 2 inputs. Certain of the
Company’s cash and cash equivalents are in excess of U.S. government
insurance. $28,194 of the $105,440 of cash and marketable securities at
February 26, 2023 were owned by one of the Company’s wholly-owned foreign
subsidiaries.
Supplemental cash flow information:
2023
Fiscal Year
2022
2021
Cash paid during the year for:
Income taxes, net of refunds
$
3,235
$
3,924
$
782
43
On February 9, 2023, the Company’s Board of Directors declared a special
dividend of $1.00 per share payable April 6, 2023 to shareholders of record at the
close of business on March 9, 2023. The total amount of this special dividend
was approximately $20.5 million.
At February 26, 2023 and February 27, 2022, the Company held $773 and
$2,929, respectively, of cash and cash equivalents in foreign financial institutions.
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
44
g.
h.
i.
j.
k.
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.
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 2023 or 2022 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
2023 or 2022 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
$1,129, $1,136 and $1,150 for the 2023, 2022 and 2021 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
45
l.
m.
n.
o.
p.
future taxable income, tax planning strategies and results of recent acquisitions.
If these estimates and assumptions change in the future, the Company may be
required to record additional valuation allowances against its deferred tax assets,
resulting in additional income tax expense in the Company's Consolidated
Statements of Operations, or conversely to further reduce the existing valuation
allowance, resulting in less income tax expense. The Company evaluates the
realizability of the deferred tax assets and assesses the need for additional
valuation allowances quarterly. (See Note 4).
Tax benefits are recognized for an uncertain tax position when, in the Company’s
judgment, it is more likely than not that the position will be sustained upon
examination by a taxing authority. For a tax position that meets the more-likely-
than-not recognition threshold, the tax benefit is measured as the largest amount
that is judged to have a greater than 50% likelihood of being realized upon
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.
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.
46
q.
r.
s.
2. MARKETABLE SECURITIES
The following is a summary of available-for-sale securities:
Total
Level 1
Level 2
Level 3
February 26, 2023
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
$
$
83,859
17,344
101,203
$
83,859
17,344
101,203
$
-
$
-
$
-
-
$
-
$
-
Total
Level 1
Level 2
Level 3
February 27, 2022
$
$
62,612
34,938
97,550
$
$
62,612
34,938
97,550
-
$
-
$
-
-
$
-
$
-
The following tables show the amortized cost basis, gross unrealized gains and losses
and gross realized gains and losses on the Company’s available-for-sale securities:
February 26, 2023:
U.S. Treasury and other
government securities
Amortized
Cost Basis
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$
89,603
$
-
$
5,744
U.S. corporate debt securities
Total marketable securities
17,414
107,017
$
-
$
-
70
5,814
$
February 27, 2022:
U.S. Treasury and other
government securities
$
65,177
$
5
$
2,570
U.S. corporate debt securities
Total marketable securities
35,064
100,241
$
$
5
10
131
2,701
$
Gross realized gains on sale
Gross realized losses on sale
$
-
$
26
$
155
$
5
$
36
$
145
2023
Fiscal Year
2022
2021
47
The estimated fair values of such securities at February 26, 2023, by contractual
maturity, are shown below:
Due in one year or less
Due after one year through five years
$
30,625
70,578
101,203
$
3. OTHER CONSOLIDATED BALANCE SHEET DATA
Other consolidated balance sheet data consisted of the following:
February 26,
2023
February 27,
2022
$
$
$
$
$
$
$
$
$
$
9,776
7
9,783
$
$
9,776
14
9,790
$
$
5,376
536
856
6,768
15,889
32,741
48,630
24,379
24,251
591
3
92
428
-
232
1,346
4,026
253
378
4,657
16,054
33,581
49,635
25,302
24,333
688
3
96
512
8
187
1,494
$
$
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
48
4.
INCOME TAXES
The income tax provision (benefit) for continuing operations includes the following:
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
2023
Fiscal Year
2022
2021
$
(875)
822
30
(23)
$
1,912
484
4
2,400
435
(111)
-
324
301
$
565
88
267
920
3,320
$
$
1,662
447
10
2,119
132
109
(267)
(26)
2,093
$
The income tax provision (benefit) for discontinued operations includes the following:
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
2023
-
$
-
-
-
-
-
-
-
$
-
Fiscal Year
2022
2021
-
$
-
-
-
-
-
-
-
$
-
$
(84)
(23)
-
(107)
-
-
-
-
(107)
$
State income tax benefits from loss carryforwards to future years were recognized as
deferred tax assets in the 2023, 2022 and 2021 fiscal years.
Notwithstanding the U.S. taxation of the deemed repatriated foreign earnings as a result
of the transition tax, the Company intends to indefinitely invest approximately $25 million of
undistributed earnings outside of the U.S. If these future earnings are repatriated to the U.S., or
if the Company determines that such earnings will be remitted in the foreseeable future, the
Company may be required to accrue U.S. deferred taxes.
The Company’s pre-tax earnings (loss) from continuing operations in the United States
and foreign locations are as follows:
2023
Fiscal Year
2022
2021
United States
Foreign
Earnings before income taxes
$
$
10,669
363
11,032
49
$
$
11,987
(203)
11,784
$
$
8,732
(1,447)
7,285
The Company’s pre-tax earnings (loss) from discontinued operations in the United
States and foreign locations are as follows:
2023
Fiscal Year
2022
2021
United States
Foreign
(Loss) earnings before income taxes
$
-
-
$
-
$
-
-
$
-
$
$
(435)
-
(435)
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
NQSO Expirations and
Cancellations
Adjustment on tax accruals
ASC 740-10 change
Foreign tax credits
Subpart F
Permanent differences and other
2023
21.0%
3.8%
(0.4%)
2.1%
0.9%
(24.8%)
0.0%
0.5%
(0.4%)
2.7%
Fiscal Year
2022
21.0%
4.3%
2.7%
0.0%
(0.3%)
0.5%
0.0%
(1.0%)
1.0%
28.2%
2021
21.0%
5.9%
0.7%
0.0%
0.0%
0.9%
(0.1%)
1.1%
(0.8%)
28.7%
The Company had state net operating loss carryforwards of approximately $1,725 and
$2,030 in the 2023 and 2022 fiscal years, respectively, and total net foreign operating loss
carryforwards of approximately $7,791 and $7,790 in the 2023 and 2022 fiscal years,
respectively. The Company has a valuation allowance against the remaining carryforwards. The
state net operating loss carryforwards will expire in 2024 through 2040.
The Company had Arizona tax credits of $991 in both the 2023 and 2022 fiscal years, for
which no benefit has been provided.
The deferred tax asset valuation allowance of $2,938 as of February 26, 2023 relates to
foreign net operating losses and state tax credit carryforwards from continuing operations for
which the Company does not expect to realize any tax benefit. During the 2023 fiscal year, the
valuation allowance increased by $649, primarily related to the recognition of the Arizona tax
credits. Deferred income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts for
income tax purposes.
50
Significant components of the Company's deferred tax assets and liabilities from
continuing operations as of February 26, 2023 and February 27, 2022 were as follows:
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 liability
February 26,
2023
February 27,
2022
$
1,949
991
784
590
4,314
$
2,598
991
977
174
4,740
(2,938)
1,376
(3,587)
1,153
(2,841)
(2)
(528)
(3,371)
(1,995)
$
(2,492)
(2)
(556)
(3,050)
(1,897)
$
At February 26, 2023 and February 27, 2022, the Company had gross unrecognized tax
benefits and related interest of $1,751 and $4,537, respectively, included in other liabilities. If
any portion of the unrecognized tax benefits at February 26, 2023 were recognized, the
Company’s effective tax rate would decrease. The change as of February 26, 2023 was due to
$214,000 of additional tax due to tax deductions becoming unavailable related to stock options
expiring unexercised in the 2023 fiscal year, offset by a reduction in uncertain tax positions of
$2.8 million from the reduction of uncertain tax positions related to expiring statute of limitations
of tax positions taken in prior years regarding the taxability of funds repatriated from the
Company’s subsidiary in Singapore.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits for
continuing operations is as follows:
February 26,
2023
Unrecognized Tax Benefits
February 27,
2022
February 28,
2021
Balance, beginning of year
Tax positions - Discontinued Ops
$
4,078
-
$
4,117
-
$
4,164
(47)
in prior period
Gross decreases - tax positions
in prior period
Gross increases - current period
tax positions
Audit settlements
Balance, end of year
(2,980)
326
(39)
-
-
-
$
-
1,424
$
-
4,078
$
-
4,117
The amount of unrecognized tax benefits may increase or decrease in the future for
various reasons, including adding or subtracting amounts for current year tax positions,
expiration of statutes of limitations on open income tax years, changes in the Company’s
judgment about the level of uncertainty, status of tax examinations, and legislative changes.
Changes in prior period tax positions are the result of a re-evaluation of the probability of
realizing the benefit of a particular tax position based on new information. It is reasonably
possible that none of the unrecognized tax benefits will be recognized within the next 12
months.
51
A list of open tax years by major jurisdiction follows:
U.S. Federal
California
New York
Kansas
France
Singapore
2021-2023
2020-2023
2021-2023
2021-2023
2021-2023
2020-2023
The Company had approximately $327 and $460 of accrued interest and penalties as of
February 26, 2023 and February 27, 2022, respectively. The Company’s policy is to include
applicable interest and penalties related to unrecognized tax benefits as a component of current
income tax expense.
On August 16, 2022, the Inflation Reduction Act was signed into law. The Inflation
Reduction Act includes various tax provisions, which are effective for tax years beginning on or
after January 1, 2023. For tax years beginning after December 31, 2021, the Tax Cuts & Jobs
Act of 2017 eliminated the option to deduct research and development expenditures as incurred
and instead required taxpayers to capitalize and amortize them over five or 15 years beginning
in 2022. The Company incurs research and development expenses in the U.S., as such, the
research and development expense addback is in the U.S. tax return. The Company will
continue to monitor the possible future impact of changes in tax legislation.
The Company has no ongoing examinations of its Federal returns. The audit of the New
York state tax returns for the 2018 and 2019 fiscal years has been completed.
5.
STOCK-BASED COMPENSATION
As of February 26, 2023, the Company had a 2018 Stock Option Plan (the “2018 Plan”)
and no other stock-based compensation plan. The 2018 Plan was adopted by the Board of
Directors of the Company on May 8, 2018 and approved by the shareholders of the Company at
the Annual Meeting of Shareholders of the Company on July 24, 2018. Prior to the 2018 Plan,
the Company had the 2002 Stock Option Plan (the “2002 Plan”) which had been approved by
the Company’s shareholders and provided for the grant of stock options to directors and key
employees of the Company. All options granted under the 2018 Plan and 2002 Plan have
exercise prices equal to the fair market value of the underlying common stock of the Company
at the time of grant, which, pursuant to the terms of such Plans, is the reported closing price of
the common stock on the New York Stock Exchange on the date preceding the date an option is
granted. Options granted under the Plans become exercisable 25% one year after the date of
grant, with an additional 25% exercisable each succeeding anniversary of the date of grant, and
expire 10 years after the date of grant. Options to purchase a total of 800,000 shares of
common stock were authorized for grant under the 2018 Plan. At February 26, 2023, 365,600
shares of common stock of the Company were reserved for issuance upon exercise of stock
options under the 2018 Plan.
The compensation expense for stock options includes an estimate for forfeitures and is
recognized on a straight-line basis over the requisite service period.
The future compensation expense to be recognized in earnings before income taxes for
options outstanding at February 26, 2023 was $584, which is expected to be recognized ratably
over a weighted average vesting period of 2.65 years.
52
The Company records its stock-based compensation at fair value. The weighted average
fair value for options was estimated at the dates of grants, using the Black-Scholes option
pricing model.
The
following table represents the weighted average fair value and valuation
assumptions used for options granted in the 2023, 2022 and 2021 fiscal years:
2023
Fiscal Year
2022
2021
Weighted average fair value
per share of option grants
Risk-free interest rates
Expected stock price
volatility
Expected dividend yields
Estimated option terms
$2.66
2.69% - 3.64%
$2.76
0.74% - 1.85%
$2.12
0.23% - 0.42%
27.9% - 28.3%
3.17% - 3.32%
5.4 - 8.1 Years
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
The risk-free interest rates are based on U.S. Treasury rates at the date of grant with
maturity dates approximately equal to the estimated term of the options at the date of grant.
Volatility factors are based on historical volatility of the Company’s common stock. The
expected dividend yields are based on the regular quarterly cash dividend per share most
recently declared by the Company and on the exercise price of the options granted during the
2023 fiscal year. The estimated terms of the options are based on evaluations of the historical
and expected future employee exercise behavior.
Information with respect to stock option activity follows:
Outstanding
Options
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Term
(in years)
Balance, March 1, 2020
Granted
Exercised
Terminated or expired
Balance, February 28, 2021
Granted
Exercised
Terminated or expired
Balance, February 27, 2022
Granted
Exercised
Terminated or expired
Balance, February 26, 2023
Vested and exercisable, February 26, 2023
Expected to vest, February 26, 2023
510,634
132,100
(1,450)
(6,750)
634,534
147,750
(75,334)
(58,650)
648,300
134,100
(13,000)
(98,975)
670,425
376,613
640,256
$
12.45
12.55
8.02
13.01
$
12.47
13.82
9.81
13.96
$
12.96
12.08
10.67
13.13
12.80
12.67
12.67
$
$
$
Aggregate
Intrinsic
Value
$
597
$
730
$
428
5.80
3.87
5.80
$
$
$
2,159
1,262
2,145
The aggregate intrinsic values realized (the market value of the underlying shares on the
date of exercise, less the exercise price, times the number of shares acquired) from the
53
exercise of options during the 2023, 2022 and 2021 fiscal years were $23, $358 and $8,
respectively.
A summary of the status of the Company’s non-vested options at February 26, 2023,
and changes during the fiscal year then ended, is presented below:
Non-vested, beginning of year
Granted
Vested
Terminated or expired
Shares Subject
to Options
Weighted
Average Grant
Date Fair Value
257,025
134,100
(80,925)
(16,387)
$
2.75
2.58
2.85
2.67
Non-vested, end of year
293,813
$
2.65
6.
SHAREHOLDERS’ EQUITY
Treasury Stock – On May 18, 2022, the Company’s Board of Directors authorized the
Company’s purchase, on the open market and in privately negotiated transactions, of up to
1,500,000 shares of its Common Stock. This represents approximately 7% of the Company’s
20,458,210 total outstanding shares as of the close of business on May 18, 2022. This
authorization supersedes any unused prior Board of Directors’ authorizations to purchase
shares of the Company’s Common Stock. As of February 26, 2023, the Company had not
purchased any shares of the Company’s Common stock pursuant to the above authorization.
Reserved Common Shares – At February 26, 2023, 1,036,025 shares of common stock
were reserved for issuance upon exercise of stock options.
Accumulated Other Comprehensive Earnings (Loss) – Accumulated balances related to
each component of other comprehensive earnings were as follows:
February 26, 2023
February 27, 2022
Unrealized losses on investments,
net of taxes of $2,279 and $1,629, respectively
Accumulated balance
$
$
(4,244)
(4,244)
$
$
(1,965)
(1,965)
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
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.
54
The following table sets forth the calculation of basic and diluted earnings per share:
(Amounts in thousands, except per share amounts)
2023
Fiscal Year
2022
2021
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
$
$
$
10,731
-
10,731
8,464
-
8,464
5,192
(328)
4,864
$
$
$
20,465
44
20,509
20,422
129
20,551
20,387
91
20,478
$
$
$
$
$
$
$
$
$
$
$
$
0.41
-
0.41
0.41
-
0.41
0.52
-
0.52
0.52
-
0.52
0.25
(0.01)
0.24
0.25
(0.01)
0.24
Potentially dilutive stock options, which were not included in the computation of diluted
earnings per share because either the effect would have been antidilutive or the options’
exercise prices were greater than the average market price of the common stock, were 441,781,
263,744 and 387,975 for the 2023, 2022 and 2021 fiscal years, respectively.
8.
RESTRUCTURING CHARGES
The Company recorded restructuring charges of $0, $259 and $1,570 in the 2023, 2022
and 2021 fiscal years, respectively, related to the closure of the Company’s Park Aerospace
Technologies Asia Pte. Ltd. facility located in Singapore.
9.
EMPLOYEE BENEFIT PLANS
Profit Sharing Plan – The Company has a non-contributory profit sharing retirement plan
covering substantially all full-time employees in the United States. The plan may be modified or
terminated at any time, but in no event may any portion of the contributions revert back to the
Company. The Company's estimated contributions are accrued at the end of each fiscal year
and paid to the plan in the subsequent fiscal year. The Company’s contributions to the plan
were $157 and $170 for fiscal years 2022 and 2021, respectively. The contribution for fiscal
year 2023 has not been paid. Contributions are discretionary and may not exceed the amount
allowable as a tax deduction under the Internal Revenue Code.
Savings Plan – The Company also sponsors a 401(k) retirement savings plan but has
no financial obligations to plan participants in the form of matching contributions or otherwise.
10.
LEASES AND COMMITMENTS
The Company has operating leases related to land, office space, warehouse space and
equipment. All of the Company’s leases have been assessed to be operating leases. Renewal
options are included in the lease terms to the extent the Company is reasonably certain to
exercise the option. The exercise of lease renewal options is at the Company’s sole discretion.
The amounts disclosed in our consolidated balance sheet as of February 26, 2023, pertaining to
55
the right-of-use assets and lease liabilities, are measured on our current expectations of
exercising our available renewal options. The incremental borrowing rate represents the
Company’s ability to borrow on a collateralized basis over a term similar to the lease term. The
leases typically contain renewal options for periods ranging from one year to 10 years and
require the Company to pay real estate taxes and other operating costs. The latest land lease
expiration is 2068 assuming exercise of all applicable renewal options by the Company. The
Company’s existing leases are not subject to any restrictions or covenants which preclude its
ability to pay dividends, obtain financing or exercise its available renewal options.
Future minimum lease payments under non-cancellable operating leases as of February
26, 2023 are as follows:
Fiscal Year:
2024
2025
2026
2027
2028
Thereafter
Total undiscounted operating lease payments
Less imputed interest
Present value of operating lease payments
$
53
36
-
-
-
162
251
(69)
182
$
The above payment schedule includes renewal options that the Company is reasonably
likely to exercise. Leases with an initial term of 12 months or less are not recorded on the
Company’s balance sheet. The Company recognizes lease expense for leases on a straight-line
basis over the terms of the leases.
During the 2023 fiscal year, the Company’s operating lease expense was $62. Cash
payments of $53, pertaining to operating leases, are reflected in the consolidated cash flow
statement under cash flows from operating activities.
The following table sets forth the right-of-use assets and operating lease liabilities as of
February 26, 2023:
Operating right-of-use assets
$
150
Operating lease liabilities
Long-term operating lease liabilities
Total operating lease liabilities
$
53
129
182
$
The Company’s weighted average remaining lease term for its operating leases is 7.54
years. The Company’s weighted average borrowing rate for its operating leases is 4.46%.
These non-cancelable leases have the following payment schedule:
Fiscal Year
Amount
2024
2025
2026
2027
2028
Thereafter
56
$
-
-
-
-
-
$
36
36
The above payment schedule does not include renewal options that have not been
committed to. An additional $53 would be included in the period 2024 to 2025 if the Company
included renewal periods that the Company deems likely to renew.
Rental expenses, inclusive of real estate taxes and other costs, were $242, $267 and
$328 for the 2023, 2022 and 2021 fiscal years, respectively.
In December 2018, the Company entered into a Development Agreement with the City
of Newton, Kansas and the Board of County Commissioners of Harvey County, Kansas.
Pursuant to this agreement, the Company agreed to construct and operate a redundant
manufacturing facility of approximately 90,000 square feet for the design, development and
manufacture of advanced composite materials and parts, structures and assemblies for
aerospace. The Company further agreed to equip the facility through the purchase of
machinery, equipment and furnishings and to create additional new full-time employment of
specified levels during a five-year period. In exchange for these agreements, the City and the
County agreed to lease to the Company three acres of land at the Newton, Kansas Airport, in
addition to the eight acres previously leased to the Company by the City and County. The City
and County further agreed to provide financial and other assistance toward the construction of
the additional facility as set forth in the Development Agreement. The total cost of the additional
facility was approximately $19.8 million, and the expansion is complete. As of February 26,
2023, the Company had $99 in equipment purchase obligations.
11.
CONTINGENCIES
Litigation
The Company is subject to a small number of immaterial proceedings, lawsuits and
other claims related to environmental, employment, product and other matters. The Company is
required to assess the likelihood of any adverse judgments or outcomes in these matters as well
as potential ranges of probable losses. A determination of the amount of reserves required, if
any, for these contingencies is made after careful analysis of each individual issue. The required
reserves may change in the future due to new developments in each matter or changes in
approach, such as a change in settlement strategy in dealing with these matters. The Company
believes that the ultimate disposition of such proceedings, lawsuits and claims will not have a
material adverse effect on the liquidity, capital resources, business or consolidated results of
operations or financial position of the Company.
Environmental Contingencies
The Company and certain of its subsidiaries have been named by the Environmental
Protection Agency (the “EPA”) or a comparable state agency under the Comprehensive
Environmental Response, Compensation and Liability Act (the “Superfund Act”) or similar state
law as potentially responsible parties in connection with alleged releases of hazardous
substances at three sites.
Under the Superfund Act and similar state laws, all parties who may have contributed
any waste to a hazardous waste disposal site or contaminated area identified by the EPA or
comparable state agency may be jointly and severally liable for the cost of cleanup. Generally,
these sites are locations at which numerous persons disposed of hazardous waste. In the case
of the Company’s subsidiaries, generally the waste was removed from their manufacturing
facilities and disposed at waste sites by various companies which contracted with the
subsidiaries to provide waste disposal services. Neither the Company nor any of its subsidiaries
have been accused of or charged with any wrongdoing or illegal acts in connection with any
57
such sites. The Company believes it maintains an effective and comprehensive environmental
compliance program.
The insurance carriers which provided general liability insurance coverage to the
Company and its subsidiaries for the years during which the Company’s subsidiaries’ waste was
disposed at these sites have in the past reimbursed the Company and its subsidiaries for 100%
of their legal defense and remediation costs associated with two of these sites.
The Company does not record environmental liabilities and related legal expenses for
which the Company believes that it and its subsidiaries have general liability insurance
coverage for the years during which the Company’s subsidiaries’ waste was disposed at two
sites for which certain subsidiaries of the Company have been named as potentially responsible
parties. Pursuant to such general liability insurance coverage, three insurance carriers
reimburse the Company and its subsidiaries for 100% of the legal defense and remediation
costs associated with the two sites.
Included in selling, general and administrative expenses are charges for actual
expenditures and accruals, based on estimates, for certain environmental matters described
above. The Company accrues estimated costs associated with known environmental matters,
when such costs can be reasonably estimated and when the outcome appears probable. The
Company believes that the ultimate disposition of known environmental matters will not have a
material adverse effect on the Company’s consolidated results of operations, cash flows or
financial position.
12.
DISCONTINUED OPERATIONS
On July 25, 2018, the Company entered into a definitive agreement to sell its Electronics
Business to AGC Inc. for $145,000 in cash, subject to post-closing adjustments for changes in
working capital compared to target net working capital, excluding cash in certain acquired
subsidiaries and certain accrued and unpaid taxes of certain acquired subsidiaries. The net
cash proceeds from the sale were approximately $124,156, net of transaction costs of
approximately $7,657 and taxes of approximately $13,187. The net gain on the Sale was
estimated to be $102,145. The net gain on the sale was calculated as the sum of the gains on
the sale of each of the Electronics Business subsidiaries as determined by the total
consideration allocation between the subsidiaries, less the respective tax bases and deductible
transaction costs for each of the subsidiaries. The total consideration allocation for Nelco
Products Pte. Ltd. (Singapore), Neltec, Inc. (US), and Neltec SA (France), was 82%, 16%, and
2%, respectively, as agreed upon by the Company and AGC Inc. The Company completed this
transaction on December 4, 2018.
The Company has classified the operating results of its former Electronics Business,
together with certain costs related to the transaction, as discontinued operations, net of tax, in
the Consolidated Statements of Operations. The Company has income in the U.S., Singapore
and France, the blended tax rates for discontinued operations for the 2021 and 2020 fiscal
years were negative 24.7% and negative 26.4%, respectively. The Company had no income
from discontinued operations in the 2023 fiscal year.
58
The following table shows the summary operating results of the discontinued operations:
Fiscal Year Ended
February 26,
2023
February 27,
2022
February 28,
2021
-
$
-
-
-
$
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
427
(435)
-
(435)
-
(107)
$
-
$
-
$
(328)
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:
2023
Fiscal Year
2022
2021
Sales:
North America
Asia
Europe
Total sales
Long-lived assets:
North America
Asia
Europe
Total long-lived assets
$
$
$
51,307
700
1,571
53,578
43,874
625
1,777
46,276
$
$
$
$
$
$
$
34,448
-
-
34,448
$
31,170
1
-
31,171
$
50,044
786
3,225
54,055
34,292
-
-
34,292
59
14.
CUSTOMER AND SUPPLIER CONCENTRATIONS
As a result of the sale of the Electronics Business, the Company now operates in a
single segment. As such, segment reporting is no longer provided.
Customers – Net sales to affiliate and non-affiliate subtier suppliers of General Electric
Company were 41.2%, 49.5% and 27.9% of the Company’s total worldwide sales in the 2023,
2022 and 2021 fiscal years, respectively. Net sales to AAE Aerospace were 20.7% of the
Company’s total worldwide sales in the 2021 fiscal year.
While no other customer accounted for 10% or more of the Company’s total worldwide
net sales in the 2023, 2022 or 2021 fiscal years, the loss of a major customer or of a group of
customers could have a material adverse effect on the Company’s business or consolidated
results of operations or financial position.
Suppliers – Suppliers ArianeGroup and Huntsman Advanced Materials accounted for
20.2% and 10.9% of the Company’s accounts payable balance, respectively, in the 2023 fiscal
year. No suppliers accounted for more than 10% of the Company’s accounts payable balance
in the 2022 or 2021 fiscal years.
Sources of Supply – The principal materials used in the manufacture of the Company’s
advanced composite materials, aerospace grade reinforcements, thermoset resins and base
chemicals. Although there is a limited number of qualified suppliers of these materials, the
Company has nevertheless identified alternate sources of supply for many of such materials.
While the Company has not experienced significant problems in the delivery of these materials
and considers its relationships with its suppliers to be strong, a disruption of the supply of
material from a principal supplier could adversely affect the Company’s business. Furthermore,
substitutes for these materials are not readily available, and an inability to obtain essential
materials, if prolonged, could materially adversely affect the Company’s business.
15. ACCOUNTING PRONOUNCEMENTS
Recently Issued
In March 2023, the Financial Accounting Standards Board issued Accounting Standards
Update (“ASU”) No. 2023-01, Leases (Topic 842): Common Control Arrangements. The
changes requires all entities to amortize leasehold improvements associated with common
control leases over the useful life to the common control group. The amendments in ASU 2023-
01 are effective for public business entities for fiscal years beginning after December 15, 2023,
and interim periods within those fiscal years. Early adoption is permitted for: (1) public business
entities for periods for which financial statements have not yet been issued, and (2) all other
entities for periods for which financial statements have not yet been made available for
issuance. The adoption of ASU 2023-101 will not have a material impact on the Company’s
consolidated financial statements and disclosures.
60
PARK AEROSPACE CORP. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Amounts in thousands, except per share amounts)
Fiscal 2023:
Net sales
Gross profit
Net earnings
Basic earnings per share
Diluted earnings per share
Weighted average common shares
outstanding:
Basic
Diluted
Fiscal 2022:
Net sales
Gross profit
Net earnings
Basic earnings per share
Diluted earnings per share
Weighted average common shares
outstanding:
Basic
Diluted
First
Second
Third
Fourth
Quarter
$
12,783
4,092
$
13,875
4,086
$
13,867
4,444
$
13,530
3,851
1,910
1,885
2,230
4,706
$
0.09
$
0.09
$
0.11
$
0.23
$
0.09
$
0.09
$
0.11
$
0.23
20,458
20,504
20,461
20,503
20,471
20,510
20,471
20,518
$
13,594
5,472
$
13,618
4,411
$
13,864
3,836
$
12,502
4,198
2,745
2,022
1,741
1,956
0.13
0.13
0.10
0.10
0.09
0.08
0.10
0.10
20,383
20,710
20,397
20,485
20,450
20,503
20,458
20,508
Earnings per share are computed separately for each quarter. Therefore, the sum of
such quarterly per share amounts may differ from the total for each year.
61
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-15I and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of February 26, 2023,
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 consolidated 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 consolidated 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 26, 2023. 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 26, 2023.
62
(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.
63
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 2023 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 2023 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 2023 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 2023 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 2023 annual meeting of Shareholders to be filed pursuant to
Regulation 14A.
64
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
36
37
38
39
40
41
42
66
ITEM 16.
FORM 10-K SUMMARY
Not Applicable
65
PARK AEROSPACE CORP. AND SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
Column A
Column B
Column C
Additions
Column D
Column E
Description
DEFERRED INCOME TAX ASSET
VALUATION ALLOWANCE:
52 weeks ended February 26, 2023
52 weeks ended February 27, 2022
52 weeks ended February 28, 2021
Balance at
Beginning of
Period
Costs and
Expenses
Other
Reductions
Balance at End
of Period
$
$
$
3,587,000
3,587,000
3,175,000
$
-
$
-
$
412,000
$
-
$
-
$
-
(649,000)
$
-
$
$
-
$
$
$
2,938,000
3,587,000
3,587,000
Column A
Column B
Column C
Column D
Other
Column E
Description
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:
52 weeks ended February 26, 2023
52 weeks ended February 27, 2022
52 weeks ended February 28, 2021
(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
$
$
$
104,000
89,000
73,000
$
$
$
16,000
15,000
16,000
$
-
$
-
$
-
$
-
-
$
$
-
$
$
$
120,000
104,000
89,000
66
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.)...............................................................................................
67
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
99.1
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............................................................................................................
Insider trading policies and procedures pursuant to Rule 10b5-1 under
the Securities Exchange Act of 1934……....................................................
The following materials from the Company’s Annual Report on Form 10-K
for the year ended February 26, 2023, formatted in XBRL (Inline
eXtensible Business Reporting Language): (i) Consolidated Balance
Sheets at February 26, 2023 and February 27, 2022, (ii) Consolidated
Statements of Operations for the years ended February 26, 2023,
February 27, 2022 and February 28, 2021, (iii) Consolidated Statements of
Comprehensive Earnings for the years ended February 26, 2023, February
27, 2022 and February 28, 2021, (iv) Consolidated Statements of
Shareholders’ Equity for the years ended February 26, 2023, February 27,
2022 and February 28, 2021 and (v) Consolidated Statements of Cash
Flows for the years ended February 26, 2023, February 27, 2022 and
February 28, 2021 .*+
68
104
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101)………………………………………………………
* 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
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.
69
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, 2023 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
70
May 12, 2023
May 12, 2023
May 12, 2023
May 12, 2023
May 12, 2023
May 12, 2023
May 12, 2023
May 12, 2023
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
71
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 Park Aerospace Corp. of our report dated May 12, 2023, relating to
the consolidated financial statements of Park Aerospace Corp. and Subsidiaries as of February
26, 2023 and February 27, 2022 and for each of the years in the three-year period ended
February 26, 2023, February 27, 2022 and February 28, 2021, which report is included in the
Annual Report on Form 10-K of Park Aerospace Corp. for the year ended February 26, 2023.
/s/ CohnReznick LLP
Parsippany, New Jersey
May 12, 2023
72
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
26, 2023 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
73
(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, 2023
/s/ Brian E. Shore
Name: Brian E. Shore
Title: Chief Executive Officer
74
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 26, 2023 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
75
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, 2023
/s/ P. Matthew Farabaugh
Name: P. Matthew Farabaugh
Title: Senior Vice President and Chief Financial Officer
76
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 26, 2023 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, 2023
77
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 26, 2023 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, 2023
78