PARK AEROSPACE CORP
For the period ended Sep 1, 2024. Filed Oct 16, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 1, 2024 · Filed Oct 16, 2024
PKE$23.38+3.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-02; filed 2024-07-17.
0001437749-24-022897
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-01; filed 2024-10-16.
0001437749-24-031340
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 64 previous paragraphs and 60 current paragraphs.
29 unchanged; 22 reworded; 9 added; 11 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
The Company's net sales in the 13 weeks and 26 weeks ended September 1, 2024 were $16.7 million and $30.7 million, respectively, compared to $12.5 million and $28.0 million, respectively, in the 13 weeks and 26 weeks ended August 27, 2023. Sales for the 13 weeks and 26 weeks ended September 1, 2024 were higher than in the comparable periods of the prior fiscal year due to higher sales to the commercial aerospace and military markets.
Current report
The Company’s gross profit in the 13 weeks ended September 1, 2024 was higher than the gross profit in the prior year’s comparable period due to higher sales levels in the 13 weeks ended September 1, 2024 compared to the comparable period in the prior year partially offset by a less favorable product mix, higher depreciation, repairs and maintenance and utilities related to the use of a new production line, and higher costs for raw materials, supplies, freight and labor resulting from inflationary trends. The Company’s gross profit in the 26 weeks ended September 1, 2024 was similar to the gross profit in the prior year’s comparable period despite higher sales levels primarily due to a less favorable sales mix and the higher costs mentioned above.
Current report
The Company’s gross profit margins, measured as percentages of sales, were 28.5% and 28.9%, respectively, in the 13 weeks and 26 weeks ended September 1, 2024 compared to 32.7% and 31.8%, respectively, in the 13 weeks and 26 weeks ended August 27, 2023. The lower gross profit margins for the 13 and 26 weeks ended September 1, 2024 compared to the prior year’s comparable periods were primarily due to ramping up capacity ahead of customer program volume increases, a less favorable sales mix due to fabric sales, higher depreciation, repairs and maintenance and utilities related to use of the new production line, and higher costs for raw materials, supplies, freight and labor resulting from inflationary trends, partially offset by higher sales.
Current report
The Company’s earnings before income taxes and net earnings increased 19.1% and 18.3%, respectively, in the 13 weeks ended September 1, 2024, compared to the 13 weeks ended August 27, 2023, primarily as a result of higher sales, partially offset by an unfavorable sales mix due to higher fabric sales and the higher costs mentioned above.
Current report
The Company’s earnings before income taxes and net earnings decreased 14.7% and 15.0%, respectively, in the 26 weeks ended September 1, 2024, compared to the 26 weeks ended August 27, 2023, primarily as a result of charges incurred related to the storm damage and the higher costs mentioned above, partially offset by higher sales.
Current report
The Company's net sales in the 13 weeks and 26 weeks ended September 1, 2024, were $16.7 million and $30.7 million, respectively, compared to $12.5 million and $28.0 million, respectively, in the 13 weeks and 26 weeks ended August 27, 2023. Sales for the 13 weeks and 26 weeks ended September 1, 2024 were higher than the comparable periods of the prior year, primarily due to higher sales to the commercial aerospace and military markets.
Current report
The Company’s gross profit in the 13 weeks ended September 1, 2024 was higher than the gross profit in the prior year’s comparable period due to higher sales levels in the 13 weeks ended September 1, 2024, compared to the comparable period in the prior year partially offset by a less favorable product mix, due to higher fabric sales, higher depreciation, repairs and maintenance and utilities related to use of the new production line, and higher costs for raw materials, supplies, freight and labor resulting from inflationary trends. The Company’s gross profit in the 26 weeks ended September 1, 2024 was similar to the gross profit in the prior year’s comparable period despite higher sales levels primarily due to a less favorable sales mix, due to higher fabric sales, and the higher costs mentioned above.
Current report
The Company’s gross profit margins, measured as a percentage of sales, were 28.5% and 28.9%, respectively, in the 13 weeks and 26 weeks ended September 1, 2024, compared to 32.7% and 31.8%, respectively, in the 13 weeks and 26 weeks ended August 27, 2023. The lower gross profit margins for the 13 and 26 weeks ended September 1, 2024, compared to the prior year’s comparable periods were primarily due to ramping up capacity ahead of customer program volume increases, to a less favorable sales mix, due to higher fabric sales, higher depreciation, repairs and maintenance and utilities related to the use of the new production line, and higher costs for raw materials, supplies, freight and labor resulting from inflationary trends, partially offset by higher sales.
Current report
Selling, general and administrative expenses increased by $287,000 during the 13 weeks ended September 1, 2024, and increased by 15.5% compared to the prior year’s comparable period, and these expenses, measured as percentages of sales, were 12.8% in the 13 weeks ended September 1, 2024 compared to 14.8% in the 13 weeks ended August 27, 2023. The increase in selling, general and administrative expenses during the 13 weeks ended September 1, 2024 was primarily due to freight out, advertising and tradeshow expense, higher salaries and payroll related expenses and higher profit sharing expense mainly due to higher headcount in connection with ramping up capacity in preparation of increases in customer program volumes.
Removed paragraphs (11)
Previous report
The Company's total net sales in the 13 weeks ended June 2, 2024 were $14.0 million compared to $15.6 million in the 13 weeks ended May 28, 2023. The decrease in sales was primarily due to disruptions in production and shipping resulting from the storm damage that occurred late in the first quarter of the 2025 fiscal year. The Company expected to have an additional $1.8 million in sales in the 13 weeks ended June 2, 2024 that did not ship due to the disruption in operations resulting from the storm.
Previous report
The Company’s gross profit margins, measured as percentages of sales, were 29.3% in the 13 weeks ended June 2, 2024 compared to 31.1% in the 13 weeks ended May 28, 2023. The lower gross profit margin for the 13 weeks ended June 2, 2024 was primarily due to lower sales volume resulting from the storm mentioned above and to, among other things, a higher depreciation expense and higher salaries and higher labor costs related to higher headcount.
Previous report
The Company’s earnings from operations before income taxes and net earnings decreased 46.1% and 46.4%, respectively, in the 13 weeks ended June 2, 2024 compared to the 13 weeks ended May 28, 2023, primarily as a result of lower sales due to the storm and the charge recorded for the storm damage that occurred in the 13 weeks ended June 2, 2024. The 13 weeks ended June 2, 2024 were also impacted by a higher depreciation expense and higher salaries and higher labor costs related to higher headcount. The 13 weeks ended May 28, 2023 included $65,000 of losses on sales of investments to fund the $1.00 per share special cash dividend paid on April 6, 2023 to shareholders of record on March 9, 2023, additional stock option expense of $109,000 due to the modification of previously granted stock options in connection with the special cash dividend mentioned above and $570,000 of activist shareholder defense costs.
Previous report
The Company's total net sales in the 13 weeks ended June 2, 2024 were $14.0 million compared to $15.6 million in the 13 weeks ended May 28, 2023. The decrease in sales was primarily due to disruptions in production and shipping resulting from the storm damage that occurred late in the first quarter of fiscal year 2025. The Company expected to have an additional $1.8 million in sales in the 13 weeks ended June 2, 2024 that did not ship due to the disruption in operations resulting from the storm.
Previous report
The Company’s gross profit margins, measured as percentages of sales, were 29.3% in the 13 weeks ended June 2, 2024 compared to 31.1% in the 13 weeks ended May 28, 2023. The lower gross profit margin for the 13 weeks ended June 2, 2024 was primarily due to lower sales volume resulting from the storm damage mentioned above and to higher costs for raw materials, supplies and freight resulting from inflationary trends, higher depreciation expense and higher salaries and labor due to higher headcount.
Previous report
Storm Damage
Previous report
The Company recorded a charge of $1.1 million for storm damage in the 13 weeks ended June 2, 2024.
Previous report
The Company does not anticipate the loss of any sales for the 2025 fiscal year, however, $1.8 million of sales could not be delivered before the end of the first quarter ended June 2, 2024 due to storm related delays. The Company expects these delayed shipments will be delivered during the Company’s second quarter ended September 1, 2024.
Previous report
The Company paid its employees for the days immediately following the storm despite many not being able to work while others worked on the clean-up of the storm damage to the facilities. The Company incurred $78,000 of payroll and related costs for lost production time and employees working on the clean-up.
Previous report
The $1.1 million charge recorded by the Company includes an asset damage charge, emergency services by outside contractors, rental of temporary HVAC units and the cost of employee downtime or time spent on the clean-up of the storm damage to the facilities. Additional costs will be recorded in future periods as additional work is needed and performed and for on-going rental of temporary HVAC units.
Previous report
The Company has insurance coverage for wind damage with a deductible of approximately $2.5 million. Under the insurance policy, the Company expects to recover all costs and damages incurred in excess of the deductible. The costs will be in part based on replacement costs, which will be in excess of the charge.
Reworded paragraphs (22)
Previous wording
Park Aerospace Corp. (“Park” or the “Company”) develops and manufactures solution and hot-melt advanced composite materials used to produce composite structures for the global aerospace markets. Park’s advanced composite materials include film adhesives and lightning strike protection materials. Park offers an array of composite materials specifically designed for hand lay-up or automated fiber placement (“AFP”) manufacturing applications. Park’s advanced composite materials are used to produce primary and secondary structures for jet engines, large and regional transport aircraft, military aircraft, Unmanned Aerial Vehicles (UAVs commonly referred to as “drones”), business jets, general aviation aircraft and rotary wing aircraft. Park also offers specialty ablative materials for rocket motors and nozzles and specially designed materials for radome applications. As a complement to Park’s advanced composite materials offering, Park designs and fabricates composite parts, structures and assemblies and low volume tooling for the aerospace industry. Target markets for Park’s composite parts and structures (which include Park’s proprietary composite Sigma Strut TM and Alpha Strut TM product lines) are, among others, prototype and development aircraft, special mission aircraft, spares for legacy military and civilian aircraft and exotic spacecraft.
Current wording
Park Aerospace Corp. (“Park” or the “Company”) develops and manufactures solution and hot-melt advanced composite materials used to produce composite structures for the global aerospace markets. Park’s advanced composite materials include film adhesives (Aeroadhere®) and lightning strike protection materials (Electroglide®). 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 SigmaStrut TM and AlphaStrut TM product lines) are, among others, prototype and development aircraft, special mission aircraft, spares for legacy military and civilian aircraft and exotic spacecraft.
Previous wording
On May 19, 2024, the Company’s manufacturing facilities in Newton, Kansas were damaged by a strong storm which transitioned the area. None of the Company’s manufacturing lines or equipment were damaged by the storm. Although the building structures are secure, the roofs on all three buildings in the Company’s Newton, Kansas campus will ultimately need to be replaced. Also, multiple specialty HVAC units were damaged or destroyed. These specialty HVAC units are necessary to control the temperature and humidity in certain manufacturing areas, quality laboratories and R&D laboratories, as required by certain specifications and certifications the Company is subject to. The Company is currently working with multiple contractors on site and the insurance company in order to fully assess the damage and the remediation options.
Current wording
On May 19, 2024, the Company’s manufacturing facilities in Newton, Kansas were damaged by a strong storm which transitioned the area. None of the Company’s manufacturing lines or equipment were damaged by the storm. Although the building structures are secure, the roofs on two of the three buildings in the Company’s Newton, Kansas campus will need significant repairs and the roof on one building will need to be replaced. Also, multiple specialty HVAC units were damaged or destroyed. These specialty HVAC units are necessary to control the temperature and humidity in certain manufacturing areas, quality laboratories and R&D laboratories, as required by certain specifications and certifications the Company is subject to. The Company is currently working with multiple contractors on site to remediate the damage.
Previous wording
Although the Company is still in the process of assessing the situation, the Company’s production lines are all fully operational. The Company is employing certain temporary measures in order to keep its production lines operating at full service, including the use of temporary HVAC equipment, but it will take the Company several months to permanently repair or replace all the damaged facilities and infrastructure equipment. The Company has recorded a charge of $1.1 million in the 13 weeks ended June 2, 2024 related to the damage and related repair and downtime costs.
Current wording
Although the Company is still in the process of remediating the damage, the Company’s production lines are all fully operational. The Company is employing certain temporary measures in order to keep its production lines operating at full service, including the use of temporary HVAC equipment, but it will take the Company several months to permanently repair or replace all the damaged facilities and infrastructure equipment. The Company has recorded a charge of $1.1 million in the 26 weeks ended September 1, 2024 related to the damage and related repair and downtime costs.
Previous wording
Selling, general and administrative expenses were lower compared to the prior year’s comparable period, and these expenses, measured as percentages of sales, were 14.4% in the 13 weeks ended June 2, 2024 compared to 16.8% in the 13 weeks ended May 28, 2023. The decrease in selling, general and administrative expenses was primarily due to $570,000 of activist shareholder defense costs included in the 13 weeks ended May 28, 2023.
Current wording
Selling, general and administrative expenses decreased by $311,000 during the 26 weeks ended September 1, 2024, and decreased by 7.0% compared to the prior year’s comparable period, and these expenses, measured as a percentage of sales, were 13.5% in the 26 weeks ended September 1, 2024 compared to 15.9% in the 26 weeks ended August 27, 2023. The decrease in selling, general and administrative expenses during the 26 weeks ended September 1, 2024 was primarily due to $570,000 of activist shareholder defense costs in the prior year comparable period.
Previous wording
Selling, general and administrative expenses included stock option expenses of $89,000 for the 13 weeks ended June 2, 2024, compared to stock option expenses of $218,000, including $109,000 due to the modification of previously granted stock options in the 13 weeks ended May 28, 2023.
Current wording
Selling, general and administrative expenses included stock option expenses of $101,000 and $190,000, respectively, for the 13 weeks and 26 weeks ended September 1, 2024, compared to stock option expenses of $104,000 and $322,000, including $109,000 due to the modification of previously granted stock options, respectively, for the 13 weeks and 26 weeks ended August 27, 2023.
Previous wording
For the reasons set forth above, the Company’s earnings from operations were $2.1 million for the 13 weeks ended June 2, 2024 compared to $2.2 million for the 13 weeks ended May 28, 2023.
Current wording
For the reasons set forth above, the Company’s earnings from operations were $2.6 million and $4.7 million, respectively, for the 13 weeks and 26 weeks ended September 1, 2024, compared to $2.2 million and $4.4 million, respectively, for the 13 weeks and 26 weeks ended August 27, 2023.
Previous wording
Interest and other income was $339,000 for the 13 weeks ended June 2, 2024, compared to $324,000 for the prior year’s comparable period. Interest income increased 4.6% for the 13 weeks ended June 2, 2024. Interest and other income for the 13 weeks ended May 28, 2023 included $65,000 of losses on sales of investments to fund the $1.00 per share special cash dividend paid on April 6, 2023 to shareholders of record on March 9, 2023. During the 13 weeks ended June 2, 2024, the Company earned interest income principally from its investments, which consisted primarily of short-term instruments and money market funds.
Current wording
Interest and other income were $245,000 and $584,000, respectively, for the 13 weeks and 26 weeks ended September 1, 2024, compared to $139,000 and $463,000, respectively, for the prior year's comparable periods. Interest income increased 76.3% and 26.1%, respectively, for the 13 weeks and 26 weeks ended September 1, 2024, primarily as a result of higher weighted average interest rates and lower losses on the sales of marketable securities, compared to the prior year's comparable periods. During the 13 weeks and 26 weeks ended September 1, 2024, the Company earned interest income principally from its investments, which consisted primarily of short-term instruments and money market funds.
Previous wording
For the 13 weeks ended June 2, 2024, the Company recorded an income tax provision of $376,000, which included a discrete income tax provision of $19,000 for the accrual of interest related to unrecognized tax benefits. For the 13 weeks ended May 28, 2023, the Company recorded an income tax provision of $688,000, which included a discrete income tax provision of $37,000 for the accrual of interest related to unrecognized tax benefits.
Current wording
For the 13 weeks and 26 weeks ended September 1, 2024, the Company recorded income tax provisions of $750,000 and $1.1 million, respectively, which included discrete income tax provisions of $22,000 and $41,000, respectively, for the accrual of interest related to unrecognized tax benefits. For the 13 weeks and 26 weeks ended August 27, 2023, the Company recorded income tax provisions of $619,000 and $1.3 million, respectively, which included discrete income tax provisions of $16,000 and $53,000, respectively, for the accrual of interest related to unrecognized tax benefits.
Previous wording
The Company’s effective tax rate for the 13 weeks ended June 2, 2024 was 27.5% compared to 27.1% in the prior year’s comparable period. The effective tax rate for the 13 weeks ended June 2, 2024 was higher than the U.S. statutory rate of 21% primarily due to state and local taxes and the accrual of interest related to unrecognized tax benefits. The effective rate for the 13 weeks ended May 28, 2023 was higher than the U.S. statutory rate of 21% primarily due to state and local taxes and the accrual of interest related to unrecognized tax benefits.
Current wording
The Company’s effective tax rates for the 13 weeks and 26 weeks ended September 1, 2024 were 26.6% and 26.9%, respectively, compared to 26.2% and 26.6%, respectively, in the prior year’s comparable periods. The effective tax rates for the 13 weeks and 26 weeks ended September 1, 2024 were higher than the U.S. statutory rate of 21% primarily due to state and local taxes and liabilities and the accrual of interest related to unrecognized tax benefits. The effective rates for the 13 weeks and 26 weeks ended August 27, 2023 were higher than the U.S. statutory rate of 21% primarily due to state and local taxes and the accrual of interest related to unrecognized tax benefits.
Previous wording
For the reasons set forth above, the Company’s net earnings for the 13 weeks ended June 2, 2024 were $1.0 million compared to net earnings of $1.9 million for the 13 weeks ended May 28, 2023.
Current wording
For the reasons set forth above, the Company's net earnings for the 13 weeks and 26 weeks ended September 1, 2024 were $2.1 million and $3.1 million, respectively, compared to net earnings of $1.7 million and $3.6 million, respectively, for the 13 weeks and 26 weeks ended August 27, 2023.
Previous wording
In the 13 weeks ended June 2, 2024, basic and diluted earnings per share were $0.05, including the storm damage charge of $1.1 million, compared to basic and diluted earnings per share of $0.09 in the 13 weeks ended May 28, 2023, including the pretax charges of $570,000 related to activist shareholder defense costs, the stock option modification pretax charge of $109,000 and the $65,000 of losses on sales of investments to fund the special cash dividend.
Current wording
In the 13 weeks and 26 weeks ended September 1, 2024, basic and diluted earnings per share were $0.10 and $0.15, respectively, compared to basic and diluted earnings per share of $0.09 and $0.18, respectively, in the 13 weeks and 26 weeks ended August 27, 2023.
Previous wording
Liquidity and Capital Resources:
Current wording
Liquidity and Capital Resources - Continuing Operations:
Previous wording
Of the $74.4 million of cash and cash equivalents and marketable securities at June 2, 2024, $28.9 million was owned by one of the Company’s wholly-owned foreign subsidiaries.
Current wording
Of the $72.0 million of cash and cash equivalents and marketable securities at September 1, 2024, $30.4 million was owned by one of the Company’s wholly-owned foreign subsidiaries.
Previous wording
The change in cash and cash equivalents and marketable securities at June 2, 2024 compared to March 3, 2024 was the result of capital expenditures and dividends paid to shareholders, partially offset by cash provided by operating activities and a number of additional factors. The significant changes in cash provided by operating activities were as follows:
Current wording
The change in cash and cash equivalents and marketable securities at September 1, 2024 compared to March 3, 2024 was the result of capital expenditures, the purchase of treasury shares, dividends paid to shareholders, the Company’s transition tax installment payment, and a number of additional factors. The significant changes in cash provided by (used in) operating activities was as follows:
Previous wording
In addition, the Company paid $2.5 million in cash dividends in the 13-week period ended June 2, 2024 and $23.0 million in cash dividends in the 13-week period ended May 28, 2023.
Current wording
In addition, the Company paid $5.1 million in cash dividends in the 26-week period ended September 1, 2024 compared to $25.6 million in the 26-week period ended August 27, 2023. The amount paid during the 26-week period ended August 27, 2023 included a $20.5 million special dividend.
Previous wording
The increase in working capital at June 2, 2024 compared to March 3, 2024 was due principally to the increases in inventories and prepaid expenses and other current assets and a decrease in accounts payable and accrued liabilities partially offset by decreases in cash and cash equivalents and accounts receivable and a decrease in income taxes payable.
Current wording
The decrease in working capital at September 1, 2024 compared to March 3, 2024 was due principally to the decreases in marketable securities, accounts receivable and prepaid and other current assets and increased income taxes payable, partially offset by an increase in inventories and decreases in accrued liabilities.
Previous wording
The Company's current ratio (the ratio of current assets to current liabilities) was 12.3 to 1.0 at June 2, 2024 compared to 10.2 to 1.0 at March 3, 2024.
Current wording
The Company's current ratio (the ratio of current assets to current liabilities) was 9.1 to 1.0 at September 1, 2024, compared to 10.2 to 1.0 at March 3, 2024.
Previous wording
During the 13 weeks ended June 2, 2024, the Company had a negative operating cash flow of $423,000. During the same 13-week period, the Company expended $12,000 for the purchase of property, plant and equipment, compared with $167,000 during the 13 weeks ended May 28, 2023. The Company paid $2.5 million in cash dividends in the 13-week period ended June 2, 2024.
Current wording
During the 26 weeks ended September 1, 2024, the Company's net earnings, adjusted for depreciation and amortization, deferred income taxes, stock-based compensation, amortization of bond premium and changes in operating assets and liabilities, resulted in a $1.0 million operating cash inflow. During the same 26-week period, the Company expended $206,000 for the purchase of property, plant and equipment, compared with $374,000 during the 26 weeks ended August 27, 2023. The Company paid $5.1 million in cash dividends in the 26-week period ended September 1, 2024, compared to $25.6 million in the 26-week period ended August 27, 2023. The Company purchased treasury shares of $1.9 million in the 26-week period ended September 1, 2024 compared to $2.9 million in the 26-week period ended August 27, 2023.
Previous wording
The Company believes its financial resources will be sufficient, through the 12 months following the filing of this Form 10-Q Quarterly Report and for the foreseeable future thereafter, to provide for continued investment in working capital and property, plant and equipment and for general corporate purposes. The Company’s financial resources are also available for purchases of the Company's common stock, cash dividend payments, appropriate acquisitions and other expansions of the Company's business.
Current wording
The Company believes its financial resources will be sufficient, through the 12 months following the filing of this Form 10-Q Quarterly Report and for the foreseeable future thereafter, to provide for continued investment in working capital and property, plant and equipment and for general corporate purposes. The Company’s financial resources are also available for purchases of the Company's common stock, cash dividend payments, and appropriate acquisitions and other expansions of the Company's business.
Previous wording
The foregoing Discussion and Analysis of Financial Condition and Results of Operations is based upon the Company’s Condensed Consolidated Financial Statements, which have been prepared in accordance with US GAAP. The preparation of these Condensed Consolidated Financial Statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to sales allowances, allowances for doubtful accounts, inventories, valuation of long-lived assets, income taxes, contingencies and litigation, and employee benefit programs. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Current wording
The foregoing Discussion and Analysis of Financial Condition and Results of Operations is based upon the Company’s Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these Condensed Consolidated Financial Statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to sales allowances, allowances for credit losses, 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.
Previous wording
The Company’s critical accounting policies that are important to the Condensed Consolidated Financial Statements and that entail, to a significant extent, the use of estimates and assumptions and the application of management’s judgment, are described in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in the Company’s Annual Report on Form 10-K for the fiscal year ended March 3, 2024. There have been no significant changes to such accounting policies during the 2025 fiscal year first quarter.
Current wording
The Company’s critical accounting policies that are important to the Condensed Consolidated Financial Statements and that entail, to a significant extent, the use of estimates and assumptions and the application of management’s judgment are described in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in the Company’s Annual Report on Form 10-K for the fiscal year ended March 3, 2024. There have been no significant changes to such accounting policies during the 2025 fiscal year second quarter.
Previous wording
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 accrual required, if any, for these contingencies is made after careful analysis of each individual issue. The required accrual 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.
Current wording
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.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
On May 19, 2024, the Company’s manufacturing facilities in Newton, Kansas were damaged by a strong storm which transitioned the area. None of the Company’s manufacturing lines or equipment were damaged by the storm. Although the building structures are secure, it is likely that the roofs on all three buildings in the Company’s Newton, Kansas campus will ultimately need to be replaced. Also, multiple specialty HVAC units were damaged or destroyed. These specialty HVAC units are necessary to control the temperature and humidity in certain manufacturing areas, quality laboratories and R&D laboratories, as required by certain specifications and certifications the Company is subject to. The Company is currently working with multiple contractors on site in order to fully assess the damage and the remediation options.
Previous report — wording carried elsewhere
Although the Company is still in the process of assessing the situation, the Company’s production lines were returned to full production within two weeks of the storm. The Company is employing certain temporary measures in order to return its production lines operating at full service, including the use of temporary HVAC equipment, but it will take the Company several months to permanently repair or replace all of the damaged facilities and infrastructure equipment.