PKE Park Aerospace Corp

PART I. FINANCIAL INFORMATION

 

Item 1.     Financial Statements.

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

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* The balance sheet at February 26, 2023 has been derived from the audited consolidated financial statements at that date.

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

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See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Amounts in thousands)

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See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in thousands, except share and per share amounts)

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See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

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See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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1.	CONSOLIDATED FINANCIAL STATEMENTS

 

The Condensed Consolidated Balance Sheet and the Consolidated Statement of Shareholders’ Equity as of May 28, 2023, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Earnings for the 13 weeks ended May 28, 2023 and May 29, 2022, 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 condensed consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at May 28, 2023 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 February 26, 2023. There have been no significant changes to such accounting policies during the 13 weeks ended May 28, 2023.

 

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.

 

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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. 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. There have been no changes in events or circumstances which required impairment charges to be recorded during the 13 weeks ended May 28, 2023.

 

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 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:

 

		May 28, 2023
		Total				Level 1				Level 2				Level 3
U.S. Treasury and other government securities		$	70,284			$	70,284			$	-			$	-
U.S. corporate debt securities			4,985				4,985				-				-
Total marketable securities		$	75,269			$	75,269			$	-			$	-

 

		February 26, 2023
		Total				Level 1				Level 2				Level 3
U.S. Treasury and other government securities		$	83,859			$	83,859			$	-			$	-
U.S. corporate debt securities			17,344				17,344				-				-
Total marketable securities		$	101,203			$	101,203			$	-			$	-

 

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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
May 28, 2023:
U.S. Treasury and other government securities		$	75,110			$	-			$	4,826
U.S. corporate debt securities			4,992				-				7
Total marketable securities		$	80,102			$	-			$	4,833
February 26, 2023:
U.S. Treasury and other government securities		$	89,603			$	-			$	5,744
U.S. corporate debt securities			17,414				-				70
Total marketable securities		$	107,017			$	-			$	5,814

 

The estimated fair values of such securities at May 28, 2023 by contractual maturity are shown below:

 

Due in one year or less		$	16,018
Due after one year through five years			59,251
		$	75,269

 

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:

 

		May 28,				February 26,
		2023				2023
Inventories:
Raw materials		$	6,533			$	5,376
Work-in-process			455				536
Finished goods			923				856
		$	7,911			$	6,768

 

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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 May 28, 2023 are as follows:

 

Fiscal Year:
2024		$	40
2025			36
2026			-
2027			-
2028			-
Thereafter			162
Total undiscounted operating lease payments			238
Less imputed interest			(67	)
Present value of operating lease payments		$	171

 

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 May 28, 2023, the Company’s operating lease expenses were $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 May 28, 2023:

 

Operating right-of-use assets		$	136
Operating lease liabilities		$	53
Long-term operating lease liabilities			118
Total operating lease liabilities		$	171

 

The Company’s weighted average remaining lease term for its operating leases is 7.8 years.

 

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In December 2018, the Company entered into a Development Agreement with the City of Newton, Kansas and the Board of County Commissioners of Harvey County, Kansas. Pursuant to this agreement, the Company agreed to construct and operate a redundant manufacturing facility of approximately 90,000 square feet for the design, development and manufacture of advanced composite materials and parts, structures and assemblies for aerospace. The Company further agreed to equip the facility through the purchase of machinery, equipment and furnishings and to create additional new full-time employment of specified levels during a five-year period. In exchange for these agreements, the City and the County agreed to lease to the Company three acres of land at the Newton, Kansas Airport, in addition to the eight acres previously leased to the Company by the City and County. The City and County further agreed to provide financial and other assistance toward the construction of the additional facility as set forth in the Development Agreement. The total cost of the additional facility was $19,800 and the expansion is complete. As of May 28, 2023, the Company had $42 in equipment purchase obligations related to the additional facility.

6.	STOCK-BASED COMPENSATION

 

As of May 28, 2023, the Company had a 2018 Stock Option Plan (the “2018 Plan”) and no other stock-based compensation plan. The 2018 Plan was adopted by the Board of Directors of the Company on May 8, 2018 and approved by the shareholders of the Company at the Annual Meeting of Shareholders of the Company on July 24, 2018 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 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.

 

During the 13 weeks ended May 28, 2023, the Company granted options under the 2018 Plan to purchase a total of 133,300 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 $387 and will be recorded on a straight-line basis over the requisite service period. The weighted average fair value of the granted options was $3.01 per share using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 3.61%-3.85%; expected volatility factor of 28.5%-29.6%; expected dividend yield of 3.82%; and estimated option terms of 4.9-8.3 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 ended May 28, 2023. The estimated term of the options was based on evaluations of the historical and expected future employee exercise behavior.

 

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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 following is a summary of option activity for the 13 weeks ended May 28, 2023:

 

		Outstanding Options				Weighted Average Exercise Price				Weighted Average Remaining  Contractual Term (in years)				Aggregate Intrinsic Value
Balance, February 26, 2023			670,425			$	11.80							$	838
Granted			133,300				13.08
Exercised			-				-
Terminated or expired			(900	)			11.81
Balance, May 28, 2023			802,825			$	12.01				6.28			$	835
Vested and exercisable, May 28, 2023			482,263			$	11.81				4.49			$	598

 

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.

 

The following table sets forth the calculation of basic and diluted earnings per share:

 

		13 Weeks Ended
		May 28, 2023				May 29, 2022
Net earnings		$	1,854			$	1,910
Weighted average common shares outstanding for basic EPS			20,461				20,458
Net effect of dilutive options			65				46
Weighted average shares outstanding for diluted EPS			20,526				20,504
Basic earnings per share		$	0.09			$	0.09
Diluted earnings per share		$	0.09			$	0.09

 

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 157,000 and 397,000 for the 13 weeks ended May 28, 2023 and May 29, 2022, respectively.

 

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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 129,654 and 0 shares of its common stock during the 13 weeks ended May 28, 2023 and May 29, 2022, respectively. As a result, the Company is authorized to purchase up to a total of 1,279,001 shares of its common stock, representing approximately 6.3% of the Company’s 20,250,211 total outstanding shares as of the close of business on July 3, 2023. 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 May 28, 2023, the Company recorded an income tax provision of $688, which included a discrete income tax provisions of $37. For the 13 weeks ended May 29, 2022, the Company recorded an income tax provision of $682, which included a discrete income tax provision of $28.

 

The Company’s effective tax rate for the 13 weeks ended May 28, 2023 was 27.1% compared to 26.3% in the comparable prior year period. The effective tax rate for the 13 weeks ended May 28, 2023 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 29, 2022 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.

 

Notwithstanding the U.S. taxation of the deemed repatriated earnings as a result of the mandatory one-time transition tax on the accumulated untaxed earnings of foreign subsidiaries of U.S. shareholders included in the 2017 Tax Cuts and Jobs Act, the Company intends to indefinitely invest approximately $25 million of undistributed earnings outside of the U.S. If these future earnings are repatriated to the U.S., or if the Company determines such earnings will be remitted in the foreseeable future, the Company may be required to accrue U.S. deferred taxes on such earnings.

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.

 

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

 

		13 Weeks Ended
		May 28, 2023				May 29, 2022
Sales:
North America		$	13,619			$	12,149
Asia			130				124
Europe			1,802				510
Total sales		$	15,551			$	12,783

 

11.	CONTINGENCIES

 

Litigation

 

The Company is subject to a small number of immaterial proceedings, lawsuits and other claims related to environmental, employment, product and other matters. The Company is required to assess the likelihood of any adverse judgments or outcomes in these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy in dealing with these matters. The Company believes that the ultimate disposition of such proceedings, lawsuits and claims will not have a material adverse effect on the liquidity, capital resources, business, 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 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.

 

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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 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.

 

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Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

General:

 

Park Aerospace Corp. (“Park” or the “Company”) develops and manufactures solution and hot-melt advanced composite materials used to produce composite structures for the global aerospace markets. Park’s advanced composite materials include film adhesives and lightning strike protection materials. Park offers an array of composite materials specifically designed for hand lay-up or automated fiber placement (“AFP”) manufacturing applications. Park’s advanced composite materials are used to produce primary and secondary structures for jet engines, large and regional transport aircraft, military aircraft, Unmanned Aerial Vehicles (UAVs commonly referred to as “drones”), business jets, general aviation aircraft and rotary wing aircraft. Park also offers specialty ablative materials for rocket motors and nozzles and specially designed materials for radome applications. As a complement to Park’s advanced composite materials offering, Park designs and fabricates composite parts, structures and assemblies and low volume tooling for the aerospace industry. Target markets for Park’s composite parts and structures (which include Park’s proprietary composite Sigma Strut^TM and Alpha Strut^TM product lines) are, among others, prototype and development aircraft, special mission aircraft, spares for legacy military and civilian aircraft and exotic spacecraft.

 

Financial Overview

 

The Company's total net sales in the 13 weeks ended May 28, 2023 were $15.6 million compared to $12.8 million in the 13 weeks ended May 29, 2022. The increase in sales was primarily due to higher sales to both the commercial and military markets. 

 

The Company’s gross profit margins, measured as percentages of sales, were 31.1% in the 13 weeks ended May 28, 2023 compared to 32.0% in the 13 weeks ended May 29, 2022. The lower gross profit margin for the 13 weeks ended May 28, 2023 was primarily due to higher costs for raw materials, supplies, freight, utilities and labor resulting from inflationary trends.

 

The Company’s earnings from operations before income taxes and net earnings were essentially flat in the 13 weeks ended May 28, 2023 compared to the 13 weeks ended May 29, 2022, primarily as a result of higher sales offset by higher costs for raw materials, supplies, freight, utilities and labor resulting from inflationary trends, $65,000 of losses on sales of investments to fund the $1.00 per share special dividend paid on April 6, 2023 to shareholders of record on March 9, 2023, additional stock option expense of $109,000 due to the modification of previously granted stock options in connection with the special dividend and $570,000 of activist shareholder defense costs.

 

The Company is experiencing inflation in costs of raw materials, supplies, freight, utilities, labor and other costs. The impact of inflation on the Company’s profits has been partially mitigated by the Company’s ability to adjust pricing for a large portion of its sales to pass the impact of inflation through to its customers.

 

Programs that the Company supplies into may be experiencing supply chain issues from other suppliers to the programs. The Company’s sales could be impacted by delays and reductions in its customers’ production schedules caused by other suppliers in the chain.

 

 

The tight labor market has created challenges in hiring personnel. Although the Company feels very positive about its workforce, staffing to proper levels continues to pose challenges for the Company. The Company’s cross-training “Customer Flexibility Program” continues to help the Company deal with the staffing shortages

 

The war in Ukraine has not had a material impact on the Company’s results of operations, but the Company has the potential for an increase in future sales due to increases in spending worldwide on missile defense systems and other defense programs. The Company does not have any significant customers in Russia or Ukraine.  The Company has experienced some increases to raw material costs from overseas suppliers due to the impacts of the war in Ukraine.

 

The Company has a long-term contract pursuant to which one of its customers, which represents a substantial portion of the Company’s revenue, places orders. The long-term contract with the customer is requirements based and does not guarantee quantities. An order forecast and pricing were agreed upon in the contract. However, this order forecast is updated periodically during the term of the contract. Purchase orders generally are received by the Company in excess of three months in advance of delivery by the Company to the customer.

 

Results of Operations:

 

The following table sets forth the components of the consolidated statements of operations:

 

		13 Weeks Ended
(Amounts in thousands, except per share		May 28,				May 29,				%
amounts)		2023				2022				Change
Net sales		$	15,551			$	12,783				21.7	%
Cost of sales			10,718				8,691				23.3	%
Gross profit			4,833				4,092				18.1	%
Selling, general and administrative expenses			2,615				1,633				60.1	%
Earnings from operations			2,218				2,459				(9.8	)%
Interest and other income			324				133				143.6	%
Earnings from operations before income taxes			2,542				2,592				(1.9	)%
Income tax provision (Note 9)			688				682				0.9	%
Net earnings		$	1,854			$	1,910				(2.9	)%
Earnings per share:
Basic:
Basic earnings per share		$	0.09			$	0.09				0	%
Diluted:
Diluted earnings per share		$	0.09			$	0.09				0	%

 

Net Sales

 

The Company’s total net sales worldwide in the 13 weeks ended May 28, 2023 increased to $15.6 million from $12.8 million in the 13 weeks ended May 29, 2022. The increase in sales was principally due to higher sales to both the commercial and military markets.

 

 

Gross Profit

 

The Company’s gross profit in the 13 weeks ended May 28, 2023 was higher than its gross profit in the prior year’s comparable period due to higher sales. The gross profit as a percentage of sales for the Company’s worldwide operations in the 13 weeks ended May 28, 2023 decreased to 31.1% from 32.0% in the 13 weeks ended May 29, 2022. The lower gross profit margin for the 13 weeks ended May 28, 2023 was primarily due to higher costs for raw materials, supplies and freight.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were higher compared to the prior year’s comparable period, and these expenses, measured as percentages of sales, were 16.8% in the 13 weeks ended May 28, 2023 compared to 12.8% in the 13 weeks ended May 29, 2022.  The increase in selling, general and administrative expenses was primarily due to $570,000 of activist shareholder defense costs.

 

Selling, general and administrative expenses included stock option expenses of $218,000, including $109,000 due to the modification of previously granted stock options, for the 13 weeks ended May 28, 2023, compared to stock option expenses of $85,000 for the 13 weeks ended May 29, 2022.

 

Earnings from operations

 

For the reasons set forth above, the Company’s earnings from operations were $2.2 million for the 13 weeks ended May 28, 2023 compared to $2.5 million for the 13 weeks ended May 29, 2022.

 

Interest and Other Income

 

Interest and other income was $324,000 for the 13 weeks ended May 28, 2023, compared to $133,000 for the prior year’s comparable period. Interest income increased 144% for the 13 weeks ended May 28, 2023 primarily as a result of higher weighted average interest rates in the 13 weeks ended May 28, 2023 compared to the prior year’s comparable period. Interest and other income for the 13 weeks ended May 28, 2023 included $65,000 of losses on sales of investments to fund the $1.00 per share special dividend paid on April 6, 2023 to shareholders of record on March 9, 2023. During the 13 weeks ended May 28, 2023, 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 ended May 28, 2023, the Company recorded an income tax provision of $688,000, which included a discrete income tax provision of $37,000 for the accrual of interest related to unrecognized tax benefits. For the 13 weeks ended May 29, 2022, the Company recorded an income tax provision of $682,000, which included a discrete income tax provision of $28,000 for the accrual of interest related to unrecognized tax benefits.

 

The Company’s effective tax rate for the 13 weeks ended May 28, 2023 was 27.1% compared to 26.3% in the prior year’s comparable period. The effective tax rate for the 13 weeks ended May 28, 2023 was 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. The effective rate for the 13 weeks ended May 29, 2022 was 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.

 

 

Net Earnings

 

For the reasons set forth above, the Company’s net earnings for the 13 weeks ended May 28, 2023 were $1.9 million compared to net earnings of $1.9 million for the 13 weeks ended May 29, 2022.

 

Basic and Diluted Earnings Per Share

 

In the 13 weeks ended May 28, 2023, basic and diluted earnings per share were $0.09, including the pretax charges of $570,000 related to activist shareholder defense costs, the stock option modification pretax charge of $109,000 and the $65,000 of losses on sales of investments to fund the special dividend, compared to basic and diluted earnings per share of $0.09 in the 13 weeks ended May 29, 2022.

 

Liquidity and Capital Resources:

 

(Amounts in thousands)		May 28,				February 26,
		2023				2023				Change
Cash and cash equivalents and marketable securities		$	81,105			$	105,440			$	(24,335	)
Working capital			93,509				96,455				(2,946	)

 

		13 Weeks Ended
(Amounts in thousands)		May 28,				May 29,
		2023				2022				Change
Net cash provided by operating activities		$	117			$	44			$	73
Net cash provided by (used in) investing activities			26,181				(6,476	)			32,657
Net cash used in financing activities			(24,699	)			(2,046	)			(22,653	)

 

Cash and Marketable Securities

 

Of the $81.1 million of cash and cash equivalents and marketable securities at May 28, 2023, $28.6 million was owned by one of the Company’s wholly owned foreign subsidiaries.

 

The change in cash and cash equivalents and marketable securities at May 28, 2023 compared to February 26, 2023 was the result of capital expenditures and dividends paid to shareholders, partially offset by cash provided by operating activities and a number of additional factors. The significant changes in cash provided by operating activities were as follows:

 

●

Accounts receivable increased by 16% at May 28, 2023 compared to February 26, 2023 primarily due to the timing of sales;

 

 

●

inventories increased by 17% at May 28, 2023 compared to February 26, 2023 primarily due to the timing of raw material purchases;

 

●

prepaid expenses and other current assets decreased by 5% at May 28, 2023 compared to February 26, 2023 primarily due to marketable securities;

 

●

accounts payable decreased by 15% at May 28, 2023 compared to February 26, 2023 primarily due to the timing of vendor payments; and

 

●

accrued liabilities increased by 47% at May 28, 2023 compared to February 26, 2023 primarily due to accrual of expenses related to the activist shareholder defense costs.

 

In addition, the Company paid $23.0 million in cash dividends in the 13-week period ended May 28, 2023 and $2.0 million in cash dividends in the 13-week period ended May 29, 2022.

 

Working Capital         

 

The decrease in working capital at May 28, 2023 compared to February 26, 2023 was due principally to the decrease in cash and cash equivalents and increases in accounts payable and income taxes payable partially offset by increases in accounts receivable, inventories and prepaid expenses and other current assets and a decrease in accrued liabilities.

 

The Company's current ratio (the ratio of current assets to current liabilities) was 10.5 to 1.0 at May 28, 2023 compared to 4.4 to 1.0 at February 26, 2023.

 

Cash Flows

 

During the 13 weeks ended May 28, 2023, the Company's net earnings, before depreciation and amortization, deferred income taxes, stock-based compensation, amortization of bond premium and changes in operating assets and liabilities, were $117,000. During the same 13-week period, the Company expended $167,000 for the purchase of property, plant and equipment, compared with $88,000 during the 13 weeks ended May 29, 2022. The Company paid $23.0 million in cash dividends in the 13-week period ended May 28, 2023.

 

Other Liquidity Factors

 

The Company believes its financial resources will be sufficient, through the 12 months following the filing of this Form 10-Q Quarterly Report and for the foreseeable future thereafter, to provide for continued investment in working capital and property, plant and equipment and for general corporate purposes. The Company’s financial resources are also available for purchases of the Company's common stock, cash dividend payments, appropriate acquisitions and other expansions of the Company's business, including the expansion in Kansas.

 

The Company is not aware of any circumstances or events that are reasonably likely to occur that could materially affect its liquidity. The Company further believes its balance sheet and financial position to be very strong.

 

 

Contractual Obligations:

 

The Company’s contractual obligations and other commercial commitments to make future payments under contracts, such as lease agreements, consist only of (i) operating lease commitments and (ii) commitments to purchase raw materials. The Company has no other long-term debt, capital lease obligations, unconditional purchase obligations or other long-term obligations, standby letters of credit, guarantees, standby repurchase obligations or other commercial commitments or contingent commitments, other than two standby letters of credit in the total amount of $140,000, to secure the Company’s obligations under its workers’ compensation insurance program.

 

Off-Balance Sheet Arrangements:

 

The Company’s liquidity is not dependent on the use of, and the Company is not engaged in, any off-balance sheet financing arrangements, such as securitization of receivables or obtaining access to assets through special purpose entities.

 

Critical Accounting Policies and Estimates:

 

The foregoing Discussion and Analysis of Financial Condition and Results of Operations is based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with US GAAP. The preparation of these Condensed Consolidated Financial Statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to sales allowances, allowances for doubtful accounts, inventories, valuation of long-lived assets, income taxes, contingencies and litigation, and employee benefit programs. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

The Company’s critical accounting policies that are important to the 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 February 26, 2023. There have been no significant changes to such accounting policies during the 2024 fiscal year first quarter.

 

Contingencies:

 

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.

 

Factors That May Affect Future Results.

 

Certain portions of this Report which do not relate to historical financial information may be deemed to constitute forward-looking statements that are subject to various factors which could cause actual results to differ materially from the Company’s expectations or from results which might be projected, forecasted, estimated or budgeted by the Company in forward-looking statements. Such factors include, but are not limited to, general conditions in the aerospace industry, the Company’s competitive position, the status of the Company’s relationships with its customers, economic conditions in international markets, the cost and availability of raw materials, transportation and utilities, and the various factors set forth under the caption “Factors That May Affect Future Results” in Item 1 and in Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended February 26, 2023.

 

 

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.

 

The Company’s market risk exposure at May 28, 2023 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 February 26, 2023.

 

Item 4.     Controls and Procedures.

 

(a)    Disclosure Controls and Procedures.

 

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of May 28, 2023, the end of the quarterly fiscal period covered by this quarterly report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

(b)    Changes in Internal Control Over Financial Reporting.

 

There has not been any change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

PART II. OTHER INFORMATION

 

Item 1.                  Legal Proceedings.

 

None.

 

Item 1A.               Risk Factors.

 

There have been no material changes in the risk factors as previously disclosed in the Company’s Form 10-K Annual Report for the fiscal year ended February 26, 2023.

 

Item 2.                  Unregistered Sales of Equity Securities and Use of Proceeds.

 

The following table provides information with respect to shares of the Company’s common stock acquired by the Company during each month included in the Company’s 2024 fiscal year first quarter ended May 28, 2023.

 

Period		Total Number of Shares (or Units) Purchased				Average Price Paid Per Share (or Unit)				Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Programs			Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
February 27 - March 28			0			$	-				0
March 29 - April 28			0			$	-				0
April 29 - May 28			129,654			$	12.87				129,654
Total			129,654			$	12.87				129,654		1,370,346 (a)
(a)		Aggregate number of shares available to be purchased by the Company pursuant to share purchase authorization announced on May 23, 2022. Pursuant to such authorization, the Company is authorized to purchase its shares from time to time on the open market or in privately negotiated transactions.

 

Item 3.                  Defaults Upon Senior Securities.

 

None.

 

Item 4.                  Mine Safety Disclosures.

 

None.

 

Item 5.                  Other Information.

 

None.

 

 

Item 6.	Exhibits.
31.1		Certification of principal executive officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
31.2		Certification of principal financial officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
32.1		Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended May 28, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at May 28, 2023 (unaudited) and February 26, 2023; (ii) Consolidated Statements of Operations for the 13 weeks ended May 28, 2023 and May 29, 2022 (unaudited); (iii) Consolidated Statements of Comprehensive Earnings for the 13 weeks ended May 28, 2023 and May 29, 2022 (unaudited); (iv) Consolidated Statements of Shareholders’ Equity at May 28, 2023 (unaudited) and May 29, 2022; and (v) Condensed Consolidated Statements of Cash Flows for the 13 weeks ended May 28, 2023 and May 29, 2022 (unaudited). * +
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
		*	Filed electronically herewith.
		+    Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

     

 

EXHIBIT INDEX

 

Exhibit No.	Name
31.1	Certification of principal executive officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
31.2	Certification of principal financial officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
32.1	Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended May 28, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at May 28, 2023 (unaudited) and February 26, 2023; (ii) Consolidated Statements of Operations for the 13 weeks ended May 28, 2023 and May 29, 2022 (unaudited); (iii) Consolidated Statements of Comprehensive Earnings for the 13 weeks ended May 28, 2023 and May 29, 2022 (unaudited); (iv) Consolidated Statements of Shareholders’ Equity at May 28, 2023 (unaudited) and May 29, 2022; and (v) Condensed Consolidated Statements of Cash Flows for the 13 weeks ended May 28, 2023 and May 29, 2022 (unaudited). * +
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*	Filed electronically herewith.
+	Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.         

 

		Park Aerospace Corp.
		(Registrant)
Date: July 7, 2023		/s/ Brian E. Shore
		Brian E. Shore
		Chief Executive Officer
		(principal executive officer)
Date: July 7, 2023		/s/ P. Matthew Farabaugh
		P. Matthew Farabaugh
		Senior Vice President and Chief Financial Officer
		(principal financial officer)
		(principal accounting officer)

 

 

EXHIBIT 31.1

 

 

Certification of Principal Executive Officer

Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)

 

 

I, Brian E. Shore, as Chief Executive Officer of Park Aerospace Corp., certify that:

 

1.	I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended May 28, 2023 of Park Aerospace Corp.;

 

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP;

(c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:          July 7, 2023

 

 

/s/               Brian E. Shore                                                 

Name:        Brian E. Shore

Title:          Chief Executive Officer

 

EXHIBIT 31.2

 

 

Certification of Principal Financial Officer

Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)

 

 

I, P. Matthew Farabaugh, as Senior Vice President and Chief Financial Officer of Park Aerospace Corp., certify that:

 

1.	I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended May 28, 2023 of Park Aerospace Corp.;

 

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP;

(c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:          July 7, 2023

 

 

/s/               P. Matthew Farabaugh                                                        

Name:        P. Matthew Farabaugh

Title:          Senior Vice President and Chief Financial Officer

 

EXHIBIT 32.1

 

 

Certification of Principal Executive Officer Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

 

 

In connection with the Quarterly Report on Form 10-Q of Park Aerospace Corp. (the “Company”) for the quarterly period ended May 28, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Brian E. Shore, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

 

(1)         The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)         The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

/s/               Brian E. Shore                                         

Name:        Brian E. Shore

Title:          Chief Executive Officer

Date:          July 7, 2023

 

EXHIBIT 32.2

 

 

Certification of Principal Financial Officer Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

 

 

In connection with the Quarterly Report on Form 10-Q of Park Aerospace Corp. (the “Company”) for the quarterly period ended May 28, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), P. Matthew Farabaugh, as Senior Vice President and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

 

(1)         The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)         The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

/s/               P. Matthew Farabaugh________________________

Name:        P. Matthew Farabaugh

Title:          Senior Vice President and Chief Financial Officer

Date:          July 7, 2023

 

v3.23.2

Document And Entity Information - shares	3 Months Ended
	May 28, 2023	Jul. 03, 2023
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	May 28, 2023
Document Transition Report	false
Entity File Number	1-4415
Entity Registrant Name	PARK AEROSPACE CORP.
Entity Incorporation, State or Country Code	NY
Entity Tax Identification Number	11-1734643
Entity Address, Address Line One	1400 Old Country Road
Entity Address, City or Town	Westbury
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	11590
City Area Code	631
Local Phone Number	465-3600
Title of 12(b) Security	Common Stock, par value $.10 per share
Trading Symbol	PKE
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		20,250,211
Entity Central Index Key	0000076267
Current Fiscal Year End Date	--02-26
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Amendment Flag	false

v3.23.2

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	May 28, 2023	Feb. 26, 2023	[1]
Current assets:
Cash and cash equivalents	$ 5,836	$ 4,237
Marketable securities (Note 3)	75,269	101,203
Accounts receivable, less allowance for doubtful accounts of $124 and $120, respectively	11,600	9,989
Inventories (Note 4)	7,911	6,768
Prepaid expenses and other current assets	2,691	2,844
Total current assets	103,307	125,041
Property, plant and equipment, net	24,112	24,251
Operating right-of-use assets (Note 5)	136	150
Goodwill and other intangible assets	9,783	9,783
Other assets	105	108
Total assets	137,443	159,333
Current liabilities:
Accounts payable	3,859	4,545
Operating lease liability (Note 5)	53	53
Accrued liabilities	1,984	1,346
Dividend Payable	0	20,471
Income taxes payable	3,902	2,171
Total current liabilities	9,798	28,586
Long-term operating lease liability (Note 5)	118	129
Non-current income taxes payable (Note 9)	9,255	10,938
Deferred income taxes (Note 9)	1,996	1,995
Other liabilities	1,782	1,751
Total liabilities	22,949	43,399
Shareholders' equity (Note 8)
Common stock	2,096	2,096
Additional paid-in capital	170,150	169,932
Accumulated deficit	(43,399)	(42,694)
Accumulated other comprehensive loss	(3,528)	(4,244)
Stockholders' Equity, Including Treasury Stock	125,319	125,090
Less treasury stock, at cost	10,825	9,156
Total shareholders' equity	114,494	115,934
Total liabilities and shareholders' equity	$ 137,443	$ 159,333
[1] The balance sheet at February 26, 2023 has been derived from the audited consolidated financial statements at that date.

v3.23.2

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	May 28, 2023	Feb. 26, 2023
Accounts receivable, allowance for doubtful accounts	$ 124	$ 120

v3.23.2

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	May 28, 2023	May 29, 2022
Net sales	$ 15,551	$ 12,783
Cost of sales	10,718	8,691
Gross profit	4,833	4,092
Selling, general and administrative expenses	2,615	1,633
Earnings from operations	2,218	2,459
Interest and other income	324	133
Earnings from operations before income taxes	2,542	2,592
Income tax provision (Note 9)	688	682
Net earnings	$ 1,854	$ 1,910
Basic:
Basic earnings per share (in dollars per share)	$ 0.09	$ 0.09
Basic weighted average shares (in shares)	20,461	20,458
Diluted:
Diluted earnings per share (in dollars per share)	$ 0.09	$ 0.09
Diluted weighted average shares (in shares)	20,526	20,504

v3.23.2

Consolidated Statements of Comprehensive Earnings (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	May 28, 2023	May 29, 2022
Net earnings	$ 1,854	$ 1,910
Other comprehensive loss, net of tax:
Other comprehensive earnings (loss)	716	(933)
Total comprehensive earnings	2,570	977
Gains on Marketable Securities [Member]
Other comprehensive loss, net of tax:
Unrealized holding gains arising during the period	592	9
Less: reclassification adjustment for gains included in net earnings	0	(7)
Losses on Marketable Securities [Member]
Other comprehensive loss, net of tax:
Unrealized holding gains arising during the period	0	(938)
Less: reclassification adjustment for gains included in net earnings	$ 124	$ 3

v3.23.2

Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock, Common [Member]	Total
Balance (in shares) at Feb. 27, 2022	20,965,144				506,934
Balance at Feb. 27, 2022	$ 2,096,000	$ 169,665,000	$ (24,767,000)	$ (1,965,000)	$ (9,397,000)
Net earnings	0	0	1,910,000	0	0	$ 1,910,000
Net earnings	0	0	1,910,000	0	0	1,910,000
Unrealized gain (loss) on marketable securities, net of tax	0	0	0	(933,000)	0
Stock-based compensation	0	85,000	0	0	0
Cash dividends	$ 0	0	(2,046,000)	0	$ 0
Balance (in shares) at May. 29, 2022	20,965,144				506,934
Balance at May. 29, 2022	$ 2,096,000	169,750,000	(24,903,000)	(2,898,000)	$ (9,397,000)
Balance (in shares) at Feb. 26, 2023	20,965,144				493,934
Balance at Feb. 26, 2023	$ 2,096,000	169,932,000	(42,694,000)	(4,244,000)	$ (9,156,000)	115,934,000	[1]
Net earnings	0	0	1,854,000	0		1,854,000
Net earnings	0	0	1,854,000	0		1,854,000
Unrealized gain (loss) on marketable securities, net of tax	0	0	0	716,000	0
Stock-based compensation	$ 0	218,000	0	0	$ 0
Purchase of treasury stock (in shares)	0				129,654
Purchase of treasury stock	$ 0	0	0	0	$ (1,669,000)
Cash dividends	$ 0	0	(2,559,000)	0	$ 0
Balance (in shares) at May. 28, 2023	20,965,144				623,588
Balance at May. 28, 2023	$ 2,096,000	$ 170,150,000	$ (43,399)	$ (3,528,000)	$ (10,825,000)	$ 114,494,000
[1] The balance sheet at February 26, 2023 has been derived from the audited consolidated financial statements at that date.

v3.23.2

Consolidated Statements of Shareholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	May 28, 2023	May 29, 2022
Cash dividends, per share (in dollars per share)	$ 0.125	$ 0.10

v3.23.2

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	May 28, 2023	May 29, 2022
Cash flows from operating activities:
Net earnings	$ 1,854	$ 1,910
Depreciation and amortization	305	260
Stock-based compensation	218	85
Deferred income taxes	2	107
Amortization of bond premium	237	11
Loss (gain) on sale of marketable securities	65	0
Changes in operating assets and liabilities	(2,564)	(2,329)
Net cash provided by operating activities	117	44
Cash flows from investing activities:
Purchases of property, plant and equipment	(167)	(88)
Purchases of marketable securities	0	(18,962)
Proceeds from sales and maturities of marketable securities	26,348	12,574
Net cash (used in) provided by investing activities	26,181	(6,476)
Cash flows from financing activities:
Dividends paid	(23,030)	(2,046)
Purchase of treasury stock	(1,669)	0
Net cash used in financing activities	(24,699)	(2,046)
Increase (decrease) in cash and cash equivalents:	1,599	(8,478)
Cash and cash equivalents, beginning of period	4,237	12,811
Cash and cash equivalents, end of period	5,836	4,333
Supplemental disclosure of non-cash activities:
Cash paid during the period for income taxes, net of refunds	$ 608	$ (5)

v3.23.2

Note 1 - Consolidated Financial Statements	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]	1. CONSOLIDATED FINANCIAL STATEMENTS   The Condensed Consolidated Balance Sheet and the Consolidated Statement of Shareholders’ Equity as of May 28, 2023, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Earnings for the 13 weeks ended May 28, 2023 and May 29, 2022, 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 condensed consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at May 28, 2023 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 February 26, 2023. There have been no significant changes to such accounting policies during the 13 weeks ended May 28, 2023.

v3.23.2

Note 2 - Fair Value Measurements	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Fair Value Disclosures [Text Block]	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.   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. 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. There have been no changes in events or circumstances which required impairment charges to be recorded during the 13 weeks ended May 28, 2023.

v3.23.2

Note 3 - Marketable Securities	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]	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 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:       May 28, 2023       Total     Level 1     Level 2     Level 3                                     U.S. Treasury and other government securities   $ 70,284     $ 70,284     $ -     $ -   U.S. corporate debt securities     4,985       4,985       -       -   Total marketable securities   $ 75,269     $ 75,269     $ -     $ -         February 26, 2023       Total     Level 1     Level 2     Level 3                                     U.S. Treasury and other government securities   $ 83,859     $ 83,859     $ -     $ -   U.S. corporate debt securities     17,344       17,344       -       -   Total marketable securities   $ 101,203     $ 101,203     $ -     $ -     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                             May 28, 2023:                         U.S. Treasury and other government securities   $ 75,110     $ -     $ 4,826   U.S. corporate debt securities     4,992       -       7   Total marketable securities   $ 80,102     $ -     $ 4,833                             February 26, 2023:                         U.S. Treasury and other government securities   $ 89,603     $ -     $ 5,744   U.S. corporate debt securities     17,414       -       70   Total marketable securities   $ 107,017     $ -     $ 5,814     The estimated fair values of such securities at May 28, 2023 by contractual maturity are shown below:   Due in one year or less   $ 16,018   Due after one year through five years     59,251       $ 75,269

v3.23.2

Note 4 - Inventories	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Inventory Disclosure [Text Block]	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:       May 28,     February 26,       2023     2023                     Inventories:                                   Raw materials   $ 6,533     $ 5,376   Work-in-process     455       536   Finished goods     923       856       $ 7,911     $ 6,768

v3.23.2

Note 5 - Leases	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Lessee, Operating Leases [Text Block]	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 May 28, 2023 are as follows:   Fiscal Year:         2024   $ 40   2025     36   2026     -   2027     -   2028     -   Thereafter     162   Total undiscounted operating lease payments     238   Less imputed interest     (67 ) Present value of operating lease payments   $ 171     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 May 28, 2023, the Company’s operating lease expenses were $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 May 28, 2023:   Operating right-of-use assets   $ 136             Operating lease liabilities   $ 53   Long-term operating lease liabilities     118   Total operating lease liabilities   $ 171     The Company’s weighted average remaining lease term for its operating leases is 7.8 years.   In December 2018, the Company entered into a Development Agreement with the City of Newton, Kansas and the Board of County Commissioners of Harvey County, Kansas. Pursuant to this agreement, the Company agreed to construct and operate a redundant manufacturing facility of approximately 90,000 square feet for the design, development and manufacture of advanced composite materials and parts, structures and assemblies for aerospace. The Company further agreed to equip the facility through the purchase of machinery, equipment and furnishings and to create additional new full-time employment of specified levels during a five-year period. In exchange for these agreements, the City and the County agreed to lease to the Company three acres of land at the Newton, Kansas Airport, in addition to the eight acres previously leased to the Company by the City and County. The City and County further agreed to provide financial and other assistance toward the construction of the additional facility as set forth in the Development Agreement. The total cost of the additional facility was $19,800 and the expansion is complete. As of May 28, 2023, the Company had $42 in equipment purchase obligations related to the additional facility.

v3.23.2

Note 6 - Stock-based Compensation	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Share-Based Payment Arrangement [Text Block]	6. STOCK-BASED COMPENSATION   As of May 28, 2023, the Company had a 2018 Stock Option Plan (the “2018 Plan”) and no other stock-based compensation plan. The 2018 Plan was adopted by the Board of Directors of the Company on May 8, 2018 and approved by the shareholders of the Company at the Annual Meeting of Shareholders of the Company on July 24, 2018 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 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.   During the 13 weeks ended May 28, 2023, the Company granted options under the 2018 Plan to purchase a total of 133,300 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 $387 and will be recorded on a straight-line basis over the requisite service period. The weighted average fair value of the granted options was $3.01 per share using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 3.61%-3.85%; expected volatility factor of 28.5%-29.6%; expected dividend yield of 3.82%; and estimated option terms of 4.9-8.3 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 ended May 28, 2023. 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 following is a summary of option activity for the 13 weeks ended May 28, 2023:       Outstanding Options     Weighted Average Exercise Price     Weighted Average Remaining  Contractual Term (in years)     Aggregate Intrinsic Value                                     Balance, February 26, 2023     670,425     $ 11.80             $ 838   Granted     133,300       13.08                   Exercised     -       -                   Terminated or expired     (900 )     11.81                   Balance, May 28, 2023     802,825     $ 12.01       6.28     $ 835   Vested and exercisable, May 28, 2023     482,263     $ 11.81       4.49     $ 598

v3.23.2

Note 7 - Earnings Per Share	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Earnings Per Share [Text Block]	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.   The following table sets forth the calculation of basic and diluted earnings per share:       13 Weeks Ended       May 28, 2023     May 29, 2022                     Net earnings   $ 1,854     $ 1,910                     Weighted average common shares outstanding for basic EPS     20,461       20,458   Net effect of dilutive options     65       46   Weighted average shares outstanding for diluted EPS     20,526       20,504                     Basic earnings per share   $ 0.09     $ 0.09                     Diluted earnings per share   $ 0.09     $ 0.09     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 157,000 and 397,000 for the 13 weeks ended May 28, 2023 and May 29, 2022, respectively.

v3.23.2

Note 8 - Shareholders' Equity	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Equity [Text Block]	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 129,654 and 0 shares of its common stock during the 13 weeks ended May 28, 2023 and May 29, 2022, respectively. As a result, the Company is authorized to purchase up to a total of 1,279,001 shares of its common stock, representing approximately 6.3% of the Company’s 20,250,211 total outstanding shares as of the close of business on July 3, 2023. 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.

v3.23.2

Note 9 - Income Taxes	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Income Tax Disclosure [Text Block]	9. INCOME TAXES   For the 13 weeks ended May 28, 2023, the Company recorded an income tax provision of $688, which included a discrete income tax provisions of $37. For the 13 weeks ended May 29, 2022, the Company recorded an income tax provision of $682, which included a discrete income tax provision of $28.   The Company’s effective tax rate for the 13 weeks ended May 28, 2023 was 27.1% compared to 26.3% in the comparable prior year period. The effective tax rate for the 13 weeks ended May 28, 2023 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 29, 2022 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.   Notwithstanding the U.S. taxation of the deemed repatriated earnings as a result of the mandatory one-time transition tax on the accumulated untaxed earnings of foreign subsidiaries of U.S. shareholders included in the 2017 Tax Cuts and Jobs Act, the Company intends to indefinitely invest approximately $25 million of undistributed earnings outside of the U.S. If these future earnings are repatriated to the U.S., or if the Company determines such earnings will be remitted in the foreseeable future, the Company may be required to accrue U.S. deferred taxes on such earnings.

v3.23.2

Note 10 - Geographic Regions	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Geographic Regions [Text Block]	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       May 28, 2023     May 29, 2022                     Sales:                                   North America   $ 13,619     $ 12,149   Asia     130       124   Europe     1,802       510   Total sales   $ 15,551     $ 12,783

v3.23.2

Note 11 - Contingencies	3 Months Ended
	May 28, 2023
Notes to Financial Statements
Contingencies Disclosure [Text Block]	11. CONTINGENCIES   Litigation   The Company is subject to a small number of immaterial proceedings, lawsuits and other claims related to environmental, employment, product and other matters. The Company is required to assess the likelihood of any adverse judgments or outcomes in these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy in dealing with these matters. The Company believes that the ultimate disposition of such proceedings, lawsuits and claims will not have a material adverse effect on the liquidity, capital resources, business, 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 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 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 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.

v3.23.2

Note 3 - Marketable Securities (Tables)	3 Months Ended
	May 28, 2023
Notes Tables
Debt Securities, Available-for-Sale [Table Text Block]	May 28, 2023       Total     Level 1     Level 2     Level 3                                     U.S. Treasury and other government securities   $ 70,284     $ 70,284     $ -     $ -   U.S. corporate debt securities     4,985       4,985       -       -   Total marketable securities   $ 75,269     $ 75,269     $ -     $ -       February 26, 2023       Total     Level 1     Level 2     Level 3                                     U.S. Treasury and other government securities   $ 83,859     $ 83,859     $ -     $ -   U.S. corporate debt securities     17,344       17,344       -       -   Total marketable securities   $ 101,203     $ 101,203     $ -     $ -
Schedule of Available-for-Sale Securities Reconciliation [Table Text Block]	Amortized Cost Basis     Gross Unrealized Gains     Gross Unrealized Losses                             May 28, 2023:                         U.S. Treasury and other government securities   $ 75,110     $ -     $ 4,826   U.S. corporate debt securities     4,992       -       7   Total marketable securities   $ 80,102     $ -     $ 4,833                             February 26, 2023:                         U.S. Treasury and other government securities   $ 89,603     $ -     $ 5,744   U.S. corporate debt securities     17,414       -       70   Total marketable securities   $ 107,017     $ -     $ 5,814
Investments Classified by Contractual Maturity Date [Table Text Block]	Due in one year or less   $ 16,018   Due after one year through five years     59,251       $ 75,269

v3.23.2

Note 4 - Inventories (Tables)	3 Months Ended
	May 28, 2023
Notes Tables
Schedule of Inventory, Current [Table Text Block]	May 28,     February 26,       2023     2023                     Inventories:                                   Raw materials   $ 6,533     $ 5,376   Work-in-process     455       536   Finished goods     923       856       $ 7,911     $ 6,768

v3.23.2

Note 5 - Leases (Tables)	3 Months Ended
	May 28, 2023
Notes Tables
Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block]	Fiscal Year:         2024   $ 40   2025     36   2026     -   2027     -   2028     -   Thereafter     162   Total undiscounted operating lease payments     238   Less imputed interest     (67 ) Present value of operating lease payments   $ 171
Schedule of Right-of-use Assets and Operating Lease Liabilities [Table Text Block]	Operating right-of-use assets   $ 136             Operating lease liabilities   $ 53   Long-term operating lease liabilities     118   Total operating lease liabilities   $ 171

v3.23.2

Note 6 - Stock-based Compensation (Tables)	3 Months Ended
	May 28, 2023
Notes Tables
Share-Based Payment Arrangement, Option, Activity [Table Text Block]	Outstanding Options     Weighted Average Exercise Price     Weighted Average Remaining  Contractual Term (in years)     Aggregate Intrinsic Value                                     Balance, February 26, 2023     670,425     $ 11.80             $ 838   Granted     133,300       13.08                   Exercised     -       -                   Terminated or expired     (900 )     11.81                   Balance, May 28, 2023     802,825     $ 12.01       6.28     $ 835   Vested and exercisable, May 28, 2023     482,263     $ 11.81       4.49     $ 598

v3.23.2

Note 7 - Earnings Per Share (Tables)	3 Months Ended
	May 28, 2023
Notes Tables
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]	13 Weeks Ended       May 28, 2023     May 29, 2022                     Net earnings   $ 1,854     $ 1,910                     Weighted average common shares outstanding for basic EPS     20,461       20,458   Net effect of dilutive options     65       46   Weighted average shares outstanding for diluted EPS     20,526       20,504                     Basic earnings per share   $ 0.09     $ 0.09                     Diluted earnings per share   $ 0.09     $ 0.09

v3.23.2

Note 10 - Geographic Regions (Tables)	3 Months Ended
	May 28, 2023
Notes Tables
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]	13 Weeks Ended       May 28, 2023     May 29, 2022                     Sales:                                   North America   $ 13,619     $ 12,149   Asia     130       124   Europe     1,802       510   Total sales   $ 15,551     $ 12,783

v3.23.2

Note 3 - Marketable Securities - Summary of Available-for-sale Securities (Details) - USD ($) $ in Thousands	May 28, 2023	Feb. 26, 2023
Available-for-sale securities	$ 75,269	$ 101,203
Fair Value, Inputs, Level 1 [Member]
Available-for-sale securities	75,269	101,203
Fair Value, Inputs, Level 2 [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities	0	0
US Treasury and Government [Member]
Available-for-sale securities	70,284	83,859
US Treasury and Government [Member] | Fair Value, Inputs, Level 1 [Member]
Available-for-sale securities	70,284	83,859
US Treasury and Government [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale securities	0	0
US Treasury and Government [Member] | Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities	0	0
Debt Security, Corporate, US [Member]
Available-for-sale securities	4,985	17,344
Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 1 [Member]
Available-for-sale securities	4,985	17,344
Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale securities	0	0
Debt Security, Corporate, US [Member] | Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities	$ 0	$ 0

v3.23.2

Note 3 - Marketable Securities - Summary of Unrealized Gains and Losses on Available-for-sale Securities (Details) - USD ($) $ in Thousands	May 28, 2023	Feb. 26, 2023
Amortized cost basis	$ 80,102	$ 107,017
Gross unrealized gains	0	0
Gross unrealized losses	4,833	5,814
US Treasury and Government [Member]
Amortized cost basis	75,110	89,603
Gross unrealized gains	0	0
Gross unrealized losses	4,826	5,744
Debt Security, Corporate, US [Member]
Amortized cost basis	4,992	17,414
Gross unrealized gains	0	0
Gross unrealized losses	$ 7	$ 70

v3.23.2

Note 3 - Marketable Securities - Estimated Fair Value of Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	May 28, 2023	Feb. 26, 2023
Due in one year or less	$ 16,018
Due after one year through five years	59,251
Debt Securities, Available-for-Sale	$ 75,269	$ 101,203

v3.23.2

Note 4 - Inventories - Summary of Inventories (Details) - USD ($) $ in Thousands	May 28, 2023	Feb. 26, 2023
Raw materials	$ 6,533	$ 5,376
Work-in-process	455	536
Finished goods	923	856
Inventory, Net	$ 7,911	$ 6,768	[1]
[1] The balance sheet at February 26, 2023 has been derived from the audited consolidated financial statements at that date.

v3.23.2

Note 5 - Leases (Details Textual) $ in Thousands	1 Months Ended	3 Months Ended
	Dec. 31, 2018 USD ($) a ft²	May 28, 2023 USD ($)
Operating Lease, Expense		$ 15
Operating Lease, Payments		$ 13
Operating Lease, Weighted Average Remaining Lease Term (Year)		7 years 9 months 18 days
Additional Lease Agreement with City and County for Land at Newton, Kansas Airport [Member]
Area of Land | a	3
Lease Agreement with City and County for Land at Newton, Kansas Airport [Member]
Area of Land | a	8
Additional Manufacturing Facility [Member]
Area of Land | ft²	90,000
Construction in Progress Estimated Cost	$ 19,800
Purchase Obligation		$ 42
Minimum [Member]
Lessee, Operating Lease, Renewal Term (Year)		1 year
Maximum [Member]
Lessee, Operating Lease, Renewal Term (Year)		10 years

v3.23.2

Note 5 - Leases - Future Minimum Lease Payments (Details) $ in Thousands	May 28, 2023 USD ($)
Present value of operating lease payments	$ 171
Leases with Renewal Options [Member]
2024	40
2025	36
2026	0
2027	0
2028	0
Thereafter	162
Total undiscounted operating lease payments	238
Less imputed interest	(67)
Present value of operating lease payments	$ 171

v3.23.2

Note 5 - Leases - Schedule of Right-of-use Assets and Operating Lease Liabilities (Details) - USD ($) $ in Thousands	May 28, 2023	Feb. 26, 2023	[1]
Operating right-of-use assets	$ 136	$ 150
Operating lease liabilities	53	53
Long-term operating lease liabilities	118	$ 129
Total operating lease liabilities	$ 171
[1] The balance sheet at February 26, 2023 has been derived from the audited consolidated financial statements at that date.

v3.23.2

Note 6 - Stock-based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	3 Months Ended
	Jul. 24, 2018	Apr. 30, 2023	May 28, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross			133,300
Share-Based Payment Arrangement, Plan Modification, Incremental Cost			$ 109
Special Dividend [Member]
Common Stock, Dividends, Per Share, Cash Paid		$ 1.00
The 2018 Stock Option Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized	800,000
Percentage of Stock Options, Exercisable One Year From Date of Grant	25.00%
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)	1 year
Percentage of Stock Options Exercisable On Each Succeeding Year from Date of Grant	25.00%
Share-Based Compensation Arrangement by Share-Based Payment Award, Expiration Period (Year)	10 years
The 2018 Stock Option Plan [Member] | Directors and Certain of Employees [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross			133,300
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount			$ 387
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value			$ 3.01
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Dividend Rate			3.82%
The 2018 Stock Option Plan [Member] | Directors and Certain of Employees [Member] | Minimum [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Risk Free Interest Rate			3.61%
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Volatility Rate			28.50%
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Term			4 years 10 months 24 days
The 2018 Stock Option Plan [Member] | Directors and Certain of Employees [Member] | Maximum [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Risk Free Interest Rate			3.85%
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Volatility Rate			29.60%
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Term			8 years 3 months 18 days

v3.23.2

Note 6 - Stock-based Compensation - Option Activity (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	May 28, 2023	Feb. 26, 2023
Outstanding options (in shares)	670,425
Balance, weighted average exercise price (in dollars per share)	$ 11.80
Outstanding aggregate intrinsic value	$ 835	$ 838
Outstanding options, granted (in shares)	133,300
Granted, weighted average exercise price (in dollars per share)	$ 13.08
Outstanding options, exercised (in shares)	0
Exercised, weighted average exercise price (in dollars per share)	$ 0
Outstanding options, terminated or expired (in shares)	(900)
Terminated or expired, weighted average exercise price (in dollars per share)	$ 11.81
Outstanding options (in shares)	802,825
Balance, weighted average exercise price (in dollars per share)	$ 12.01
Balance, weighted average remaining contractual term (Year)	6 years 3 months 10 days
Vested and exercisable (in shares)	482,263
Vested and exercisable, weighted average exercise price (in dollars per share)	$ 11.81
Vested and exercisable, weighted average remaining contractual term (Year)	4 years 5 months 26 days
Vested and exercisable, aggregate intrinsic value	$ 598

v3.23.2

Note 7 - Earnings Per Share (Details Textual) - shares	3 Months Ended
	May 28, 2023	May 29, 2022
Share-Based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	157,000	397,000

v3.23.2

Note 7 - Earnings Per Share - Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	May 28, 2023	May 29, 2022
Net earnings	$ 1,854	$ 1,910
Weighted average common shares outstanding for basic EPS (in shares)	20,461	20,458
Net effect of dilutive options (in shares)	65	46
Weighted average shares outstanding for diluted EPS (in shares)	20,526	20,504
Basic earnings per share (in dollars per share)	$ 0.09	$ 0.09
Diluted earnings per share (in dollars per share)	$ 0.09	$ 0.09

v3.23.2

Note 8 - Shareholders' Equity (Details Textual) - shares	3 Months Ended
	May 28, 2023	May 29, 2022	Jul. 03, 2023	May 23, 2022
Stock Repurchase Program, Number of Shares Authorized to be Repurchased				1,500,000
Stock Repurchased During Period, Shares	129,654	0
Subsequent Event [Member]
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased			1,279,001
Stock Repurchase Program, Percentage of Outstanding Shares Authorized to be Repurchased			6.30%
Common Stock, Shares, Outstanding			20,250,211

v3.23.2

Note 9 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	May 28, 2023	May 29, 2022
Income Tax Expense (Benefit), Total	$ 688	$ 682
Income Tax Expense (Benefit), Discrete Amount	$ 37	$ 28
Effective Income Tax Rate Reconciliation, Percent, Total	27.10%	26.30%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	21.00%
Undistributed Earnings, Basic, Total	$ 25,000

v3.23.2

Note 10 - Geographic Regions - Financial Information by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended
	May 28, 2023	May 29, 2022
Sales	$ 15,551	$ 12,783
North America [Member]
Sales	13,619	12,149
Asia [Member]
Sales	130	124
Europe [Member]
Sales	$ 1,802	$ 510

v3.23.2

Note 11 - Contingencies (Details Textual) $ in Thousands	3 Months Ended
	May 28, 2023 USD ($)
Percentage of Legal Defense and Remediation Costs Associated with Sites Reimbursed by Insurance Carriers	100.00%
Number of Units Covered Under General Liability Insurance Coverage	2
Accrual for Environmental Loss Contingencies	$ 0
Number of Insurance Carriers	3

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