What changed in this filing

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Item 1. Financial Statements

2024-10-16 compared with 2024-07-17 · 75 added, 47 removed, 263 unchanged (32% of the section changed)

42 unchanged sentences

13 Weeks Ended (Unaudited)

26 Weeks Ended (Unaudited)

Cost of sales

16 unchanged sentences

13 Weeks Ended (Unaudited)

Other comprehensive earnings, net of tax:

26 Weeks Ended (Unaudited)

Other comprehensive earnings (loss), net of tax:

Unrealized gains on marketable securities:

18 unchanged sentences

Balance, June 2, 2024

Unrealized gain on marketable securities, net of tax

Stock options exercised

Stock-based compensation

Repurchase of treasury shares

Cash dividends ($ 0.125 per share)

Balance, September 1, 2024

Comprehensive

7 unchanged sentences

Balance, May 28, 2023

Unrealized gain on marketable securities, net of tax

Stock-based compensation

Repurchase of treasury shares

Cash dividends ($ 0.125 per share)

Balance, August 27, 2023

See Notes to Condensed Consolidated Financial Statements (Unaudited).

5 unchanged sentences

Cash flows from operating activities:

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

Non-cash storm damage charge

1 unchanged sentence

Stock-based compensation

Provision for credit losses

Deferred income taxes

2 unchanged sentences

Changes in operating assets and liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

5 unchanged sentences

Dividends paid

Proceeds from exercise of stock options

Purchase of treasury stock

Net cash used in financing activities

(Decrease) increase in cash and cash equivalents:

Increase in cash and cash equivalents:

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental disclosure of non-cash activities:

Addition to operating right-of-use asset from new operating lease liability

Supplemental cash flow information:

5 unchanged sentences

(Amounts in thousands, except share (unless otherwise stated), per share and option amounts)

CONSOLIDATED FINANCIAL STATEMENTS

The Condensed Consolidated Balance Sheet and the Consolidated Statement of Shareholders’ Equity as of June 2, 2024, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Earnings for the 13 weeks ended June 2, 2024 and May 28, 2023, and the Condensed Consolidated Statements of Cash Flows for the 13 week periods then ended have been prepared by Park Aerospace Corp.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Condensed Consolidated Balance Sheet and the Consolidated Statement of Shareholders’ Equity as of September 1, 2024, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Earnings for the 13 weeks and 26 weeks ended September 1, 2024 and August 27, 2023, and the Condensed Consolidated Statements of Cash Flows for the 26 weeks then ended have been prepared by Park Aerospace Corp.

(the “Company”), without audit.

In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at June 2, 2024 and the results of operations and cash flows for all periods presented.

In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at September 1, 2024 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 condensed 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 3, 2024.

There have been no significant changes to such accounting policies during the 13 weeks ended June 2, 2024.

There have been no significant changes to such accounting policies during the 26 weeks ended September 1, 2024.

FAIR VALUE MEASUREMENTS

8 unchanged sentences

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, and accounts payable approximate their carrying value due to their short-term nature.

The fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued 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 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 26 weeks ended September 1, 2024.

MARKETABLE SECURITIES

3 unchanged sentences

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

September 1, 2024

Treasury and other government securities

corporate debt securities

Total marketable securities

5 unchanged sentences

Amortized Cost

June 2, 2024:

September 1, 2024:

Treasury and other government securities

5 unchanged sentences

Total marketable securities

The estimated fair values of such securities at June 2, 2024 by contractual maturity are shown below:

The estimated fair values of such securities at September 1, 2024 by contractual maturity are shown below:

Due in one year or less

10 unchanged sentences

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 options.

Renewal options are included in the lease term 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.

3 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 June 2, 2024 are as follows:

Future minimum lease payments under non-cancellable operating leases as of September 1, 2024 are as follows:

Total undiscounted operating lease payments

4 unchanged sentences

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

For the 13 weeks ended June 2, 2024, the Company’s operating lease expenses were $ 15 .

For the 13 weeks and 26 weeks ended September 1, 2024, the Company’s operating lease expenses were $ 15 and $ 31 , respectively.

Cash payments of $ 27 , 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 June 2, 2024:

The following table sets forth the right-of-use assets and operating lease liabilities as of September 1, 2024:

Operating right-of-use assets

4 unchanged sentences

STOCK-BASED COMPENSATION

As of June 2, 2024, 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.

As of September 1, 2024, 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, approved by the shareholders of the Company at the Annual Meeting of Shareholders of the Company on July 24, 2018, and amended by the shareholders of the Company on July 18, 2024 and provides for the grant of options to purchase up to 1,550,000 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 been approved by the Company’s shareholders and provided for the grant of stock options to directors and key employees of the Company.

3 unchanged sentences

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

On June 13, 2024, the Company’s Board of Directors adopted a proposed Amendment to 2018 stock option plan to increase the number of shares authorized for issuance under such plan by 750,000 shares, subject to shareholder approval at the Annual Meeting of Shareholders of the Company to be held on July 18, 2024.

During the 26 weeks ended September 1, 2024, the Company granted options under the 2018 Plan to purchase a total of 135,100 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 $ 434 and will be recorded on a straight-line basis over the requisite service period.

The weighted average fair value of the granted options was $ 3.21 per share using the Black-Scholes option pricing model with the following assumptions:

risk-free interest rate of 4.23 %- 4.24 %;

expected volatility factor of 28.7 %- 29.1 %;

expected dividend yield of 3.77 %;

and estimated option term of 5.8 - 8.6 years.

The risk-free interest rates were based on U.S.

Treasury rates at the date of grant with maturity dates approximately equal to the estimated terms of the options at the date of the grant.

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 26 weeks ended September 1, 2024.

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

During the 2024 fiscal year, the Company recorded non-cash charges of $ 109 related to the modification of previously granted employee stock options resulting from the $ 1.00 per share special cash dividend paid by the Company in April 2023.

The future compensation expense to be recognized in earnings before income taxes for options outstanding at June 2, 2024 was $578, which is expected to be recognized ratably over a weighted average vesting period of 1.24 years.

The following is a summary of option activity for the 13 weeks ended June 2, 2024:

The future compensation expense to be recognized in earnings before income taxes for options outstanding at September 1, 2024 was $ 895 , which is expected to be recognized ratably over a weighted average vesting period of 1.53 years.

The following is a summary of option activity for the 26 weeks ended September 1, 2024:

Exercise Price

4 unchanged sentences

Terminated or expired

Balance, June 2, 2024

Vested and exercisable, June 2, 2024

Balance, September 1, 2024

Vested and exercisable, September 1, 2024

EARNINGS PER SHARE

1 unchanged sentence

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 potentially dilutive securities outstanding during the period.

Stock options are the Company’s only potentially dilutive securities;

Stock options are the only potentially dilutive securities;

and the number of dilutive options is computed using the treasury stock method.

1 unchanged sentence

13 Weeks Ended

26 Weeks Ended

Weighted average common shares outstanding for basic EPS

3 unchanged sentences

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 0 and 157,000 for the 13 weeks ended June 2, 2024 and May 28, 2023, 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 84,000 and 148,000 for the 13 weeks ended September 1, 2024 and August 27, 2023, respectively, and 42,000 and 152,000 for the 26 weeks ended September 1, 2024 and August 27, 2023, respectively.

SHAREHOLDERS ’ EQUITY

On May 23, 2022, 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 1,500,000 additional shares of its common stock.

This authorization superseded any unused prior Board of Directors’ authorizations to purchase shares of the Company’s Common Stock.

The Company purchased 0 and 129,654 shares of its common stock during the 13 weeks ended June 2, 2024 and May 28, 2023, respectively.

As a result, the Company is authorized to purchase up to a total of 1,278,901 shares of its common stock, representing approximately 6.3 % of the Company’s 20,253,361 total outstanding shares as of the close of business on July 8, 2024.

This authorization supersedes any unused prior Board of Directors’ authorizations to purchase shares of the Company’s common stock.

The Company purchased 149,633 and 221,099 shares of its common stock during the 26 weeks ended September 1, 2024 and August 27, 2023, respectively.

As a result, the Company is authorized to purchase up to a total of 1,129,268 shares of its common stock, representing approximately 5.7 % of the Company’s 19,961,792 total outstanding shares as of the close of business on October 7, 2024.

There is no assurance the Company will purchase any shares pursuant to this Board of Directors’ authorization.

Shares purchased by the Company, if any, will be retained as treasury stock and will be available for use under the Company’s stock option plan and for other corporate purposes.

For the 13 weeks ended June 2, 2024, the Company recorded an income tax provision of $ 376 , which included a discrete income tax provision of $ 19 .

For the 13 weeks ended May 28, 2023, the Company recorded an income tax provision of $ 688 , which included a discrete income tax provision of $ 37 .

The Company’s effective tax rate for the 13 weeks ended June 2, 2024 was 27.5 % compared to 27.1 % in the comparable prior year period.

The effective tax rate for the 13 weeks ended June 2, 2024 was 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 rate for the 13 weeks ended May 28, 2023 was higher than the U.S.

For the 13 weeks and 26 weeks ended September 1, 2024, the Company recorded income tax provisions from operations of $ 750 and $ 1,126 , respectively, which included discrete income tax provisions of $ 22 and $ 41 , respectively.

For the 13 weeks and 26 weeks ended August 27, 2023, the Company recorded income tax provisions from operations of $ 619 and $ 1,307 , respectively, which included discrete income tax provisions of $ 16 and $ 53 , respectively.

The Company’s effective tax rates for the 13 weeks and 26 weeks ended September 1, 2024 were income tax provisions of 26.6 % and 26.9 %, respectively, compared to income tax provisions of 26.2 % and 26.6 % in the comparable prior periods.

The effective tax rates for the 13 weeks and 26 weeks ended September 1, 2024 were 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.

The effective rates for the 13 weeks and 26 weeks ended August 27, 2023 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.

9 unchanged sentences

All of the Company’s long-lived assets are located in North America.

Financial information regarding the Company’s operations by geographic region is as follows:

Financial information regarding the Company’s continuing operations by geographic region is as follows:

13 Weeks Ended

26 Weeks Ended

North America

Total net sales

STORM DAMAGE CHARGE

The Company recorded a charge of $ 1,052 for storm damage in the 13 weeks ended June 2, 2024.

The Company recorded a charge of $ 46 and $ 1,098 , respectively, for storm damage in the 13 weeks and 26 weeks ended September 1, 2024.

On May 19, 2024, the Company’s manufacturing facilities in Newton, Kansas were damaged by a strong storm which transitioned the area.

3 unchanged sentences

These specialty HVAC units are necessary to control the temperature and humidity in certain manufacturing areas, quality laboratories and R&D laboratories, which is required by certain specifications and certifications the Company is subject to.

The Company is currently working with multiple contractors on site and the insurance company in order to fully assess the damage and the remediation options.

Although the Company is still in the process of assessing the situation, the Company’s production lines were returned to full production within two weeks of the storm.

The Company is currently working with multiple contractors on site to remediate the damage.

Although the Company is still in the process of remediating the damage, the Company’s production lines were returned to full production within two weeks of the storm.

The Company is employing certain temporary measures in order to return its production lines to full service, including the use of temporary HVAC equipment, but it will take the Company several months to permanently repair or replace all of the damaged facilities and infrastructure equipment.

The Company does not anticipate the loss of any sales for the 2025 fiscal year, however, $ 1.8 million of sales could not be delivered before the end of the first quarter ended June 2, 2024 due to storm related delays.

The Company expects these delayed shipments will be delivered during the Company’s second quarter ended September 1, 2024.

The Company does not anticipate the loss of any sales for the 2025 fiscal year.

The Company paid its employees for the days immediately following the storm despite many not being able to work while others worked on the clean-up of the storm damage to the facilities.

1 unchanged sentence

The charge recorded by the Company includes an asset damage charge, emergency services by outside contractors, rental of temporary HVAC units and the cost of employee downtime or time spent on the clean-up of the storm damage to the facilities.

Additional costs will be recorded in future periods as additional work is needed and performed and for on-going rental of temporary HVAC units.

Additional costs will be recorded in future periods as additional work is needed and performed.

The Company has insurance coverage for wind damage with a deductible of approximately $ 2.5 million.

13 unchanged sentences

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.

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.

2 unchanged sentences

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.

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