Park Aerospace Corp.

Good morning. My name is Shannon, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. first quarter fiscal year 2021 earnings release conference call and investor presentation. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you very much, Operator. Welcome, everybody. This is Brian. Welcome, everybody, to our first quarter conference call. I have with me, as usual, Matt Farabaugh, our CFO. So I just want to mention that we announced our earnings, of course, this morning. and if you don't have the presentation up in front of me, you want to go get that. There's instructions in the earnings release itself as to how to access the presentation. Also, it's on our website, I think, under shareholders and maybe presentations or something like that. I'm sure you'll find it if you look. So you want to get that because that will make the call a lot more meaningful. Also, there is supplemental information which attaches financial information which attaches appendix one to the presentation itself. So, sorry, for those of you who attended or participated or listened to our fourth quarter conference call, which was on May 14th, you know that we went into pretty great detail about the virus and the economic crisis and the impact on the aerospace industry in part, and we're not going to go over all that again, and I think that would be... Not that productive. Unfortunately, to have the best context for this call, you probably need to have some reference to the prior call. But for us to go back over everything again, and we'd have a two-hour call, and I don't think anybody's up for that, probably me included not being up for that. So we're not going to rehash all of it. We'll do a little review with somebody and go over some updates. And then, of course, we'll answer questions. So why don't we just get right into it, and I'm going to be referring to the presentation and going through it for you and referring to it. and others. Slide 3, quarterly results, we're getting right into it. We have the history of the quarters for the last two fiscal years, plus Q1 is in yellow at the right-hand column, so you can see Our revenues, you can see our EBITDA, you see our gross profit and our gross margin a little bit up about 30%. And let's reference a little bit down lower on the page what we said about Q1 during our fourth quarter conference call on May 14. We said our sales estimate was going to be $12 million to $12.5 million. So we're at $12 million to $13 million. We came in kind of the middle of that range. Our EBITDA estimate was $2 million-ish. We did that ish stuff because as we discussed at great length during our fourth quarter call, a lot of uncertainty in our business right now and in the aerospace industry. So we put that ish on the end of the $2 million, and we came in at $2,364,000. So I guess that's kind of in the $2 million-ish range. Remember our forecast philosophy is when we give forecasts, We don't play what we consider to be a game of giving you a low number so we can be a hero. We tell you what we think is going to happen, assuming we're going to work very hard and do everything we can to make it happen. We're not trying to make it easy for ourselves. Okay, let's keep moving here. I want to go to slide four, our top five customers. This is for Q1. And if you remember, these actually are the same customers that were the top five customers for last fiscal year. This is alphabetical order, so we're not commenting on the order, except I think you all know that MRAS is going to be the top customer for PARC. AAE Aerospace, so that's for ablatives, the PAC-3 missile. You see that, the picture, a nice picture of that on the top right. And that's the latest generation of what used to be called a Patriot missile, which is designed to shoot down hostile incoming missiles. Remember during our Q4 call, I mentioned that we received 25 letters from the Department of Defense from military contractors saying we're expected to stay open. Well, this might be an example as to why we're expected to stay open. I doubt that the military wants to run out of Patriot or Pac-3 missiles anytime soon. AR Corp., multiple programs, maybe interiors and things like that, floorboards, aircraft, culturing program is one of them. Kratos, that's an important customer as well. And we are the main supplier, maybe the sole source supplier, I'm not sure, but main supplier anyway, for all the drone programs. Those are tactical drones and the target drones, including the Valkyrie, which is depicted in the bottom right picture here. Then there's Middle River Air Structure System, MRAS, which was a subsidiary of GE Aviation, but that was sold last year at MRAS. Sorry, MRAS was sold last year at SD Engineering Aerospace, which is a large Singapore-based aerospace company. And we have a picture of the COMAC 919, which is one of the, on the bottom left, which is one of the MRAS programs. New Orleans Group, multiple programs. Actually, one of the items is sea aviation for their engines. Another is weathermaster radomes, which would be for, I think, for Boeing aircraft, maybe others as well. Let's move on to slide five, if we could, please. So, we'll do a little comparison here. Kind of interesting, I think, to look at our pie chart. Remember, last quarter, we kind of took our which had kind of more breakdowns and simplified into three key areas that you thought would be meaningful in terms of understanding our business. So the top pie chart is just a pie chart you saw from our fourth quarter presentation. This is for last fiscal year. And we put the revenues on the side just because we want you to have a perspective here. Then we go to our Q1 pie chart. It's very interesting. Remember Q4, and we said we're going to focus on military. That was one of our objectives. So, obviously, military percentage went way up. Partly because commercial and business aircraft went down, so military obviously went up. But do the math here for a second. Just look at the dollars. Forget about the percentages. So, last year, 35% of... of the 60 million. That's about 21 million. I think that's the number. In the first quarter, 53% of the 12.2 million. That's 6.5 million. That annualized to 26 million. So in a very tough market, we actually grew the military segment dollar-wise, not just percentage-wise, quite nicely. Some of it's luck because some of it's just timing in terms of when the programs are are produced because it's lumpy. You know, there'll be a quarter when we're producing one program, next quarter maybe not. But nevertheless, a nice job by our sales people, all three or four of them. We have a pretty small sales group. Because we're a sales group, though. You saw the announcement, I think, a couple days ago with the new sales guy. So that's good. So let me see if there's anything else. No, let's keep moving here. Let's go to slide six. So slide six and seven are really pretty much slides that were in our Q4 presentation. And you see up top it says revisited because we thought, well, let's take a look and see how we're doing. We were talking about different factors, different effects. What will, you know, the recovery of the different industry segments, aerospace industry segments we supply into. Military, we hear there's supply chain disruptions that haven't affected us really very much. We've heard about them, for instance, with respect to the F-35, a program we're not on. Park programs seem fairly strong and steady so far. And as we already said, it's actually even better now. We grew our military business, not just percentage-wise in terms of the pie chart, but actually dollar-wise. in Q1 as compared to the quarterly rate from last year. Commercial aircraft, so this is, you know, the big kahuna for PARC. Ejecual prices, remember we spoke about that last time? Well, that's actually gotten better. I haven't checked this morning, but yesterday it was lower, $40, not to Ejecual. The approved is $40 for a barrel, but obviously that's going to drive Ejecual prices, meaning the lower prices are a disincentive for airlines buying new airplanes. Reopening the Economy, Economic Recovery. So we've come a little bit of a, you know, what is it, two months? It's almost two months, maybe seven, eight weeks since your last call. And, you know, things have developed, so the economy's being reopened. One concern I want to highlight, though, is that these quarantines that are being put forth by these different governors of different states, I'm, you know, quite concerned about it. I'm quite concerned that it actually could Thank you for joining us. Thank you for joining us. But with all these quarantine orders, we're concerned about the impact. Because, you know, you can't travel from one state to another without locking yourself down in quarantine for two weeks. You know, it's kind of a pretty big disincentive for doing that. So we'll have to see what happens with that. But I just want to flag that's kind of a new thing, and it's concerning. So I don't know. I just want to flag that. Down to the bottom of the page, we're going to cover everything here because, like I said, this is really a slide from last quarter. We just wanted to update you on it. So generally, the news is actually pretty good. The commercial aviation industry was improving a little bit more quickly, I think, than most people expected, not to where it was, you know, before the crisis, but people are getting back on planes. Let's see what happens with these quarantine orders.

Single aisle at the bottom versus wide body.

We cover this a lot and I think it's pretty well, pretty clear that single aisle is going to recover more quickly and more strongly. Let's go to slide seven. This relates to business aircraft. Again, slide from last quarter. Just update here. Jet fuel prices, probably not much of an issue. Reopening economy, economic recovery. Yeah, you know, it's interesting that the same kind of pattern. So in terms of business aviation usage, May was better than April, June was better than May, and we're expecting July to be even better, but now there's serious concern about these quarantine orders. So let's see what happens. I spoke to a couple of executives from business aviation field yesterday, different companies, and they both confirmed the same thing, which I was surprised about, a little interesting. They said that actually the smaller jets have been recovering in terms of sales more quickly than the larger jets, larger jet like the Global 7500, which is an important program for PAR. This is probably the largest business jet you can buy. So interesting. They said, well, you know, you've got the individual owner-operators. You know, they can write a check for a smaller airplane. These are not cheap airplanes. They're like, you know, $5 million to maybe $12 million. But the corporations that buy the real big airplanes that could cost more than $50 million, They're kind of sitting tight. They're not ready to make a commitment yet. So we'll see what happens. And that was before we had this issue I've raised regarding the quarantines. And both the guys said that, yeah, this quarantine, they're already seeing an impact on their business from the quarantines already. And it's just, you know, this is a two or three week event. So this is a real concern. And like I said, hopefully these governors will do the right thing and think about what's best for the country and the world. But we'll see. Let's see. Okay, so will social distancing be a factor of concerns for commercial aircraft, benefit business aircraft? Of course it will. I mean, obviously, if somebody's in a position to buy and operate a business aircraft, that's going to be a preference that we might have considering the issues with flying on airlines these days. Will business aircraft recover before commercial aircraft? I do not know that. People have different opinions, but it's an interesting topic to discuss. Let's see. Slide eight. Let me go to slide eight. Let's talk about GE Aviation. We always have to do that because it's such an important portion of our business. So why don't we go through the individual programs because I think it would be helpful to put GE Aviation in perspective. Obviously, we'll start with the 8 through 20 NEO family. and you can read up top the different variants of the A320 NEO family or when you use the LEAP 1A engine and all these are PARC programs. So last quarter we mentioned that Airbus had announced they're reducing production by one-third. Now I think the production rate for the A320 was maybe 60 a month. I think that's right. So they're reducing it by one-third. Then there was something confusing happening about I think last week they said, well, maybe 40%. But I read that the difference between 130-40% relates more to how they measure the output on a weighted basis rather than any kind of new cut. So I think they got some attention. I'm not sure what it means, a little bit vague. Well, one thing I can tell you is for us, I've been in touch recently, just a couple days ago, I think, with my counterpart at MRAS. and they received a forecast recently from Sarah Bussins-Haffran, which actually moves the numbers up. I can't give you the numbers. That wouldn't be appropriate. I'm not allowed to do that. Moves the numbers up in 2021. actually significantly, and in 2020 as well. The caveat of 2020 is that, remember the whole inventory thing we talked about last time, the burndown? So it's kind of muddy water. It's not clear how it's going to impact us in 2020 yet. But those are facts I'm reporting to you. There's a lot of different information out there. Some of it's consistent. Some of it's not completely consistent. But now you know pretty much most of what I know. The news on this aircraft is actually positive from what we hear. Bombardier Global 7500, we're talking about that with respect to business aircraft with the Passport 20 engines. This one is the biggest unknown for us. I'm not sure what's going to happen with this program. We know Bombardier is pushing the program hard because this is really the big new aircraft. The company has a lot invested in this aircraft. Their future is very dependent on the success of this aircraft. And also, even though it's slower engines, PARC has a lot of content per engine, dollar content per engine, on the passport 20 engines for the Global 7500. This is the question mark for us in terms of where things are going in the short term. 747-8, no change of program rates. Not sure how long the Queen of the Skies will be produced, but they're not going to reduce the rate, in my opinion. They'll produce at the rate which is six airplanes per year. We have four engines per airplane. That's 24 engines per year. They're going to produce that rate until such time as they cancel the program. Hopefully they never will, but there's some talk and maybe it's even trade gossip a little bit that Boeing may be pulling a plug in two years. But Boeing has refused, as far as I know, to confirm that. They have not confirmed that news. My feeling is two years is a long time, even if it is true. So hopefully somebody else will come in and and order these airplanes for cargo. They're not really being sold for passenger anymore. It's really a cargo sale. So I believe UPS has a number of them on order. And hopefully somebody else will decide to order some more. To me, I'm mostly involved with the 747. It's my favorite airplane. But also, just so you know, our first shipment in the GE Aviation Program, the first program we got qualified on, was a 747-8. Our first shipment was on, let me think, February 28, 2014, 11 p.m. I'm never going to forget that day or that time. So we hope it lasts forever. It's been around for a long, long time. Wonderful airplane. COMEC 919, this is one I suggest you pay a lot of attention to. This has LEAF-1C engines, consumer to the H-320, a different variant. Comac is pushing this program forward. Our understanding is actually pushing it pretty hard. Maybe partly because of trade wars, that makes the Chinese even more motivated. This is a real prestige thing for China. If you go to the next one, we'll talk about the Comac ARJ21 a minute. That's a regional jet, mostly sold within China. This 919, this is not for China. This is for the world. This is to compete with the 737 MAX and A320. China wants to be a player in the global commercial aircraft market. This is their entry into the big time. And there's a lot of prestige involved for China, not just COMAC, for the country of China. So they're pushing this program very hard. I'm not going to give you an estimate as to when it actually gets certified in production. Right now we're doing development work, but you can check their website and see what they say about it. One little piece of good news as far as lighting strike protection materials now used in the program, so it's good because that means for every unit we have more content. So this, I think, is a really important potential program for PARP. The picture here is the 747-8. Sorry to digress, but you see the nacelles. I always love this picture of these. You see the person standing kind of under the two engines. You get a feel for how huge these engines are and how huge these nacelles are. Love that little sculpted trailing edge of the nacelles. COMAC ARJ-21, that's a regional jet. It has the Alpha-GE engines, CF-34-10A engines. This program is strong and proceeding well. Actually, we're told that COMAC is trying to move up this program. Move up, okay? Not down, up. So, obviously, the supply chain has to be able to support that. But COMAC is different than the other aircraft manufacturers. They're not going down at all. None. They're going up. They're trying to go up, okay? I just want you to understand that. Not like Boeing, not like Airbus. And also, this is the next program we're told that is to qualify our lightning strike materials. I think you know this, but our lightning strike materials are used on the H320 program. We're sole source, actually, just for it on the H320 program, which is good. Let's see. Why don't we go over to slide nine? And slide nine, the 777X, and this is not a good story for us, maybe for anybody. So last time we told you all the POs were canceled for the 777X program for the parks POs. Production schedules pushed out further. Boeing then announced a rate reduction for the program. Then Park was recently advised by GE that they do not currently have the funding to continue to support parks qualification activities. And this is not an MRES program. This is a GE aviation program. Now we've become more pessimistic about this program of late. and we have not included in our planning. So this doesn't affect any of our internal forecasting because basically we're not including anything for this program. We're not getting up yet. You know, hopefully GE will get back in the game and come up with the funding to complete the qualification, but we don't know. That's kind of a question mark. But it doesn't play into any of our thinking short term, let's say this year or next year. Next slide, on slide 9, PARC recently arranged with AMRAS to maintain baseline production levels to preserve PARC's ability to ramp up production when needed. And this is kind of important. This relates to hot melt. Almost all of our production for the GE programs are hot melt rather than a supposed solution. So we were kind of getting some vibes that, well, maybe, you know, we were just going to shut down production for us. for the next quarter or two because there's so much inventory in the system. So we spoke to MRAS and we said that's not going to work. We need to have a baseline amount of production per month to keep our hotmail operation going. We have highly trained crews and if we shut everything down, we'll lose that five-year investment in these crews and guess what? We need to ramp up. That's not going to work. So they jumped on immediately and talked to MRAS and responded. They didn't push back at all. They realized it was a problem. So we reached an agreement. Let's say an understanding, it's not under an agreement, a handshake, is the minimal amount of production that we will do per month. And that's by unit, it's not by dollars. That's why we get down to our little forecast for Q2. It's kind of a, there's a range here because we don't know what the dollars will be. It's based upon units because units are what drives the production needs of the hot melt departments. Just so you know, we have... We retained three crews. Now one of the crews is transferred to Solution, and we'll talk about that a little later on when we go to our customer flexibility program, which helps a lot. So that's what we need. That's our baseline so we can ramp up when we need to ramp up. And we'll get into that in a second because I don't think that day is too far off. Now, just for perspective, last year, last fiscal year, are key aviation program, 28.9 million. Let's say Ron's at 29 million. About 60% of the revenues were attributable to A320 family. But 29 million, let's say there's about 1 million for the 777X program. So let's take that off the list. 28 million, that's a nice number. Divide by four, it's 7 million. You get the concept. So last year, about $7 million of revenue per year on the key aviation programs. I mentioned that so you can have some perspective on what we're saying is going on this year. So Q1, that's an actual 4.1 million, obviously quite a bit down from 7 million. And then Q2, now we're estimating 2 million to 2.5 million. That's based upon that minimum rate that we said we need per month, production rate we need per month in order to sustain and keep intact all the capabilities that we've built over five years with our people in the hot melt department. So that's a very low number, but that's what we said we need as a minimum. Now, what's the message here? That number is well, well, well below the end market requirements. Not based upon any increase based on what we know now. What do we know now? We know we talked about 8 through 20. We talked about maybe a one-third reduction 8 through 20. We also talked about the forecast we just got. It goes up. The global 7,500, that's a question mark. We don't know. 7478, that's not going anywhere. That's flat for the next two years. COMEC 919, probably not a factor this year. because they're still doing the development, hasn't been certified yet, but pushing forward aggressively. Comac, ARJ21, pushing it up, not down. 777X, not a factor. So if you're taking into account just the end market requirements now, not talking about any recovery at all based on those specific programs, that $2 million, $2.5 million, that isn't even close. Here's the problem we're facing here. and the rest of the supply chain, I guess, as well. My guess, and I'm going to give you a guess on this, is that if you looked at just supply keeping up with the in-market demand of today, that number is 4 to 5 million, not 2 million, 4 to 5 million. So that's a guess, a lot of variables, and like I said, the passport 20, the 7500 is one of those variables. But I want you to understand this because it's a really key point. What's going on? Of course, it's the inventory. It's the burn down. It's inventory everywhere. We talked last time how the whole kind of thrust of the aerospace market was push up, push up, push up, more, more, more, more, and then already got pulled out from all, under all of us. And everybody's left a lot of inventory. So, at some point, though, the inventory's going to be normalized. And then what? Then the end market is going to have to drive the production requirements. We're going to have to keep up with the end market. So, my concern is this, I'll just tell you, I think the supply chain is demoralized, kind of in a survival mode, maybe feeling sorry for itself, maybe not paying attention as much as they should. My feeling, and this is just a feeling, I could be wrong, well, sometimes, let's say the market doesn't even get improved over the next 12 months, at some point, there's going to be that day of reckoning, where the inventory is normalized, and production has to match the end market requirement. My belief is, I could be wrong, that's later on this year. My other belief is that a lot of companies in the supply chain are going to get, are going to really be caught off guard. Because they're going to be told, well, we've got a problem. We need to double, triple your production. And I think a lot of companies are not going to be prepared to do that. We are going to be prepared to do it. That's why we went to these guys and said, you know, we cannot allow our hot milk capability that we've built over five years to be decimated. That's not going to work. We're also working with our suppliers to make sure they're able to support this inevitable change. Inevitable unless the market takes a big step down. The end market takes a big step down. The end requirements. Assuming the end requirements don't get better, you know, it's just what we have now. There's going to be a day of reckoning, a crossover point. and our production is going to have to go up significantly. Remember what I said, probably 4 to 5 million, that's an estimate, and we're at 2 million in Q2. That's our baseline production level that we agreed to with MRAS. So then, Q3, Q4, that's really going to be a function of when this crossover point happens, and we don't know that. And this again is assuming there's no recovery. Nothing gets better. It also assumes nothing gets worse, but it assumes nothing gets better. So I just give you a wild guess. My guess is in Q3 and Q4 that it's going to look more like Q1. Not like last year's $7 million, because the end market is not at that level of $7 million. But that $2 million is not sustainable unless the market takes a significant drop down in the end market. I want you to understand these dynamics because they're really important for PARC. I think they're also important for supply chain. Like I said, my sense is that a lot of folks in supply chain are demoralized, maybe, you know, feeling kind of bad for themselves and not really paying attention to what they need to think about for their future. Maybe they're in survival mode, their future is, you know, if we can, you know, make payroll next week. I don't know. So I'm not criticizing people. You know, everybody has their own issues to deal with. And I'm not criticizing anybody. It's a pretty difficult time. But I want to make sure you get that. This slide is probably the most important slide for this presentation. Let's go on to slide 10. Some perspective on commercial aircraft industry. This is just a review. Single aisle versus wide body. We kind of beat this to death a little bit here. So there's already a trend in place for single aisle. I mean, it's kind of like unanimous. Everybody believes a single aisle is going to recover before a wide body. Wide body is used for those long international flights. So there are no initial flights at this point. Basically, all the flights are domestic, you know, using the single aisles, not the twin aisles. There are three major single aisle programs, A320, the Boeing 737 MAX, POMAC 919. We're on two of the three. Check through those three boxes. Those are the boxes we think we want to check. We hear the 737 MAX, they're maybe getting certified again, and they're back in business. We hope that they do. We wish them the best. We're not in that program, though. So we wish Boeing only the best, and hopefully they'll get the airplane certified and flying again. We're not in that program, but we're on those other two programs, which we believe are the IT programs. So we believe if you're interested in commercial aviation, which we are, you've got to be in single aisle. If you're interested in single aisle, these are the two programs you want to be on. So it says park checks, two of the three single aisle boxes, right, so we already covered that. I believe were quite well positioned. And as I said already, watch out for the 919 because this is a juggernaut, in my opinion, coming because it has a full force of not just COMAC, the whole country of China behind it. Very big prestige aircraft for China. Slide 11. Okay, so where's our strategy and what strategy means to us? It's just a fancy way of saying what we plan to do. Okay, so a double down, triple down in commercial airspace. We're not backing down. We're doubling down in commercial airspace. People want to fly again. And, you know, sometimes out of a crisis comes opportunity. So what do I mean by that? So some airlines are going to innovate and make it fun and interesting for people to fly on them, make passengers feel safe, and actually look forward to getting on the planes. and some won't. Some will just be in a survival mode. So this is, I think, how capitalism is supposed to work. The ones that innovate and do a good job, they will not only survive, they will thrive. And the ones that don't innovate, you know, they get back into defense mode and survival mode, maybe they won't make it, but it's all okay because that means that the better ones will survive and this is good for the future of commercial aerospace, commercial aircraft, in my opinion. We believe a commercial aircraft will be one of the world's great industries for many years to come. Park believes single-aisle aircraft is the place to be, so we covered that only five times already. Next item, we believe we're ideally positioned on the two most attractive single-aisle programs. We covered that. And we believe the glory days of aviation is still to come. We want to be part of it. So the timing of the recovery in commercial aviation is uncertain. We don't know what's going to happen. I'm not sure anybody does. We watch, we pay attention, but we don't know. But to us, it's a little less important. What's important to us is we think commercial aviation is so important, so critical, such an important industry for many years to come, and we want to be part of it. So if it takes a year to recover, that's fine. Two years to recover, that's okay for us. We just want to be there. So next item. We want to emphasize and focus on programs and opportunities in military aerospace markets, especially niche programs and opportunities. So we already talked about the fact that our sales in Q1 were relatively good in the military area. What do we mean by this? So we're interested in niche programs, maybe a little more out-of-the-way programs, programs a little bit hard to find and get, but they're easier to protect. We're less likely to be interested in a big program like the F-35 because it's so big, it's over budget, it's so late that, you know, it gets a lot of visibility. And, you know, if there's a government change or something like that, who knows what will happen to these big high visibility programs. You know, we don't want to be blown around the wind. We want to be on programs that have real staying power and are not that vulnerable. So that's what we try to do. And it takes more work. It's harder, but it's worth it. used parts balance sheet and cash to our advantage. We covered that in some detail in our last quarter calls. Why don't we skip over that? Any questions about it, let us know. And we haven't spoken about this in a while. It's not that it's being a niche company. It's not that it's not part of us. It's just that it hasn't come up in a presentation. Ben Shore told me about this culture each strategy for lunch. Peter Drucker said that, I guess. I like that. So, in other words, you can have all kinds of great strategies, but your culture, our company culture is a niche company culture. What does niche company mean to us? It's not a generic thing. Niche companies mean something specific to us. It means doing what others are unwilling or unable to do. It means saying yes when others say no. It means not accepting mediocrity, going for greatness. We believe mediocrity is a choice. We believe greatness is a choice, too, although it's the more difficult choice to make. If you go over greatness, you need to be prepared to overcome any obstacles and setbacks. And the path to greatness can be a lonely path because you run across many doubters and nonbelievers along the way. But that's our little culture thing being this company, and it's something we're very committed to. It's something that's kind of palpable in our company, something that's spoken about a lot, and it's something we keep reminding ourselves of. We need to drive ourselves, force ourselves to be that niche company. Slide 12, financial forecast. So we withdrew our long-term forecast during our last call. And the reason is simple, as we explained. We just don't know. So we don't want to just put something out there just to guess. I mean, that's kind of silly. It doesn't help you. It doesn't help us. It doesn't help anybody. So it's a waste of time. There's so much uncertainty in the global economy. and the aerospace industry, that it'd be just really kind of silly for us to update a long-term forecast. When we think about a long-term forecast generally, though, where we're going to also try to grow military, we're still going after commercial programs. The impact of, sorry, the commercial recovery, the commercial aviation aerospace recovery is going to impact our long-term forecast because we have so much of our companies invested in a commercial industry. Aircraft. So, at some point, I made this comment last time, kind of interesting to think about. We're not posting a prior long-term forecast that was withdrawn, but we feel it's more like move to the right. At some point, we'll resume that long-term forecast. We just don't know when. How much of a move to the right? Now, is it a year or two years? We don't know, and we're not going to speculate about that piece. It's not worth it. We just don't have a real good feel for that. But we feel all the principals and drivers for the long-term forecast are still in place. Just move to the right. Our thoughts about our quarters. So this is kind of interesting. Q1, those are just the facts, actual. Q2, so we're going to give you some ish numbers just, you know, to think about. For sales, we're thinking about $9 million-ish. Rebit data, $1 million-ish. But obviously there's lots of uncertainty. So we've got to emphasize that this part of it, we're just giving you some perspective. We have a little more than $8 million shipped and booked for Q2. But the issue, and so in normal times that would be good. You know, we would have too much trouble getting to $9 million booking and shipping and other whatever, $8 or $9 or $1,000 a quarter. But the risk is that the bookings where we have could be canceled or pushed to the right, you know, could be pushed out. and there's been a lot of push-outs and cancellations of late. So that's why there's a risk and that's how we go with the ish part of it. It's really driven mostly by the top line. Once you know what the top line is, we can figure out the bottom line, you know, more or less. As far as Q3, Q4 are concerned, big, big question marks and be partly dependent upon what happens with commercial aerospace. Thank you very much. But, you know, you may want to just think Q3 and Q4 may look like Q1, but that is very speculative. I'm just putting it out there just to help you think about things a little bit. Okay? So why don't we go to slide 13, updates on PARP. How are we doing? Well, our New York office is open. I guess we went to say whatever in New York. We're able to open our New York office. Our folks in New York, our small office in New York are doing great. Kansas continues to be fully operational. Never had to shut it down. Customer flexibility program. Remember I mentioned that? So you have 75% participation. This is really like a cross-training program. Our employee, we have a number of job categories. If you get trained in another category, you have to take a test and get approved. You actually get a financial incentive. So some of our employees have maybe three or four approvals. But this is really so important to us. Remember I said that our We moved one of our hotmail crews to Solution. They already had approval to work in Solution. And when things are very unpredictable and very dynamic, it helps so much to be able to have people move from one department to another, one department to another. It makes us so much more flexible, so much more responsive, and so much more productive. And so it's helped a lot. We've had no layoffs. We don't like layoffs. It's not part of us. We have reduced our are headcount, are people count, through attrition, and we have let go of some people that we didn't feel were life or part, but no layoffs. We kind of, it's something we just feel strongly about. We want people to believe and feel they can build a filled future with a company, so layoffs are something that are almost like against our religion. Now, we're not God, so we can't ever guarantee there will be layoffs, but it's something we're very, very reluctant to do, and so far, We're not done. I mean, we have no plans of doing layoffs. And like I said, not God, so I can't guarantee that'll never happen. But it's very much, we're very much opposed to the concept of layoffs. We don't like it. Don't like it. We want people, like I said, to believe they have the opportunity to build a future with our company. And, you know, laying people off is not really consistent with that concept very much, is it? So... Anyway, let's keep going here. Parks people continue to do very well under difficult circumstances. Yeah, it's pretty difficult with all the stress and anxiety in the world. I mean, my advice to most people is don't watch TV very much because it's all bad. But, you know, people need to come to work, need to focus and do their job, do the best they can, find ways to do better every day. As we say, if you... You come to work at the end of the day, you've made something better for the company, even small. Everybody we're talking about, that's a good day for you. If you haven't, that's not a good day. Tomorrow you come back and you're more dedicated to make something better. That's what we're all about at Clark. Major expansions, just a little update. Remember, $18 million in our budget. Spent $10 million so far, $8 million to go. and the Board of Directors of the Board of Directors of the Board of Directors of This has been around even longer than the 747, the B-52, the re-engining the B-52, and there are potential opportunities for PARC in connection with that re-engine program. Comac, that Chinese company, is developing a twin-aisle aircraft 929. Like I said, they want to be a player in the global aircraft business. So if you want to be a player, you need to have a single aisle, but you also want to have a twin aisle, a wide body. and then JDN Asia. We've spoken about that before. We haven't brought it up recently. We're not just going to bring it up every time, but it's still an active discussion and maybe something that would happen next year. We're still working on it. These three things are potentially big opportunities for the company, although none of them are in a bank. So it's possible nothing will happen. I just want to put that out there. Those are the big things. Some big things, rather than all of them. But, but, but, we still love the small opportunities. There's nothing too small for us. It's funny because sometimes the small things end up being big things. Sometimes you're arrogant, oh, you're not important enough for us. I don't know. I'm not going to pass judgment too much on others, maybe a little bit, but I want to tell you, that ain't us. That's not how we look at things. If we're being made to feel like you do not matter, you're not essential, let us know. Maybe we can help. Can you imagine telling people you're not essential? How long do you tell people you're not essential? How does that work? How does that work? You know, I don't know. It's a very strange world. It's not a world I would ever have expected. So, you know, your supplier making you feel like they're doing you a favor, doing business with you, that's not very much fun. And, you know, we've been there. We know this life. So, and maybe you want to talk to us. All of our customers are essential to us. So, like sometimes they say, we're Catholics when it comes to customers. We don't believe in divorce. We take on a customer, we take on a customer for life. Now, they can divorce us, but we'll never divorce them. We'll never say to a customer, you know what, you're kind of small. We've got some big fish to fry. You know, go find somebody else. And we know, we heard a story just recently where somebody in our industry did just that. They got a big program that told their customers, you know, Other customers, go find somebody else. We don't want to deal with you anymore. That is so icky to us, that kind of thing. We wouldn't have ever even considered doing that. Catholic, we don't believe in divorce when it comes to customers. At Park, we're continuing to go for it. We're not letting up. We intend to make this our time. We're not waiting. We're not feeling sorry for ourselves. We're not demoralized. Others may falter, but Park is not going anywhere. Okay, thanks for listening to the long presentation. And now, operator, I think we're ready for questions.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Once again, ladies and gentlemen, if you wish to ask a question at this time, please press star, then 1, or you can touch some telephones. We have a question from Nick Ripostello within our management. Your line is open.

Hello. Good morning. Just had a question on the dividend policy. Is there intention to keep paying the 10-cent quarterly dividend? And, you know, I know this is hard to forecast, but at what level would you think you would actually have to – being a situation where you would burn cash rather than generate cash. Thank you so much.

So at this point, we're not thinking of changing our regular dividend. We discussed that last quarter. So, you know, it's something we continue to evaluate, but our position at this point is to continue the regular dividend. And that's based upon, you know, we're looking after this year, our internal forecasts. So... This year we probably won't cover the dividend. You know, we probably have some limited positive cash flow, but it won't cover the dividend. But I think we're okay with that. It's important to us to continue the dividend. Not a guarantee. I mean, something could change. But that's our perspective at this point. So does that answer your question, Nick, or is there anything else I can help you with on that point or that question?

No, that's basically it. And one other thing, and again, I'm looking at, I'm not saying this to happen, but at one point an investor had requested or asked you to consider a share repurchase. Now, I do believe all that cash is a good asset to have, especially in these troubled times. Are you seeing any more opportunities coming up for acquisitions? Is there anything out there that's looking more appealing in these troubled times? And just address share repurchase. You know, if the stock were at six or five or something like that, is that something you might consider? Thank you.

Okay, so let's take those questions in reverse. So that's hypothetical, but yeah, I mean, or how about at one? Oh, sure. As the stock goes lower, obviously the share of purchase becomes more interesting. As far as the acquisition market is concerned, so what we're advised by the bankers we work with is that you probably need to wait another couple of months, maybe the fall, maybe like September, October time frame for some of these opportunities to kind of come out of woodwork. But we covered this in our last call. That's why I didn't go into detail on this call. But it's something very important I mentioned earlier. just kind of briefly using our cash and our balance sheet to our advantage. But we've been frustrated with acquisitions for a long time. We've had cash for a while. But valuations have just not looked right to us. And I think with the benefit of hindsight, we were right and the world was wrong. So the inmates may be running the asylum. We're told, well, if you want to get in the game, you've got to pay these multiples and everything. I think I mentioned last time we looked at companies that were actually, you know, the estimate price was maybe five times revenue.

And they were sold for five times revenue.

Not to us, of course, but, you know, in many cases we saw the announcement and we were quite stunned. We just don't, and these are not cure for cancer companies, you know, I mean, maybe I thought they were, but we didn't. So what we're looking for is something more central to our business, something that would be not a direct competitor, would be added for business, different capabilities, different Product lines, but still central to our business, not very tangential. And, you know, we've been looking and looking and looking, but we've been frustrated because the evaluations have not been right. And maybe some of the things we're looking for weren't available as well. We're hoping that maybe opportunities will develop in the next couple of months. We're told by the bankers and the investment bankers we work with that they think it's probably the fall because the way they explain it to me is that the sellers have to go through some kind of process of adjusting their realities and expectations to realize that whatever they thought they were worth before, you know, that's kind of irrelevant. And also some of these companies may be in financial distress because the other factor is there's a lot of debt in corporate America. Everybody knows that. And maybe some big high-profile companies will get bailed out. But we're not buying those companies. We're buying smaller companies, you know, I mean, part-size, something like that. So they're probably not going to have the opportunity to get a lot of help from the government, which is fine. So we're hoping to be optimistic. We're hoping to be able to buy something important at good values, maybe even distressed values. So we're sitting tight. We have seen a couple things in the last couple of months, but we felt it was early. We felt maybe the valuation is still high. And also they're a little more peripheral, not so central. In aerospace, obviously. Well, I shouldn't say obviously. We're all in aerospace. We wouldn't look outside of aerospace, but less central to what we do now. So we look. I think we decide maybe not for us. So, Nick, does that help with your question?

Yes. Thank you so much. I just want to say I'm very appreciative of your conservative stewardship.

Thank you. Oh, well, thank you for that input. Appreciate it.

Thank you. Our next question comes from Chris Hillary with Blue Bay Capital. Your line is open.

Hi, everyone. Good morning. Hi, Chris.

I just wanted to ask, with all the disruption that's out there in the industry, do you see that creating opportunity to bid on new business, or is it more a situation where Everyone is more disrupted and just trying to deal and manage their own business commitments or whatever the pipelines are as they recover.

I think it's a little bit of a mix, but unfortunately there's a lot of companies in the aerospace industry right now that are just, I think, feeling very defensive and in a survival mode. So that could be a little frustrating. We're doing everything we can. We reach out to customers all the time. You know, we're not going away looking for opportunities, looking for opportunities. But, you know, it's not just black and white. There definitely are opportunities. I think especially in the military area where it seems that the funding is still pretty good. So we have to keep at it. I mean, it can be frustrating sometimes for the sales guys, you know, to call and say, look, you know, we're having to do it. We're not doing anything now. We've got no money. We've got no funding. We're just trying to survive through tomorrow. Okay, we'll call you back next week. We're not going to go away. We'll make a pest of ourselves. But there are opportunities, and I don't want to be overly generalized, Chris, but I think probably more in the military or defense area than in the commercial civilian area. You know, all industries are affected by the economic crisis and the pandemic, but military seems to be doing better. The funding is there. New programs are being initiated, qualifying new suppliers. So, I don't know. Well, I guess the answer to your question is not so black and white as far as I'm concerned. It's kind of a mixed thing. But from our perspective, like I said, we're going forward. We're not going to relent. We're not going to let up. And yeah, we'll be a pest. I mean, we'll keep calling. What can we do? How can we help? Can we help? You know, sometimes, I'll just say one other thing. Sometimes the first answer is, well, there's nothing we can do, but you need a follow-up question. Well, what do you mean by that? You know, what are your issues? What are you struggling with? Don't accept no for an answer. So, I mean, obviously you've got to be polite and respectful, not belligerent, but don't accept no for an answer. In other words, they may not even think there's an opportunity. You start a discussion, well, wait a minute, what about that over there? Oh, yeah, maybe you can help with that. We're looking for little things, looking for big things. I mentioned last quarter there was a couple of initiatives that we're taking on. In other words, to do more ourselves rather than farming these things out. And we don't want to be specific because it's, again, a kind of sensitive thing. So we're looking at those kind of opportunities at all. Those are not huge ones, but they're nevertheless opportunities. As I just said, small, big, either way, it's okay with us.

Okay. I think that covers my question. Thanks so much. Have a good rest of your summer.

Thank you very much, Chris.

Thank you. And I'm sure no further questions at this time. I'd like to turn the call back over to Brian Shore for any closing remarks.

Thank you, Operator, and thank you, everybody, for listening during the summer when you probably have other things you might prefer to be doing. So even though the world continues to be kind of a challenging place, I still want to wish you a really good summer. Hopefully you'll all get away a little bit, get some R&R, and we'll talk to you again, at least in terms of a quarterly call in a couple of few months. But in the meantime, you call us any time you have any questions. So you take care and have a great day. Goodbye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.