PARK AEROSPACE CORP 10-Q

Item 1. Financial Statements. PARK AEROSPACE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) June 1, 2025 (unaudited) March 2, 2025* ASSETS Current assets Cash and cash equivalents $ 20,624 $ 21,621 Marketable securities (Note 3) 44,947 47,213 Accounts receivable, less allowance for credit losses of $ 129 and $ 125 , respectively 12,953 12,903 Inventories (Note 4) 6,763 7,213 Prepaid expenses and other current assets 2,045 1,344 Total current assets 87,332 90,294 Property, plant and equipment, net 21,675 21,650 Operating right-of-use assets (Note 5) 295 308 Goodwill and other intangible assets 9,776 9,776 Other assets 1,640 80 Total assets $ 120,718 $ 122,108 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 1,710 $ 2,513 Operating lease liability (Note 5) 41 40 Accrued liabilities 1,613 1,318 Income taxes payable 6,764 5,390 Total current liabilities 10,128 9,261 Long-term operating lease liability (Note 5) 307 318 Deferred income taxes (Note 9) 5,260 5,304 Other liabilities 72 71 Total liabilities 15,767 14,954 Commitments and contingencies (Note 12) Shareholders' equity (Note 8) Common stock 2,096 2,096 Additional paid-in capital 170,203 170,265 Accumulated deficit ( 49,969 ) ( 49,550 ) Accumulated other comprehensive loss ( 450 ) ( 665 ) 121,880 122,146 Less treasury stock, at cost ( 16,929 ) ( 14,992 ) Total shareholders' equity 104,951 107,154 Total liabilities and shareholders' equity $ 120,718 $ 122,108 * The balance sheet at March 2, 2025 has been derived from the audited consolidated financial statements at that date. See Notes to Condensed Consolidated Financial Statements (Unaudited). 3 PARK AEROSPACE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) 13 Weeks Ended (Unaudited) June 1, June 2, 2025 2024 Net sales $ 15,400 $ 13,970 Cost of sales 10,682 9,871 Gross profit 4,718 4,099 Selling, general and administrative expenses 2,299 2,017 Earnings from operations 2,419 2,082 Storm Damage Charge (Note 11) - ( 1,052 ) Interest and other income 355 339 Earnings from operations before income taxes 2,774 1,369 Income tax provision (Note 9) 694 376 Net earnings $ 2,080 $ 993 Earnings per share (Note 7) Basic: Basic earnings per share $ 0.10 $ 0.05 Basic weighted average shares 19,919 20,253 Diluted: Diluted earnings per share $ 0.10 $ 0.05 Diluted weighted average shares 19,968 20,371 See Notes to Condensed Consolidated Financial Statements (Unaudited). 4 PARK AEROSPACE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Amounts in thousands) 13 Weeks Ended (Unaudited) June 1, June 2, 2025 2024 Net earnings $ 2,080 $ 993 Other comprehensive earnings, net of tax: Unrealized gains on marketable securities: Unrealized holding gains arising during the period 227 258 Unrealized losses on marketable securities: Unrealized holding losses arising during the period ( 12 ) ( 35 ) Other comprehensive earnings 215 223 Total comprehensive earnings $ 2,295 $ 1,216 See Notes to Condensed Consolidated Financial Statements (Unaudited). 5 PARK AEROSPACE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Amounts in thousands, except share and per share amounts) Accumulated Additional Other Common Stock Paid-in Accumulated Comprehensive Treasury Stock Shares Amount Capital Deficit Loss Shares Amount Balance, March 2, 2025 20,965,144 $ 2,096 $ 170,265 $ ( 49,550 ) $ ( 665 ) 962,476 $ ( 14,992 ) Net earnings - - - 2,080 - - - Unrealized gain on marketable securities, net of tax - - - - 215 - - Stock options exercised - - ( 150 ) - - ( 15,000 ) 228 Stock-based compensation - - 88 - - - - Repurchase of treasury shares - - - - - 166,955 ( 2,165 ) Cash dividends ($ 0.125 per share) - - - ( 2,499 ) - - - Balance, June 1, 2025 20,965,144 $ 2,096 $ 170,203 $ ( 49,969 ) $ ( 450 ) 1,114,431 $ ( 16,929 ) Accumulated Additional Other Common Stock Paid-in Accumulated Comprehensive Treasury Stock Shares Amount Capital Deficit Loss Shares Amount Balance, March 3, 2024 20,965,144 $ 2,096 $ 170,445 $ ( 45,374 ) $ ( 2,271 ) 711,783 $ ( 11,982 ) Net earnings - - - 993 - - - Unrealized gain on marketable securities, net of tax - - - - 223 - - Stock-based compensation - - 89 - - - - Cash dividends ($ 0.125 per share) - - - ( 2,532 ) - - - Balance, June 2, 2024 20,965,144 $ 2,096 $ 170,534 $ ( 46,913 ) $ ( 2,048 ) 711,783 $ ( 11,982 ) See Notes to Condensed Consolidated Financial Statements (Unaudited). 6 PARK AEROSPACE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) 13 Weeks Ended (Unaudited) June 1, June 2, 2025 2024 Cash flows from operating activities: Net earnings $ 2,080 $ 993 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Non-cash storm damage charge - 887 Depreciation and amortization 456 439 Stock-based compensation 88 89 Allowance for credit losses 4 - Deferred income taxes ( 44 ) 18 Amortization of bond premium 1 49 Changes in operating assets and liabilities ( 995 ) ( 2,898 ) Net cash provided by (used in) operating activities 1,590 ( 423 ) Cash flows from investing activities: Purchase of property, plant and equipment ( 481 ) ( 12 ) Purchases of marketable securities ( 2,440 ) ( 2,937 ) Proceeds from sales and maturities of marketable securities 4,920 3,418 Net cash provided by investing activities 1,999 469 Cash flows from financing activities: Dividends paid ( 2,499 ) ( 2,532 ) Proceeds from exercise of stock options 78 - Purchase of treasury stock ( 2,165 ) - Net cash used in financing activities ( 4,586 ) ( 2,532 ) Decrease in cash and cash equivalents ( 997 ) ( 2,486 ) Cash and cash equivalents, beginning of period 21,621 6,567 Cash and cash equivalents, end of period $ 20,624 $ 4,081 Supplemental cash flow information: Cash paid during the period for income taxes, net of refunds $ - $ - See Notes to Condensed Consolidated Financial Statements (Unaudited). 7 PARK AEROSPACE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Amounts in thousands, except share (unless otherwise stated), per share and option amounts) 1. CONSOLIDATED FINANCIAL STATEMENTS The Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of Shareholders’ Equity as of June 1, 2025, the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Earnings for the 13 weeks ended June 1, 2025 and June 2, 2024, and the Condensed Consolidated Statements of Cash Flows for the 13-week periods 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 1, 2025 and the results of operations and cash flows for all periods presented. The Condensed 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 2, 2025. There have been no significant changes to such accounting policies during the 13 weeks ended June 1, 2025. 2. FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability ( i.e ., the “exit price”) in an orderly transaction between market participants at the measurement date. Fair value measurements are broken down into three levels based on the reliability of inputs as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs 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. 8 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. 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. 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. With respect to goodwill, the Company first assesses qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. 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. 3. 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 in the Condensed Consolidated Statements of Operations. The costs of securities sold are based on the specific identification method. The following is a summary of available-for-sale securities: June 1, 2025 Total Level 1 Level 2 Level 3 U.S. Treasury and other government securities $ 44,947 $ 44,947 $ - $ - Total marketable securities $ 44,947 $ 44,947 $ - $ - March 2, 2025 Total Level 1 Level 2 Level 3 U.S. Treasury and other government securities $ 47,213 $ 47,213 $ - $ - Total marketable securities $ 47,213 $ 47,213 $ - $ - 9 The following table shows the amortized cost basis of, and gross unrealized gains and losses on, the Company’s available-for-sale securities: Amortized Cost Basis Gross Unrealized Gains Gross Unrealized Losses June 1, 2025: U.S. Treasury and other government securities $ 45,564 $ 11 $ 628 Total marketable securities $ 45,564 $ 11 $ 628 March 2, 2025: U.S. Treasury and other government securities $ 48,124 $ 24 $ 935 Total marketable securities $ 48,124 $ 24 $ 935 The estimated fair values of such securities at June 1, 2025 by contractual maturity are shown below: Due in one year or less $ 36,291 Due after one year through five years 8,656 $ 44,947 4. 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. Work-in-process and finished goods inventories cost valuations include direct material costs as well as a portion of the Company’s overhead expenses. The Company’s overhead expenses that are applied to its finished goods inventories are based on actual expenses related to the procurement, storage, shipment and production of the finished goods. Inventories consisted of the following: June 1, March 2, 2025 2025 Inventories: Raw materials $ 4,346 $ 4,768 Work-in-process 786 727 Finished goods 1,631 1,718 $ 6,763 $ 7,213 10 5. 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 options. 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. Future minimum lease payments under non-cancellable operating leases as of June 1, 2025 are as follows: Fiscal Year: 2026 $ 43 2027 59 2028 61 2029 65 2030 59 Thereafter 143 Total undiscounted operating lease payments 430 Less imputed interest ( 82 ) Present value of operating lease payments $ 348 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 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 ended June 1, 2025 and June 2, 2024, the Company’s operating lease expenses were $ 17 and $ 15 , respectively. Cash payments for the 13 weeks ended June 1, 2025 and June 2, 2024 of $ 14 and $ 13 , respectively, 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 1, 2025 and March 2, 2025: June 1, March 2, 2025 2025 Operating right-of-use assets $ 295 $ 308 Operating lease liabilities $ 41 $ 40 Long-term operating lease liabilities 307 318 Total operating lease liabilities $ 348 $ 358 11 At June 1, 2025 and March 2, 2025, the Company’s weighted average remaining lease terms for its operating leases were 6.14 years and 6.34 years, respectively, and the weighted average borrowing rates for its operating leases were 4.97 % and 4.97 %, respectively. 6. STOCK-BASED COMPENSATION As of June 1, 2025, 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. 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. 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. Upon termination of employment or service as a director, all options held by the optionee that have not previously become exercisable shall terminate and all other options held by such optionee may be exercised, to the extent exercisable on the date of such termination, for a limited time after such termination. 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. The future compensation expense to be recognized in earnings before income taxes for options outstanding at June 1, 2025 was $ 596 , which is expected to be recognized ratably over a weighted average vesting period of 1.18 years. The following is a summary of option activity for the 13 weeks ended June 1, 2025: Outstanding Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Balance, March 2, 2025 718,950 $ 12.15 Granted - - Exercised ( 15,000 ) 5.23 Terminated or expired ( 5,574 ) 12.74 Balance, June 1, 2025 698,376 $ 12.30 6.35 $ 1,003 Vested and exercisable, June 1, 2025 388,276 $ 11.93 5.04 $ 726 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 potentially dilutive securities outstanding during the period. Stock options are the Company’s only potentially dilutive securities; and the number of dilutive options is computed using the treasury stock method. 12 The following table sets forth the calculation of basic and diluted earnings per share: 13 Weeks Ended June 1, 2025 June 2, 2024 Net earnings $ 2,080 $ 993 Weighted average common shares outstanding for basic EPS 19,919 20,253 Net effect of dilutive options 49 118 Weighted average shares outstanding for diluted EPS 19,968 20,371 Basic earnings per share $ 0.10 $ 0.05 Diluted earnings per share $ 0.10 $ 0.05 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 335,338 and 0 for the 13 weeks ended June 1, 2025 and June 2, 2024, respectively. 8. 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 166,955 and 0 shares of its common stock during the 13 weeks ended June 1, 2025 and June 2, 2024, respectively. As a result, the Company is authorized to purchase up to a total of 781,766 shares of its common stock, representing approximately 3.9 % of the Company’s 19,855,838 total outstanding shares as of the close of business on July 9, 2025. 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. 9. INCOME TAXES For the 13 weeks ended June 1, 2025, the Company recorded an income tax provision of $ 694 , which included a discrete income tax provision of $( 28 ). 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 . The Company’s effective tax rate for the 13 weeks ended June 1, 2025 was 25.0 % compared to 27.5 % in the comparable prior year period. The effective tax rate for the 13 weeks ended June 1, 2025 was higher than the U.S. statutory rate of 21 % primarily due to state and local taxes. 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. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus deprecation, domestic research cost expensing, and the business interest expense limitation. ASC 740, "Income Taxes", requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the three months ended August 31, 2025, the Company will identify any changes required to its financial statements as a result of the OBBBA. The Company is still evaluating the impact of the OBBBA and the results of such evaluations will be reflected on the Company's Form 10-K for the year ended March 1, 2026. 13 10. GEOGRAPHIC REGIONS The Company’s products are sold to customers in North America, Asia and Europe. The Company’s manufacturing facility is located in Kansas. Sales are attributed to geographic regions based upon the region in which the materials were delivered to the customer. 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: 13 Weeks Ended June 1, 2025 June 2, 2024 Net Sales: North America $ 14,315 $ 11,986 Asia 674 719 Europe 411 1,265 Total net sales $ 15,400 $ 13,970 11. STORM DAMAGE CHARGE The Company recorded a charge of $ 1,052 for storm damage in the 13 weeks ended June 2, 2024. On May 19, 2024, the Company’s manufacturing facilities in Newton, Kansas were damaged by a strong storm which transitioned the area. None of the Company’s manufacturing lines or equipment were damaged by the storm. Although the building structures were secure, the roofs on all three buildings in the Company’s Newton, Kansas campus were damaged and required significant repairs. Also, multiple specialty HVAC units were damaged or destroyed. 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’s production lines were returned to full production within two weeks of the storm. The Company did not lose any sales for the 2025 fiscal year; however, $ 1.8 million of sales originally planned to be delivered could not be delivered before the end of the first quarter ended June 2, 2024 due to storm related delays. 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. The Company incurred $ 78 of payroll and related costs for lost production time and employees working on clean-up. The charge recorded by the Company in fiscal 2025 included 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. There were no such charges in fiscal 2026. 14 12. COMMITMENTS AND 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, 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 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 Company does not record environmental liabilities and related legal expenses for which the Company believes that it and its subsidiaries have general liability insurance coverage for the years during which the Company’s subsidiaries’ waste was disposed at two sites for which certain subsidiaries of the Company have been named as potentially responsible parties. Pursuant to such general liability insurance coverage, three insurance carriers reimburse the Company and its subsidiaries for 100% of the legal defense and remediation costs associated with the two sites. Included in selling, general and administrative expenses are charges for actual expenditures and accruals, based on estimates, for certain environmental matters described above. The Company accrues estimated costs associated with known environmental matters when such costs can be reasonably estimated and when the outcome appears probable. The Company believes that the ultimate disposition of known environmental matters will not have a material adverse effect on the Company’s results of operations, cash flows or financial position. Commitments On March 27, 2025, Park and ArianeGroup SAS entered into an agreement under which Park would advance funds to ArianeGroup SAS against future purchases of C2®B product in the total amount of € 4,587 payable in three installments in 2025, 2026, and 2027. The advance would be paid as follows: € 1,376 was paid in April 2025 (actual cost of $ 1,564 ), € 1,835 to be paid in the first quarter of fiscal 2027 (approximately $ 2,200 based on July 3, 2025 exchange rates) and € 1,376 to be paid in the first quarter of fiscal 2028 (approximately $ 1,600 based on July 3, 2025 exchange rates). These advanced funds are to be used to help fund the purchase and installation, by ArianeGroup SAS, of additional manufacturing equipment for ArianeGroup SAS’ production of C2®B product. Under the agreement, the Company commits to purchase C2®B product through December 2033 at an estimated cost of € 36,000 . The Company had a remaining advance of $ 1,564 recorded in Other Assets on the Condensed Consolidated Balance Sheet at June 1, 2025. 15 13. OPERATING SEGMENT The Company operates in a single segment. The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer. The CODM assesses the performance of this reportable segment and allocates resources on a consolidated basis using the entity-wide revenues and expense information reported on the Condensed Consolidated Statements of Operations. The primary measure of segment profit is consolidated net income as reported on the Condensed Consolidated Statements of Operations. In addition, segment assets reviewed by the CODM are reported on the Company’s Condensed Consolidated Balance Sheets as total assets. 16