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Park Aerospace Corp – ‘10-Q’ for 12/1/19

On:  Friday, 1/10/20, at 10:13am ET   ·   For:  12/1/19   ·   Accession #:  1437749-20-431   ·   File #:  1-04415

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 1/10/20  Park Aerospace Corp               10-Q       12/01/19   62:4.4M                                   RDG Filings/FA

Quarterly Report   —   Form 10-Q   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    612K 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     25K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     25K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     19K 
 5: EX-32.2     Certification -- §906 - SOA'02                      HTML     19K 
27: R1          Document And Entity Information                     HTML     49K 
55: R2          Condensed Consolidated Balance Sheets (Current      HTML    114K 
                Period Unaudited)                                                
37: R3          Condensed Consolidated Balance Sheets (Current      HTML     21K 
                Period Unaudited) (Parentheticals)                               
21: R4          Consolidated Statements of Operations (Unaudited)   HTML     98K 
28: R5          Consolidated Statements of Comprehensive Earnings   HTML     47K 
                (Unaudited)                                                      
56: R6          Consolidated Statements of Shareholders' Equity     HTML     84K 
                (Unaudited)                                                      
38: R7          Consolidated Statements of Shareholders' Equity     HTML     22K 
                (Unaudited) (Parentheticals)                                     
20: R8          Condensed Consolidated Statements of Cash Flows     HTML    108K 
                (Unaudited)                                                      
29: R9          Note 1 - Consolidated Financial Statements          HTML     30K 
36: R10         Note 2 - Fair Value Measurements                    HTML     31K 
16: R11         Note 3 - Marketable Securities                      HTML     74K 
45: R12         Note 4 - Inventories                                HTML     33K 
51: R13         Note 5 - Leases                                     HTML     44K 
35: R14         Note 6 - Stock-based Compensation                   HTML     46K 
15: R15         Note 7 - Earnings Per Share                         HTML     67K 
44: R16         Note 8 - Shareholders' Equity                       HTML     28K 
49: R17         Note 9 - Income Taxes                               HTML     29K 
34: R18         Note 10 - Geographic Regions                        HTML     52K 
17: R19         Note 11 - Discontinued Operations                   HTML     93K 
40: R20         Note 12 - Contingencies                             HTML     31K 
59: R21         Note 13 - Accounting Pronouncements                 HTML     35K 
25: R22         Note 3 - Marketable Securities (Tables)             HTML     73K 
19: R23         Note 4 - Inventories (Tables)                       HTML     33K 
39: R24         Note 5 - Leases (Tables)                            HTML     36K 
58: R25         Note 6 - Stock-based Compensation (Tables)          HTML     36K 
24: R26         Note 7 - Earnings Per Share (Tables)                HTML     64K 
18: R27         Note 10 - Geographic Regions (Tables)               HTML     51K 
41: R28         Note 11 - Discontinued Operations (Tables)          HTML     96K 
57: R29         Note 1 - Consolidated Financial Statements          HTML     22K 
                (Details Textual)                                                
52: R30         Note 3 - Marketable Securities - Summary of         HTML     34K 
                Available-for-sale Securities (Details)                          
47: R31         Note 3 - Marketable Securities - Summary of         HTML     30K 
                Unrealized Gains and Losses on Available-for-sale                
                Securities (Details)                                             
13: R32         Note 3 - Marketable Securities - Estimated Fair     HTML     25K 
                Value of Securities by Contractual Maturity                      
                (Details)                                                        
32: R33         Note 4 - Inventories - Summary of Inventories       HTML     30K 
                (Details)                                                        
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48: R35         Note 5 - Leases - Future Minimum Lease Payments     HTML     36K 
                (Details)                                                        
14: R36         Note 5 - Leases - Schedule of Right-of-use Assets   HTML     26K 
                and Operating Lease Liabilities (Details)                        
33: R37         Note 6 - Stock-based Compensation (Details          HTML     55K 
                Textual)                                                         
54: R38         Note 6 - Stock-based Compensation - Option          HTML     56K 
                Activity (Details)                                               
46: R39         Note 7 - Earnings Per Share (Details Textual)       HTML     22K 
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                Earnings Per Share (Details)                                     
42: R41         Note 8 - Shareholders' Equity (Details Textual)     HTML     50K 
22: R42         Note 9 - Income Taxes (Details Textual)             HTML     41K 
30: R43         Note 10 - Geographic Regions - Financial            HTML     30K 
                Information by Geographic Region (Details)                       
61: R44         Note 11 - Discontinued Operations (Details          HTML     31K 
                Textual)                                                         
43: R45         Note 11 - Discontinued Operations - Summary of      HTML     55K 
                Discontinued Operations (Details)                                
23: R46         Note 11 - Discontinued Operations - Restructuring   HTML     51K 
                Charges (Details)                                                
31: R47         Note 12 - Contingencies (Details Textual)           HTML     28K 
62: R48         Note 13 - Accounting Pronouncements (Details        HTML     26K 
                Textual)                                                         
12: XML         IDEA XML File -- Filing Summary                      XML    110K 
50: EXCEL       IDEA Workbook of Financial Reports                  XLSX     50K 
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‘10-Q’   —   Quarterly Report


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 1, 2019

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

 

Commission file number 1-4415

 

PARK AEROSPACE CORP.

(Exact Name of Registrant as Specified in Its Charter)

 

New York

 

11-1734643

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

1400 Old Country Road, Westbury, N.Y.  

 

11590

(Address of Principal Executive Offices)

 

(Zip Code)

 

                  (631) 465-3600                    

(Registrant’s Telephone Number, Including Area Code)

 

                  Not Applicable                    

(Former Name, Former Address and Former Fiscal Year,

if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $.10 per share

PKE

New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ☐ Accelerated Filer ☒ Non-Accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 20,518,548 as of January 6, 2020

 

2

 
 

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

   

Page

Number

PART I.

FINANCIAL INFORMATION:

 

     

Item 1.

Financial Statements

 
     
 

Condensed Consolidated Balance Sheets December 1, 2019 (Unaudited) and March 3, 2019

4

     
 

Consolidated Statements of Operations 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited)

5

     
 

Consolidated Statements of Comprehensive Earnings 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited)

6

     
 

Consolidated Statements of Shareholders’ Equity 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited)

7

     
 

Condensed Consolidated Statements of Cash Flows 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited)

9

     
 

Notes to Condensed Consolidated Financial Statements (Unaudited)

10

     

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

     
 

Factors That May Affect Future Results

29

     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

     

Item 4.

Controls and Procedures

30

     

PART II.

OTHER INFORMATION:

 
     

Item 1.

Legal Proceedings

31

     

Item 1A.

Risk Factors

31

     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

     

Item 3.

Defaults Upon Senior Securities

31

     

Item 4.

Mine Safety Disclosures

31

     

Item 5.

Other Information

32

     

Item 6.

Exhibits

32

     

EXHIBIT INDEX

33

   

SIGNATURES

34

 

3

 

 

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)


 

   

December 1,

2019

(unaudited)

   

March 3,

2019*

 
                 

ASSETS

               

Current assets

               

Cash and cash equivalents

  $ 6,680     $ 71,007  

Marketable securities (Note 3)

    137,486       80,617  

Accounts receivable, less allowance for doubtful accounts of $44 and $32, respectively

    10,194       9,352  

Inventories (Note 4)

    3,936       5,267  

Prepaid expenses and other current assets

    1,703       1,690  

Total current assets

    159,999       167,933  
                 

Property, plant and equipment, net

    14,011       10,791  

Operating right-of-use assets (Note 5)

    453       -  

Goodwill and other intangible assets

    9,811       9,811  

Other assets

    284       316  

Total assets

  $ 184,558     $ 188,851  
                 

LIABILITIES AND SHAREHOLDERS' EQUITY

               

Current liabilities

               

Accounts payable

  $ 2,010     $ 3,169  

Operating lease liabilities (Note 5)

    152       -  

Accrued liabilities

    2,039       2,920  

Income taxes payable

    1,737       5,066  

Total current liabilities

    5,938       11,155  
                 

Long-term operating lease liabilities (Note 5)

    301       -  

Non-current income taxes payable (Note 9)

    15,986       17,669  

Deferred income taxes (Note 9)

    103       -  

Other liabilities

    1,067       1,016  

Total liabilities

    23,395       29,840  
                 

Commitments and contingencies (Note 12)

               
                 

Shareholders' equity (Note 8)

               

Common stock

    2,096       2,096  

Additional paid-in capital

    169,542       169,395  

Accumulated deficit

    (1,587 )     (2,605 )

Accumulated other comprehensive earnings (loss)

    307       (22 )
      170,358       168,864  

Less treasury stock, at cost

    (9,195 )     (9,853 )

Total shareholders' equity

    161,163       159,011  

Total liabilities and shareholders' equity

  $ 184,558     $ 188,851  

  

* The balance sheet at March 3, 2019 has been derived from the audited consolidated financial statements at that date.

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

4

 

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)


 

   

13 Weeks Ended (Unaudited)

   

39 Weeks Ended (Unaudited)

 
   

December 1,

   

November 25,

   

December 1,

   

November 25,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Net sales

  $ 15,847     $ 12,853     $ 44,520     $ 34,457  

Cost of sales

    10,825       8,569       30,881       24,176  

Gross profit

    5,022       4,284       13,639       10,281  

Selling, general and administrative expenses

    1,949       1,983       5,785       6,200  

Earnings from continuing operations

    3,073       2,301       7,854       4,081  

Interest and other income

    802       393       2,613       1,090  

Earnings from continuing operations before income taxes

    3,875       2,694       10,467       5,171  

Income tax provision (Note 9)

    1,069       616       2,895       453  

Net earnings from continuing operations

    2,806       2,078       7,572       4,718  

(Loss) earnings from discontinued operations, net of tax (Note 11)

    (360 )     1,613       (404 )     4,841  

Net earnings

  $ 2,446     $ 3,691     $ 7,168     $ 9,559  
                                 

Earnings per share (Note 7)

                               

Basic:

                               

Continuing operations

  $ 0.14     $ 0.10     $ 0.37     $ 0.23  

Discontinued operations

    (0.02 )     0.08       (0.02 )     0.24  

Basic earnings per share

  $ 0.12     $ 0.18     $ 0.35     $ 0.47  

Basic weighted average shares

    20,518       20,278       20,503       20,258  
                                 

Diluted:

                               

Continuing operations

  $ 0.14     $ 0.10     $ 0.37     $ 0.23  

Discontinued operations

    (0.02 )     0.08       (0.02 )     0.24  

Diluted earnings per share

  $ 0.12     $ 0.18     $ 0.35     $ 0.47  

Diluted weighted average shares

    20,617       20,352       20,601       20,343  

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

5

 

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Amounts in thousands)


 

   

13 Weeks Ended (Unaudited)

   

39 Weeks Ended (Unaudited)

 
                                 
   

December 1,

   

November 25,

   

December 1,

   

November 25,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Net earnings

  $ 2,446     $ 3,691     $ 7,168     $ 9,559  

Other comprehensive earnings (loss), net of tax:

                               

Foreign currency translation

    -       8       -       7  

Unrealized gains on marketable securities:

                               

Unrealized holding gains arising during the period

    24       -       594       -  

Less: reclassification adjustment for gains included in net earnings

    (1 )     -       (24 )     -  

Unrealized losses on marketable securities:

                               

Unrealized holding losses arising during the period

    (248 )     (19 )     (274 )     (37 )

Less: reclassification adjustment for losses included in net earnings

    15       30       33       140  

Other comprehensive (loss) earnings

    (210 )     19       329       110  

Total comprehensive earnings

  $ 2,236     $ 3,710     $ 7,497     $ 9,669  

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

6

 

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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


 

                                   

Accumulated

                 
                   

Additional

           

Other

                 
   

Common Stock

   

Paid-in

   

Accumulated

   

Comprehensive

   

Treasury Stock

 
   

Shares

   

Amount

   

Capital

   

Deficit

   

Earnings (Loss)

   

Shares

   

Amount

 
                                                         

Balance, March 3, 2019

    20,965,144     $ 2,096     $ 169,395     $ (2,605 )   $ (22 )     479,191     $ (9,853 )
                                                         

Net earnings

    -       -       -       2,587       -       -       -  

Unrealized gain on marketable securities, net of tax

    -       -       -       -       346       -       -  

Stock options exercised

    -       -       (56 )     -       -       (6,200 )     127  

Stock-based compensation

    -       -       124       -       -       -       -  

Cash dividends ($0.10 per share)

    -       -       -       (2,049 )     -       -       -  
                                                         

Balance, June 2, 2019

    20,965,144       2,096       169,463       (2,067 )     324       472,991       (9,726 )
                                                         

Net earnings

    -       -       -       2,135       -       -       -  

Unrealized gain on marketable securities, net of tax

    -       -       -       -       193       -       -  

Stock options exercised

    -       -       (179 )     -       -       (22,974 )     473  

Stock-based compensation

    -       -       141       -       -       -       -  

Cash dividends ($0.10 per share)

    -       -       -       (2,050 )     -       -       -  
                                                         

Balance, September 1, 2019

    20,965,144       2,096       169,425       (1,982 )     517       450,017       (9,253 )
                                                         

Net earnings

    -       -       -       2,446       -       -       -  

Unrealized gain on marketable securities, net of tax

    -       -       -       -       (210 )     -       -  

Stock options exercised

    -       -       (22 )     -       -       (2,812 )     58  

Stock-based compensation

    -       -       139       -       -       -       -  

Cash dividends ($0.10 per share)

    -       -       -       (2,051 )     -       -       -  
                                                         

Balance, December 1, 2019

    20,965,144     $ 2,096     $ 169,542     $ (1,587 )   $ 307       447,205     $ (9,195 )

 

7

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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


 

                                   

Accumulated

                 
                   

Additional

           

Other

                 
   

Common Stock

   

Paid-in

   

Accumulated

   

Comprehensive

   

Treasury Stock

 
   

Shares

   

Amount

   

Capital

   

Deficit

   

Earnings (Loss)

   

Shares

   

Amount

 
                                                         

Balance, February 25, 2018

    20,965,144     $ 2,096     $ 169,011     $ (21,099 )   $ 131       723,573     $ (14,878 )
                                                         

Net earnings

    -       -       -       3,168       -       -       -  

Foreign currency translation adjustment for sale of business

    -       -       -       -       (19 )     -       -  

Unrealized loss on marketable securities, net of tax

    -       -       -       -       (16 )     -       -  

Stock options exercised

    -       -       (14 )     -       -       (2,987 )     61  

Stock-based compensation

    -       -       201       -       -       -       -  

Cash dividends ($0.10 per share)

    -       -       -       (2,023 )     -       -       -  
                                                         

Balance, May 27, 2018

    20,965,144       2,096       169,198       (19,954 )     96       720,586       (14,817 )
                                                         

Net earnings

    -       -       -       2,700       -       -       -  

Foreign currency translation adjustment for sale of business

    -       -       -       -       18       -       -  

Unrealized gain on marketable securities, net of tax

    -       -       -       -       108       -       -  

Stock options exercised

    -       -       (93 )     -       -       (32,550 )     670  

Stock-based compensation

    -       -       199       -       -       -       -  

Cash dividends ($0.10 per share)

    -       -       -       (2,024 )     -       -       -  
                                                         

Balance, August 26, 2018

    20,965,144       2,096       169,304       (19,278 )     222       688,036       (14,147 )
                                                         

Net earnings

    -       -       -       3,691       -       -       -  

Foreign currency translation adjustment for sale of business

    -       -       -       -       8       -       -  

Unrealized gain on marketable securities, net of tax

    -       -       -       -       11       -       -  

Stock options exercised

    -       -       (10 )     -       -       (2,300 )     47  

Stock-based compensation

    -       -       195       -       -       -       -  

Cash dividends ($0.10 per share)

    -       -       -       (2,028 )     -       -       -  
                                                         

Balance, November 25, 2018

    20,965,144     $ 2,096     $ 169,489     $ (17,615 )   $ 241       685,736     $ (14,100 )

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

8

 

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)


 

 

   

39 Weeks Ended (Unaudited)

 
   

December 1,

   

November 25,

 
   

2019

   

2018

 

Cash flows from operating activities:

               

Net earnings from continuing operations

  $ 7,572     $ 4,718  

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

               

Depreciation and amortization

    1,142       1,317  

Stock-based compensation

    404       594  

Deferred income taxes

    103       (940 )

Amortization of bond premium

    (36 )     (34 )

Changes in operating assets and liabilities

    (6,492 )     (430 )

Net cash provided by operating activities - continuing operations

    2,693       5,225  

Net cash (used in) provided by operating activities - discontinued operations

    (404 )     5,731  

Net cash provided by operating activities

    2,289       10,956  
                 

Cash flows from investing activities:

               

Purchase of property, plant and equipment

    (4,363 )     (399 )

Purchases of marketable securities

    (100,454 )     (19,271 )

Proceeds from sales and maturities of marketable securities

    43,950       14,238  

Net cash used in investing activities - continuing operations

    (60,867 )     (5,432 )

Net cash used in investing activities - discontinued operations

    -       (158 )

Net cash used in investing activities

    (60,867 )     (5,590 )
                 

Cash flows from financing activities:

               

Dividends paid

    (6,150 )     (6,076 )

Proceeds from exercise of stock options

    401       661  

Net cash used in financing activities - continuing operations

    (5,749 )     (5,415 )

Net cash used in financing activities - discontinued operations

    -       -  

Net cash used in financing activities

    (5,749 )     (5,415 )
                 

Decrease in cash and cash equivalents before effect of exchange rate changes - continuing operations

    (63,923 )     (5,622 )

Decrease in cash and cash equivalents before effect of exchange rate changes - discontinued operations

    (404 )     5,573  

Decrease in cash and cash equivalents before effect of exchange rate changes

    (64,327 )     (49 )
                 

Effect of exchange rate changes on cash and cash equivalents - continuing operations

    -       (3 )

Effect of exchange rate changes on cash and cash equivalents - discontinued operations

    -       (1,207 )

Effect of exchange rate changes on cash and cash equivalents

    -       (1,210 )
                 

Decrease in cash and cash equivalents

    (64,327 )     (1,259 )

Cash and cash equivalents, beginning of period

    71,007       18,254  

Cash and cash equivalents, end of period

  $ 6,680     $ 16,995  
                 
                 

Supplemental cash flow information:

               

Cash paid during the period for income taxes, net of refunds

  $ 7,614     $ 2,332  

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

9

 

 

PARK AEROSPACE CORP. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


 

 

1. CONSOLIDATED FINANCIAL STATEMENTS

 

The Condensed Consolidated Balance Sheet as of December 1, 2019, the Consolidated Statements of Operations, the Consolidated Statements of Comprehensive Earnings and the Consolidated Statements of Shareholders’ Equity for the 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 and the Condensed Consolidated Statements of Cash Flows for the 39 weeks then ended have been prepared by Park Aerospace Corp., formerly Park Electrochemical Corp. (the “Company”), without audit. In the opinion of management, these unaudited consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at December 1, 2019 and the results of operations and cash flows for all periods presented. The Consolidated Statements of Operations are not necessarily indicative of the results to be expected for the full fiscal year or any subsequent interim period.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 3, 2019.  There have been no significant changes to such accounting policies during the 39 weeks ended December 1, 2019, except for adoption of Accounting Standards Codification (“ASC”) 842. (See Note 13, Accounting Pronouncements)

 

On July 25, 2018, the Company entered into an agreement to sell its Electronics Business for $145,000 in cash.  The Company completed this transaction on December 4, 2018. (See Note 11, Discontinued Operations)

 

The Company has classified the operating results of its Electronics Business, together with certain costs related to the transaction, as discontinued operations, net of tax, in the Consolidated Statements of Operations, in accordance with ASC 205-20 Discontinued Operations. (See Note 11, Discontinued Operations)

 

On July 16, 2019, the Company filed with the State of New York Department of State a Certificate of Amendment of its Restated Certificate of Incorporation, as amended, changing its name to “Park Aerospace Corp.” after the Board of Directors of the Company approved such amendment and the shareholders of the Company approved such amendment at the Annual Meeting of Shareholders. On July 16, 2019, the Company also filed with the Secretary of State of the State of Kansas, a Certificate of Ownership and Merger whereby the Company’s wholly owned subsidiary, Park Aerospace Technologies Corp. (“PATC”), located at the Newton, Kansas Airport was merged into the Company and ceased to exist.

 

 

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.

 

10

 

 

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 and accounts payable approximate their carrying value due to their short-term nature. Certain assets and liabilities of the Company are required to be recorded at fair value on either a recurring or non-recurring basis. On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs. (See Note 3, Marketable Securities)

 

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. There were no transfers between levels within the fair value hierarchy during the 39 weeks ended December 1, 2019 and November 25, 2018. 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 or 39 weeks ended December 1, 2019.

 

 

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.

 

11

 

 

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

 

   

December 1, 2019

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 
                                 

U.S. Treasury and other government securities

  $ 109,491     $ 109,491     $ -     $ -  

U.S. corporate debt securities

    27,995       27,995       -       -  

Total marketable securities

  $ 137,486     $ 137,486     $ -     $ -  

  

   

March 3, 2019

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 
                                 

U.S. Treasury and other government securities

  $ 68,718     $ 68,718     $ -     $ -  

U.S. corporate debt securities

    11,899       11,899       -       -  

Total marketable securities

  $ 80,617     $ 80,617     $ -     $ -  

 

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

 
                         

December 1, 2019:

                       

U.S. Treasury and other government securities

  $ 109,139     $ 440     $ 88  
                         

U.S. corporate debt securities

    27,959       59       23  

Total marketable securities

  $ 137,098     $ 499     $ 111  
                         

March 3, 2019:

                       

U.S. Treasury and other government securities

  $ 68,727     $ 44     $ 53  
                         

U.S. corporate debt securities

    11,924       7       32  

Total marketable securities

  $ 80,651     $ 51     $ 85  

 

The estimated fair values of such securities at December 1, 2019 by contractual maturity are shown below:

 

Due in one year or less

  $ 80,787  

Due after one year through five years

    56,699  
    $ 137,486  

 

12

 
 

 

 

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 labor and 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:

 

   

December 1,

   

March 3,

 
   

2019

   

2019

 
                 

Inventories:

               
                 

Raw materials

  $ 2,764     $ 4,556  

Work-in-process

    433       232  

Finished goods

    739       479  
    $ 3,936     $ 5,267  

 

 

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 option. 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 December 1, 2019 are as follows:

 

Fiscal Year:

       

2020

  $ 38  

2021

    152  

2022

    90  

2023

    61  

2024

    61  

Thereafter

    161  

Total undiscounted operating lease payments

    563  

Less imputed interest

    (110 )

Present value of operating lease payments

  $ 453  

 

The above payment schedule includes renewal options that the Company is reasonably likely to exercise. Leases with an initial term of 12 months or less are not recorded on the Company’s balance sheet. The Company recognizes lease expense for leases on a straight-line basis over the terms of the leases. The above payment schedule does not include lease payments of $199 in 2020 and $463 in 2021 for the Company’s idle facility in Fullerton, California that have been accrued on the condensed consolidated balance sheets in accrued liabilities.

 

13

 

 

For the 13 weeks and 39 weeks ended December 1, 2019, the Company’s operating lease expense was $88 and $278, respectively. Cash payments of $274, pertaining to operating leases, are reflected in the condensed consolidated 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 December 1, 2019:

 

Operating right-of-use assets

  $ 453  
         

Operating lease liabilities

  $ 152  

Long-term operating lease liabilities

    301  

Total operating lease liabilities

  $ 453  

 

The Company’s weighted average remaining lease term for its operating leases is 5.9 years.

 

In December 2018, PATC entered into a Development Agreement with the City of Newton, Kansas and the Board of County Commissioners of Harvey County, Kansas. Pursuant to this agreement, PATC agreed to construct and operate an additional manufacturing facility of approximately 90,000 square feet for the design, development and manufacture of advanced composite materials and parts, structures and assemblies for aerospace. PATC further agreed to equip the facility through the purchase of machinery, equipment and furnishings and to create additional new full-time employment of specified levels during a five-year period. In exchange for these agreements, the City and the County agreed to lease to PATC three acres of land at the Newton, Kansas Airport, in addition to the eight acres previously leased to PATC by the City and County. The City and County further agreed to provide financial and other assistance toward the construction of the additional facility as set forth in the Development Agreement. The Company estimates the total cost of the additional facility to be approximately $20 million, and the Company expects to complete the construction of the additional facility in the second half of the 2020 calendar year. As of December 1, 2019, the Company had $1,170 in equipment purchase obligations and $5,385 of construction-in-progress related to the additional facility. On July 16, 2019, PATC was merged into the Company and ceased to exist, and the Company assumed the rights and obligations of PATC, including the rights and obligations of PATC under the Development Agreement. (See Note 1, Consolidated Financial Statements)

 

 

6. STOCK-BASED COMPENSATION

 

As of December 1, 2019, 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 to directors, employees and consultants. Prior to the 2018 Plan, the Company had the 2002 Stock Option Plan (the “2002 Plan”) which had also 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 of an optionee, 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.

 

14

 

 

The 2002 Plan terminated on May 21, 2018, and authority to grant additional options under the 2002 Plan expired on that date. All options granted under the 2002 Plan will expire in April 2028 or earlier.

 

During the 39 weeks ended December 1, 2019, the Company granted options under the 2018 Plan to purchase a total of 114,450 shares of common stock to its directors and certain of its employees. The weighted average fair value of the granted options was $3.97 per share using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 2.24%-2.26%; expected volatility factor of 30.4%-31.5%; expected dividend yield of 2.43%; and estimated option term of 4.3-5.8 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 39 weeks ended December 1, 2019. The estimated term of the options was based on evaluations of the historical and expected future employee exercise behavior.

 

The future compensation expense to be recognized in earnings before income taxes is $486 and will be recorded on a straight-line basis over the requisite service periods.

 

The following is a summary of option activity for the 39 weeks ended December 1, 2019:

 

 

   

Outstanding

Options

   

Weighted

Average

Exercise Price

   

Weighted Average

Remaining

Contractual Term

(in years)

   

Aggregate

Intrinsic

Value

 
                                 

Balance, March 3, 2019

    540,709     $ 13.49             $ 1,525  

Granted

    114,450       16.44                  

Exercised

    (31,986 )     12.69                  

Terminated or expired

    (104,814 )     16.98                  

Balance, December 1, 2019

    518,359     $ 13.48       5.76     $ 1,467  

Vested and exercisable, December 1, 2019

    375,422     $ 13.02       4.50     $ 1,235  

 

15

 
 

 

 

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 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

   

39 Weeks Ended

 
   

December 1,

2019

   

November 25,

2018

   

December 1,

2019

   

November 25,

2018

 
                                 

Net earnings - continuing operations

  $ 2,806     $ 2,078     $ 7,572     $ 4,718  

Net (loss) earnings - discontinued operations

    (360 )     1,613       (404 )     4,841  

Net earnings

  $ 2,446     $ 3,691     $ 7,168     $ 9,559  
                                 

Weighted average common shares outstanding for basic EPS

    20,518       20,278       20,503       20,258  

Net effect of dilutive options

    99       74       98       85  

Weighted average shares outstanding for diluted EPS

    20,617       20,352       20,601       20,343  
                                 

Basic earnings per share - continuing operations

  $ 0.14     $ 0.10     $ 0.37     $ 0.23  

Basic earnings per share - discontinued operations

    (0.02 )     0.08       (0.02 )     0.24  

Basic earnings per share

  $ 0.12     $ 0.18     $ 0.35     $ 0.47  
                                 

Diluted earnings per share - continuing operations

  $ 0.14     $ 0.10     $ 0.37     $ 0.23  

Diluted earnings per share - discontinued operations

    (0.02 )     0.08       (0.02 )     0.24  

Diluted earnings per share

  $ 0.12     $ 0.18     $ 0.35     $ 0.47  

 

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 76,000 and 145,000 for the 13 weeks ended December 1, 2019 and November 25, 2018, respectively, and 115,000 and 279,000 for the 39 weeks ended December 1, 2019 and November 25, 2018, respectively.

 

 

8. SHAREHOLDERS EQUITY

 

During the 39 weeks ended December 1, 2019, the Company sold 31,986 shares of the Company’s treasury stock pursuant to the exercises of employee stock options, received proceeds of $401 from such exercises and recognized stock-based compensation expense, net of recognized tax benefits, of $404. These transactions resulted in a $257 increase in additional paid-in capital during the period.

 

On January 8, 2015, 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 1,250,000 shares of its common stock, representing approximately 6% of the Company’s 20,945,634 total outstanding shares as of the close of business on January 7, 2015. This authorization superseded all prior Board of Directors’ authorizations to purchase shares of the Company’s common stock.

 

16

 

 

On March 10, 2016, the Company announced that its Board of Directors authorized the Company’s purchase, on the open market and in privately negotiated transactions, of up to 1,000,000 additional shares of its common stock, in addition to the unused prior authorization to purchase shares of the Company’s common stock announced on January 8, 2015. As a result, the Company is authorized to purchase up to a total of 1,531,412 shares of its common stock, representing approximately 7.5% of the Company’s 20,518,548 total outstanding shares as of the close of business on January 6, 2020.

 

The Company did not purchase any shares of its common stock during the 39 weeks ended December 1, 2019 or during the 39 weeks ended November 25, 2018.

 

 

9. INCOME TAXES

 

For the 13 weeks and 39 weeks ended December 1, 2019, the Company recorded an income tax provision from continuing operations of $1,069 and $2,895, respectively. The income taxes for the 39 weeks ended December 1, 2019 were impacted by a one-time tax charge of $144,000 for the write down of deferred tax assets for expirations of stock options held by employees who transferred to AGC Inc. in connection with the sale of the Electronics Business. For the 13 and 39 weeks ended November 25, 2018, the Company recorded an income tax provision from continuing operations of $616 and $453, respectively. The income taxes for the 39 weeks ended November 25, 2018 were impacted by a one-time benefit of $788 related to clarifying regulations pertaining to the Tax Cuts and Jobs Act enacted in December 2017. 

 

The Company’s effective tax rates for the 13 weeks and 39 weeks ended December 1, 2019 were income tax provisions of 27.6% and 27.7%, respectively, compared to income tax provisions of 22.9% and 8.8%, respectively, in the comparable prior periods. The effective tax rates for the 13 weeks and 39 weeks ended December 1, 2019 were higher than the U.S. statutory rate of 21% primarily due to state and local taxes, a discrete income tax provision for stock compensation and the accrual of interest related to unrecognized tax benefits. The effective rate for the 39 weeks ended November 25, 2018 was lower than the U.S. statutory rate of 21% primarily due to the one-time benefit noted above.

 

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. The Company repatriated $1,500, $113,600, and $135,300 in cash from the Company’s subsidiary in Singapore in the 2020, 2019 and 2018 fiscal years, respectively.

 

 

10. GEOGRAPHIC REGIONS

 

The Company’s products are sold to customers in North America, Asia and Europe. The Company’s manufacturing facilities are located in Kansas. Sales are attributed to geographic regions based upon the region in which the materials were delivered to the customer. Sales between geographic regions were not significant. Customer sales concentrations for the 13 weeks and 39 weeks ended December 1, 2019 are not materially different from that reported in the Company’s Annual Report on Form 10-K for the fiscal year ended March 3, 2019.

 

17

 

 

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

 

   

13 Weeks Ended

   

39 Weeks Ended

 
   

December 1,

2019

   

November 25,

2018

   

December 1,

2019

   

November 25,

2018

 
                                 

Sales:

                               
                                 

North America

  $ 14,469     $ 12,223     $ 41,546     $ 31,690  

Asia

    473       150       882       505  

Europe

    905       480       2,092       2,262  

Total sales

  $ 15,847     $ 12,853     $ 44,520     $ 34,457  

 

   

December 1,

2019

   

March 3,

2019

 

Long-lived assets:

               
                 

North America

  $ 22,867     $ 19,372  

Asia

    1,692       1,546  

Europe

    -       -  

Total long-lived assets

  $ 24,559     $ 20,918  

 

 

11. DISCONTINUED OPERATIONS

 

On July 25, 2018, the Company entered into an agreement to sell its Electronics Business for $145,000 in cash. The Company completed this transaction on December 4, 2018.

 

The Company has classified the operating results of its Electronics Business, together with certain costs related to the transaction, as discontinued operations, net of tax, in the Consolidated Statements of Operations.

 

18

 

 

The following table shows the summary operating results of the discontinued operations:

 

   

13 Weeks Ended (Unaudited)

   

39 Weeks Ended (Unaudited)

 
                                 
   

December 1,

   

November 25,

   

December 1,

   

November 25,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Net sales

  $ -     $ 16,680     $ -     $ 55,232  

Cost of sales

    -       13,962       -       42,899  

Gross profit

    -       2,718       -       12,333  

Selling, general and administrative expenses

    -       2,597       231       7,643  

Restructuring charges

    484       836       599       1,593  

(Loss) earnings from discontinued operations

    (484 )     (715 )     (830 )     3,097  

Other income

    -       2,945       288       2,945  

(Loss) earnings from discontinued operations before income taxes

    (484 )     2,230       (542 )     6,042  

Income tax (benefit) provision

    (124 )     617       (138 )     1,201  

Net (loss) earnings from discontinued operations

  $ (360 )   $ 1,613     $ (404 )   $ 4,841  

 

During the 13 weeks ended December 1, 2019, the Company received from AGC Inc. the final settlement payment for the sale of the Electronics Business of $288 for post-closing adjustments for changes in working capital compared to target net working capital as agreed in the Electronics Business Purchase Agreement with AGC Inc. Additionally, during the 39 weeks ended December 1, 2019, the Company incurred transition and tax related costs of $231 in connection with the sale of the Electronics Business. 

 

During the 2018 fiscal year, the Company consolidated its Nelco Products, Inc. Business Unit located in Fullerton, California and its Neltec, Inc. Business Unit located in Tempe, Arizona. (Both Business Units were included in the Company’s sale of its Electronics Business on December 4, 2018). The Company estimates the remaining pre-tax charge in connection with the consolidation to be approximately $300, which the Company expects to incur primarily during the fiscal year ending March 1, 2020. Current year restructuring charges primarily relate to the exit from the facility located in Fullerton, California.

 

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

 

   

Accrual

March 3,

2019

   

Current

Period

Charges

   

Cash

Payments

   

Non-Cash

Charges

   

Accrual
December 1, 2019

   

Total

Expense

Accrued to

Date

   

Total

Expected

Costs

 
Facility lease costs   $ 1,324     $ 100     $ (748 )   $ -     $ 676     $ 2,941     $ 2,941  
Severance costs     -       -       -       -       -       1,081       1,081  
Equipment removal     -       324       (324 )     -       -       324       615  

Other

    -       71       (71 )     -       -       839       863  
Total restructuring charges   $ 1,324     $ 495     $ (1,143 )   $ -     $ 676     $ 5,185     $ 5,500  

 

19

 
 

 

 

12. CONTINGENCIES

 

Litigation 

 

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

 

Environmental Contingencies 

 

The Company and certain of its subsidiaries have been named by the Environmental Protection Agency (the “EPA”) or a comparable state agency under the Comprehensive Environmental Response, Compensation and Liability Act (the “Superfund Act”) or similar state law as potentially responsible parties in connection with alleged releases of hazardous substances at three sites.

 

Under the Superfund Act and similar state laws, all parties who may have contributed any waste to a hazardous waste disposal site or contaminated area identified by the EPA or comparable state agency may be jointly and severally liable for the cost of cleanup. Generally, these sites are locations at which numerous persons disposed of hazardous waste. In the case of the Company’s subsidiaries, generally the waste was removed from their manufacturing facilities and disposed at waste sites by various companies which contracted with the subsidiaries to provide waste disposal services. Neither the Company nor any of its subsidiaries have been accused of or charged with any wrongdoing or illegal acts in connection with any such sites. The Company believes it maintains an effective and comprehensive environmental compliance program.

 

The insurance carriers which provided general liability insurance coverage to the Company and its subsidiaries for the years during which the Company’s subsidiaries’ waste was disposed at these three sites have in the past reimbursed the Company and its subsidiaries for 100% of their legal defense and remediation costs associated with two of these sites.

 

The Company does not record environmental liabilities and related legal expenses for which the Company believes that it and its subsidiaries have general liability insurance coverage for the years during which the Company’s subsidiaries’ waste was disposed at two sites for which certain subsidiaries of the Company have been named as potentially responsible parties. Pursuant to such general liability insurance coverage, three insurance carriers reimburse the Company and its subsidiaries for 100% of the legal defense and remediation costs associated with the two sites.

 

Included in selling, general and administrative expenses are charges for actual expenditures and accruals, based on estimates, for certain environmental matters described above. The Company accrues estimated costs associated with known environmental matters, when such costs can be reasonably estimated and when the outcome appears probable. The Company believes that the ultimate disposition of known environmental matters will not have a material adverse effect on the Company’s results of operations, cash flows or financial position.

 

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13. ACCOUNTING PRONOUNCEMENTS

 

Recently Adopted

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a lease (i.e., lessees and lessors). The new standard requires lessees to classify leases as either finance leases or operating leases and record a right-of-use asset and a lease liability for all leases with terms greater than 12 months regardless of their classification. An accounting policy election may be made to account for leases with a term of 12 months or less similar to existing guidance for operating leases today. ASU No. 2016-02 supersedes the existing guidance on accounting for leases. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows for an optional transition method for the adoption of Topic 842. The two permitted transition methods are now the modified retrospective approach, which applies the new lease requirements at the beginning of the earliest period presented, and the optional transition method, which applies the new lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 is effective for the Company’s fiscal year ending March 1, 2020 and the interim periods within that year. The Company adopted this standard in the first quarter of the 2020 fiscal year using the optional transition method. The optional transition method enables the Company to adopt the new standard as of the beginning of the period of adoption and does not require restatement of prior period financial information.  As a result, prior period financial information has not been restated and continues to be reported under the accounting guidance that was effective during those periods. The Company also elected the practical expedients that allow the Company to carry forward the historical lease classification. At adoption, the Company elected the following practical expedients: (1) the “package of practical expedients”, pursuant to which the Company did not need to reassess its prior conclusions about lease identification, lease classification and initial direct costs, (2) creation of an accounting policy for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis over the lease term, and (3) to account separately for lease and non-lease components for all leases. The Company has established an inventory of existing leases and implemented a new process of evaluating the classification of each lease. The financial impact of the adoption of the new standard in the 2020 fiscal year increased total assets and total liabilities by approximately $551. The financial impact of the adoption primarily relates to the capitalization of right-of-use assets and recognition of lease liability related to operating leases. See Note 5, Leases, for additional information with respect to the impact of the adoption of the lease accounting guidance and the disclosures required by ASU 2016-02 and the related amendments.

 

In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows for reclassification of stranded tax effects resulting from U.S. Tax Reform from accumulated other comprehensive loss to retained earnings, but it does not require this reclassification. This ASU is effective for the Company’s fiscal year ending March 1, 2020 and the interim periods within that year. The Company adopted this ASU in the first quarter of its 2020 fiscal year and elected to reclassify the stranded tax effects resulting from U.S. Tax Reform. As a result of that election, the adoption of ASU 2018-02 did not have an impact on the Company’s consolidated financial statements and disclosures.

 

21

 

 

Recently Issued

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. This ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss). This ASU is effective for the Company’s fiscal year ending February 28, 2021 and for the interim periods within that year. Early adoption is permitted. ASU 2018-13 is generally required to be applied retrospectively to all periods presented upon their effective date with the exception of certain amendments, which should be applied prospectively to the most recent interim or annual period presented in the year of adoption. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements and disclosures.

 

22

 
 

 

 

Item 2.

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

 

General:

 

Park Aerospace Corp., formerly Park Electrochemical 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 (undergoing qualification) and lightning strike 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 SigmaStrutTM and AlphaStrutTM product lines) are, among others, prototype and development aircraft, special mission aircraft, spares for legacy military and civilian aircraft and exotic spacecraft.

 

On December 4, 2018, Park completed the previously announced sale of its Electronics Business, including manufacturing facilities in Singapore, France, California and Arizona and R&D facilities in Singapore and Arizona, to AGC Inc. for an aggregate purchase price of $145 million in cash, excluding cash in certain acquired subsidiaries and certain accrued and unpaid taxes of certain acquired subsidiaries. See Note 11, Discontinued Operations, of the Notes to Consolidated Financial Statements elsewhere in this Report for additional information on the sale.  As a result, the discussion below is of the Company’s continuing operations, which are comprised of the aerospace business.

 

On July 16, 2019, the Company filed with the State of New York Department of State a Certificate of Amendment of its Restated Certificate of Incorporation, as amended, changing its name to “Park Aerospace Corp.” after the Board of Directors of the Company approved such amendment and the shareholders of the Company approved such amendment at the Annual Meeting of Shareholders. On July 16, 2019, the Company also filed with the Secretary of State of the State of Kansas, a Certificate of Ownership and Merger whereby the Company’s wholly owned subsidiary, Park Aerospace Technologies Corp. (“PATC”), located at the Newton, Kansas Airport was merged into the Company and ceased to exist.

 

Financial Overview

 

The Company's total net sales from continuing operations in the 13 weeks and 39 weeks ended December 1, 2019 were $15.8 million and $44.5 million, respectively, compared to $12.9 million and $34.5 million, respectively, in the 13 weeks and 39 weeks ended November 25, 2018.

 

The Company’s gross profit margins from continuing operations, measured as percentages of sales, were 31.7% and 30.6%, respectively, in the 13 weeks and 39 weeks ended December 1, 2019 compared to 33.3% and 29.8%, respectively, in the 13 weeks and 39 weeks ended November 25, 2018.

 

The Company’s earnings from continuing operations before income taxes and net earnings from continuing operations increased by 44% and 35%, respectively, in the 13 weeks ended December 1, 2019 compared to the 13 weeks ended November 25, 2018 and by 102% and 60%, respectively, in the 39 weeks ended December 1, 2019 compared to the 39 weeks ended November 25, 2018, in both periods, primarily as a result of higher sales and higher interest income, partially offset by a higher tax provision, in the case of net earnings, compared to the prior year’s comparable period.

 

23

 

 

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

           

39 Weeks Ended

         

(amounts in thousands, except per share amounts)

 

December 1,

   

November 25,

   

%

   

December 1,

   

November 25,

   

%

 
   

2019

   

2018

   

Change

   

2019

   

2018

   

Change

 
                                                 

Net sales

  $ 15,847     $ 12,853       23 %   $ 44,520     $ 34,457       29 %

Cost of sales

    10,825       8,569       26 %     30,881       24,176       28 %

Gross profit

    5,022       4,284       17 %     13,639       10,281       33 %

Selling, general and administrative expenses

    1,949       1,983       (2 )%     5,785       6,200       (7 )%

Earnings from continuing operations

    3,073       2,301       34 %     7,854       4,081       92 %

Interest and other income

    802       393       104 %     2,613       1,090       140 %

Earnings from continuing operations before income taxes

    3,875       2,694       44 %     10,467       5,171       102 %

Income tax provision

    1,069       616       74 %     2,895       453       539 %

Net earnings from continuing operations

    2,806       2,078       35 %     7,572       4,718       60 %

(Loss) earnings from discontinued operations, net of tax

    (360 )     1,613       (122 )%     (404 )     4,841       (108 )%

Net earnings

  $ 2,446     $ 3,691       (34 )%   $ 7,168     $ 9,559       (25 )%
                                                 

Earnings per share:

                                               

Basic:

                                               

Continuing operations

  $ 0.14     $ 0.10       40 %   $ 0.37     $ 0.23       61 %

Discontinued operations

    (0.02 )     0.08       (125 )%     (0.02 )     0.24       (108 )%

Basic earnings per share

  $ 0.12     $ 0.18       (33 )%   $ 0.35     $ 0.47       (26 )%
                                                 

Diluted:

                                               

Continuing operations

  $ 0.14     $ 0.10       40 %   $ 0.37     $ 0.23       61 %

Discontinued operations

    (0.02 )     0.08       (125 )%     (0.02 )     0.24       (108 )%

Diluted earnings per share

  $ 0.12     $ 0.18       (33 )%   $ 0.35     $ 0.47       (26 )%

 

Net Sales

 

The Company's total net sales from continuing operations in the 13 weeks and 39 weeks ended December 1, 2019 were $15.8 million and $44.5 million, respectively, compared to $12.9 million and $34.5 million in the 13 weeks and 39 weeks, respectively, ended November 25, 2018. The increases in sales were due to the ramping up of programs on which the Company’s materials are qualified.

 

24

 

 

Gross Profit

 

The Company’s gross profit from continuing operations in the 13 weeks ended December 1, 2019 was higher than its gross profit from continuing operations in the prior year’s comparable period. The gross profit from continuing operations as a percentage of sales for the Company’s worldwide operations in the 13 weeks ended December 1, 2019 decreased to 31.7% from 33.3% in the 13 weeks ended November 25, 2018. The higher gross profit for the 13 weeks ended December 1, 2019 compared to the 13 weeks ended November 25, 2018 was principally a result of higher sales and the partially fixed nature of overhead expenses in the 13 weeks ended December 1, 2019 compared to the 13 weeks ended November 25, 2018, partially offset by increased direct labor and supplies expenses.

 

The Company’s gross profit from continuing operations in the 39 weeks ended December 1, 2019 was higher than its gross profit from continuing operations in the prior year’s comparable period. The gross profit from continuing operations as a percentage of sales for the Company’s worldwide operations in the 39 weeks ended December 1, 2019 increased to 30.6% from 29.8% in the 39 weeks ended November 25, 2018. The higher gross profit for the 39 weeks ended December 1, 2019 compared to the 39 weeks ended November 25, 2018 was principally a result of higher sales and the partially fixed nature of overhead expenses in the 39 weeks ended December 1, 2019 compared to the 39 weeks ended November 25, 2018, partially offset by increased direct labor and supplies expenses.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses from continuing operations decreased by $34,000 and $415,000, respectively, during the 13 weeks and 39 weeks ended December 1, 2019, or by 2% and 7%, respectively, compared to the prior year's comparable periods, and these expenses, measured as percentages of sales from continuing operations, were 12.3% and 13.0%, respectively, in the 13 weeks and 39 weeks ended December 1, 2019 compared to 15.4% and 18.0%, respectively, in the 13 weeks and 39 weeks ended November 25, 2018.  The decreases in such expenses during the 13 weeks and 39 weeks ended December 1, 2019 were primarily the results of lower legal, travel and entertainment and stock option expenses.

 

Selling, general and administrative expenses from continuing operations included stock option expenses of $139,000 and $404,000, respectively, for the 13 weeks and 39 weeks ended December 1, 2019, compared to stock option expenses of $194,000 and $594,000, respectively, for the 13 weeks and 39 weeks ended November 25, 2018.

 

Earnings from Continuing Operations

 

For the reasons set forth above, the Company’s earnings from continuing operations were $3.1 million and $7.9 million, respectively, for the 13 weeks and 39 weeks ended December 1, 2019 compared to $2.3 million and $4.1 million, respectively, for the 13 weeks and 39 weeks ended November 25, 2018.

 

Interest and Other Income

 

Interest and other income from continuing operations was $802,000 and $2.6 million, respectively, for the 13 weeks and 39 weeks ended December 1, 2019, compared to $393,000 and $1.1 million, respectively, for the prior year's comparable periods. Interest income increased 104% and 140%, respectively, for the 13 weeks and 39 weeks ended December 1, 2019 primarily as a result of higher average balances of marketable securities held by the Company in the 13 weeks and 39 weeks ended December 1, 2019, compared to the prior year's comparable periods, and higher weighted average interest rates. During the 13 weeks and 39 weeks ended December 1, 2019, the Company earned interest income principally from its investments, which consisted primarily of short-term instruments and money market funds.

 

25

 

 

Income Tax Provision

 

For the 13 weeks and 39 weeks ended December 1, 2019, the Company recorded income tax provisions from continuing operations of $1.1 million and $2.9 million, respectively, which included a discrete income tax provision of $223,000 for expirations of stock options, of which $144,000 pertained to employees who transferred to AGC Inc. in the sale of the Company’s Electronics Business. For the 13 weeks and 39 weeks ended November 25, 2018, the Company recorded income tax provisions from continuing operations of $616,000 and $453,000, respectively. 

 

The Company’s effective tax rates for the 13 weeks and 39 weeks ended December 1, 2019 were 27.6% and 27.7%, respectively, compared to 22.9% and 8.8%, respectively, in the prior year’s comparable periods. The effective tax rates for the 13 weeks and 39 weeks ended December 1, 2019 and the 13 weeks ended November 25, 2018 were higher than the U.S. statutory rate of 21% primarily due to state and local taxes, a discrete income tax provision for stock compensation and the accrual of interest related to unrecognized tax benefits. The effective rate for the 39 weeks ended November 25, 2018 was lower than the U.S. statutory rate of 21% primarily due to a one-time benefit of $788,000 related to clarifying regulations pertaining to the Tax Cuts and Jobs Act enacted in December 2017.

 

Net Earnings from Continuing Operations

 

For the reasons set forth above, the Company's net earnings from continuing operations for the 13 weeks and 39 weeks ended December 1, 2019 were $2.8 million and $7.6 million, respectively, compared to net earnings from continuing operations of $2.1 million and $4.7 million, respectively, for the 13 weeks and 39 weeks ended November 25, 2018.

 

Discontinued Operations

 

On July 25, 2018, the Company entered into an agreement to sell its Electronics Business for $145.0 million in cash. The Company completed this transaction on December 4, 2018.

 

The operating results of the Electronics Business are classified, together with certain costs related to the transaction, as discontinued operations, net of tax, in the Consolidated Statements of Operations.

 

The Company’s net earnings from discontinued operations included expenses pertaining to the sale transaction and costs related to the vacated facility in Fullerton, California in the 13 weeks and 39 weeks ended December 1, 2019 compared to full operating results of the Electronics Business for the 13 weeks and 39 weeks ended November 25, 2018.

 

Basic and Diluted Earnings Per Share

 

In the 13 weeks and 39 weeks ended December 1, 2019, basic and diluted earnings per share from continuing operations were $0.14 and $0.37, respectively, including the tax expenses described above. This compared to basic and diluted earnings per share from continuing operations of $0.10 and $0.23, respectively, in the 13 weeks and 39 weeks ended November 25, 2018. The net impact of the tax benefit described above increased basic and diluted earnings per share by $0.04 for the 39 weeks ended November 25, 2018.

 

26

 

 

Liquidity and Capital Resources - Continuing Operations:

 

 

(amounts in thousands)

 

December 1,

   

March 3,

         
   

2019

   

2019

   

Change

 
                         

Cash and cash equivalents and marketable securities

  $ 144,166     $ 151,624     $ (7,458 )

Working capital

    154,061       156,778       (2,717 )

 

 

   

39 Weeks Ended

 

(amounts in thousands)

 

December 1,

   

November 25,

         
   

2019

   

2018

   

Change

 
                         

Net cash provided by operating activities

  $ 2,693     $ 5,225     $ (2,532 )

Net cash used in investing activities

    (60,867 )     (5,432 )     (55,435 )

Net cash used in financing activities

    (5,749 )     (5,415 )     (334 )

 

Cash and Marketable Securities

 

Of the $144.2 million of cash and cash equivalents and marketable securities at December 1, 2019, $126.7 million was owned by certain of the Company’s wholly owned foreign subsidiaries.

 

The change in cash and cash equivalents and marketable securities at December 1, 2019 compared to March 3, 2019 was the result of capital expenditures, dividends paid to shareholders and a number of additional factors. The significant changes in cash flow from operating activities were as follows:

 

 

accounts receivable increased by 9% at December 1, 2019 compared to March 3, 2019 primarily due to an increase in the days sales were outstanding in the 13 weeks ended December 1, 2019 compared to the 13 weeks ended March 3, 2019;

 

 

inventories decreased by 25% at December 1, 2019 compared to March 3, 2019 primarily due to large sales and timing of raw material purchases at the end of the 13 weeks ended December 1, 2019 compared to the 13 weeks ended March 3, 2019

 

 

accounts payable decreased by 37% at December 1, 2019 compared to March 3, 2019 primarily due to the timing of vendor payments and raw material purchases from suppliers;

 

 

accrued liabilities decreased by 30% at December 1, 2019 compared to March 3, 2019 primarily due to decreases in restructuring accruals and bonus accruals; and

 

 

income taxes payable decreased by 69% at December 1, 2019 compared to March 3, 2019 primarily due to estimated tax payments, partially offset by the income tax provision for the 39 weeks ended December 1, 2019.

 

27

 

 

In addition, the Company paid $6.2 million in cash dividends in the 39-week period ended December 1, 2019 compared to $6.1 million in the 39-week period ended November 25, 2018.

 

Working Capital

 

The decrease in working capital at December 1, 2019 compared to March 3, 2019 was due principally to the decrease in cash and cash equivalents and marketable securities resulting from capital expenditures, estimated tax payments and dividend payments.

 

The Company's current ratio (the ratio of current assets to current liabilities) was 27.7 to 1.0 at December 1, 2019 compared to 15.1 to 1.0 at March 3, 2019.

 

Cash Flows

 

During the 39 weeks ended December 1, 2019, the Company's net earnings, before depreciation and amortization, stock-based compensation, amortization of bond premium and changes in operating assets and liabilities, were $2.0 million. During the same 39-week period, the Company expended $4.4 million for the purchase of property, plant and equipment, compared with $399 during the 39 weeks ended November 25, 2018The Company paid $6.2 million in cash dividends in the 39-week period ended December 1, 2019 compared to $6.1 million in the 39-week period ended November 25, 2018.

 

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, appropriate acquisitions and other expansions of the Company's business, including the announced 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.

 

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 $320,000 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.

 

28

 

 

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 accounting principles generally accepted in the United States. The preparation of these 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 March 3, 2019. There have been no significant changes to such accounting policies through the 2020 fiscal year third quarter with the exception of the implementation of Accounting Standards Codification 842. (See Note 5, Leases, of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Report).

 

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 March 3, 2019.

 

29

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

The Company’s market risk exposure at December 1, 2019 is consistent with, and not greater than, the types of market risk and amount of exposures presented in the Annual Report on Form 10-K for the fiscal year ended March 3, 2019.

 

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 December 1, 2019, 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 Quarterly Report relates that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

30

 

 

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 March 3, 2019.

 

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 2020 fiscal year third quarter ended December 1, 2019:

 

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

                           

September 3 - October 1

    0     $ -       0    
                           

October 2 - November 1

    0     $ -       0    
                           

November 2 - December 1

    0     $ -       0    
                           

Total

    0     $ -       0  

1,531,412 (a)

                           

(a)

 

Aggregate number of shares available to be purchased by the Company pursuant to share purchase authorizations announced on January 8, 2015 and March 10, 2016. Pursuant to such authorizations, 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.

 

31

 

 

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 December 1, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at December 1, 2019 (Unaudited) and March 3, 2019; (ii) Consolidated Statements of Operations for the 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited); (iii) Consolidated Statements of Comprehensive Earnings for the 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited); (iv) Consolidated Statements of Shareholders’ Equity for the 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited); and (v) Condensed Consolidated Statements of Cash Flows for the 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited). * +

     
    *     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.

 

32

 

 

EXHIBIT INDEX

 

 

Exhibit No.

 

Name

 

Page

Number

         

31.1

 

Certification of principal executive officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)

 

35

         

31.2

 

Certification of principal financial officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)

 

36

         

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

 

37

         

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

 

38

         

101

 

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 1, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at December 1, 2019 (Unaudited) and March 3, 2019; (ii) Consolidated Statements of Operations for the 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited); (iii) Consolidated Statements of Comprehensive Earnings for the 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited); (iv) Consolidated Statements of Shareholders’ Equity for the 13 weeks and 39 weeks ended December 1, 2019 and November 25, 2018 (Unaudited); and (v) Condensed Consolidated Statements of Cash Flows for the 13 weeks ended December 1, 2019 and November 25, 2018 (Unaudited). * +

 

 

 

         

*

 

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.

   

 

33

 

 

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: January 10, 2020 

 

/s/ Brian E. Shore

 

 

 

Brian E. Shore

 

    Chief Executive Officer  
    (principal executive officer)  
       
       
       
    /s/ P. Matthew Farabaugh  
Date: January 10, 2020   P. Matthew Farabaugh  
    Senior Vice President and Chief Financial Officer    

 

 

(principal financial officer)

 

    (principal accounting officer)  

      

 

34


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
2/28/21
3/1/2010-K
Filed on:1/10/20
1/6/20
For Period end:12/1/19
11/25/19
9/1/1910-Q
7/16/198-K,  DEF 14A
6/2/1910-Q
3/3/1910-K,  NT 10-K
12/4/188-K
11/25/1810-Q
8/26/1810-Q
7/25/188-K
7/24/188-K,  DEF 14A
5/27/1810-Q
5/21/18
5/8/18
2/25/1810-K
3/10/16
1/8/158-K
1/7/15
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