What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-09 compared with 2021-01-07 · 76 added, 126 removed, 282 unchanged (42% of the section changed)

34 unchanged sentences

Total liabilities and shareholders' equity

* The balance sheet at March 1, 2020 has been derived from the audited consolidated financial statements at that date.

* The balance sheet at February 28, 2021 has been derived from the audited consolidated financial statements at that date.

See Notes to Consolidated Financial Statements (Unaudited).

4 unchanged sentences

13 Weeks Ended (Unaudited)

39 Weeks Ended (Unaudited)

Cost of sales

Selling, general and administrative expenses

Restructuring charges (Note 9)

Earnings from continuing operations

4 unchanged sentences

Loss from discontinued operations, net of tax (Note 12)

Earnings (loss) per share (Note 7)

Earnings per share (Note 7)

Continuing operations

6 unchanged sentences

Diluted weighted average shares

Dividends declared per share

See Notes to Consolidated Financial Statements (Unaudited).

1 unchanged sentence

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE E ARNINGS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Amounts in thousands)

13 Weeks Ended (Unaudited)

39 Weeks Ended (Unaudited)

Other comprehensive (loss) earnings, net of tax:

Other comprehensive earnings, net of tax:

Unrealized gains on marketable securities:

4 unchanged sentences

reclassification adjustment for losses included in net earnings

Other comprehensive (loss) earnings

Other comprehensive earnings

Total comprehensive earnings

6 unchanged sentences

Treasury Stock

Earnings (Loss)

Balance, March 1, 2020

(Loss) Earnings

Balance, February 28, 2021

Unrealized gain on marketable securities, net of tax

Stock-based compensation

Repurchase of treasury shares

Cash dividends ($0.10 per share)

Balance, May 30, 2021

Unrealized loss on marketable securities, net of tax

Stock-based compensation

Cash dividends ($0.10 per share)

Balance, August 30, 2020

Unrealized loss on marketable securities, net of tax

Stock-based compensation

Cash dividends ($0.10 per share)

Balance, November 29, 2020

Comprehensive

Treasury Stock

Earnings (Loss)

Balance, March 1, 2020

Unrealized gain on marketable securities, net of tax

Stock options exercised

Stock-based compensation

Cash dividends ($0.10 per share)

Balance, June 2, 2019

Unrealized gain on marketable securities, net of tax

Stock options exercised

Stock-based compensation

Cash dividends ($0.10 per share)

Balance, September 1, 2019

Unrealized gain on marketable securities, net of tax

Stock options exercised

Stock-based compensation

Repurchase of treasury shares

Cash dividends ($0.10 per share)

Balance, December 1, 2019

Balance, May 31, 2020

See Notes to Consolidated Financial Statements (Unaudited).

5 unchanged sentences

Cash flows from operating activities:

Loss from discontinued operations, net of tax

Net earnings from continuing operations

12 unchanged sentences

Proceeds from sales and maturities of marketable securities

Net cash used in investing activities - continuing operations

Net cash (used in) provided by investing activities - continuing operations

Net cash used in investing activities - discontinued operations

Net cash used in investing activities

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

2 unchanged sentences

Net cash used in financing activities

Decrease in cash and cash equivalents

(Decrease) increase in cash and cash equivalents:

Cash and cash equivalents, beginning of period

8 unchanged sentences

CONSOLIDATED FINANCIAL STATEMENTS

The Condensed Consolidated Balance Sheet and the Consolidated Statements of Shareholders’ Equity as of November 29, 2020, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Earnings for the 13 weeks and 39 weeks ended November 29, 2020 and December 1, 2019, and the Condensed Consolidated Statements of Cash Flows for the 39 weeks then ended have been prepared by Park Aerospace Corp.

The Condensed Consolidated Balance Sheet and the Consolidated Statements of Shareholders’ Equity as of May 30, 2021, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Earnings for the 13 weeks ended May 30, 2021 and May 31, 2020, and the Condensed Consolidated Statements of Cash Flows for the 13 weeks then ended have been prepared by Park Aerospace Corp.

(the “Company”), without audit.

In the opinion of management, these unaudited consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at November 29, 2020 and the results of operations and cash flows for all periods presented.

In the opinion of management, these unaudited consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at May 30, 2021 and the results of operations and cash flows for all periods presented.

The Consolidated Statements of Operations are not necessarily indicative of the results to be expected for the full fiscal year or any subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted.

It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 1, 2020.

There have been no significant changes to such accounting policies during the 39 weeks ended November 29, 2020.

There have been no significant changes to such accounting policies during the 13 weeks ended May 30, 2021.

FAIR VALUE MEASUREMENTS

10 unchanged sentences

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 3).

On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs.

(See Note 3).

The Company’s non-financial assets measured at fair value on a non-recurring basis include goodwill and any long-lived assets written down to fair value.

4 unchanged sentences

If, based on that assessment, the Company believes it is more likely than not that fair value is less than carrying value, a goodwill impairment test is performed.

There have been no changes in events or circumstances which required impairment charges to be recorded during the 13 weeks and 39 weeks ended November 29, 2020.

There have been no changes in events or circumstances which required impairment charges to be recorded during the 13 weeks ended May 30, 2021.

MARKETABLE SECURITIES

3 unchanged sentences

The following is a summary of available-for-sale securities:

November 29, 2020

Treasury and other government securities

1 unchanged sentence

Total marketable securities

March 1, 2020

February 28, 2021

Treasury and other government securities

3 unchanged sentences

Amortized Cost

November 29, 2020:

May 30, 2021:

Treasury and other government securities

1 unchanged sentence

Total marketable securities

March 1, 2020:

February 28, 2021:

Treasury and other government securities

1 unchanged sentence

Total marketable securities

The estimated fair values of such securities at November 29, 2020 by contractual maturity are shown below:

The estimated fair values of such securities at May 30, 2021 by contractual maturity are shown below:

Due in one year or less

16 unchanged sentences

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 November 29, 2020 are as follows:

Future minimum lease payments under non-cancellable operating leases as of May 30, 2021 are as follows:

Total undiscounted operating lease payments

2 unchanged sentences

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.

Leases with an initial term of 12 months or less are not recorded on the Company’s condensed consolidated balance sheet.

The Company recognizes lease expense for these leases on a straight-line basis over the terms of the leases.

For the 13 weeks and 39 weeks ended November 29, 2020, the Company’s operating lease expense was $40 and $120, respectively.

The above payment schedule does not include lease payments of $157 for the Company’s idle facility in Singapore that have been accrued on the condensed consolidated balance sheets in accrued liabilities.

For the three months ended May 30, 2021, the Company’s operating lease expense was $15.

Cash payments of $13, pertaining to operating leases, are reflected in the 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 November 29, 2020:

The following table sets forth the right-of-use assets and operating lease liabilities as of May 30, 2021:

Operating right-of-use assets

3 unchanged sentences

The Company’s weighted average remaining lease term for its operating leases is 14.2 years.

In December 2018, the Company’s wholly-owned subsidiary Park Aerospace Technologies Corp.

(“PATC”) 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, PATC agreed to construct and operate an additional manufacturing facility approximately 90,000 square feet in size for the design, development and manufacture of advanced composite materials and parts, structures and assemblies for aerospace.

PATC 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 PATC three acres of land at the Newton City/County Airport, in addition to the eight acres previously leased to PATC by the City and County.

The City and the County further agreed to provide financial and other assistance toward the construction of the additional facility as set forth in the Development Agreement.

The Company estimates the total cost of the additional facility to be approximately $18.0 million, and the Company expects to complete the construction of the additional facility in the 2021 calendar year.

As of November 29, 2020, the Company had $1,033 in equipment purchase obligations and $12,390 of construction-in-progress related to the additional facility.

On July 16, 2019, PATC was merged into the Company and ceased to exist, and the Company assumed the rights and obligations of PATC, including the rights and obligations of PATC under the Development Agreement.

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 an additional manufacturing facility of approximately 90,000 square feet for the design, development and manufacture of advanced composite materials and parts, structures and assemblies for aerospace.

The Company further agreed to equip the facility through the purchase of machinery, equipment and furnishings and to create additional new full-time employment of specified levels during a five-year period.

In exchange for these agreements, the City and the County agreed to lease to the Company three acres of land at the Newton, Kansas Airport, in addition to the eight acres previously leased to the Company by the City and County.

The City and County further agreed to provide financial and other assistance toward the construction of the additional facility as set forth in the Development Agreement.

The Company estimates the total cost of the additional facility to be approximately $18,800, and the Company expects to complete the construction of the additional facility in the second half of the 2021 calendar year.

As of May 30, 2021, the Company had $752 in equipment purchase obligations and $16,346 of construction-in-progress related to the additional facility.

STOCK-BASED COMPENSATION

As of November 29, 2020, the Company had a 2018 Stock Option Plan (the “2018 Plan”) and no other stock-based compensation plan.

As of May 30, 2021, 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 and provides for the grant of options to purchase up to 800,000 shares of common stock of the Company.

Prior to the 2018 Plan, the Company had the 2002 Stock Option Plan (the “2002 Plan”) which had also provided for the grant of stock options to purchase shares of the Company.

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 the option is granted.

2 unchanged sentences

Any shares of common stock subject to an option under the 2018 Plan which expire or are terminated unexercised as to such shares shall again become available for issuance under the 2018 Plan.

The 2002 Plan terminated on May 21, 2018, and authority to grant additional options under the 2002 Plan expired on that date.

All options granted under the 2002 Plan will expire in April 2028 or earlier.

During the 13 weeks and 39 weeks ended November 29, 2020, the Company granted options under the 2018 Plan to purchase a total of 0 and 132,100, respectively, shares of common stock to its directors and certain of its employees.

During the 13 weeks ended May 30, 2021, the Company granted options under the 2018 Plan to purchase a total of 142,250 shares of common stock to its directors and certain of its employees.

The future compensation expense to be recognized in earnings before income taxes is $396 and will be recorded on a straight-line basis over the requisite service period.

7 unchanged sentences

Volatility factors were based on historical volatility of the Company’s common stock.

The expected dividend yields were 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 13 weeks and 39 weeks ended November 29, 2020.

The estimated term of the options was based on evaluations of the historical and expected future employee exercise behavior.

The following is a summary of option activity for the 39 weeks ended November 29, 2020:

The following is a summary of option activity for the 13 weeks ended May 30, 2021:

Exercise Price

2 unchanged sentences

Term (in years)

Balance, March 1, 2020

Balance, February 28, 2021

Terminated or expired

Balance, November 29, 2020

Vested and exercisable, November 29, 2020

Balance, May 30, 2021

Vested and exercisable, May 30, 2021

EARNINGS PER SHARE

5 unchanged sentences

13 Weeks Ended

39 Weeks Ended

Net earnings - continuing operations

4 unchanged sentences

Basic earnings per share - continuing operations

Basic loss per share - discontinued operations

Basic earnings per share - discontinued operations

Basic earnings per share

Diluted earnings per share - continuing operations

Diluted loss per share - discontinued operations

Diluted earnings per share - discontinued operations

Diluted earnings per share

Potentially dilutive securities, which were not included in the computation of diluted earnings per share because either the effect would have been anti-dilutive or the options’ exercise prices were greater than the average market price of the common stock, were 471,000 and 76,000 for the 13 weeks ended November 29, 2020 and December 1, 2019, respectively, and 457,000 and 115,000, respectively, for the 39 weeks ended November 29, 2020 and December 1, 2019, respectively.

Potentially dilutive securities, which were not included in the computation of diluted earnings per share, because either the effect would have been anti-dilutive or the options’ exercise prices were greater than the average market price of the common stock, were 175,000 and 426,000 for the 13 weeks ended May 30, 2021 and May 31, 2020, respectively.

SHAREHOLDERS ’ EQUITY

2 unchanged sentences

On March 10, 2016, the Company announced that its Board of Directors authorized the Company’s purchase, on the open market and in privately negotiated transactions, of up to 1,000,000 additional shares of its common stock, in addition to the unused prior authorization to purchase shares of the Company’s common stock announced on January 8, 2015.

As a result, the Company is authorized to purchase up to a total of 1,394,015 shares of its common stock, representing approximately 6.8% of the Company’s 20,381,426 total outstanding shares as of the close of business on January 4, 2021.

The Company purchased 137,397 and 0 shares of its common stock during the 39 weeks ended November 29, 2020 and December 1, 2019, respectively.

For the 13 weeks and 39 weeks ended November 29, 2020, the Company recorded income tax provisions from continuing operations of $369 and $1,557, respectively, which included discrete income tax provisions of $44 and $126, respectively.

For the 13 weeks and 39 weeks ended December 1, 2019, the Company recorded income tax provisions from continuing operations of $1,069 and $2,895, respectively.

The Company’s effective tax rates for the 13 weeks and 39 weeks ended November 29, 2020 were 26.3% and 27.2%, respectively, compared to 27.6% and 27.7%, respectively, in the comparable prior year periods.

The effective tax rates for the 13 weeks and 39 weeks ended November 29, 2020 were higher than the U.S.

statutory rate of 21% primarily due to state and local taxes and discrete income tax provisions for the accrual of interest related to unrecognized tax benefits.

The effective tax rates for the 13 weeks and 39 weeks ended December 1, 2019 were higher than the U.S.

statutory rate of 21% primarily due to state and local taxes, discrete income tax provisions for stock compensation and the accrual of interest related to unrecognized tax benefits.

As a result, the Company is authorized to purchase up to a total of 1,394,015 shares of its common stock, representing approximately 6.8% of the Company’s 20,384,126 total outstanding shares as of the close of business on July 1, 2021.

The Company purchased 0 and 137,397 shares of its common stock during the 13 weeks ended May 30, 2021 and May 31, 2020, respectively.

RESTRUCTURING CHARGES

The Company recorded restructuring charges of $14 and $0 for the 13 weeks ended May 30, 2021 and May 31, 2020, respectively, related to the closure of the Company’s Park Aerospace Technologies Asia Pte, Ltd facility located in Singapore.

The following table sets forth the charges and accruals related to the restructuring:

Facility Lease Costs

Asset Impairment

Total Restructuring Charges

For the 13 weeks ended May 30, 2021, the Company recorded an income tax provision from continuing operations of $1,182, which included a discrete income tax provision of $143.

For the 13 weeks ended May 31, 2020, the Company recorded an income tax provision from continuing operations of $728, which included a discrete income tax provision of $41.

The Company’s effective tax rate for the 13 weeks ended May 30, 2021 was an income tax provision of 30.0%, compared to an income tax provision of 27.0% in the comparable prior period.

The effective tax rate for the 13 weeks ended May 30, 2021 was higher than the U.S.

statutory rate of 21% primarily due to state and local taxes and a discrete income tax provision for the write-off of deferred tax assets and liabilities related to its closed Singapore facility and the accrual of interest related to unrecognized tax benefits.

The effective rate for the 13 weeks ended May 31, 2020 was higher than the U.S.

statutory rate of 21% primarily due to state and local taxes and a discrete income tax provision for the accrual of interest related to unrecognized tax benefits.

Notwithstanding the U.S.

2 unchanged sentences

If these future earnings are repatriated to the U.S., or if the Company determines such earnings will be remitted in the foreseeable future, the Company may be required to accrue U.S.

deferred taxes.

deferred taxes on such earnings.

GEOGRAPHIC REGIONS

5 unchanged sentences

13 Weeks Ended

39 Weeks Ended

North America

8 unchanged sentences

13 Weeks Ended (Unaudited)

39 Weeks Ended (Unaudited)

Cost of sales

5 unchanged sentences

Net loss from discontinued operations

During the 2018 fiscal year, the Company consolidated its Nelco Products, Inc.

Business Unit located in Fullerton, California and its Neltec, Inc.

Business Unit located in Tempe, Arizona.

The following table sets forth the charges and accruals related to the consolidation:

Facility Lease Costs

Severance Costs

Equipment Removal

Total Restructuring Charges

CONTINGENCIES

8 unchanged sentences

Generally, these sites are locations at which numerous persons disposed of hazardous waste.

In the case of the Company’s subsidiaries, generally the waste was removed from their manufacturing facilities and disposed at waste sites by various companies which contracted with the subsidiaries to provide waste disposal services.

Neither the Company nor any of its subsidiaries have been accused of or charged with any wrongdoing or illegal acts in connection with any such sites.

In the case of the Com‐pany’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 sub‐sidiaries have been accused of or charged with any wrongdoing or illegal acts in connection with any such sites.

The Company believes it maintains an effective and comprehensive environmental compliance program.

The insurance carriers which provided general liability insurance coverage to the Company and its subsidiaries for the years during which the Company’s subsidiaries’ waste was disposed at these three 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 insurance carriers which provided general liability insurance coverage to the Company and its subsidiaries for the years dur‐ing which the Company’s subsidiaries’ waste was disposed at these three 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.

Included in selling, general and administrative expenses are charges for actual expenditures and accruals, based on estimates, for certain environmental mat‐ters described above.

The Company accrues estimated costs asso‐ciated with known environmental matters when such costs can be reasonably estimated and when the outcome appears probable.

The Company believes that the ultimate disposition of known environmental matters will not have a material adverse effect on the Company’s results of operations, cash flows or financial position.

A CCOUNT I NG P RONOUNCEMENTS

ACCOUNTING PRONOUNCEMENTS

Recently Adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement .

This ASU modifies the disclosure requirements for fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers.

This ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss).

This ASU is effective for the Company’s fiscal year ending February 28, 2021 and for the interim periods within that year.

The Company adopted this ASU in the first quarter of its 2021 fiscal year.

The adoption of ASU 2018-13 did not have an impact on the Company’s consolidated financial statements and disclosures.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

This ASU improves financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

This ASU is effective for the Company’s fiscal year ending February 28, 2021 and for the interim periods within that year.

The Company adopted this ASU in the first quarter of its 2021 fiscal year.

The adoption of ASU 2016-13 did not have an impact on the Company’s consolidated financial statements and disclosures.

Recently Issued

In December 2019, the FASB issued ASU No.

In December 2019, the Financial Accounting Standard Board issued Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

3 unchanged sentences

The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted for public business entities for periods for which financial statements have not yet been issued.

The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements and disclosures.

COVID-19 PANDEMIC

In December 2019, a novel strain of coronavirus was reported in Wuhan, China and has since spread worldwide, including to the United States, posing public health risks that have reached pandemic proportions (the “COVID-19 Pandemic”).

The COVID-19 Pandemic and resultant global economic crisis had significant impacts on the Company’s results of operations and cash flow for the 13 weeks and 39 weeks ended November 29, 2020.

The COVID-19 Pandemic and crisis had significant impacts on the markets the Company sells into, particularly the commercial and business aircraft markets.

As a result, the Company has experienced a significant reduction in sales and backlog.

For all other entities, the requirements are effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022.

Early adoption is permitted for:

(1) public business entities for periods for which financial statements have not yet been issued, and (2) all other entities for periods for which financial statements have not yet been made available for issuance.

The Company adopted this ASU in the first quarter of the 2022 fiscal year.

The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements and disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements