What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-15 compared with 2024-10-16 · 58 added, 52 removed, 87 unchanged (56% of the section changed)

17 unchanged sentences

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

The Company has recorded a charge of $1.1 million in the 26 weeks ended September 1, 2024 related to the damage and related repair and downtime costs.

The Company's net sales in the 13 weeks and 26 weeks ended September 1, 2024 were $16.7 million and $30.7 million, respectively, compared to $12.5 million and $28.0 million, respectively, in the 13 weeks and 26 weeks ended August 27, 2023.

Sales for the 13 weeks and 26 weeks ended September 1, 2024 were higher than in the comparable periods of the prior fiscal year due to higher sales to the commercial aerospace and military markets.

The Company’s gross profit in the 13 weeks ended September 1, 2024 was higher than the gross profit in the prior year’s comparable period due to higher sales levels in the 13 weeks ended September 1, 2024 compared to the comparable period in the prior year partially offset by a less favorable product mix, higher depreciation, repairs and maintenance and utilities related to the use of a new production line, and higher costs for raw materials, supplies, freight and labor resulting from inflationary trends.

The Company’s gross profit in the 26 weeks ended September 1, 2024 was similar to the gross profit in the prior year’s comparable period despite higher sales levels primarily due to a less favorable sales mix and the higher costs mentioned above.

The Company’s gross profit margins, measured as percentages of sales, were 28.5% and 28.9%, respectively, in the 13 weeks and 26 weeks ended September 1, 2024 compared to 32.7% and 31.8%, respectively, in the 13 weeks and 26 weeks ended August 27, 2023.

The lower gross profit margins for the 13 and 26 weeks ended September 1, 2024 compared to the prior year’s comparable periods were primarily due to ramping up capacity ahead of customer program volume increases, a less favorable sales mix due to fabric sales, higher depreciation, repairs and maintenance and utilities related to use of the new production line, and higher costs for raw materials, supplies, freight and labor resulting from inflationary trends, partially offset by higher sales.

The Company’s earnings before income taxes and net earnings increased 19.1% and 18.3%, respectively, in the 13 weeks ended September 1, 2024, compared to the 13 weeks ended August 27, 2023, primarily as a result of higher sales, partially offset by an unfavorable sales mix due to higher fabric sales and the higher costs mentioned above.

The Company’s earnings before income taxes and net earnings decreased 14.7% and 15.0%, respectively, in the 26 weeks ended September 1, 2024, compared to the 26 weeks ended August 27, 2023, primarily as a result of charges incurred related to the storm damage and the higher costs mentioned above, partially offset by higher sales.

The Company expects all repairs to be completed in the first quarter of fiscal year 2026.

The Company has recorded a charge of $1.1 million in the 39 weeks ended December 1, 2024 related to the damage and related repair and downtime costs.

The Company's net sales in the 13 weeks and 39 weeks ended December 1, 2024 were $14.4 million and $45.1 million, respectively, compared to $11.6 million and $39.7 million, respectively, in the 13 weeks and 39 weeks ended November 26, 2023.

Sales for the 13 weeks ended December 1, 2024 were higher than in the comparable period of the prior fiscal year due to higher sales to the commercial aerospace and business aircraft markets while sales for the 39 weeks ended December 1, 2024 were higher than the 39 weeks ended November 23, 2023 due to higher sales from the commercial aerospace, business aircraft and military markets.

The Company’s gross profit in the 13 weeks ended December 1, 2024 was higher than the gross profit in the prior year’s comparable period due to higher sales levels in the 13 weeks ended December 1, 2024 compared to the comparable period in the prior year partially offset by a less favorable product mix, higher labor costs due to ramping up capacity ahead of customer program volume increases, higher depreciation and higher costs for raw materials, supplies, and freight resulting from inflationary trends.

The Company’s gross profit in the 39 weeks ended December 1, 2024 was higher than the gross profit in the prior year’s comparable period due to the higher sales levels partially offset by a less favorable sales mix and the higher costs mentioned above.

The Company’s gross profit margins, measured as percentages of sales, were 26.6% and 28.1%, respectively, in the 13 weeks and 39 weeks ended December 1, 2024 compared to 27.2% and 30.5%, respectively, in the 13 weeks and 39 weeks ended November 26, 2023.

The lower gross profit margins for the 13 and 39 weeks ended December 1, 2024 compared to the prior year’s comparable periods were primarily due to a less favorable sales mix, as well as the higher costs mentioned above.

The Company’s earnings before income taxes and net earnings increased 31.4% and 31.1%, respectively, in the 13 weeks ended December 1, 2024 compared to the 13 weeks ended November 26, 2023, primarily as a result of higher sales, partially offset by an unfavorable sales mix, the higher costs mentioned above as well as higher selling, general and administrative expenses.

The Company’s earnings before income taxes and net earnings for the 39 weeks ended December 1, 2024 decreased slightly compared to the 39 week period ended November 26, 2023.

The increase from higher sales was offset by less favorable sales mix, the higher costs mentioned above as well as the additional expenses incurred due to the damage from the storm in the first quarter of the fiscal year.

The Company continues to experience inflation in costs of raw materials and supplies, freight costs and other costs and expenses.

14 unchanged sentences

39 Weeks Ended

(Amounts in thousands, except per share amounts)

(Amounts in thousands, except per share

Cost of sales

4 unchanged sentences

Earnings from operations before income taxes

Income tax provision (Note 9)

Income tax provision

Earnings per share:

1 unchanged sentence

Diluted earnings per share

The Company's net sales in the 13 weeks and 26 weeks ended September 1, 2024, were $16.7 million and $30.7 million, respectively, compared to $12.5 million and $28.0 million, respectively, in the 13 weeks and 26 weeks ended August 27, 2023.

Sales for the 13 weeks and 26 weeks ended September 1, 2024 were higher than the comparable periods of the prior year, primarily due to higher sales to the commercial aerospace and military markets.

The Company’s gross profit in the 13 weeks ended September 1, 2024 was higher than the gross profit in the prior year’s comparable period due to higher sales levels in the 13 weeks ended September 1, 2024, compared to the comparable period in the prior year partially offset by a less favorable product mix, due to higher fabric sales, higher depreciation, repairs and maintenance and utilities related to use of the new production line, and higher costs for raw materials, supplies, freight and labor resulting from inflationary trends.

The Company’s gross profit margins, measured as a percentage of sales, were 28.5% and 28.9%, respectively, in the 13 weeks and 26 weeks ended September 1, 2024, compared to 32.7% and 31.8%, respectively, in the 13 weeks and 26 weeks ended August 27, 2023.

The lower gross profit margins for the 13 and 26 weeks ended September 1, 2024, compared to the prior year’s comparable periods were primarily due to ramping up capacity ahead of customer program volume increases, to a less favorable sales mix, due to higher fabric sales, higher depreciation, repairs and maintenance and utilities related to the use of the new production line, and higher costs for raw materials, supplies, freight and labor resulting from inflationary trends, partially offset by higher sales.

The Company's net sales in the 13 weeks and 39 weeks ended December 1, 2024, were $14.4 million and $45.1 million, respectively, compared to $11.6 million and $39.7 million, respectively, in the 13 weeks and 39 weeks ended November 26, 2023.

Sales for the 13 weeks ended December 1, 2024 were higher than the comparable period of the prior year, primarily due to higher sales to the commercial aerospace and business aircraft markets.

Sales for the 39 weeks ended December 1, 2024 were higher than the comparable period of the prior year due to higher sales to the commercial aerospace, business aircraft and military markets.

The Company’s gross profit in the 13 weeks ended December 1, 2024 was higher than the gross profit in the prior year’s comparable period due to higher sales levels in the 13 weeks ended December 1, 2024, compared to the comparable period in the prior year partially offset by a less favorable product mix, higher labor costs due to bringing up the new manufacturing lines to ramp up capacity in preparation for increases in customer program volumes , higher depreciation, repairs and maintenance, insurance costs and higher costs for raw materials, supplies, and freight resulting from inflationary trends.

Gross profit in the 13 weeks ended December 1, 2024 was also negatively impacted by lower production in the period due to bringing up the new manufacturing lines.

The Company’s gross profit in the 39 weeks ended December 1, 2024 was higher to the gross profit in the prior year’s comparable period due to higher sales levels offset by a less favorable sales mix, and the higher costs mentioned above.

The Company’s gross profit margins, measured as a percentage of sales, were 26.6% and 28.1%, respectively, in the 13 weeks and 39 weeks ended December 1, 2024, compared to 27.2% and 30.5%, respectively, in the 13 weeks and 39 weeks ended November 26, 2023.

The lower gross profit margins for the 13 and 39 weeks ended December 1, 2024, compared to the prior year’s comparable periods were primarily due to ramping up capacity ahead of customer program volume increases, a less favorable sales mix, higher depreciation, repairs and maintenance and insurance costs, and higher costs for raw materials, supplies, freight and labor resulting from inflationary trends, partially offset by higher sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $287,000 during the 13 weeks ended September 1, 2024, and increased by 15.5% compared to the prior year’s comparable period, and these expenses, measured as percentages of sales, were 12.8% in the 13 weeks ended September 1, 2024 compared to 14.8% in the 13 weeks ended August 27, 2023.

The increase in selling, general and administrative expenses during the 13 weeks ended September 1, 2024 was primarily due to freight out, advertising and tradeshow expense, higher salaries and payroll related expenses and higher profit sharing expense mainly due to higher headcount in connection with ramping up capacity in preparation of increases in customer program volumes.

Selling, general and administrative expenses decreased by $311,000 during the 26 weeks ended September 1, 2024, and decreased by 7.0% compared to the prior year’s comparable period, and these expenses, measured as a percentage of sales, were 13.5% in the 26 weeks ended September 1, 2024 compared to 15.9% in the 26 weeks ended August 27, 2023.

The decrease in selling, general and administrative expenses during the 26 weeks ended September 1, 2024 was primarily due to $570,000 of activist shareholder defense costs in the prior year comparable period.

Selling, general and administrative expenses included stock option expenses of $101,000 and $190,000, respectively, for the 13 weeks and 26 weeks ended September 1, 2024, compared to stock option expenses of $104,000 and $322,000, including $109,000 due to the modification of previously granted stock options, respectively, for the 13 weeks and 26 weeks ended August 27, 2023.

Selling, general and administrative expenses increased by $178,000 during the 13 weeks ended December 1, 2024, and increased by 9.9% compared to the prior year’s comparable period, and these expenses, measured as percentages of sales, were 13.8% in the 13 weeks ended December 1, 2024 compared to 15.5% in the 13 weeks ended November 26, 2023.

The increase in selling, general and administrative expenses during the 13 weeks ended December 1, 2024 was primarily due to higher salaries and payroll related expenses, and higher professional and legal fees.

The increase in salaries and payroll related expenses is due to increased headcount in connection with ramping up capacity in preparation of expected increases in customer program volumes.

Selling, general and administrative expenses decreased by $133,000 during the 39 weeks ended December 1, 2024, and decreased by 2.1% compared to the prior year’s comparable period, and these expenses, measured as a percentage of sales, were 13.6% in the 39 weeks ended December 1, 2024 compared to 15.8% in the 39 weeks ended November 26, 2023.

The decrease in selling, general and administrative expenses during the 39 weeks ended December 1, 2024 was primarily due to $570,000 of activist shareholder defense costs in the prior year comparable period offset by higher salaries and payroll related expenses as well as higher professional fees.

Selling, general and administrative expenses included stock option expenses of $105,000 and $295,000, respectively, for the 13 weeks and 39 weeks ended December 1, 2024, compared to stock option expenses of $103,000 and $425,000, including $109,000 due to the modification of previously granted stock options, respectively, for the 13 weeks and 39 weeks ended November 26, 2023.

Earnings from Operations

For the reasons set forth above, the Company’s earnings from operations were $2.6 million and $4.7 million, respectively, for the 13 weeks and 26 weeks ended September 1, 2024, compared to $2.2 million and $4.4 million, respectively, for the 13 weeks and 26 weeks ended August 27, 2023.

For the reasons set forth above, the Company’s earnings from operations were $1.8 million and $6.5 million, respectively, for the 13 weeks and 39 weeks ended December 1, 2024, compared to $1.4 million and $5.8 million, respectively, for the 13 weeks and 39 weeks ended November 26, 2023.

Interest and Other Income

Interest and other income were $245,000 and $584,000, respectively, for the 13 weeks and 26 weeks ended September 1, 2024, compared to $139,000 and $463,000, respectively, for the prior year's comparable periods.

Interest income increased 76.3% and 26.1%, respectively, for the 13 weeks and 26 weeks ended September 1, 2024, primarily as a result of higher weighted average interest rates and lower losses on the sales of marketable securities, compared to the prior year's comparable periods.

During the 13 weeks and 26 weeks ended September 1, 2024, the Company earned interest income principally from its investments, which consisted primarily of short-term instruments and money market funds.

Interest and other income were $290,000 and $874,000, respectively, for the 13 weeks and 39 weeks ended December 1, 2024, compared to $261,000 and $724,000, respectively, for the prior year's comparable periods.

Interest income increased 11.1% and 20.7%, respectively, for the 13 weeks and 39 weeks ended December 1, 2024, primarily as a result of higher weighted average interest rates and lower losses on the sales of marketable securities, compared to the prior year's comparable periods.

During the 13 weeks and 39 weeks ended December 1, 2024, the Company earned interest income principally from its investments, which consisted primarily of short-term instruments and money market funds.

Income Tax Provision

For the 13 weeks and 26 weeks ended September 1, 2024, the Company recorded income tax provisions of $750,000 and $1.1 million, respectively, which included discrete income tax provisions of $22,000 and $41,000, respectively, for the accrual of interest related to unrecognized tax benefits.

For the 13 weeks and 26 weeks ended August 27, 2023, the Company recorded income tax provisions of $619,000 and $1.3 million, respectively, which included discrete income tax provisions of $16,000 and $53,000, respectively, for the accrual of interest related to unrecognized tax benefits.

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

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

For the 13 weeks and 39 weeks ended December 1, 2024, the Company recorded income tax provisions of $559,000 and $1.7 million, respectively, which included discrete income tax provisions of $19,000 and $60,000, respectively, primarily for the accrual of interest related to unrecognized tax benefits.

For the 13 weeks and 39 weeks ended November 26, 2023, the Company recorded income tax provisions of $423,000 and $1.7 million, respectively, which included discrete income tax provisions of $25,000 and $78,000, respectively, for the accrual of interest related to unrecognized tax benefits.

The Company’s effective tax rates for the 13 weeks and 39 weeks ended December 1, 2024 were 26.2% and 26.7%, respectively, compared to 26.0% and 26.5%, respectively, in the prior year’s comparable periods.

The effective tax rates for the 13 weeks and 39 weeks ended December 1, 2024 were higher than the U.S.

statutory rate of 21% primarily due to state and local taxes and liabilities and 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.

The effective rates for the 13 weeks and 39 weeks ended November 26, 2023 were higher than the U.S.

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

For the reasons set forth above, the Company's net earnings for the 13 weeks and 26 weeks ended September 1, 2024 were $2.1 million and $3.1 million, respectively, compared to net earnings of $1.7 million and $3.6 million, respectively, for the 13 weeks and 26 weeks ended August 27, 2023.

For the reasons set forth above, the Company's net earnings for the 13 weeks and 39 weeks ended December 1, 2024 were $1.6 million and $4.6 million, respectively, compared to net earnings of $1.2 million and $4.8 million, respectively, for the 13 weeks and 39 weeks ended November 26, 2023.

Basic and Diluted Earnings Per Share

In the 13 weeks and 26 weeks ended September 1, 2024, basic and diluted earnings per share were $0.10 and $0.15, respectively, compared to basic and diluted earnings per share of $0.09 and $0.18, respectively, in the 13 weeks and 26 weeks ended August 27, 2023.

In the 13 weeks and 39 weeks ended December 1, 2024, basic and diluted earnings per share were $0.08 and $0.23, respectively, compared to basic and diluted earnings per share of $0.06 and $0.24, respectively, in the 13 weeks and 39 weeks ended November 26, 2023.

Liquidity and Capital Resources - Continuing Operations:

5 unchanged sentences

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Net cash used in financing activities

Cash and Marketable Securities

Of the $72.0 million of cash and cash equivalents and marketable securities at September 1, 2024, $30.4 million was owned by one of the Company’s wholly-owned foreign subsidiaries.

The change in cash and cash equivalents and marketable securities at September 1, 2024 compared to March 3, 2024 was the result of capital expenditures, the purchase of treasury shares, dividends paid to shareholders, the Company’s transition tax installment payment, and a number of additional factors.

Of the $70.0 million of cash and cash equivalents and marketable securities at December 1, 2024, $30.8 million was owned by one of the Company’s wholly-owned foreign subsidiaries.

The change in cash and cash equivalents and marketable securities at December 1, 2024 compared to March 3, 2024 was the result of the purchase of treasury shares, dividends paid to shareholders, the Company’s transition tax installment payment, capital expenditures and a number of additional factors.

The significant changes in cash provided by (used in) operating activities was as follows:

accounts receivable decreased by 12% at September 1, 2024 compared to March 3, 2024 primarily due to timing of sales;

inventories increased by 19% at September 1, 2024 compared to March 3, 2024 primarily due to timing of raw materials purchases;

prepaid and other current assets decreased by 12% at September 1, 2024 compared to March 3, 2024 primarily due to lower prepaid tax balances;

accounts payable increased by 5% at September 1, 2024 compared to March 3, 2024 primarily due to timing of vendor payments;

accrued liabilities decreased by 32% at September 1, 2024 compared to March 3, 2024 primarily due to decreases in bonus, profit sharing, and property tax accruals;

income taxes payable decreased by 45% at September 1, 2024 compared to March 3, 2024 due to the payment of a $4.2 million transition tax installment payment in June 2024.

In addition, the Company paid $5.1 million in cash dividends in the 26-week period ended September 1, 2024 compared to $25.6 million in the 26-week period ended August 27, 2023.

The amount paid during the 26-week period ended August 27, 2023 included a $20.5 million special dividend.

accounts receivable decreased by 22% at December 1, 2024 compared to March 3, 2024 primarily due to timing of sales;

inventories increased by 65% at December 1, 2024 compared to March 3, 2024 primarily due to higher in-transit shipments;

prepaid and other current assets decreased by 21% at December 1, 2024 compared to March 3, 2024 primarily due to lower prepaid tax balances;

accounts payable increased by 57% at December 1, 2024 compared to March 3, 2024 primarily due to increase in inventory and timing of vendor payments;

accrued liabilities decreased by 28% at December 1, 2024 compared to March 3, 2024 primarily due to decreases in bonus, profit sharing, and property tax accruals;

income taxes payable decreased by 44% at December 1, 2024 compared to March 3, 2024 due the payment of a $4.2 million transition tax installment payment in June 2024.

In addition, the Company paid $7.6 million in cash dividends in the 39 weeks ended December 1, 2024 compared to $28.1 million in the 39 weeks ended November 26, 2023.

The amount paid during the 39 weeks ended November 26, 2023 included a $20.5 million special cash dividend.

The Company purchased treasury stock of $4.3 million during the 39 weeks ended December 1, 2024 compared to $2.9 million in the 39 weeks ended November 26, 2023.

Working Capital

The decrease in working capital at September 1, 2024 compared to March 3, 2024 was due principally to the decreases in marketable securities, accounts receivable and prepaid and other current assets and increased income taxes payable, partially offset by an increase in inventories and decreases in accrued liabilities.

The Company's current ratio (the ratio of current assets to current liabilities) was 9.1 to 1.0 at September 1, 2024, compared to 10.2 to 1.0 at March 3, 2024.

During the 26 weeks ended September 1, 2024, the Company's net earnings, adjusted for depreciation and amortization, deferred income taxes, stock-based compensation, amortization of bond premium and changes in operating assets and liabilities, resulted in a $1.0 million operating cash inflow.

During the same 26-week period, the Company expended $206,000 for the purchase of property, plant and equipment, compared with $374,000 during the 26 weeks ended August 27, 2023.

The Company paid $5.1 million in cash dividends in the 26-week period ended September 1, 2024, compared to $25.6 million in the 26-week period ended August 27, 2023.

The Company purchased treasury shares of $1.9 million in the 26-week period ended September 1, 2024 compared to $2.9 million in the 26-week period ended August 27, 2023.

The decrease in working capital at December 1, 2024 compared to March 3, 2024 was due principally to the decreases in marketable securities, accounts receivable and prepaid and other current assets and increased income taxes payable, partially offset by an increase in inventories and decreases in accrued liabilities.

The Company's current ratio (the ratio of current assets to current liabilities) was 7.6 to 1.0 at December 1, 2024, compared to 10.2 to 1.0 at March 3, 2024.

During the 39 weeks ended December 1, 2024, the Company's net earnings, adjusted for depreciation and amortization, deferred income taxes, stock-based compensation, amortization of bond premium and changes in operating assets and liabilities, resulted in a $3.7 million operating cash inflow.

During the same 39-week period, the Company expended $258,000 for the purchase of property, plant and equipment, compared with $481,000 during the 39 weeks ended November 26, 2023.

The Company paid $7.6 million in cash dividends in the 39-week period ended December 1, 2024, compared to $28.1 million in the 39-week period ended November 26, 2023.

The Company purchased treasury shares of $4.3 million in the 39-week period ended December 1, 2024 compared to $2.9 million in the 39-week period ended November 26, 2023.

Other Liquidity Factors

15 unchanged sentences

The Company’s critical accounting policies that are important to the Condensed Consolidated Financial Statements and that entail, to a significant extent, the use of estimates and assumptions and the application of management’s judgment are described in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, 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 2025 fiscal year second quarter.

There have been no significant changes to such accounting policies during the 2025 fiscal year third quarter.

Contingencies:

7 unchanged sentences

Quantitative and Qualitative Disclosures About Market Risk .

The Company’s market risk exposure at September 1, 2024 is consistent with, and not greater than, the types of market risk and amount of exposures presented in the Annual Report on Form 10-K for the fiscal year ended March 3, 2024.

The Company’s market risk exposure at December 1, 2024 is consistent with, and not greater than, the types of market risk and amount of exposures presented in the Annual Report on Form 10-K for the fiscal year ended March 3, 2024.

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 2. Management’s Discussion and Analysis