Park Aerospace Corp.

Good morning. My name is Justin, and I'll be the conference operator today. At this time, I would like to welcome everyone to Park Aerospace Corp., fourth quarter fiscal year, 21 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 the session, 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 call.

Thank you very much, Operator. Welcome, everybody, to PARCC's fourth quarter conference call. With me, as usual, of course, Matt Farber, our CFO. We announced, published a earnings release earlier this morning, so if you haven't checked it out, you won't do that. In the earnings release, there are instructions as to how to access the presentation. We're about to go through a presentation you also can find on our website, but you really want to get that presentation in front of you in order to make this call more meaningful. Without the presentation from you, it might be a little confusing. Also, there's supplemental financial information that's attached as Appendix 1 to the presentation. Matt used to read that for us. These presentations are going on for so long that we don't do that anymore, but feel free to access it and ask any questions you like about it. You know, we mention this every now and then, probably almost every call actually, that we're not able to cover everything. These presentations are filling lengthy as is. We need to kind of select what we think would be of interest to you and helpful to you in understanding our company. We do the best we can with that and then, you know, next call maybe we'll cover something else. The call could go on for 45 minutes, so you see we really can't, it's not possible to cover everything. We'll try to keep it to 45 minutes. When I say the call, I mean the presentation, and we'll have as much time as you want for questions and answers. When we're done with the presentation, then we'll turn it back over to you, and you can ask any questions you want, either about the presentation or anything about PARCC generally that's not in the presentation. Okay, so why don't we just go ahead and get started. on when we turn to slide two. This is our forward-looking disclaimer language. Any questions about this, just let us know. Slide three, we'll take a little bit longer on slide three than slide two. Slide three has a lot of stuff going on here, very busy. So why don't we take a look, start by looking at the top line for the quarters of the 21 fiscal year, one, two, three, and four. You can obviously see what's going on. based upon the significant downturn in commercial aerospace. And also we talked about destocking at some point. Come back a little bit in Q4, but I want to remind you right now, right when we start, about something we discussed I think last quarter, maybe in a prior quarter, and that relates to this essential component for rockets, for missile systems. This is our ablative product line. So remember how it works. There's an essential component that's sourced overseas. We have the relationship with the supplier, so the OEMs are concerned about this. These are critical missile programs. They ask us to buy that component and then sell it to them just to have a safe stockpile of that component. It's an essential component. The product couldn't be made without it. So we do that. We buy this component. We sell it back to, I shouldn't say back, we sell the OEM to the customer. They never owned it to begin with. It's their product, and they can do with it what they want, I guess, but the expectation is that we will use that component to produce the blade of materials, the composite blade of materials for these rocket and missile programs. This is significant for a couple reasons. It affects our top line, also our bottom line, We sell it at a small markup, so the margins are quite small. The material content for these sales are quite high. So I just wanted to remind you of that for background. In Q2, sorry, in Q3, we had approximately $2 million of those sales of the component. And in Q4, we had $3.5 million of sales. And we predicted that, I think, when we did our Q3 call, so that shouldn't be a surprise to you. But I just want to remind you of that because it does kind of affect the numbers. So let's go through... 24, the current quarter, fiscal 21-24, $14,441,000 of sales. You can see the numbers moving up, but in that number, $3.5 million of sales of that critical component with very low margins, gross profit, $4,326,000. Gross margin, 30%, which is, we like that. We don't like it when it's below 30%. We're actually surprised about this because with that critical component, that central component. The margins are quite low, so we're surprised that the gross margins actually came in at exactly 30%, actually. That's not a forced number. We don't do that. That's just the math. It came in 30.0%, and the adjusted EBITDA at 3,257,000. So we're a little bit surprised about that. Let me remind you about our forecast philosophy before we go into more discussion about the numbers. So we give you a forecast. We're telling you what we think is going to happen based upon working very hard and everything we need to do to make it happen. But we're telling you what we think is going to happen. We don't give you a low number to beat it. We think that's kind of silly. We know lots of other companies do that, large and small alike. We think it's kind of, I don't know, wasting your time to do that. If we tell you something, We're telling you what we think is going to happen. We could be wrong, but we're telling you what we think is going to happen. So, all right, so with that in mind, let's talk about what did happen in Q4. What did we say about Q4 during our Q3 conference call? We said the sales estimate was 14 to 14.5. Well, we came in within that range, okay, maybe to the higher end, but still within that range, no problem. We also said the adjusted EBITDA estimate was 2.3 to 2.8 million, but we came in at 3.257 million. So quite a bit above the top of the range. That's not what we thought was going to happen. And what happened was that we did not properly capture in our estimate for Q4 the margins on ablative products. Now I'm not talking about the essential component. These are our sales of ablative materials for rockets and missile programs. Very good margins, and we just didn't fully capture those margins. That's on us. This is not something we did to, you know, give you a low number. We could be a hero. We don't, as I say, we just don't do that. Not our way of doing things. Let me see. Anything else to cover on the numbers? No, I don't think so. But there's another big item I kind of deal with on this page. This page is closed down. Special items. Okay. You see at the bottom it says before special items. Well, there was a big special item. and Q4, $1,570,000. And that related to something we used to call a pioneer plant, which is a plant in Singapore we opened in 2008. This is a composite material plant. This is just around the time we were going into aerospace. This plant was going to be our Asian aerospace for composite materials facility, but it was part of our Singapore company, our Singapore entity, our Singapore operation. In electronics, our Singapore facility was our largest facility, so it was part of that. It wasn't a separate entity, and the key thing was it was going to be operated and managed by our Singapore team, which is the electronics group at the time. I wouldn't say it was very successful in terms of marketing. We didn't get very much sales, but nevertheless, For whatever reason, I would not say it was a great success. But then, as you know, we sold our electronics business in its entirety, ACG, in December of 2018, and that included the Singapore operation, of course, the Singapore entity. Now, this Pioneer plant, as I said, wasn't a separate entity. It was part of the Singapore entity. But we separated it and dropped it into another entity owned by Park. Why is that? Because AGC did not want to buy the Pioneer plant. They didn't want it. So we said, okay, fine, we'll keep it. And we have kept it. We had a mothball almost right away, I think almost right away when we did the sale in 2018. because we didn't have, without AGC, we didn't have, or Singapore people, we didn't have the ability to operate this plant anymore, so we mothballed it. We didn't write it off right away because we had some, you know, hopes that we could be able, we might be able to use it at some point. Why is that? Remember we've been talking about working on an Asian JV for a while. I don't think we discussed it every quarter. We've been talking about it for a while. and actually we're still in discussions with an Asian, large Asian aerospace company about doing a JV in Asia and our thought is that well maybe this plant would be used in that JV. These discussions are high level at the executive level of this company. I would say they're serious but also they're still preliminary and COVID has not been our friend because we really need to get together. We've had a lot of phone discussions, correspondence back and forth, questions and answers But to me, in order for this to get to the next level, this discussion, we need to get together. And really, their team needs to come to Kansas, spend a couple days with us. And with COVID travel restrictions, that just has not been possible. They have not been able to do it. So, you know, it really sidetracked this whole thing. We're still in active discussions. I mean, I don't want to tell you that I'm not telling you it's dormant at all. We're still in active discussions. I mean, like probably on a weekly basis, you know, emails or phone calls, that kind of thing. But I feel like until we're able to get together, it's kind of not going to get to the next level. So why did we decide to write it off this time? Because this thing has been going on for a while. and even if we do a JV, it's not clear that we'd use this facility in a JV. So we decided to write down the assets at this time. I think that's the right decision. I think it was the right, you know, prudent and thoughtful decision. Just in case you're interested, not much of an impact of, you know, why is the pre-tax benefit now that we've written off the facilities by $200,000 per year positive and the EBITDA benefit is only about $80,000 because, you know, some of the costs of depreciation. So just wanted you to be aware of that because I think in the news release there's kind of a reference to this write down but I wanted you to know the background. It just kind of wasn't, I mean we didn't have the ability to continue to operate this plant after we sold electronics to AGC because we just didn't have, there was nobody to operate it for us. So maybe the decision was kind of inevitable but we made it and I think it was the right decision and the right timing. Why don't we go on to slide four. Just a little more history here with our 2021 results. You can see the top line, kind of nice growth, 17, 18, 19, 20, and oops, 21. But of course, no news flash here. That's the effects of the commercial aircraft industry downturn, and that's the stocking we talk about sometimes. Okay, why don't we move on to slide five, our top five customers. This is something we do, I think, every presentation actually.

It's kind of almost a fun thing sometimes. We have a little picture for each customer.

AEA Aerospace, that's the MK-825, the picture in the bottom left. And we supply material to this program for actually structural components, just not the rocketry, the structural components of the warhead. Let's see, CPI Radiant, that's NEC1, that's over on the top right, the NMT Navy multiband terminal. And we supply cradle materials into that program. Kratos, we've talked about Kratos quite a bit. Here in the bottom middle of the Valkyrie, I think we've told you we believe we're the main material supplier, composite material supplier to Kratos for all their drone programs. and this is a picture of the Kratos launching what they call a baby drone. Kind of interesting. That's a drone launching a drone. So how about that? I think Kratos actually said they expect the first production delivery of the Valkyrie in a couple of months. I think that was their terminology. Middle River Aircraft, you know, that's the company that was owned by part of GE Aviation. Now it's part of ST Engineering Aerospace. You know all about them. and we have a picture of, this is 747-8 on the top left. And Turkish Aerospace, not often in our top five, but it's really nice to have them. They're a contractor for Sikorsky Aerospace. They have a picture of a Sikorsky helicopter on the bottom right. We provide materials for the structures for the Sikorsky helicopters. Okay, why don't we go on to slide six. These pie charts I find very interesting. Let's look at military in 2021. Just as a mass, 60 million total revenues, 35% is about 21 million. Now, you have fiscal 21, where the total revenue is a lot less, only 46.3 million, but 59% military, and obviously the military percentage has grown quite a bit, but actually the absolute number, it's about $27.25 million, so it grew from 20 to 21, which is nice. Remember, we decided about a year ago to focus on military. I'm not saying we're happy with the results completely. You know, we need to do better. But at least we've achieved some results. And just remember also that the $27.25 million includes quite a bit of that sale of the, what do we call it, that essential component for ablatives, for rocket programs. So just keep that in mind. Look at the commercial aerospace portion of the pie. It was $28 million apparently, it looks like, in 2017. and the fiscal 20 and 16 million in 21. Just doing the math, that's all. So obviously quite a bit of a downturn in commercial aerospace. Why don't we go on to slide seven. This is our fun slide and Donna and Lena kind of do this every quarter they put together. We try to come up with things that are fun and interesting. They're not necessarily the biggest programs, but we thought we want to make this a little bit entertaining for you. We try to come up with some cool programs, military programs. Top left, there's a B-1B, but it's not the B-1B program. It's the LRASM, the long-range anti-ship missile that's being launched by the B-1B. And so we produce parts using park materials for that program. Avio Aster 30 air defense missile. Those are rocket nozzle materials, obliterated materials that go into that program. The F-15 Eagle, 104 to zero. Do you know what that means? 104, this is in combat, 104 wins, zero losses. So it's not even fair. We produce materials for radomes for the F-15. And we have the JSTARS parts for cover assembly using park materials. and we have the pie chart here, kind of interesting, you see rock analysis are big, structures are big, drones are big, radon's not as big, but still really important segment for us. Okay, why don't we keep going, got a lot to cover here, slide eight. Okay, so we talked about we love our military programs, so just in fairness, we need to also say we love our commercial aircraft programs, we gotta give equal time to commercial. So we've covered this. It's kind of a review slide, so you know the story if you've been listening to our calls. Single aisle versus wide body, a clear trend for single aisle. You know, it was actually before the pandemic. It was because people wanted to fly direct rather than going to the hub-and-spoke system. But now it's even more so because the domestic aviation has recovered, is recovering, has recovered to some extent. International travel probably recovered. are all ways off. Domestic, think of single aisle for domestic. For international, think of wide body. So our view, if you want to be a commercial aircraft, at least now you want to be in single aisle, there are three major single aisle programs. We're in two or three. We think those are the two you want to be on. You know, no offense to the Macs. You know, we wish it well. Hopefully, you know, we'll do really well in the future. But we're happy, very happy to be on the A320 NEO program and also the COMAC 919 program. So we think, we check two or three boxes and we say if you want to be in a single aisle, which we do, those are two boxes we want to check. That's our opinion. And we think we're ideally positioned Partly by luck in the commercial aircraft industry. I think we're kind of being nice to ourselves by saying partly by luck. I would say mostly by luck that we're just very well positioned. So slide nine. Commercial aviation emerging from the abyss and certainly was an abyss. Higher jet fuel prices and environmental concerns. provide extra motivation for airlines to move, to more quickly replace the less fuel-efficient legacy aircrafts with more fuel-efficient modern aircraft, such as the A320 family. You know, a year ago, fuel prices were downward, saying that's kind of an impediment for the new aircraft, the new, more fuel-efficient aircraft. Now fuel prices are not so good. They're very high. It's a little concerning. The environmental concerns are in place, whether fuel prices are high or low. The fuel prices, higher fuel prices, provide extra economic incentive for the airlines to go to the more fuel-efficient aircraft, of course. China domestic aviation, domestic has recovered to pre-COVID levels even greater, depending who you ask. That's very positive for single aisle. U.S. domestic aviation recovered a lot, like 75%. are pre-COVID levels, expecting full recovery 2022. Very positive for Senegal. And just kind of an interesting little anecdote, I don't know if you saw this, two new U.S. domestic airlines that recently announced they're launching. They don't plan to buy, from what they say, don't plan to buy airplanes from Progress Park is on, but still a very good sign of optimism about the U.S. domestic aviation market. Very good news for SunRile. I think a year ago people said this is just not possible. Nobody's going to start an airline in the U.S., you know, maybe ever. But that was the pessimism at the time. Let's go on to slide 10. This is also a review slide. We provide the slide pretty much every quarter. I think the first item, you know, we have the LTA started in 2019 through 2029. It's a requirements contract, Middle River Aircraft. Air Structure Systems, MRAS, that's a subsidiary of SD Engineering Aerospace. So what's the GE connection? Why don't we talk about GE Aviation? Why are all these programs GE Aviation programs? Because Middle River, MRAS was a subsidiary of GE Aviation until about I think two years ago. were sold to ST Engineering and Aerospace so the GA Aviation legacy programs, the GA Aviation programs used MRAS which was part of GA Aviation for all the nacelle structures and thruster versus structures. So that's the connection there. We're done with factory, we'll talk about that a little later, it's just about done. But when we signed up that LTA with MRAS. We said, okay, well, we'll go ahead and now we'll build a redundant factory. Why are we doing that? Well, next item, sole source for composite materials for engine and cells and thrust reversers for multiple MRAS programs, the whole A320 NEO family of airplanes with those LEAP 1A engines. That's the first five items. The Boeing 747-8, the COMEC 919, COMEC ARJ-21, which is the regional jet for China, and the Bombardier Global 7500. It takes a long, long, long, long time to qualify a composite material supplier. So you see the problem here is that if something happened to our one plant, it's actually a major crisis almost immediately for all these aircraft programs. So it was very proper and understandable that they asked us to build a redundant factory as part of our signing of LTA and we did that. It was actually, I think, a handshake but, you know, are people of our word, whether it's the right or not. Top right item, just quickly, there's also a component we produce for those Passport 20 engines. That's not part of the MRS LTA, that's actually through GE Aviation still, and we supply one of their contractors. A picture of the legendary Boeing 747-8 nacelles. I love this picture because it gives you a perspective on these nacelles are huge. I mean, look at the kind of background there. and these cells are all PARC materials, not only themselves, the thruster versus structures and for Boeing, some internal fixed structures as well for the 747 I should say. Let's go on to slide 11. We're doing time, pushing ahead here. Okay, so let's do an update on these specific GE Aviation programs. So the A320 NEO family, by the way, we added the A319 NEO, that's part of the family. Not talked about that much, but there are some sales, so that's part of the family, and that uses those LEAP 1A engines, meaning when they use those LEAP 1A engines, it's our program. Definitely in a ramp mode, I would say, Airbus, just some information, Airbus delivered 57 NEO family of aircraft in March. Airbus, this is from Airbus. This is not industry gossip or analyst opinions, that kind of stuff. Airbus plans to increase the A320 family of aircraft production rate, or 40, which it currently is at per month, to 43 per month in Q3, 45 per month in Q4. And just if you want to do some math, I like doing this, remember that the A320 and the Yale family of aircraft, they have two engines. One is the LEAP 1A engine, that's the program we're on. They also have a PRAT engine. Now, each airplane has two engines, so you've got to remember that when you're doing the math. Just FYI, I'm not telling you what's going to happen in the future because I don't know, but if you look at the May edition of Aeroengine News, it says that the Leap 1A, which is CFM, CFM is a joint venture between GE and Safran, Leap 1A engines, has about 61% market share of all of the firm orders for engines for an A320neo family of aircraft. So if you like doing math, that's the current situation. I'm not saying it will happen in the future because we don't know that. but about 61% of market share. So two engines but 61%. Think of it that way. Let's keep going. Now this is really pretty important. During Airbus' Q1 investor call on April 29, 21, the Airbus CEO, I'm not going to pronounce his, even try his first name but I think it's Mr. Fiore and probably not pronouncing that name correctly. Sorry about that. A lot of French friends stated there will be a steep ramp up This is quote, you know, direct quote, a steep ramp up in 2022 and 2023 for the single aisle aircraft. That means the A320neo family of aircraft. Steep ramp up, that's his quote, for 22 and 23. He also commented during the call that Airbus has provided scenarios to the supply chain to determine the fastest possible ramp up of single aisle aircraft production the supply chain can reasonably support. You get what's going on here? From my perspective, these guys are optimistic. They're trying to push up the rate as much as possible with A320neo, and now they're trying to figure out what the supply chain can support, a really important thing to understand. Okay, so that's the A320neo story, except on slide 12 a little bit more, still in the A320neo family. A320XLR news, this is part of that family, using the LEAP-1A engine. First test flight nearing aircraft, first test aircraft, sorry, nearing final assembly. First flight expected in 2022. Certification entering the service in 2023. I mean, that's kind of around the corner. And, you know, aircraft timeframes, you know, electronics in the old days, that would be forever. Two years of aircraft, it's like tomorrow. Now, many expect this airplane to be a game changer, very significant range, holds a lot of people. and the theory is it will replace wide bodies for many missions, at least some missions. And the key thing is Boeing does not have an answer for this aircraft. Boeing is reportedly considering the 5X, which would be an answer to the XLR. In my opinion, they really need to do it because they don't have an answer for it. But the problem I guess for Boeing a little bit is that this XLR is going to be in production and being sold in two years and Boeing hasn't even announced this 5X yet. I have no idea what time frame they'll be talking about, but it's going to be into the future. You know, with kind of a new airplane category, I mean, I think the general rule is it's always good to be first. Maybe not always, but usually good to be first. Let's go on to, anyway, so just on C-112, I think this could be a really important program for part of the XLR, part of the A320 family, but a real important program for part. Let's go to slide 13, the Global 7500. I think they recently sold their 50th unit. This airplane's in production and doing well in the ramp mode, ramping up, which is really good news for us. POMAC Air J-21. This is a Chinese airplane made by POMAC. It's a regional jet. It's in production, mostly for the China market for now. They're ramping up. It's in production, ramping up. Slide 14, POMAC 919 with elite 1C engines. Comac has indicated they intend to certify and begin deliveries of this aircraft before the end of 2021. That's this year, so I guess we'll see what happens. I don't know whether that's correct or not. I haven't heard any updates on that. But, you know, whether it's 21 or some other date after that, this is, I think, a very big potential program for PARC. This is Airbus' attempt to be a real player in commercial aerospace. This is their answer to the 737 MAX and A320. This is their single aisle airplane, and you see a picture right here. So I suspect it's going to be big. I suspect originally they're going to sell inside China. Remember, domestic aviation, you know, single aisle. But eventually, I believe they'd like to sell us outside of China. Boeing 747-8, Boeing announced it will terminate production of the Queen of Skies in 2022. 12 orders left to fill, along with the Queen. As some of you know, I have a real fondness for the 747-8. You know, one of the things that makes it a real sentimental thing for us is the first program we got on with G-Aviation was the 747-8. Our first shipment for these programs was February 28, 2014, at about 11 o'clock at night. It was kind of a pretty exciting day for PARC, actually. So we have a special fund for the 747. I took this picture actually at the Anchorage airport, this airplane, you see the gears down about to land. Slide 15, so a commercial aerospace year in review, Armageddon revisited. So you know about all the stuff, airplanes parked by the thousands. Donna did a real nice job with these pictures. and many more. If you weren't there, you heard about it. Airplanes flying almost empty. We've seen lots of pictures of two people on an airplane. Thousands of flights canceled. Thousands and thousands of employees were laid off throughout the commercial aircraft and commercial aviation industries. That's Armageddon. Almost all news about commercial aircraft industry was negative, very negative. This again is the analysts and the commentators and the people that get interviewed on TV that I guess a lot of people listen to. And it was maybe not a good thing because that kind of becomes a self-fulfilling prophecy. Aviation analysts and commentators predicted full recovery would not come for many years or may never come. Maybe it's over. Maybe the commercial aerospace industry is a thing of the past. There just won't be an industry anymore almost. End of days, they're talking about. Slide 16. But at PARCC, we did not completely buy all that doom and gloom stuff. We did not buy that the end of days were at hand.

But it doesn't really matter.

Either way, we made our arrangements with MRFs to maintain minimum monthly baseline critical mass production levels to preserve PARCC's ability to ramp up production when needed. We covered this, I think, during the last couple of calls at least. So if you listened to our prior calls, you know about this. But it was very important for MRFs and PARCC that we did this. We didn't want to allow are production levels of the type of product we make for MRAS to go below the critical mass because we knew, we didn't know. I guess we didn't know anything. Nobody did. But we had a lot of, we believe we're going to need to ramp back up one day. So it ended up being approximately $700,000 to $900,000 a month. The minimums were in terms of units because it was a production thing, not a sales thing. But it turns out it was approximately $700,000 to $900,000. 100,000 per month, starting about July. And even though layoffs were widespread and pervasive through the commercial aircraft industry, we laid off nobody, none of our people, through the darkest and seemingly hopeless days of the commercial aerospace industry. Listening to all these guys on TV talking about the end of days, it's over, you know, everybody we knew, everybody we knew was letting people off. But we did not do that. and it turns out that decision to not lay off people is critically important to PARC because ramping back up, we have to go try to rehire these people and call them back, which I know a lot of other companies are doing. We never let them go to begin with. A reason for not letting them go wasn't on that. It's because we don't like doing that kind of thing as we discussed many times in the past. Slide 17, continuing the same thing. We spoke at length during our Q1, Q2, and Q3 investor calls last year about the significant divergence from and mispatch between the minimum monthly baseline critical mass production amounts agreed to with MRAS and the then current end market requirements for GE programs with Parkinson's. I'm not talking about now. I'm talking about then. Airbus always maintained they were going to stay at 40. They weren't going to go under 40. All the analysts, not all, I'm being unfair, a lot of the analysts accommodated, oh, they're going to have to, you know, another shoe's going to drop. All right, fine. It didn't drop. But we were producing, with our minimum amount, about half level of what was needed to support the then market, not the now market, the then market. Inventory destocking, and this is what happened. Everybody was so intimidated, so frightened, so afraid, and like I said, the analysts and commentators didn't help very much. People weren't willing to buy anything. People weren't willing to build anything. They were just kind of selling inventory down because basically the world was coming to an end. What did we say? We said, to you, said inventory cannot be the stock to below zero. It's kind of, you can't have a negative number unless you're involved in very creative accounting, I guess. The divergence was mathematical and sustainable. I mean, how long can you sustain that kind of mismatch? We didn't know how long, but it was not going to be sustainable. Unless the aircraft end market took another dramatic step down, the day of reckoning was coming. We told you that.

This was our opinion.

Well, it came. The stocking has ended. all the GE aviation programs that PARC is on are in the ramp mode except for the 747 whose rates are unchanged. Let's go to slide 18. And the ramp is looking steep. This is just an update from the slide we did last quarter. From perspective, GE aviation program sales for the following periods were, now these are calendar year periods, just want to mention that because normally you talk fiscal years, but calendar year 19, 29.3 million. Calender year 20, oops, 15.8 million. But the last six months of calendar year 20, 5 million, 5 million. That's a $10 million run rate. But if you think about it, 700 or 900,000, that was a minimum. Maybe 800,000 kind of, you know, in the middle of that range, 800 times 12 is about 10 million. So that kind of makes sense. So we're running a $10 million rate during the last half, the last half of calendar year 20. Okay, calendar year 21. Calendar year, still calendar year, forecast for GA Aviation Program sales. Based on new forecast, we recently received from the customer $25.5 million. What happened? Last time we talked, it was $24 million. Well, it moved up. Is it done moving up? I don't know. We'll have to see about that. What does it mean? This is not a forecast to you. We're just telling you the forecast we received. our forecast to you would be done, you know, fiscal year basis and normally we'll provide ranges when we give you this forecast. But this is just to give you perspective on how steep the ramp is. $10 million rate to the $25.5 million rate in a period of what? Like a month. So that's perspective. 19, slide 19, continuing the ramp mode, we're in the ramp mode. This is really important. In addition, we recently received an updated long-term forecast for GA Aviation. This is not just a 2021 forecast. This is 21 through 29. The balance of the firm pricing LTA, remember that was 19 to 29. Well, obviously, we're talking 21 to 29 now in terms of the updated forecast that passed in the past. So here's something really key. On an apples-to-apples basis, the total updated forecast GA Aviation program sales for that 21 to 29 calendar year period. Very similar to the total forecast at GA Aviation Program sales from the pre-COVID forecast for that same period. We're basically back to where we were pre-COVID. That's the forecast we received. How is the updated forecast constructed? Okay, I think we told you this before. We are given units. We know what materials, how much materials used, what types of materials used by unit. We know what the selling price is for the materials, so we just build it from there. We build a very detailed long-term forecast, big spreadsheets, lots and lots of detail, but that's how we build it. Our opinion, the updated long-term forecast that we're talking about now may not fully capture the steep ramp-up of the A320neo aircraft family production in 2023 predicted by the Airbus CEO just a couple weeks ago. And we say that because we think that those comments came after we received the forecast. And then also, my opinion is that the forecast may not capture the XLR sales opportunities. The reason I say that is because a lot of people think XLR is going to be a big deal. And in the long-term forecast, we don't really see a bump. which would be tied to the introduction of the XLR. I mean, it's in there. I'm just saying we're just kind of wondering about it. But an important question. So there is some upside. We think maybe the forecast didn't fully capture these two things. But the other side of the equation is how will the commercial aerospace manufacturing supply chain respond to the steep ramp? That's a big question. That's, remember, the Airbus CEO said they went out to the supply chain to figure out what the supply chain can support. So there's two different things that are kind of pulling in different directions, I guess. Slide 20, how are we responding to the ramp up? It's all about our people. Well, so parks, people count is currently 106. So what the heck happened here? The last quarter was 107, and we told you we planned to hire 15, 20 people. So where are those people? We haven't increased our people. So why? Well, maybe people are getting paid to stay home. So who is that helping? We hear a lot on the financial news, news about all these companies that can't really reopen, can't ramp up, they can't hire people, it's really terrible, the government's paying to stay home. But don't hear too much about the people.

Is this helping those people?

So you might want to think about that a little bit. These are people. Some of them now haven't worked for a year. They're home, getting fat, you know, their minds turning to mush maybe, to lose their edge. Some of these people are wasted people now. They may not have the ability to go back to work again, maybe ever. Look, if you're off for a few weeks, fine. A year? A year? So maybe some of these souls are broken souls. What about them? They're people too, you know. Their lives are being destroyed, at least some of them. But it's funny, that's not part of the discussion. It's always about the businesses which can't reopen. And I appreciate that. I think that's a very good point. But why is nobody thinking about those people? Are they being helped by this? I have an opinion about who's being helped, and it's not them. But don't you worry about us. We'll take care of it. As usual, parks people stepping up, getting the job done. Cory's done a magnificent job of kind of organizing so that we're able to meet the ramp up. We don't talk about disappointing customers. That's not in our vocabulary. One way or another, we'll get the job done. Slide 21, so how are we responding? Thank goodness for our customer flexibility program. We talked about this a lot. A little more detail, total current participation, 80%. We got of 80%, two job categories, 47%, three, 30%, four, 18%. Five job categories, 5%. Without this customer flexibility program, it would just be very, very difficult to get the job done. This customer flexibility program is just a godsend. It helped us so much during the downturn to keep things going, not letting people off, and it's helping us incredibly now with incredible flexibility to respond as we need to. Thank goodness we didn't lay anybody off in the darkest days in the commercial aircraft industry because we didn't have to hire anybody back. They're all there. Our team is there. That's not the reason, the only reason. The other reason is we just don't believe in letting people go. You know, it's not how we think about things. Those people are precious. And thank goodness for Park's great people. Without them, we'd not be able to get the job done. Park is very fortunate and blessed to have the great people it has. Let's go on to slide 22, GE Aviation Program. How are we doing on time? Oh, boy. Maybe more than 45 minutes. GE Aviation Program sales history and forecast estimates. So the top part of it is the history, which you're familiar with. Q4 was 4.4 million. I think that's pretty much what we predicted during our Q3 call total, 13.2 million. and look, that's less for 21, sorry, fiscal year 21. It looks like it's less than half of fiscal year 20, which is not a big shock, I don't think, to anybody. Our forecast, Q1, $6.5 to $7 million. That's pretty much booked. Q2, $6.5 to $7 million. For the fiscal year, $26 to $28 million. Is that right? Well, I don't know. It could be. I guess, you know, it depends on what happens in part with the 8-20 and, you know, what Mr. Fiore said, this Airbus CEO that we just talked about. And then the other side of the equation is always can the supply chain meet the ramp-up. I'm not talking about us, but if any part of the supply chain is not able to support the ramp-up, that means the ramp-up itself may be slowed down a little bit. So, again, a picture of the 747-8 departing Anchorage. So you see a lot of pictures of the 747-8. As a CEO, I get picture authority, and I love the 747-8. So even though it's not our biggest program, I just love the airplane. I love putting pictures of the airplane in the presentation. But if somebody asked about this, it's actually less than $2 million of revenue for us per year. So even though it's... has a very sentimental value for us. It's not one of the bigger programs for GE Aviation, so I just want you to be aware of it because, you know, the program's being ended. Slide 23, we have a little forecast here for you. First, the top box is history. So, just for perspective, history, you all, sorry, we covered history in an earlier slide. Just to remind you, kind of broken record stuff here, that a central component for missile programs This is last year, 21, Q3, about 2 million, Q4, about 3.5 million, just to keep that in mind. Now, let's go to our forecast. We haven't given a forecast for a while. Well, we gave an ish forecast, you know, like 3-ish or 4-ish. We're back to trying to give you a forecast. We think there's still a lot of uncertainty, but we feel a little bit better, so we're providing you with a forecast. Q1, sales 13.3 or 13.8 million. That's less than Q4, as you can see. But again, in Q1, we don't have the sales of that essential proponent. And 3.6 to 4.1 million of EBITDA. So we're getting back up there. Just so you know, Q1, this is something we're not sure about. We have forecast, forecast, forecast. We do P&Ls every week and recast our forecasts. But the gross margin in Q1 should be, we're predicting, quite a bit over 35%. I'm not saying that's sustainable. If you look at Q2, it's interesting. It's saying the revenues are going up, but we're looking at adjusting the dot down a little bit. First of all, you know, sorry for this broken record stuff, but there's a million dollars of essential component sales in Q2. Remember, very low margins. but quarter to quarter, the mix changes. Since we're doing a lot more military, we're going to have quarter to quarter mix changes and that's going to affect our bottom line. With the G aviation business, there's really no mix change. It is what it is. Military, a lot of programs and one quarter will be more of this, one quarter will be more of that and that's going to up and down our EBITDA from quarter to quarter. for the year looking at $55 to $62 million revenue, $13.5 to $16.5 million EBITDA. I think fiscal 20, it's in the prior part of the presentation, was $60 million of revenue and $13 million EBITDA. So we're saying, yeah, we're kind of back there, maybe a little bit better than that. So just a couple things I want to mention. These are taken into account when we do our forecast, and we could be wrong, but like I told you, earlier, and we've covered this many times. We'll give you a forecast. We're saying this is what we think is going to happen based upon, of course, working hard. This is not a walk in the park thing or anything like that. We're working very hard doing our jobs. But we're still looking to hire people. We haven't given up. We have a desire to hire, you know, maybe eight or nine people now and maybe some additional later on. So there's real cost involved with people. entry-level people, they're expensive. Over $50,000 soaking wet per person. New plant startup, there's going to be some costs involved with new plant startup. Raw material costs are going up. Inflation is quite a concern. With the LTA with GA Aviation, those raw materials are locked in. We couldn't have done an LTA with GA Aviation if we didn't have an LTA from our suppliers, but most of the other customers, not LTAs, so we quote quite often. What we do is we unfortunately raise our prices to take into account the raw material cost increases. That's what we do. It's not good, and we know where that ends when prices keep going up and up and up. It's not a good thing. Things like utilities are going up, supplies are going up. Shipping going up. We normally have that covered as either part of our selling price or our material purchase price. And there's also, you know, I would say, I'll speak for myself, serious concerns about the economy, you know, what's going on, how it's being managed, inflation, interest rates, and things like that. And, you know, we don't really spend a lot of time thinking about it, but we can't deny we're still living in the world out there. We do what we need to do every day, but I don't think it would be proper for us to say we're immune from what goes on in the outside world. Okay, why don't we go to slide 24, updating our expansion. Our budget's now $19 million. It was $18 million last time we spoke for what happened. We started with $20.5 million, I think. We pulled it down to $18 million on the theory that, you know, business is very slow, so let's kind of Hold back a couple of things, see what happens so we can make the decisions later on. But with the ramp up and everything, it's increased to $19 million. Spending to date, about 15, I guess through the math, about 4 million to go. Completion is basically next month. Little things will be worked on for a while, but the completion is basically next month. We start the manufacturing trials for the major equipment, which are pictured below in the top bottom left in my corners. July of 2021. The qualification runs for MRAS in September of 2021 is what's planned. These two items of equipment, they're huge and it's hard to give you a perspective on how big they are because some of the stuff we don't want our competitors to see and they're able to see our presentations as well. So we kind of took a funny perspective on these This equipment, the tape line and film line. Top right, a picture of our new offices. The office is open. My office is top right of the picture. And then you see at the bottom middle, it's a nice picture because you can see that on the left is a new facility and the right is the existing facility except with the new offices. And kind of toward the back between the two of them, that's the passageway. Off to the right of the existing facility, there's also the warehouse, but that's not captured in this picture. So that is the story of their expansion. I want to try to wrap it up here. Slide 25. Park's reflections on its 2021 fiscal year. Was it our finest hour? Well, let's talk about that. Park had its share of tragedy and heartbreak during the year, the kind of heartbreak that does not go away. But at Park, we don't quit. We don't give up. We don't back down. That's just not what we do. It's not our nature. We keep going. We've pushed forward with our major expansion when some others flashed their capital spending. We stayed true to our principles when maybe some others didn't. We did not sell out when maybe some others did. We did not lay off anybody when so many others did by the thousands and thousands. Parks people are precious. The park family stuck together. and saw through the darkest days together. At Park, we're a family. We have each other's backs. Slide 26, Park is a strange and unusual company filled with wonderful and special people. We're very fortunate when it comes to our people. We're not like the others. At Park, we play for keeps. We're not fooling around. We're looking to make an impact here. Park's 2021 fiscal year may have been Park's best year ever. You know, I've been with the company since 1988. I can't speak to before then. Maybe in the 50s, the early days in Woodside, Queens, maybe there were some great years then right at the beginning, way before my time. But I can tell you without hesitation that, in my opinion, the 2021 fiscal year was the park's best year since 1988 when I joined the company. And I tell you that without hesitation. I can't think of another year where I compare, that we compare. I think our best year ever. That's my opinion anyway. Yes, our finest hour. So we will save the last for a picture of one of our crews, which we love to do. The top row, that's Guadalupe and Juan. The bottom row, Jose, who's the lead, Joshua, and Sarah Finn. Now, what's interesting is it says Park, Second Shift, Solution Trader, and Film Line Crew. Wait a minute. Those are two different things. Well, what's going on here? This is the Customer Flexibility Program. Each one of these five guys has been approved to operate both lines, and that's a big deal. You don't put somebody in one of these lines with, you know, okay, here you go, just hire them. No, it doesn't work that way. So you see how it works with Customer Flexibility Program. These guys are able to move back and forth between those two major lines, and that was so important to us during the downturn and so important to us now when we're trying to ramp up. So that's how it works. So I think we're at the end of the presentation. Slide 27 is our thank you slide operator, so we'll have to take questions to the extent that we are any.

As a reminder, to ask a question, you'll 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. And once again, that is star 1 if you would like to ask a question. One moment for questions. And our first question comes from Brad Hathaway from Fairview. Your line is now open.

Thank you very much. And congrats, Brian, on getting through such a tough year. Really, really impressive. I appreciate your willingness to give us a 2022 forecast and all the commentary about kind of the ramp up that you're seeing. Given the things seem to be getting better and you kind of previously commented on kind of prior forecasts just being shifted a little to the right, I was curious if you had any thoughts on kind of those prior forecasts. and also when you will feel comfortable perhaps giving us a long-term forecast again.

So as we just commented, we're forecasting for the current fiscal year. It looks kind of like the 2020 fiscal year before the calamity occurred for the world and the industry. Our forecast may be a little bit better, particularly EBITDA kind of right in that range for top line. I don't know how to answer that question except maybe one way to look at it is that's kind of our restarting point. Obviously, before we go out with a new long-term forecast, we can't just kind of take our forecast and kind of roll it out or push it back to the right by two years. That really wouldn't be right. We have to take into account everything we know now and all the updates and all the new developments, and there are significant new developments. I think Most of which are positive, actually. When we'll be ready for that, I don't know. I don't really feel like it'll be next quarter. But let me just say I would hope that before the end of the year, this current year, we'll be able to roll out the forecast for more than just one year. You know, even the one-year forecast, as I said, there are uncertainties that we're still dealing with. It's not like kind of a stable world right now. We felt good enough that we're able to provide something to you. I don't know how to answer that second question. I would just say, again, I hope that by the end of the year, because what's happening is we feel like we're getting a lot more useful information. And what we're doing is we're really listening to what Airbus says, what Bombardier says, what Comac says, what Boeing says for commercial I'm talking about. and kind of not kind of tuning out all the analysts and everything and the commentators because they've been, you know, really have not been helpful and have been kind of wrong. But it's really great, like, for the A320 to be on that program because, you know, whatever everybody else says, how about the Airbus CEO? It's so helpful to be able to tie, you know, what we're doing to what Airbus says. And we can do it. We can do it with a pretty good precision once we know what they're talking about. So... I don't know, sorry to not give you a better answer, but I think that's all I can think of right now.

No, but anyway, it's good to see everything after a tough year moving kind of, all the programs seem to be moving pretty positively, so that's great. In terms of M&A, is there anything you can kind of update on what you've seen there?

Yeah, so I think last quarter we talked a little bit and, you know, we thought that last year we'd be able to get some distressed sales that didn't materialize. Our advisors told us that's because the Fed, you know, made it possible for people to hang on. We're pretty active in two areas. We're actually putting a, you know, preliminary bid in one company, I think, later in this week. We're still looking. We're trying to find niche things. We're trying to find things that everybody and their brother and all the Financial buyers are not piling on because it just drives the price up so much. But the other thing is that we've identified a certain product area that's very closely related to composite structures and composite materials. and we're doing some pretty good research I would say in that area and we've actually reached out to several companies that deal with operations in that area. I guess at this point we won't specify but it's something that would be used by a company producing composite structures in addition to the composite materials so we think it's a really good tie-in and some of our customers have actually helped us in that regard as well. So we're optimistic, we're talking about, optimistic, that's probably not where I would say it these days, M&A is more difficult. But we feel better about that than just going to the auctions, let me put it that way. These are companies, some are private, some are divisions of large companies. They're probably not going to be for sale, so we're trying to initiate the discussions and we'll see how those go. And then the other area I just want to mention is there are projects we work on, we know about the joint venture discussion in Asia, but there are other projects that we work on with some of our large customers wouldn't be really M&A, but would involve a significant investment of capital. So I guess I would talk about those maybe three things. We certainly haven't given up or let down all, even though we have this concern about these companies being bid up right now with, I guess, M&A inflation. I don't know. Maybe it won't last. Maybe that will reverse. We'll see. So, obviously, we'll let you know as soon as we have something to report, and we don't have anything to report right now. But I guess the message I would send is that we're still working on it, and we haven't given up or just decided to take a year off or anything like that or wait for the valuations to come back down.

Understood. In your mind, I mean, obviously, if things continue to improve, one would think that the M&A environment might become harder in the future unless you can find one of these deals that are kind of pushed to you or something really niche. Is there a point at which you decide that the cash on the balance sheet is not going to be usable for some kind of investment and you consider other alternatives?

Sure, there's a point. I don't know what that point is. But yeah, sure, that's a point. So that's kind of an open question for us. I understand exactly what you're getting, at least I think I do. I don't have, I can't give you a date, you know, but it's something in the back of our minds, absolutely.

Yeah, I mean, obviously my preference would be that you find the next one both on acquisitions, if you can do that, that would be fantastic. Well, thank you very much.

Yeah, thank you. And just, you know, we feel the same way about it, but thanks for that comment. Go ahead, sorry.

Thank you very much. I appreciate all your efforts to generate the results you did in a pandemic year like last year. It's pretty incredible. So thank you very much for the effort.

Thank you for your comments.

Thank you. And again, ladies and gentlemen, if you have a question, that is star one. Again, if you'd like to ask a question, that is star one. And our next question comes from Leonard Cooper, private investor. Your line is now open.

Hi, Brian. Sounds like you're busy bees.

Yeah. Hey, Len. How you doing? I haven't heard from you in a little while.

We're doing okay. We're hanging in. Okay, good. I just noticed a story saying that we're going to go... The U.S. is going to have a wind turbine farm. I think it will be the first authorized by the government. Are we involved in that or can we be involved in that?

We're not. We don't want to be. Wind turbines are not a market area for us. It's actually, if you look at companies that are involved, it's not really a very happy story. Those are low margin programs. We're aerospace and that's pretty much it. We decided to go into aerospace. We realized right from the start that we didn't know what tech we were doing. You don't know what you don't know. Aerospace is such a huge and complex field that we felt, small company, we don't have the bandwidth to get involved in other areas, boats or wind turbines or skateboards or whatever. Composites used obviously a lot of things. We're an aerospace company. That's it. No wind turbines for us.

Okay. It's just there's a lot of aerodynamics in those blades.

Yeah, you're right. I think they're getting more sophisticated. I'm not an expert in it, but I think they're getting more sophisticated from an aerodynamic perspective as well.

Okay. Thank you very much. That was a very interesting conversation. All the best.

Okay. Well, thanks for checking in, Len. Nice to hear from you. So hopefully we'll see you soon.

Thank you. And I am showing no further questions. I would now like to turn the call back to Brian Shore for closing remarks.

Okay. Thanks, operator. Thanks, everybody, for listening. I'm sorry. I said 45 minutes. I think we went past 45 minutes. I tried to rush through it, but, you know, there are always a lot of things you want to cover to help with perspective. So thanks again for listening in. Have a great day. and feel free to call us. Matt and I are available anytime you want to talk. We'll be talking to you fairly soon because our first quarter ends in just a couple of weeks. I think probably early July we'll be doing our first quarter announcement. Take care. Have a great day. Goodbye now.

This concludes today's conference call. Thank you for participating. You may now disconnect.