PKE 10-K & 10-Q changes, risk factors and insider trading

A loss of one or more key customers could adversely affect the Company's profitability. The Company's customer base is concentrated, in part, because the Company's business strategy has been to develop long-term relationships with a select group of customers. During the Company's fiscal years ended March 1, 2026, March 2, 2025, and March 3, 2024, and February 26, 2023, the Company's ten largest customers accounted for approximately 71%, 66%, 64%, and 69%,64%, respectively, of net sales. The Company expects sales to a relatively small number of customers will continue to account for a significant portion of its net sales for the foreseeable future. See “Customers and End Markets” in Item 1 of Part I of this Report.

As with most companies, the Company has experienced cyber-attacks, attempts to breach the Company’s systems and other similar incidents, none of which,which hashave resulted in loss of data or materially affected the Company’s business, operations or financial results. The Company has addressed past cybersecurity breaches by working with leading providers of incident response, risk management and digital forensics services. In coordination with such service providers, Park also continues to update its infrastructure, security tools (including firewalls and anti-virus software), and employee training and processes, to protect against security incidents and to prevent their recurrence. While Company personnel have been tasked to detect and investigate such incidents, cybersecurity attacks and other data security breaches can and are expected to occur in the future and the Company may be unable to implement adequate preventive or remediation measures, as breach and disruption techniques change frequently and are generally not detected until after an incident has occurred.

The unauthorized use of the Company’s intellectual property and/or confidential or personal information or any material disruption in the systems that store such information could materially harm the Company’s competitive position, reduce the value of the Company’s investment in research and development (through the loss of trade secrets or other proprietary and competitively sensitive information) and other strategic initiatives, compromise personally identifiable information regarding customers or employees, delay the Company’s ability to access its information systems at critical times, cause operational disruptions and delays, jeopardize the security of the Company’s facilities or otherwise materially and adversely affect the Company’s business or financial results. Any intrusion may also result in material fines, penalties, governmental investigations and proceedings, litigation, diminished competitive advantages through reputational damagesdamage and increased operational expenses (including remediation and damage expenses). Many victims of cyber-attacks also are forced to pay significant ransoms or incur significant expenses to recover critical business systems and data. Additionally, the Company may incur additional costs to comply with its customers’, including the U.S. Government’s, requirements for data security and increased cybersecurity protections and standards. The Company may be similarly harmed if any of the foregoing incidents occur at third parties that are connected to the Company’s networks and that are not under the Company’s direct control.

The Company’s operations could be impacted by catastrophic events outside our control, including severe weather conditions such as tornadoes, hurricanes, floods, earthquakes, storms, epidemics, pandemics, acts of war and terrorism. Any such event could cause a serious business disruption affecting the Company’s ability to produce and distribute products and could expose it to third-party liability claims. Additionally, such events could impact the Company’s suppliers, customers, and partners, which could cause energy and raw materials to be unavailable to the Company and could cause customers to be unable to purchase or accept ourthe Company’s products and services. Any such occurrence could have a negative impact on the Company’s operations and financial results.

The Company’s operating results are dependentsubject onto the continued operationrisks of itsmanufacturing productionerrors, facilitiesprocess-control andfailures, itsquality abilityescapes, foreign object debris or other operational mistakes that could result in scrap, rework, customer claims, delayed deliveries, loss of or damage to meetcustomer relationships, contractual liability, warranty or indemnity exposure, regulatory or customer contractreview, requirementsor andadditional other needs.costs. Insufficient capacity threatens the Company’s ability to generate competitive profit margins and may expose it to liabilities related to contractual commitments. Operating results are also dependent on the Company’s ability to complete new construction projects on time, on budget and in accordance with performance requirements. Failure to do so may expose the business to loss of business opportunity and associated revenue which could have a negative impact on the Company’s operations and financial results.

Park Aerospace Corp. (“Park” or the “Company”) is an aerospace company which 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 volumelow-volume tooling for the aerospace industry. Target markets for Park’s composite parts and structures (which include Park’s proprietary composite SigmaStrut™ and AlphaStrut™ product lines) are, among others, prototype and development aircraft, special mission aircraft, spares for legacy military and civilian aircraft and exotic spacecraft.

The Company’s fiscal year is the 52- or 53-week period ending the Sunday nearest to the last day of February. The 2026, 2025, 2024, and 20232024 fiscal years ended on March 1, 2026, March 2, 2025, and March 3, 2024, and February 26, 2023, respectively. The 20252026 and 20232025 fiscal years each consisted of 52 weeks and the 2024 fiscal year consisted of 53 weeks. Unless otherwise indicated in this Discussion and Analysis, all references to years and quarters in this Discussion and Analysis are to the Company’s fiscal years and fiscal quarters, and all annual and quarterly information in this Discussion and Analysis is for such fiscal years and quarters, respectively.

The Company's total net sales worldwide in 20252026 were 11%18% higher than in 2024.2025. The increase in sales was primarily driven by an increase in sales in the military and commercial aircraft markets and, to a lesser extent, higher sales in the business aircraftspace market, whilepartially offset by lower sales to each ofin the otherBusiness marketsAircraft the Company serves were relatively even with the prior year sales levels.market.

The Company’s gross profit margin, measured as a percentage of sales, decreasedincreased to 30.9% in 2026 from 28.4% in 20252025. fromThe 29.5%higher ingross 2024.profit Amargin lesswas the result of higher sales prices, a more favorable sales mix and higherlower labor and overhead costs as a percentage of sales due to rampingimproved upleverage of manufacturingthese capacity in anticipation of customer program volume increases as well as higher depreciation more than offset the increase in sales.costs.

The Company’s earnings from operations in 2025,2026, as a percentage of sales, were 15.1%18.4% compared to 15.0%15.1% in 2024,2025, primarily as a result of lowerthe higher sales and improved gross margin partially offset by higher selling, general and administrative expenses. The higher selling, general and administrative expenses which offset the lower gross profit margin noted above. The lower selling, general and administrative expenses, as a percentage of sales, were due to higher legalsalaries feesand infringe 2024benefits, astravel aexpenses, resultprofessional of shareholder activism defense costs, costs incurred in 2024 to settle an insurance claim as a result of the bankruptcy of the insurer, lowerfees, incentive compensation expenseand research and an additional week ofdevelopment expenses included in 2024.2026. The Company’s net earnings from operations in 20252026 were 7%92% higher than in 2024,2025, primarily due to an 11%18% increase in sales, andhigher gross margins, higher interest income in 20252026 offsetand by thea $1.1 million storm damage charge,charge higherin costs2025. ofThese salesincreases referencedwere above,offset by higher selling, general and administrative costsexpenses andin 2026 as well as higher income tax expense in 20252026. dueWhile income taxes increased in whole dollars in 2026, the 2026 tax rate decreased compared to a provision recorded for undistributed foreign earnings. The increase in the 2025 tax rate comparedprimarily toas the 2024result tax rate primarily resulted fromof a deferred tax provision recorded in the fourth quarter of fiscal 2025 on unrepatriated foreign earnings partially offset by a higher benefit from the reduction in uncertain tax positions in 2025 as compared to 2024.2026.

The Company continues to experience inflation in costs of raw materials and supplies, freight costs and other costs and expenses. The impact of inflation on the Company’s profits has been partially mitigated by the Company’s ability to adjust pricing for a large portion of its sales to pass the impact of inflation through to its customers. The Company may also experienceexperienced increasing costs resulting from the imposition of duties, tariffs, and similar governmental charges by the United States and certain foreign jurisdictions on the products of its customers and suppliers. The impact of these tariffs and other duties was largely mitigated by the Company’s ability to adjust pricing to pass the impact of these costs through to its customers.

On May 19, 2024, the Company’s manufacturing facilities in Newton, Kansas were damaged by a strong storm which moved through 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 needed significant repairs and the roof on one building needed 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 has remediated much of the damage and is scheduled to completecompleted the repairs in the first quarter of 2026. The Company recorded a charge of $1.1 million in 2025 related to the damage and related repair and downtime costs.

Interest and other income were $1.2 million in 2025 compared to $1.1 million in 2024. Higher weighted average interest rates in 2025 were offset by lower levels of marketable securities in 2025 due partially to share repurchases of $4.2$4.3 million in 2025 as well as a transition tax installment payment of $4.2 million made in the second quarter of 2025 related to the one-time transition tax on deemed repatriated earnings of non USnon-US subsidiaries recorded in fiscal year 2018. During 2025 and 2024, the Company earned interest income principally from its investments, which were primarily in short-term instruments and money market funds.

The Company’s effective income tax rate was 38.1% for 2025 compared to an effective rate of 20.8% for 2024. The increased rate was due primarily to a deferred tax provision of $2.1 million recorded in the fourth quarter of fiscal 2025 on unrepatriated foreign earnings that the Company had previously considered to be indefinitely reinvested. Although the Company is currently involved in discussions with Asian industrial conglomerates regarding potential Asian-basedAsian based manufacturing joint ventures, the Company would consider contributing certain of its intellectual property to such joint ventures but would consider contributing only minimal capital to such joint ventures. Other than such potential joint ventures, the Company is not currently involved in any activities which would likely lead to the Company’s investment of such funds overseas. As a result, the Company has determined that it is unlikely that opportunities to invest these funds overseas will be realized in the foreseeable futurefuture, and, therefore, the Company has provided for the potential repatriation of such funds currently held by its Singapore subsidiary. This increase in rate was offset by the U.S. federal rate and state income tax reductions in uncertain tax positions. The benefits from the reductions in 2025 and 2024 were $1.1 million and $0.6 million, respectively, related to the expirations of statutes of limitations on tax positions taken in prior years regarding the taxability of funds repatriated from the Company’s subsidiary in Singapore and to the expiration of statutes of limitations related to state throw-back rates.

Basic and diluted earnings per share for 2025 were $0.29 compared to basic and diluted earnings per share for 2024 of $0.37. The lower earnings per share in 2025 reflects the impact of the storm damage charge as well as the tax charge related to undistributed foreign earnings. These decreases were partially offset by higher sales in 2025 and a higher tax benefit from the reduction in uncertain tax positions in 2025 compared to 2024.

The Company believes it has sufficient liquidity to fund its operating activities for the 12 months from the date of the filing of this Form 10-K Annual Report and for the foreseeable future thereafter. The Company expects the planned new composite materials manufacturing facility to be a significant capital project and, accordingly, anticipates funding-related expenditures from cash generated from operations, existing cash and marketable securities, and if appropriate, other available capital resources.

The change in cash and marketable securities atas of March 2,1, 20252026 compared to March 3,2, 20242025 was primarily the result of the $21.7 million of proceeds from issuance of common stock under the “at the market offering” program described above and improved earnings in 2026 offset by repurchases of $4.3the Company’s common stock of $2.2 million in the secondfirst and third quartersquarter of 2025,2026, as well as a transition tax payment of $4.2$4.9 million made in the second quarter of 2025.2026 and the payment of a supplier advance of $1.6 million made in the first quarter of 2026. The significant changes in cash provided by operating activities were as follows:

Working capital atas of March 2,1, 20252026 decreasedincreased $8.2$21.7 million compared to March 3,2, 2024.2025. DecreasesThis was primarily due to the increase in cash and cash equivalents and marketable securities and higherlower current income taxes payable were partially offset by higher inventories andlower accounts receivable, as well as lowerhigher accounts payable.payable and accrued liabilities.

The Company's current ratio (the ratio of current assets to current liabilities) was 18.2 to 1 as of March 1, 2026 compared to 9.7 to 1 atas of March 2, 2025 compared to 10.2 to 1 at March 3, 2024.2025.

During 2025,2026, the Company's net earnings before non-cash storm damage charges, depreciation and amortization, stock-based compensation, provision for deferred income taxes, loss on sales of marketable securities, amortization of bond premium and gain on sale of fixed assets, were $11.3$14.3 million compared to $11.3 million in fiscal 2025 and $11.1 million in fiscal 2024 and $12.6 million in fiscal 2023.2024. Such earnings were decreased by changes in operating assets and liabilities of $6.6$2.8 million, $6.7$6.6 million and $6.1$6.7 million in fiscal 2025,2026, 20242025 and 2023,2024, respectively. This resulted in $4.7$11.5 million, $4.4$4.7 million and $6.5$4.4 million of cash provided by operating activities from continuing operations in fiscal 2025,2026, 20242025 and 2023,2025, respectively. During 2025,2026, the Company expended $0.9$2.0 million for the purchase of property, plant and equipment compared to $0.6$0.9 million during 2024,2025, and $1.0$0.6 million in 2023.2024. Proceeds from the sale and maturities of marketable securities, net of purchases of marketable securities,securities were $36.9 million, $24.9 million, $32.0 million and $(6.0)$32.0 million in 2025,2026, 20242025 and 2023,2024, respectively. In 2026, the Company had cash proceeds from the issuance of stock of $21.7 million. The Company paid $10.1$10.0 million, $30.6$10.1 million and $8.2$30.6 million in cash dividends in 2025,2026, 20242025 and 2023,2024, respectively. The 2024 dividends paid included a special dividend of $20.5 million paid in the first quarter of that year. The Company expended $2.2 million, $4.3 million and $2.9 million in 2026, 2025 and 2024, respectively, on repurchases of common stock.

The Company's contractual obligations and other commercial commitments to make future payments under contracts, such as lease agreements, consist onlyprimarily of operating lease commitments, commitments to purchase raw materials and commitments to purchase equipment, as described in Note 9 of the Notes to Consolidated Financial Statements included elsewhere in this report. In March 2025, the Company entered into an agreement with a supplier, ArianeGroup SAS, under which the Company would advance funds against future purchases. The agreement requires payments of €4,587 over three years, of which €1,376 was paid in April 2025 (actual cost of $1,569$1,564), €1,8341,835 (approximatelywas $2,055paid based onin May 9,2026 2025(actual exchange rates) is due in the first quartercost of fiscal 2027$2,156) and €1,376 (approximately $1,541$1,598 based on May 9,18, 20252026 exchange rates) is due in the first quarter of fiscal 2028. 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 $0.1 million to secure the Company's obligations under its workers’ compensation insurance program.

In 2025,2026, 20242025 and 2023,2024, the Company incurred approximately $37,000,$43,000, $29,000$37,000 and $14,000,$29,000, respectively, for remedial response and voluntary cleanup costs and related legal fees, and the Company received, or expects to receive, reimbursement pursuant to general liability insurance coverage for approximately $37,000,$43,000, $29,000$37,000 and $14,000,$29,000, respectively, of such amounts. While annual environmental remedial response and voluntary cleanup expenditures, including legal fees, have generally been constant from year to year, with increases over time, the Company expects it will be able to fund such expenditures from cash flow from operations. The timing of expenditures depends on a number of factors, including regulatory approval of cleanup projects, remedial techniques to be utilized and agreements with other parties. AtAs of March 1, 2026 and March 2, 2025 and March 3, 2024,2025, there were no amounts recorded in accrued liabilities for environmental matters.

As part of the processesprocess of preparing its consolidated financial statements, the Company is required to estimate its income taxes payable in each of the jurisdictions in which it operates. This process involves estimating the actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Company’s Consolidated Balance Sheets. Deferred income taxes are provided for temporary differences in the reporting of certain items, such as depreciation and undistributed earnings of foreign subsidiaries, for income tax purposes compared to financial accounting purposes. In evaluating the Company’s ability to recover the deferred tax assets within the jurisdiction from which they arise, all positive and negative evidence is considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, tax planning strategies and results of recent acquisitions. If these estimates and assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company’s Consolidated Statements of Operations, or conversely to further reduce the existing valuation allowance, resulting in less income tax expense. The Company evaluates the realizability of the deferred tax assets and assesses the need for additional valuation allowances quarterly.

The Company’s gross profit margins, measured as percentages of sales, were 34.1% and 32.0%, respectively,34.8% in the 13 weeks and 39 weeks ended NovemberMay 30,31, 2025,2026 compared to 26.6% and 28.1%, respectively,30.6% in the 13 weeks and 39 weeks ended DecemberJune 1, 2024.2025. The Company’s higher gross profit marginsmargin for the 13 weeks and 39 weeks ended NovemberMay 30,31, 20252026 compared to the prior year’s comparable periods werewas primarily due to the higher sales volume,volume increasedin sellingthe pricesquarter which allowed for improved leverage of fixed overhead costs and a more favorable salesproduct mixes in the current periods.mix.

The Company’s earnings from operations before income taxes and net earnings increased 86.7%73.1% and 87.1%,69.9%, respectively, in the 13 weeks ended NovemberMay 30,31, 2025,2026 compared to the 13 weeks ended DecemberJune 1, 2024,2025, primarily as a result of the higher gross profit margins mentionedin abovethe 13 weeks ended May 31, 2026 and higher interest income in the current13 periods.weeks ended May 31, 2026 partially offset by higher selling, general and administrative expenses.

TheWhile the Company continues to experience inflation in costs of raw materials and supplies, freight costs and other costs and expenses.expenses, Thethe impact of inflation on the Company’s profitsthis has been largely mitigated by the Company’s ability to adjust pricing for a large portion of its salessales. to pass theThe impact of inflationglobal throughtariffs has been minimal and been largely mitigated by the Company’s ability to adjust pricing of its customers.products.

Programs in which the Company participates as a supplier are, in some cases, experiencing supply chain issues from other suppliers to the programs that could result in delays in production for certain customers of the Company. The Company’s sales may be impactedaffected by these supply chain challenges thatexperienced by its customers areas experiencinga fromresult of delays involving other suppliers.

Under a Business Partner Agreement with ArianeGroup SAS of Les Mureaux, France,France (“ArianeGroup”), ArianeGroup SAS appointed Park isas theits exclusive North American distributor of ArianeGroup’s RAYCARB C2®B NG proprietary product. RAYCARB C2®B NG is used to produce ablative composite materials for critical rocketrocketry and missile systems. Park is a long-term customer of ArianeGroup and uses ArianeGroup’s RAYCARB C2®B NG product in the production of many of Park’s key ablative materials, which Park supplies into critical rocket and missile programs. On March 27, 2025, Park and ArianeGroup entered into an agreement under which Park would advance funds to ArianeGroup against future purchases of C2®B product in the totalaggregate amount in Euros of €4,587,000 payable in three installments in 2025, 2026, and 2027. The Company has made the 2025 and 2026 advances while the 2027 advance will be made in the first quarter of fiscal year 2028. These advanced funds are to bebeing used to help fund the purchase and installation, by ArianeGroup, of additional manufacturing equipment for ArianeGroup’s production of C2®B product.

The Company's total net sales in the 13 weeks and 39 weeks ended NovemberMay 30,31, 2025,2026 were $17.3$18.3 million and $49.1 million, respectively, compared to $14.4$15.4 million and $45.1 million, respectively, in the 13 weeks and 39 weeks ended DecemberJune 1, 2024.2025. SalesThe forincrease thein 13-weeksales and 39-week periods ended November 30, 2025 were higher than the comparable period of the prior year,was primarily due to higher sales toin the space, commercial and military markets partiallyreflecting offsetincreased by lower salesdemand in theboth business aircraft market.markets.

Selling, general and administrative expenses increased by $277,000, or 14.0%, during the 13 weeks ended November 30, 2025 compared to the 13prior weeksyear’s endedcomparable Decemberperiod 1,in 2024,dollars andbut thesedecreased as a percentage of sales. These expenses, measured as percentages of sales, were 13.0%12.9% in the 13 weeks ended NovemberMay 30,31, 20252026 compared to 13.8%14.9% in the 13 weeks ended DecemberJune 1, 2024.2025. The increase in selling, general and administrative expenses,expenses in dollars, during the 13 weeks ended November 30, 2025dollars was primarily due to higher salaries, fringe benefits, incentive compensation, profit sharing expenses, travel expensesresearch and professionaldevelopment feescosts, higher freight costs and higher shareholder expenses partially offset by lower freightprofessional outand expense.legal fees. As a percentage of sales, the decrease in selling, general and administrative expenses is due to the increase in sales in the 13 weeks ended May 31, 2026.

Selling, general and administrative expenses included stock option expenses of $105,000 and $294,000, respectively,$92,000 for the 13 weeks and 39 weeks ended NovemberMay 30,31, 2025,2026, compared to stock option expenses of $105,000$88,000 and $295,000 forin the 13 weeks and 39 weeks ended DecemberJune 1, 2024.2025.

For the reasons set forth above, the Company’s earnings from operations were $3.6$4.0 million and $8.9 million, respectively, for the 13 weeks and 39 weeks ended NovemberMay 30,31, 2025,2026 compared to $1.8$2.4 million and $6.5 million, respectively, for the 13 weeks and 39 weeks ended DecemberJune 1, 2024.2025.

Interest and other income werewas $343,000 and $1,088,000, respectively,$786,000 for the 13 weeks and 39 weeks ended NovemberMay 30,31, 2025,2026, compared to $290,000 and $874,000, respectively,$355,000 for the prior year'syear’s comparable periods.period. Interest income increased 18.3% and 24.5%, respectively,121% for the 13 weeks and 39 weeks ended NovemberMay 30,31, 2025,2026 primarily due to interesthigher receivedinvestment onbalances. taxCash refundsbalances were higher in the 3913 weeks ended NovemberMay 30,31, 20252026 andas a foreignresult exchangeof gainstock recordedsales relatedin tothe aprior long-termquarter supplierthat advance.resulted in net proceeds of $21.7 million under the Company’s at the market offering. During the 13 weeks and 39 weeks ended NovemberMay 30,31, 2025,2026, the Company earned interest income principally from its cash and investments, which consisted primarily of short-term instruments and money market funds as well the tax refund noted above.funds.

The Company’s effective tax ratesrate for the 13 weeks and 39 weeks ended NovemberMay 30,31, 20252026 werewas 26.0% and 25.6%, respectively,26.4% compared to 26.2% and 26.7%, respectively,25.0% in the prior year’s comparable periods.period. The effective tax ratesrate for the 13 weeks and 39 weeks ended NovemberMay 30,31, 20252026 werewas 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 offset by excess tax benefits on stock option exercises.taxes. The effective ratesrate for the 13 weeks and 39 weeks ended DecemberJune 1, 20242025 werewas 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.

For the reasons set forth above, the Company'sCompany’s net earnings for the 13 weeks and 39 weeks ended NovemberMay 30,31, 20252026 were $3.0$3.5 million and $7.4 million, respectively, compared to net earnings of $1.6$2.1 million and $4.6 million, respectively, for the 13 weeks and 39 weeks ended DecemberJune 1, 2024.2025.

In the 13 weeks and 39 weeks ended NovemberMay 30,31, 2025,2026, basic and diluted earnings per share were $0.15 and $0.37, respectively,$0.17 compared to basic and diluted earnings per share of $0.08 and $0.23, respectively,$0.10 in the 13 weeks and 39 weeks ended DecemberJune 1, 2024.2025.

Liquidity and Capital Resources - Continuing Operations:

Of the $63.6$89.4 million of cash and cash equivalents and marketable securities at NovemberMay 30,31, 2025,2026, $32.0$32.7 million was owned by one of the Company’s wholly-owned foreign subsidiaries.

The change in cash and cash equivalents and marketable securities at NovemberMay 30,31, 20252026 compared to March 2,1, 20252026 was the result of capitalhigher expenditures,cash collections due to the purchaseincreased sales mostly offset by a supplier advance of treasury$2.2 shares,million paid in May 2026 and dividends paid to shareholders, the Company’s transition tax installment payment, and a number of additional factors.shareholders. The significant changes in cash (used in) provided by operating activities waswere as follows:

The decrease in working capital at NovemberMay 30,31, 20252026 compared to March 2,1, 20252026 was primarily due principally to a decrease in cash as a result of the payment of thea long-term supplier advance ofto $1.6a million, treasury share repurchasessupplier of $2.2 million andduring the paymentperiod, oflower $7.5marketable millionsecurities ofand dividends.higher current liabilities, partially offset by higher cash, inventories, and prepaid expenses at May 31, 2026.

The Company's current ratio (the ratio of current assets to current liabilities) was 15.815.3 to 1.0 at NovemberMay 30,31, 2025,2026 compared to 9.718.2 to 1.0 at March 2,1, 2025.2026.

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.purposes including the Company’s plans to build a new composites material manufacturing and development facility. The Company expects construction on the new facility to begin in fiscal year 2027. 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.

The Company’s contractual obligations and other commercial commitments to make future payments under contracts, such as lease agreements, consist onlyprimarily of (i) operating lease commitments and (ii)commitments, commitments to purchase raw materials.materials and remaining advance payable to ArianeGroup SAS. In March 2025, the Company entered into an agreement with a supplier, ArianeGroup SAS, under which the Company would advance funds against future purchases. The agreement requires payments of €4,587 over three years, of which €1,376 was paid in April 2025 (actual cost of $1,564), €1,835 (approximatelywas $2,142paid basedin on January 7,May 2026 exchange(actual rates) is due in the first quartercost of fiscal 2027$2,156) and €1,376 (approximately $1,607$1,575 based on JanuaryJuly 7, 2026 exchange rates) is due in the first quarter of fiscal 2028. Under the agreement, the Company commits to purchase C2®B product through December 2033 at an estimated cost, in aggregate,cost of €36,000. The Company has no other long-term debt, capital lease obligations, unconditional purchase obligations or other long-term obligations, standby letters of credit, guarantees, standby repurchase obligations or other commercial commitments or contingent commitments, other than two standby letters of credit in the total amount of $140,000, thatto secure the Company’s obligations under its workers’ compensation insurance program. In July 2026, the Company entered into a sublease agreement covering approximately 18 acres of total land in Tulsa, Oklahoma. The Company plans to build a new composites material manufacturing and development facility on the site. The facility will include full production lab facilities, office space, storage and freezer space and ancillary equipment necessary to support all planned manufacturing operations. The sublease commences on September 1, 2026, and has an initial term of 25 years with a renewal option for an additional 25 years. Annual rent under the sublease agreement for the initial five years of the sublease would be $269,469 with increases for each subsequent five-year period based upon the Consumer Price Index for All Urban Consumers, U.S., City Average All Items as published by the United States Department of Commerce. The Company expects economic development incentives to offset a significant portion of the rent expense.

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 creditdoubtful losses,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 Condensed Consolidated Financial Statements and that entail, to a significant extent, the use of estimates and assumptions and the application of management’s judgmentjudgment, are described in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,Operations”, in the Company’s Annual Report on Form 10-K for the fiscal year ended March 2,1, 2025.2026. There have been no significant changes to such accounting policies during the 20262027 fiscal year thirdfirst quarter.

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 reservesaccrual required, if any, for these contingencies is made after careful analysis of each individual issue. The required reservesaccrual 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.Results;