pke20221127_10q.htm

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 November 27, 2022

☐ 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, NY	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 $0.10 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, a smaller reporting company or an emerging growth company. See 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: 20,471,210 as of January 2, 2023.

PARK AEROSPACE CORP. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION:	Page Number

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets November 27, 2022 (Unaudited) and February 27, 2022	3

	Consolidated Statements of Operations 13 weeks and 39 weeks ended November 27, 2022 and November 28, 2021 (Unaudited)	4

	Consolidated Statements of Comprehensive Earnings 13 weeks and 39 weeks ended November 27, 2022 and November 28, 2021 (Unaudited)	5

	Consolidated Statements of Shareholders’ Equity November 27, 2022 and November 28, 2021 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows 39 weeks ended November 27, 2022 and November 28, 2021 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

	Factors That May Affect Future Results	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

PART II.	OTHER INFORMATION:

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Mine Safety Disclosures	25

Item 5.	Other Information	26

Item 6.	Exhibits	26

EXHIBIT INDEX		27

SIGNATURES		28

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

	November 27, 2022 (unaudited)			February 27, 2022*

ASSETS
Current assets
Cash and cash equivalents	$	4,610		$	12,811
Marketable securities (Note 3)		98,693			97,550
Accounts receivable, less allowance for doubtful accounts of $116 and $104, respectively		8,923			8,339
Inventories (Note 4)		6,816			4,657
Prepaid expenses and other current assets		4,264			3,082
Total current assets		123,306			126,439

Property, plant and equipment, net		24,256			24,333
Operating right-of-use assets (Note 5)		163			203
Goodwill and other intangible assets		9,790			9,790
Other assets		112			122
Total assets	$	157,627		$	160,887

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	2,365		$	2,534
Operating lease liability (Note 5)		53			53
Accrued liabilities		1,270			1,494
Income taxes payable		2,660			2,211
Total current liabilities		6,348			6,292

Long-term operating lease liability (Note 5)		141			174
Non-current income taxes payable (Note 10)		10,938			12,621
Deferred income taxes (Note 10)		1,937			1,671
Other liabilities		4,650			4,497
Total liabilities		24,014			25,255

Commitments and contingencies (Note 12)

Shareholders' equity (Note 8)
Common stock		2,096			2,096
Additional paid-in capital		169,837			169,665
Accumulated deficit		(24,881	)		(24,767	)
Accumulated other comprehensive loss		(4,283	)		(1,965	)
		142,769			145,029
Less treasury stock, at cost		(9,156	)		(9,397	)
Total shareholders' equity		133,613			135,632
Total liabilities and shareholders' equity	$	157,627		$	160,887

* The balance sheet at February 27, 2022 has been derived from the audited consolidated financial statements at that date.

See Notes to Condensed Consolidated Financial Statements (Unaudited).

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

	13 Weeks Ended (Unaudited)				39 Weeks Ended (Unaudited)

	November 27,		November 28,		November 27,		November 28,
	2022		2021		2022		2021

Net sales	$	13,867	$	13,864	$	40,525	$	41,076
Cost of sales		9,423		10,028		27,903		27,357
Gross profit		4,444		3,836		12,622		13,719
Selling, general and administrative expenses		1,523		1,593		4,888		4,729
Restructuring charges (Note 9)		-		13		-		197
Earnings from operations		2,921		2,230		7,734		8,793
Interest and other income		299		80		653		286
Earnings from operations before income taxes		3,220		2,310		8,387		9,079
Income tax provision (Note 10)		990		569		2,362		2,571
Net earnings	$	2,230	$	1,741	$	6,025	$	6,508

Earnings per share (Note 7)
Basic:
Basic earnings per share	$	0.11	$	0.09	$	0.29	$	0.32
Basic weighted average shares		20,471		20,450		20,463		20,410

Diluted:
Diluted earnings per share	$	0.11	$	0.08	$	0.29	$	0.32
Diluted weighted average shares		20,510		20,503		20,506		20,566

See Notes to Condensed Consolidated Financial Statements (Unaudited).

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Amounts in thousands)

	13 Weeks Ended (Unaudited)						39 Weeks Ended (Unaudited)

	November 27,			November 28,			November 27,			November 28,
	2022			2021			2022			2021

Net earnings	$	2,230		$	1,741		$	6,025		$	6,508
Other comprehensive earnings (loss), net of tax:
Unrealized gains on marketable securities:
Unrealized holding gains arising during the period		30			3			63			107
Less: reclassification adjustment for gains included in net earnings		-			(27	)		(7	)		(36	)
Unrealized losses on marketable securities:
Unrealized holding losses arising during the period		(773	)		(472	)		(2,407	)		(576	)
Less: reclassification adjustment for losses included in net earnings		25			11			33			11
Other comprehensive loss		(718	)		(485	)		(2,318	)		(494	)
Total comprehensive earnings	$	1,512		$	1,256		$	3,707		$	6,014

See Notes to Condensed Consolidated Financial Statements (Unaudited).

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

											Accumulated
					Additional						Other
	Common Stock				Paid-in			Accumulated			Comprehensive			Treasury Stock
	Shares		Amount		Capital			Deficit			Loss			Shares			Amount

Balance, February 27, 2022		20,965,144	$	2,096	$	169,665		$	(24,767	)	$	(1,965	)		506,934		$	(9,397	)
Net earnings		-		-		-			1,910			-			-			-
Unrealized loss on marketable securities, net of tax		-		-		-			-			(933	)		-			-
Stock-based compensation		-		-		85			-			-			-			-
Cash dividends ($0.10 per share)		-		-		-			(2,046	)		-			-			-
Balance, May 29, 2022		20,965,144		2,096		169,750			(24,903	)		(2,898	)		506,934			(9,397	)
Net earnings		-		-		-			1,885			-			-			-
Unrealized loss on marketable securities, net of tax		-		-		-			-			(667	)		-			-
Stock options exercised		-		-		(102	)		-			-			(13,000	)		241
Stock-based compensation		-		-		94			-			-			-			-
Cash dividends ($0.10 per share)		-		-		-			(2,046	)		-			-			-
Balance, August 28, 2022		20,965,144		2,096		169,742			(25,064	)		(3,565	)		493,934			(9,156	)
Net earnings		-		-		-			2,230			-			-			-
Unrealized loss on marketable securities, net of tax		-		-		-			-			(718	)		-			-
Stock-based compensation		-		-		95			-			-			-			-
Cash dividends ($0.10 per share)		-		-		-			(2,047	)		-			-			-
Balance, November 27, 2022		20,965,144	$	2,096	$	169,837		$	(24,881	)	$	(4,283	)		493,934		$	(9,156	)

											Accumulated
					Additional						Other
	Common Stock				Paid-in			Accumulated			Comprehensive			Treasury Stock
	Shares		Amount		Capital			Deficit			Earnings			Shares			Amount

Balance, February 28, 2021		20,965,144	$	2,096	$	170,038		$	(25,063	)	$	(336	)		582,268		$	(10,794	)
Net earnings		-		-		-			2,745			-			-			-
Unrealized gain on marketable securities, net of tax		-		-		-			-			52			-			-
Stock-based compensation		-		-		64			-			-			-			-
Cash dividends ($0.10 per share)		-		-		-			(2,038	)		-			-			-
Balance, May 30, 2021		20,965,144		2,096		170,102			(24,356	)		(284	)		582,268			(10,794	)
Net earnings		-		-		-			2,022			-			-			-
Unrealized loss on marketable securities, net of tax		-		-		-			-			(61	)		-			-
Stock options exercised		-		-		(397	)		-			-			(46,134	)		855
Stock-based compensation		-		-		74			-			-			-			-
Cash dividends ($0.10 per share)		-		-		-			(2,039	)		-			-			-
Balance, August 29, 2021		20,965,144		2,096		169,779			(24,373	)		(345	)		536,134			(9,939	)
Net earnings		-		-		-			1,741			-			-			-
Unrealized loss on marketable securities, net of tax		-		-		-			-			(485	)		-			-
Stock options exercised		-		-		(261	)		-			-			(29,200	)		542
Stock-based compensation		-		-		73			-			-			-			-
Cash dividends ($0.10 per share)		-		-		-			(2,048	)		-			-			-
Balance, November 28, 2021		20,965,144	$	2,096	$	169,591		$	(24,680	)	$	(830	)		506,934		$	(9,397	)

See Notes to Condensed Consolidated Financial Statements (Unaudited).

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	39 Weeks Ended (Unaudited)
	November 27,			November 28,
	2022			2021
Cash flows from operating activities:
Net earnings	$	6,025		$	6,508
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		826			805
Stock-based compensation		274			211
Deferred income taxes		265			405
Amortization of bond premium		125			718
Loss on sale of fixed assets		-			27
Changes in operating assets and liabilities		(5,381	)		(5,418	)
Net cash provided by operating activities		2,134			3,256

Cash flows from investing activities:
Purchase of property, plant and equipment		(749	)		(3,586	)
Proceeds from sales of property, plant and equipment		-			14
Purchases of marketable securities		(39,785	)		(41,471	)
Proceeds from sales and maturities of marketable securities		36,199			19,538
Net cash used in investing activities		(4,335	)		(25,505	)

Cash flows from financing activities:
Dividends paid		(6,139	)		(6,125	)
Proceeds from exercise of stock options		139			739
Net cash used in financing activities		(6,000	)		(5,386	)

Decrease in cash and cash equivalents:		(8,201	)		(27,635	)
Cash and cash equivalents, beginning of period		12,811			41,595
Cash and cash equivalents, end of period	$	4,610		$	13,960


Supplemental cash flow information:
Cash paid during the period for income taxes, net of refunds	$	3,178		$	3,733

See Notes to Condensed Consolidated Financial Statements (Unaudited).

PARK AEROSPACE CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

1. CONSOLIDATED FINANCIAL STATEMENTS

The Condensed Consolidated Balance Sheet and the Consolidated Statements of Shareholders’ Equity as of November 27, 2022, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Earnings for the 13 weeks and 39 weeks ended November 27, 2022 and November 28, 2021, and the Condensed Consolidated Statements of Cash Flows for the 39 weeks then ended have been prepared by Park Aerospace Corp. (the “Company”), without audit. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at November 27, 2022 and the results of operations and cash flows for all periods presented. The Consolidated Statements of Operations are not necessarily indicative of the results to be expected for the full fiscal year or any subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 27, 2022. There have been no significant changes to such accounting policies during the 39 weeks ended November 27, 2022.

2. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

Fair value measurements are broken down into three levels based on the reliability of inputs as follows:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves observable at commonly quoted intervals or current market) and contractual prices for the underlying financial instrument, as well as other relevant economic measures.

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

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

The Company’s non-financial assets measured at fair value on a non-recurring basis include goodwill and any long-lived assets written down to fair value. To measure fair value of such assets, the Company uses Level 3 inputs consisting of techniques including an income approach and a market approach. The income approach is based on a discounted cash flow analysis and calculates the fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the discounted cash flow analysis require the exercise of significant judgment, including judgment about appropriate discount rates, terminal values, growth rates and the amount and timing of expected future cash flows. With respect to goodwill, the Company first assesses qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If, based on that assessment, the Company believes it is more likely than not that fair value is less than carrying value, a goodwill impairment test is performed. There have been no changes in events or circumstances which required impairment charges to be recorded during the 13 weeks and 39 weeks ended November 27, 2022.

3. MARKETABLE SECURITIES

All marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, included in comprehensive earnings. Realized gains and losses, amortization of premiums and discounts, and interest and dividend income are included in interest and other income in the Condensed Consolidated Statements of Operations. The costs of securities sold are based on the specific identification method.

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

	November 27, 2022
	Total		Level 1		Level 2		Level 3

U.S. Treasury and other government securities	$	79,512	$	79,512	$	-	$	-
U.S. corporate debt securities		19,181		19,181		-		-
Total marketable securities	$	98,693	$	98,693	$	-	$	-

	February 27, 2022
	Total		Level 1		Level 2		Level 3

U.S. Treasury and other government securities	$	62,612	$	62,612	$	-	$	-
U.S. corporate debt securities		34,938		34,938		-		-
Total marketable securities	$	97,550	$	97,550	$	-	$	-

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
November 27, 2022:
U.S. Treasury and other government securities	$	85,196	$	-	$	5,684
U.S. corporate debt securities		19,364		-		183
Total marketable securities	$	104,560	$	-	$	5,867

February 27, 2022:
U.S. Treasury and other government securities	$	65,177	$	5	$	2,570
U.S. corporate debt securities		35,064		5		131
Total marketable securities	$	100,241	$	10	$	2,701

The estimated fair values of such securities at November 27, 2022 by contractual maturity are shown below:

Due in one year or less	$	30,520
Due after one year through five years		68,173
	$	98,693

4. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The Company writes down its inventory for estimated obsolescence or unmarketability based upon the age of the inventory and assumptions about future demand for the Company’s products and market conditions. Work-in-process and finished goods inventories cost valuations include direct material costs as well as a portion of the Company’s overhead expenses. The Company’s overhead expenses that are applied to its finished goods inventories are based on actual expenses related to the procurement, storage, shipment and production of the finished goods. Inventories consisted of the following:

	November 27,		February 27,
	2022		2022

Inventories:
Raw materials	$	5,935	$	4,026
Work-in-process		504		253
Finished goods		377		378
	$	6,816	$	4,657

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 term to the extent the Company is reasonably certain to exercise the option. The exercise of lease renewal options is at the Company’s sole discretion. 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 November 27, 2022 are as follows:

Fiscal Year:
2022	$	13
2023		53
2024		36
2025		-
2026		-
Thereafter		162
Total undiscounted operating lease payments		264
Less imputed interest		(70	)
Present value of operating lease payments	$	194

The above payment schedule includes renewal options that the Company is reasonably likely to exercise. Leases with an initial term of 12 months or less are not recorded on the Company’s condensed consolidated balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the terms of the leases.

For the 13 weeks and 39 weeks ended November 27, 2022, the Company’s operating lease expenses were $15 and $46, respectively. Cash payments of $40, pertaining to operating leases, are reflected in the cash flow statement under cash flows from operating activities.

The following table sets forth the right-of-use assets and operating lease liabilities as of November 27, 2022:

Operating right-of-use assets	$	163

Operating lease liabilities	$	53
Long-term operating lease liabilities		141
Total operating lease liabilities	$	194

The Company’s weighted average remaining lease term for its operating leases is 7.4 years.

In December 2018, the Company entered into a Development Agreement with the City of Newton (“City”), Kansas and the Board of County Commissioners of Harvey County, Kansas. Pursuant to this agreement, the Company agreed to construct and operate a redundant manufacturing facility of approximately 90,000 square feet for the design, development and manufacture of advanced composite materials and parts, structures and assemblies for aerospace. The Company further agreed to equip the facility through the purchase of machinery, equipment and furnishings and to create additional new full-time employment of specified levels during a five-year period. In exchange for these agreements, the City and the County agreed to lease to the Company three acres of land at the Newton, Kansas Airport, in addition to the eight acres previously leased to the Company by the City and County. The City and County further agreed to provide financial and other assistance toward the construction of the additional facility as set forth in the Development Agreement. The Company estimates the total cost of the additional facility to be approximately $19,800. The expansion construction is complete and is undergoing customer qualifications, which are expected to be completed in the first half of the 2023 calendar year. As of November 27, 2022, the Company had $225 in equipment purchase obligations and $19,314 of construction-in-progress related to the additional facility.

Pursuant to the Development Agreement, the City provided a sales tax exemption for materials the Company purchased for the facility, subject to issuance of Industrial Revenue Bonds (“IRBs”). On June 7, 2022, the City issued IRB Series 2022, in an aggregate principal amount not to exceed $18,500,000, pursuant to a Trust Indenture between the City and Security Bank of Kansas City. The Company simultaneously entered into a Bond Purchase Agreement with the City, whereby the Company agreed to buy the IRBs at a purchase price equal to the par amount of the IRBs issued. The Company redeemed the IRBs in August of 2022. Neither the purchase nor redemption of the IRBs had an impact on the Company’s Consolidated Statements of Operations.

6. STOCK-BASED COMPENSATION

As of November 27, 2022, the Company had a 2018 Stock Option Plan (the “2018 Plan”) and no other stock-based compensation plan. The 2018 Plan was adopted by the Board of Directors of the Company on May 8, 2018 and approved by the shareholders of the Company at the Annual Meeting of Shareholders of the Company on July 24, 2018 and provides for the grant of options to purchase up to 800,000 shares of common stock of the Company. Prior to the 2018 Plan, the Company had the 2002 Stock Option Plan (the “2002 Plan”) which had been approved by the Company’s shareholders and provided for the grant of stock options to directors and key employees of the Company. All options granted under the 2018 Plan and 2002 Plan have exercise prices equal to the fair market value of the underlying common stock of the Company at the time of grant which, pursuant to the terms of such Plans, is the reported closing price of the common stock on the New York Stock Exchange on the date preceding the date the option is granted. Options granted under the Plans become exercisable 25% one year after the date of grant, with an additional 25% exercisable each succeeding anniversary of the date of grant, and expire 10 years after the date of grant. Upon termination of employment or service as a director, all options held by the optionee that have not previously become exercisable shall terminate and all other options held by such optionee may be exercised, to the extent exercisable on the date of such termination, for a limited time after such termination. Any shares of common stock subject to an option under the 2018 Plan, which expire or are terminated unexercised as to such shares, shall again become available for issuance under the 2018 Plan.

During the 39 weeks ended November 27, 2022, the Company granted options under the 2018 Plan to purchase a total of 131,600 shares of common stock to its directors and certain of its employees. The future compensation expense to be recognized in earnings before income taxes is $338 and will be recorded on a straight-line basis over the requisite service period. The weighted average fair value of the granted options was $2.66 per share using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 2.69%-2.70%; expected volatility factor of 28.2%-28.3%; expected dividend yield of 3.32%; and estimated option term of 5.4-8.1 years.

The risk-free interest rates were based on U.S. Treasury rates at the date of grant with maturity dates approximately equal to the estimated terms of the options at the date of the grant. Volatility factors were based on historical volatility of the Company’s common stock. The expected dividend yields were based on the regular quarterly cash dividend per share most recently declared by the Company and on the exercise price of the options granted during the 13 weeks and 39 weeks ended November 27, 2022. The estimated term of the options was based on evaluations of the historical and expected future employee exercise behavior.

The following is a summary of option activity for the 39 weeks ended November 27, 2022:

	Outstanding Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value

Balance, February 27, 2022		648,300		$	12.96			$	493
Granted		131,600			12.06
Exercised		(13,000	)		10.67
Terminated or expired		(74,225	)		12.86
Balance, November 27, 2022		692,675		$	12.84		6.05	$	610
Vested and exercisable, November 27, 2022		388,288		$	12.74		4.12	$	381

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
	November 27, 2022		November 28, 2021		November 27, 2022		November 28, 2021

Net earnings	$	2,230	$	1,741	$	6,025	$	6,508
Weighted average common shares outstanding for basic EPS		20,471		20,450		20,463		20,410
Net effect of dilutive options		39		53		43		156
Weighted average shares outstanding for diluted EPS		20,510		20,503		20,506		20,566
Basic earnings per share	$	0.11	$	0.09	$	0.29	$	0.32
Diluted earnings per share	$	0.11	$	0.08	$	0.29	$	0.32

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 595,000 and 322,000 for the 13 weeks ended November 27, 2022 and November 28, 2021, respectively, and 498,000 and 221,000 for the 39 weeks ended November 27, 2022 and November 28, 2021, respectively.

8. SHAREHOLDERS’ EQUITY

On May 23, 2022, the Company announced that its Board of Directors authorized the Company’s purchase, on the open market and in privately negotiated transactions, of up to 1,500,000 additional shares of its common stock. This authorization supersedes any unused prior Board of Directors’ authorizations to purchases shares of the Company’s Common Stock. As a result, the Company is authorized to purchase up to a total of 1,500,000 shares of its common stock, representing approximately 7.3% of the Company’s 20,471,210 total outstanding shares as of the close of business on January 2, 2023. There is no assurance the Company will purchase any shares pursuant to this Board of Directors’ authorization. Shares purchased by the Company, if any, will be retained as treasury stock and will be available for use under the Company’s stock option plan and for other corporate purposes.

The Company did not purchase any shares of its common stock during the 39 weeks ended November 27, 2022 and November 28, 2021.

9. RESTRUCTURING CHARGES

The Company recorded restructuring charges of $0 for both the 13 weeks and 39 weeks ended November 27, 2022 compared to $13 and $197, respectively, for the 13 weeks and 39 weeks ended November 28, 2021, related to the closure of the Company’s Park Aerospace Technologies Asia Pte, Ltd facility located in Singapore.

10. INCOME TAXES

For the 13 weeks and 39 weeks ended November 27, 2022, the Company recorded income tax provisions from operations of $990 and $2,362, respectively, which included discrete income tax provisions of $58 and $133, respectively. Additionally, tax expense was negatively impacted by $153 in the 13 weeks and 39 weeks ended November 27, 2022 by tax deductions becoming unavailable due to stock options expiring unexercised. For the 13 weeks and 39 weeks ended November 28, 2021, the Company recorded income tax provisions from operations of $569 and $2,571, respectively, which included discrete income tax provisions of $5 and $175, respectively.

The Company’s effective tax rates for the 13 weeks and 39 weeks ended November 27, 2022 were income tax provisions of 30.7% and 28.2%, respectively, compared to income tax provisions of 24.6% and 28.3% in the comparable prior periods. The effective tax rates for the 13 weeks and 39 weeks ended November 27, 2022 were higher than the U.S. statutory rate of 21% primarily due to state and local taxes and a discrete income tax provision for the accrual of interest related to unrecognized tax benefits and tax deductions becoming unavailable. The effective rates for the 13 weeks and 39 weeks ended November 28, 2021 were higher than the U.S. statutory rate of 21% primarily due to state and local taxes and discrete income tax provisions for the write-off of deferred tax assets and liabilities related to its closed Singapore facility and for the accrual of interest related to unrecognized tax benefits.

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

11. GEOGRAPHIC REGIONS

The Company’s products are sold to customers in North America, Asia and Europe. The Company’s manufacturing facility is located in Kansas. Sales are attributed to geographic regions based upon the region in which the materials were delivered to the customer. All of the Company’s long-lived assets are located in North America.

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

	13 Weeks Ended				39 Weeks Ended
	November 27, 2022		November 28, 2021		November 27, 2022		November 28, 2021

Sales:
North America	$	12,072	$	13,231	$	36,960	$	39,285
Asia		363		218		640		542
Europe		1,432		415

SEC Form 10-Q filed by Park Aerospace Corp.