Park Aerospace Corp. — FY2022 Form 10-K
Period clarification: The supplied filing is the annual report for the fiscal year ended February 27, 2022 (52 weeks), not a 2020 Q4 filing. The filing also reports FY2022 fourth-quarter results.
Business context
Park develops and manufactures advanced composite materials and aerospace structures, assemblies, and tooling. Its products serve commercial and business aviation, military aircraft, UAV, rocket/missile, and space markets. Manufacturing and R&D are based in Newton, Kansas. In January 2022, Park became ArianeGroup’s exclusive North American distributor for its RAYCARB C2®B NG product.
Financial performance
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Net sales | $53.6 million | $46.3 million | +16% |
| Gross profit / margin | $17.9 million / 33.4% | $13.2 million / 28.5% | Profit +36%; margin +4.9 points |
| Earnings from continuing operations | $11.4 million | $5.5 million | +107% |
| Net earnings from continuing operations | $8.5 million | $5.2 million | +63% |
| Net earnings | $8.5 million | $4.9 million | +74% |
| Diluted EPS | $0.41 | $0.24 | Continuing-operations EPS: $0.41 vs. $0.25 |
| Operating cash flow | $8.2 million | $13.3 million | Down $5.1 million |
FY2022 fourth-quarter sales were $12.5 million, gross profit $4.2 million, net earnings $2.0 million, and diluted EPS $0.10. Interest and other income fell to $0.4 million from $1.8 million in FY2021. The effective income tax rate was 28.2%.
Liquidity, debt, and capital allocation
- Cash and marketable securities totaled $110.4 million at year-end, versus $116.5 million a year earlier; working capital was $120.1 million and the current ratio was 20.1:1.
- Total liabilities were $25.3 million, including $12.6 million of non-current income taxes payable and $0.2 million of long-term operating lease liabilities. The company reported no long-term debt.
- Capital expenditures were $4.4 million. Dividends paid were $8.2 million; the regular dividend was $0.10 per share each quarter. Management expected regular cash dividends to continue for the foreseeable future.
- Park said existing cash, investments, and operating cash flow should fund operations and necessary capital expenditures for at least 12 months from filing. It described its balance sheet as strong.
Changes, outlook, and risks
- Sales rebounded from FY2021, chiefly as commercial and business-aircraft demand improved with easing pandemic impacts; lower military sales partly offset the recovery. FY2022 sales remained below FY2020’s $60.0 million.
- Higher sales and production improved margins through absorption of fixed overhead. Singapore-facility restructuring charges declined to $0.3 million from $1.6 million; no earnings guidance was provided.
- The new 90,000-square-foot Kansas expansion was complete and undergoing customer qualification, expected in the second half of calendar 2022. Park reported $18.7 million of construction-in-progress and $0.6 million of equipment purchase obligations at year-end. Backlog was $25.9 million on April 25, 2022, up from $21.3 million on April 26, 2021; management cautioned it may not predict future results.
- Raw-material delays, limited qualified suppliers, inflation, and labor-market tightness constrained production and hiring. Park said it had passed through some cost inflation via pricing. It reported no material operating impact from the Ukraine war at filing, but continued to monitor supply-chain and customer effects.
- Customer concentration is substantial: GE-affiliated and non-affiliated subtier suppliers represented 49.5% of FY2022 sales; the ten largest customers represented about 77%. Orders are generally short-term or requirements-based, and qualification efforts do not guarantee sales.
- Other risks include commercial-aerospace cyclicality and continuing COVID-19 effects, customer or supplier disruption, product qualification delays, cybersecurity incidents, and environmental obligations. Park is a potentially responsible party at three cleanup sites; management did not expect known environmental matters to have a material adverse effect. No material pending legal proceedings were reported.
- FY2022 included a $1.6 million after-tax unrealized loss on marketable securities in other comprehensive income. Available-for-sale securities were $97.6 million at year-end.
Important facts for investors to verify
- Whether the commercial and business aviation recovery continued after FY2022, and whether revenue and margins approached pre-pandemic levels.
- Progress and customer qualification of the Kansas expansion, and whether production capacity is being utilized as planned.
- Backlog conversion and the effects of supplier delays, raw-material costs, inflation, and labor availability on shipments and margins.
- Exposure to GE-related sales and other major customers, including any changes in customer production schedules or sourcing.
- Liquidity and investment portfolio values, including the impact of interest-rate changes on marketable securities; the remaining tax installment balance was approximately $14.3 million at year-end.
- Dividend sustainability, given FY2022 dividends of $8.2 million compared with operating cash flow of $8.2 million, and the company’s ongoing capital needs.