Park Aerospace Corp.

Good afternoon. My name is Paul, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp fourth quarter fiscal year 24 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 1 on your telephone keypad. If you'd like to withdraw your question, please press star 2. At this time, I would like to turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, Operator. Welcome all to our Fiscal 24 Q4 Investor Conference Call. I have with me Matt Faribault, Senior Vice President and CFO. You probably noticed in a news release that we announced Matt is retiring. The original plan was the end of this month, but Matt has agreed to stay with us through I guess it would be sometime like mid-July through our Q1 10Q filing. So thank you for doing that, Matt. I think the earnings release across the wires may be about 4-15. You want to take a look at that because in the release itself, it gives you instructions as to how to access the presentation that we're just about to go through. After the presentation, Matt and I will be happy to answer any questions you have. You look at the bottom of the cover page of the presentation, notes that we're celebrating our 70th anniversary. Park was founded on March 31, 1954, and that was four years ago. Interesting, somebody recently asked me if I founded a company, and I'm thinking, boy, I must look really old. No, I didn't actually found the company. I was two years old at the time. So let's go on to slide two. If you have any questions, we're already looking at disclaimer language. I should tell you, I forgot to mention this to you. It may be obvious during the presentation. I say the flu, so the show must go on. We'll get through it. I think a couple years ago, I actually had COVID during one of these investor presentations. I don't get sick very much, but it seems like when I get sick, it's always during an investor presentation. So I was just thinking I hope there's no psychologists listening in that might want to make a connection. Anyway, on forward-looking disclaimer, if you have any questions about the forward-looking disclaimer, let us know. Slide three, so table of contents, we have our presentation and we have the supplementary financial information. We're not going to go through it, the supplementary financial information, but if you have any questions about it, just let us know. So The original, well, it wasn't a factory. It was actually a garage. It was in Woodside, Queens. And, I mean, I'm not using poetic license. It was a garage, really a garage. And, actually, it's still a garage. We did a Google map search, and that building is still there. It's still a garage. I mean, like for fixing cars and that kind of thing. Maybe 2,000 square feet. A couple years later, I think, I don't know exactly when, the company moved to a real factory in Flushing, Queens, New York. which I think was maybe 8,000 or 10,000 square feet. This picture is in that factory. The guy leaning forward, going to the left, that's Jerry Shore, my father. The guy on the right, that's Stone Chiesa. He's my father's partner, starting a park. And as I said, sometimes he was like a second father to me. These are power presses. And the original business was nameplates and deck trim. So these presses would stamp out the sheets of – of Naples. And my father and Tony, they used to work the line. They worked the machines. They would repair the machines. They maintained the machines. They did engineering enhancements on the machines. So I think when, I don't know, look at a dictionary, hands-on, you see pictures of these guys. Anyway, we've had a long history, as you know. We changed our name to Park Electric Chemical in 1960. And a lot of people thought that related to being an electronics business. That's not true. We didn't go into electronics until 61. Electrochemical refers to the anodizing process that was used, just still used, I guess, to make nameplates and decorative frames. We ended up selling that business, the original business, at A4. It was the general manager at the time, named Bill Hand. But this goes way back, probably this picture, way back to the... mid-50s, I guess we call this, our founder's photo. I guess, you know, we did a nice little meeting with our employees. We went through a presentation and went through a lot of aspects of our history. We don't have time to go through that now, but I thought I'd just touch on a couple things. For the sake of time, we'll keep moving. Let's go into slide four, talk about our Q4 numbers. So, Sales, $16,333,000, not bad. But then you look at gross margin, 27.3%. You think, well, that doesn't make a lot of sense. That number's low, especially considering that the sales were reasonable. And then the EBITDA margin also is low. We don't like gross margins. They're generally under 30 and EBITDA margins under 20. What do we say about Q4 during our Q3 conference call? We gave you a sales estimate of $15 million to $16 million, so we actually exceeded that number a little bit in our sales. But EBITDA estimate was $3.2 to $4 million, and we just came at the bottom of the range. So, you know, obvious question is, well, why didn't the – what does the EBITDA look better, considering that the sales were actually above the top of the range? You know, you'd think that the EBITDA would be better. So let's talk about that. First of all, we always talk about missed shipments, $565,000. always the main cause of misshipments. Without turning over to the next slide, can you all guess? You probably can. But let's go to the next slide so we don't leave anything to doubt. International freight disruptions caused by the wars in the Middle East and Europe. That number is not a good number, but it's a struggle with these international freight right now. We don't like those numbers, but they are what they are. Let's put it that way. I didn't think considerations related to our P-4 So we're going to go through a few things here. I just want to explain. These are not excuses. We don't like that. We don't make excuses. There are explanations as to what happened. You can choose to be interested in them or not, but some of you might be interested. So this first one is important. We never talk about production because normally our production levels match our sales, you know, pretty closely. But Q4 sales, there were 16.3 million, but our production, we call it sales value of production, the sales value of our production was only 15.2 million, like a million dollars under our sales. And, you know, that's actually a big deal for P&L. So, and not surprisingly, where that sales came from, came from selling on inventory about a million dollars. by a million dollars. That had a negative impact at $275,000 in our gross profit and about $250,000 in EBITDA. Why is that? Because look at it this way. If we actually produce that product rather than selling it from inventory, we get the additional absorption of labor and overhead that would go into creating the inventory. So it's significant. This was not our plan. We didn't plan to do this. We just came up short in terms of our production numbers. We plan to produce at the level of our sales, but we didn't get there. And there are a lot of reasons for it, not excuses again, but we have less experienced people. They're gaining experience. Leads, I'll just give you one little example of what we're talking about. An experienced lead will know what's acceptable. Let's say in a treater line or film line or tape line, which is basically our business. It's a continuous operation. So Really important to keep those things running. That's how it works. And that experienced lead will know what's acceptable and what's not. So they'll make the decision, no, we need to stop. We need to get going. A less experienced lead won't know, so they'll stop the line when they go find somebody, maybe even Corey, you know, come take a look at this and get a, you know, ruling as to whether we run or stop. Certainly when I run it, the product's not good. It's just, you know, just running scrap. And that's, you know, a bad idea. But that's, you know, an example as to why. We were struggling in our fourth quarter to get to production where we wanted to be. The good news is that in Q1, the production levels were quite good until the storm hit, which we'll talk about later on. Then moving on, $474,000 of C2P fabric sales. We talked about that many times, but that's a product where we just buy it, we sell it to our customer at a small markup. So the margin that sales are there but the margins are going to be very light. Unplanned property tax, $212,000. The property tax goes in the course of goods sold. I don't know if you know where that is. That's not in the tax line. That's in the course of goods sold. That affects our gross profit or EBITDA, of course. And we weren't planning on that. We had a little bit of a, I don't know, let's call it disagreement with the state of Kansas, and we ended up deciding to. accrue for the amount and ultimately pay for it as well. Q4 was a 14-week quarter, which means that there's an extra week of fixed costs. The sales mix in Q4 was a little less favorable. Let's go on to slide six. Let's talk about the year-over-year results, the annual results comparison, which probably is more meaningful than the quarter-to-quarter comparisons. Fiscal year 24, $56 million of sales. 29.5% EBITDA, sorry, gross margin. That's not really very wonderful. And 19.6% EBITDA margin. This, though, is a very different discussion than Q4 where there are certain incidents, certain instances which we just reviewed which had impact on our Q4 margins. The longer-term picture at 24 is more about what we're doing intentionally to ramp up our business for what we call the juggernaut. So let's talk about that. Let's go on to slide seven. What is the story behind our year-over-year margins? As I said, probably a more meaningful question than the same question related to quarter-over-quarter. Quarter-over-quarter is always going to be items in each quarter that affect the numbers which make the quarter-over-quarter comparison less meaningful. Year-over-year, those things kind of even out, so the year-over-year comparisons become more meaningful. So ramping up to the juggernaut in slide 32, we talk about the juggernaut, we talk about that almost every quarter, going for the long term. At Park, we don't run our business for the quarter, although you may be shocked by how dedicated Park's people are to delivering outstanding results for you every quarter. I just want you to be aware of that. But let's face it, if we ran our business for the quarter, it never would have gone into aerospace to begin with. That was a decision based on very long-term thinking. not one year, not five years, not even 10 years. So that's just an example of how Park goes for the long term. And if we ran our business for the quarter, we wouldn't have gone ahead with our $20 million factory expansion either. Let's talk about that a little bit further on top of slide eight, I think. Yeah, if you consider the annual sales history, it's obvious we don't need the expansion to support our current business levels. Let's go back to the Slide six, look at the sales in 24. $56 million, look at the sales in 20, $60 million. We certainly didn't have the expansion in 20, so we certainly didn't need the expansion to get to $56 million of sales. We did $60 million of sales in 20. You see what I'm saying? With all sector costs, it isn't needed to support the business levels in 26. The extra cost is because we see what's coming, and we don't want to get caught behind the power curve. Going back to slide eight, we clearly needed the juggernaut, the plant, the new plant. Also, we're staffing up our new factory expansion to prepare for what is coming, running a lot less efficiently while we staff up and ramp up our new factory. Now, the good news is our new factory lines are ultimately expected to run more productively, meaning faster and efficiently than the lines in our existing factory. It makes sense, you know, the original line's Designed back in whatever it is, 2007, these lines are, you know, more. We've used all learning over the last 15 years to design these new lines much more efficient, much more productive. And that will have a really nice impact on the bottom line as we ramp up through the factory. We're also carrying additional $1.3 million per year depreciation costs related to expansions. Obviously, those costs don't affect EBITDA, but guess what? They don't impact EBITDA, but they do impact gross margins. And the gross margins do include depreciation. And that's approximately 2.3% of the gross margins based upon the fiscal 24 sales, 2.3%. So let's see, how do we work that? If we go back to slide six again, 29.5 was the gross margin. We were saying we could just basically add 2.3% of that if we didn't have the new factory, just the depreciation alone. And then we're carrying other additional overhead costs related to the expansion, which is obvious. So utilities, insurance, you name it. And those things both affect EBITDA and gross margins. all related to the expansion. Let's go on to slide nine. Ramping up our people costs for the juggernaut as well. It's not just about equipment and factories. We've got people. We need people. Our current people count as 126. Our hourly people count costs, rather, are already up by approximately $800,000 per year compared to last time this year. That's not going away. That's not a temporary thing. That includes the additional people and some wage inflation as well. And we just approved another five people to staff the manufacturing lines in the new factory. And that's just for now. That's not the end game. We need to hire a lot of people for the juggernaut. We increased our authorized people count for now from 133 to 138. As we ramp up our people costs and staff to prepare for the juggernaut, our productivity, we measure that. Sales value of production, that's production divided by hours. Hourly hours work. That means all hourlies, so indirect, indirect. That will temporarily slip. That's just the way it is, but ultimately will reverse very much the positive as a ramp-up production. The bottom line, though, is we want to be ready for the coming juggernaut, which we do. All these things are necessary. So this is, like I said, different than the analysis regarding Q4 where there's certain special items that affect the Q4 analysis. When you look at the fiscal year numbers, it's more part of our plan, what we plan to do, what we intended to do. Let's go on to slide 10, parts balance sheet, cash and cash dividend history. We have zero long-term debt. We reported $77.2 million in cash and marketable securities at the end of the fiscal year Q4, fiscal year 24 Q4. But don't forget, there's $9.3 million in remaining transition tax installment payments payable through June 25. And Matt just told me that $4.2 million of that is paid next month. So when we get to our Q1 balance sheet, you'll see the impact on the cash. So there's two more payments, one June of this year, and the remaining payment is June of 25. So I think you'd want to consider that. Our cash dividends, Parker's paid 39 consecutive years uninterrupted regular quarterly cash dividends without ever skipping a dividend or reducing the dividend amount. We're going for 40 years here. Parker's paid $594 million or $28.97 per share in cash dividends since the beginning of fiscal year 2005. But $594 million for a little country like Park, that's a hell of a lot of money. I don't know. It's probably a lot of money for Microsoft. I don't know about Microsoft. But that's a hell of a lot of money for a small country like Park, I would say. Slide 11, we always tell you about our top five customers in alphabetical order. AE Aerospace, that relates to the Lockheed Martin Patriot. I'll tie the names to the phone. Patriot Pac-3 missile, which we talk about often. Aerospheres, that relates to the Gulfstream G-80. So Aerospheres is a rep distributor for Israeli aircraft, a big Israeli company. And they produce some of the Gulfstream airplanes under contract for Gulfstream, like the 280. Kratos, we'll get back to them. I think that's on the next page. Middle River, so we could have done lots of examples, but we chose a Cormac 919. And the Norden Group, that's the Boeing 737-700. What we're talking about here is the Weathermaster radar, which Norden produces with our materials. And we go on to slide 12. This is a big thank you for Kratos. They're one of the top five. But Kratos gave us this gift, you know, and I never received a gift like this. I mean, that's an aircraft. That's an aircraft that saw operations. They gave this to us. to put in our, display in our factory. It's a beautiful, beautiful aircraft, unmanned aircraft. I mean, I'm just overwhelmed. I don't know what to say. Even now I don't know what to say. So we took a little picture and, you know, we did to thank Kratos, but now we're doing it publicly. So let's go on to slide. This is an airplane aircraft used by the Air Force. So let's go on to slide 13. Our pie charts. Interesting 24, In 21, it was the pandemic year, so you could see commercial aircraft was slammed, and that's why it's so low. The rest is about, the rest of the year is fairly consistent. I'm actually surprised that commercial aircraft held up in 24 because, you know, in the second and third quarter, we had those big burndowns for MRS, which you talked about. But I guess with other commercial aircraft sales, which allowed us to hold our own there. Let's go on to slide 14. This is Elena's project every quarter, just to come up with some interesting park-less niche military and military aerospace programs, some interesting military programs. Our estimated 24 military revenues by market segment. We consider radios, rocket nozzles, and drones to be niche markets for us. Well, even aircraft structure for us is a niche market. It might not be for others, but for us, it's a niche market. So what do we got here? Adrenos, next-generation short-range interceptor. This is a replacement for the Stinger missile. You've probably heard of Stinger missile. The Boeing E-18 Growler. We supply radomaterials into that program. Northrop Grumman, LGM-35 Sentinel. They call it GBSD, ground-based strategic deterrent. It's an interesting term. It used to be called an ICBM. It's a replacement for the Minuteman III. So we supply materials and parts into this program. So this is, well, you know what it's for. It's for nuclear warheads. The Donald Douglas F-15 Eagle. and we supply radio materials into that program. And the Boeing P-8 Poseidon aircraft, that's a replacement of the Orion structural materials into that program. Let's keep going. Let's talk a little bit about supply chain challenges. Well, in the past, I keep hearing that. I've heard so many times, oh, yeah, supply chain issues are behind us or about to be behind us. Whenever we hear that they're behind us, we find that they are not. I can't tell you how many times I read reports from other public companies' reports highlighting supply chain issues as the main reason why they're not making their numbers. What are supply chain issues really all about, though, anyway? What is causing them? Why won't they go away? Are supply chain issues fundamentally workforce issues? Have workforce issues been resolved? Isn't that what it's about? If you don't have the workforce, you can have all the machines, all the equipment, and you're just not going to be able to produce to the requirements you need to produce to if you don't have the people to do it. We hear unemployment is not that bad, so what's going on here? Well, one of the things to consider, it's widely reported that 7.2 million able-bodied men, just men between the ages of 25 and 54, have primarily left the workforce and are not even looking for work. I guess a lot of them left during the pandemic. Even though there are help wanted signs everywhere, why is this happening? I don't know if you have an opinion about that. I heard, you know, this guy Charles Payne, he's a, what do you call it, financial news guy. He said he knows a guy 60 years old, never worked. A lot of people apparently never worked their whole life. So obviously the government's enabling that. I wonder why that's happening. But these lives, I mean, this is not funny. These lives are being destroyed. After a couple of years, people sitting on the couch eating potato chips, watching Oprah, whatever they do for two years. They try to come back to work. They can't. They've lost their edge. It's a real tragedy. And that's not probably what you want to hear about with our investor presentation, but every now and then I'll give you my thoughts about something like that. Let's go on to slide 16. What does this mean to park the supply chain issues? So we found ways to manage supply chain challenges with better planning, strategically carrying more inventory, providing suppliers with longer lead times. But the issues continue to be a major challenge for us, and they're very consuming of our time and energy. So, yeah, we're managing it, but it's with a lot of effort. But what do the ongoing supply chain challenges mean for the aerospace industry generally? Clark's able to manage it with a lot of effort. But the aerospace industry continues to struggle with supply chain issues. These challenges are impacting program ramp-ups and new program introductions. The man is there, but the industry is just falling short, meaning the man. Where's this going? Is there a solution in sight? I don't know. You know what it is? If so, what is it? I don't know. Maybe you have some ideas. I'm serious. I don't know. I don't know what the solution is. Go into slide 17. We won't cover this in great detail. This is a slide we show you every quarter. Firm pricing GE Aviation Jet Engine Programs, firm pricing LTA, requirements contract from 19 to 29 with Middle River Air Structure Systems, MRAS, which is a sub of SGA Engineering Aerospace. So we always have to explain this, and I'm going to get it, because we have all these GE, as a matter of fact, the title of this slide, GE Aviation Jet Engine Programs, All these programs listed below are GE Aviation programs. So what's the connection? Well, the connection is that when we got on these programs, Middle River was a sub of GE Aviation. GE sold, I guess they're called GE Aerospace now, sorry. GE sold MRAS to SGA Engineering, which is a large Singapore aerospace company, I don't know, about five years ago. But MRAS in part continued to support those programs just as when it was established. when it was owned by GE Aviation. I won't go into these programs we talk about all the time, so I'll just point out the nice picture here. 747, the program was canceled, so some spares. I really love this picture because, you know, you can see how big these missiles are compared to the sky standing back here. And those missiles are all park material. Let's go on to slide 18. Yeah, we know what to cover. The first check item, we cover that every quarter. Second check item, fan case containment wrap or the GE9X, which produced our AFP composite materials. We talk about that, I think, almost every quarter now as well. But here's some new, relatively new stuff. MRES qualification of three park proprietary film adhesive formulation product forms in progress. And then the next item, MRAS Park LTA, that's the LTA we referred to in the prior slide, through 29, was recently amended to include three-part film adhesive product forms for composite bond and metal bond. That's a really great deal because, you know, we developed this film adhesive product line under a joint development agreement with GE and MRAS. But it's really wonderful because, you know, when we developed a product, and then immediately goes into qualification on really important programs. You know, the dilemma is you develop a new product, and your R&D level is a great product, so what? I mean, it's like three poles in a forest. Nobody hears it. You've got to get in a program, so that could take 20 years. Like, not 20 years, 20 seconds between the time that our product is finished and it goes into qualification. That's a very special thing that we have with that customer. Life of program agreement required by MRS and SDE. agreement is being actively worked on. We've talked about this before. What is it worth to park? I don't know what the whole point. Let's go to slide 19. Let's talk about some of the G aviation jet engine programs. We'll start with the big Kahuna, A320neo. Airbus has this huge backlog of A320 aircraft, 7,197. I don't know if you know that. That's such a huge number. And here's the problem for Airbus. Let's say they're currently producing at a rate of maybe 50 a month. Now, that's 600 a year, right? Well, how many years of backlog is that? Like 12 years? So if you want to order a new one, you've got to wait 12 years to get it. That doesn't help. They want to sell a lot more of these, so they really need to bring the lead times down. So that's why they're pushing hard to get to 75 per month, which is, what, 900 per year? Right. So do the math. Divide 75. 171 by 900. That's better. It's not like tomorrow, but it's a lot better. That's their motivation. And my opinion, you know, you can listen to other people. They have different opinions. I think Airbus is very determined to get to that 75 per month. And during their annual shareholder meeting on April 25th, sorry, their April 10th and their first quarter investor call on April 25th, they again reaffirmed their plan to achieve a rate of 75 H-320 family aircraft deliveries per month in 26. Maybe at the end of 26, I don't know, but in 26. How are they doing so far with that ramp-up? You know, this is notwithstanding and over and above all the restrictions and limitations of what? Supply chain. Supply chain. Let's go into slide 20. They're doing pretty well, actually, I think, pretty well. Airbus delivered the following number of H-320 new family aircraft each year the following calendar years, you can see the numbers ramping up. They get to 19, they peak at 561, then boom, they're hit by the pandemic and they slip back. Look at 23. So 571 compared to 561. So 23 actually exceeded the first time pre-pandemic production levels. So in 23, for the first time since the beginning of the pandemic, Airbus was able to return to A320 production and delivery rates to return to pre-pandemic rates. That's a key milestone and a very good accomplishment for Airbus. Congratulations to them because, you know, it's over and above all the supply chain issues you hear about all the time, or notwithstanding them. April 24, year-to-date, Airbus delivered 167 airplanes in those four months, but it also delivered 51 airplanes annually. in both March and April of 24. So don't get confused by the beginning of the year. Always slow and kind of ramp up at the end of the year. This doesn't come from Airbus. If you want my opinion, it's just my opinion. I can't prove it. It's just my opinion. My guess is they'll probably get 55 this year average for the year. That's just my guess. Airbus is not saying what they're going to do this year. What they're saying is the end of, or 25, they're saying by the end of 26, they'll be at a rate of 75. Let's go to 21 and slide 21. Yeah, we already covered this. Based upon this huge backlog, Airbus would already be producing N320neo aircraft at the rate of 75 per month, if not for supply chain constraints and limitations. Again, what was the story about supply chain problems behind us? I don't think so. What about Boeing, how Boeing struggles and challenges with the max impact A320 NEO family aircraft prospects and also the Simulai on market share? I think my opinion is it depends on whether Airbus is willing to try to move that number up from 75 to higher. There's a lot of reporting about it. They're thinking about it, but they've not made any announcement. So what about the engines, though, for the A320 aircraft? That's an important question for Park. By way of review, A320neo offers two approved engine options, namely the CFM LEAP 1A engine, which is the program PARC is on, and the PRAT engine, PRAT PW 1100G engine, which is PARC is not in that program. So, yeah, we just covered the second bullet item. The third bullet item, according to the May 24 edition of Aeron Engine News, that's our buyable monthly edition, CFM LEAP 1A's market share for engine orders for the 20 NEO family of aircraft is 63.1% as of March 24. Oh, sorry, slide 22. A delivery rate of 75 H320 NEOs per month is 63.1%. Market share translates into 1,136 LEAP engines per year. What's that worth to park? We'll cover that when we get to slide 32. There are currently 8,132 firm LEAF 1A engine orders. That's a lot of engines. Were those firm orders worth to park? I don't know. You might refer to slide 32, but probably about a quarter billion dollars, I would think. That's not precise because Slide 32 assumes pricing for 25 to 29. So note that pricing doesn't go into effect for nine months. Also assumes Phil Mahesa is on the screening program. Not on it yet. We're in qualifying. But the other thing is that our pricing after 29 is clearly going to be higher. That's expected by Emirates and Park. So we haven't taken that into account. And some of these engines will be delivered after 29. And we don't have a contract after 29, so I guess you'd say, well, maybe it's nothing after 29. My opinion is that highly, highly, highly, highly likely that we'll be supplying this program for a long time after 29 and all the other MRES programs. One of those firm was with the park. We just talked about that. Sorry. There are widely reported serious durability issues with the Pratt. PW1100G engine. We talked about this before. So will these issues affect market share between the Pratt and Leap engine? Interesting question. We don't know. Maybe the answer is similar to the Boeing question regarding Airbus A320. Generally, is Leap willing to produce, or CFM rather, willing to try to produce more Leap engines? And I don't know the answer to that question. So meanwhile, CFM is already delivering new LEAP 1A engines with its new reverse bleed air system design to further improve durability. So you see the dichotomy thing here. It's like Pratt's having pretty serious durability issues and CFM is moving forward improving durability. Let's go on to slide 23. We got the H320XLR variant of H320 family. We covered this. We covered every quarter. In fact, it enters service to enter 24. Boeing's not planning a response. Airbus has 550 orders for the airplane. Potentially important program for PARC. Let's focus on the 919 a little bit more, though. 919, this is a Sly 23 with CFM 1C engines. 919, that's the only engine for the 919. It's not like the A320 where there's two engines that are approved. COMAC plans to achieve a production rate of 150 919 aircraft within five years. If you look at our juggernaut slide, we're assuming less than that. COMAC has reported to have 1,500 orders. It's really hard to nail that down, but it's one of the reports I saw. China Southern just ordered another 100 airplanes. Going to slide 24, COMAC just delivered its sixth unit. COMAC is reportedly expanding its 919 production lines. This is important stuff. Now, look at this. Recently reported that China's CAAC, that's like the China FAA, is aiming for 2025 EASA, that's the European Certification Agency, for the 919 aircraft. That's a really, really big deal because the thought was this was going to be China-only airplane. It's clear that China and COMAC, that's not what they're thinking about at all. They want to take on Boeing and Airbus for a single aisle. This could be a big program, important program, important program for PARC. And like I said, they're expanding production lines. So these things, to me, mean something. The last item is the ARJ, COMEC ARJ-21 regional jet. We don't spend a lot of time on that. We'll accept a $35 million. Aircraft reportedly delivered in 22 and 23. We'll get back to that later. And the rest of the program is going well, a good program for PARC. And continuing in slide 25, 777X aircraft, the G and 9X engines, we've covered this for many quarters now, expecting certification in 25. Some people are skeptical about that, but We'll see. I'm talking about the airplane. We expect about $1.7 million from this program in this calendar year 24. And we'll see. There might be a little bit of a gap after we're done with the current production, just as there may be some almost a little bit of waiting for the program to start to really ramp up. This next check item, we carved that many times. And the next check item, Boeing S-481, open orders for this airplane. Next check item. And the 777X, the order is continuing to come in nicely, even though Boeing, notwithstanding Boeing's ongoing challenges. And this is also a potentially very significant program for PARC. So we're hoping for the best for this program. Flight 26. OK, what did we talk about here? This is GE Aviation Jet Engine Program Sales History and Forecast Estimates. We're going to go through the whole history. Q4 of 24 in the recent quarter, $7.6 million. I think we had estimated $7.5 million, so just about that number. The total for 24, even though we had a good Q4, it's only $21.1 million. That's because we had those burn-down quarters in Q2 and Q3. I'm talking about it for fiscal 24. So $21 million, you know, that's... Pretty low number, not a good number compared to last year, the prior year, 23 or 22.3 million. So we had forecasted 6.3 million for Q1. That's not even a great number. You know, you look at 7.6 million in Q4, but I guess it's an okay number. But it's really important that we now read this footnote here carefully. That amount is fully booked for Q1. This is the forecast. But Q1 GE aviation programs will be impacted by an unknown amount of storm damage to the company's facilities reported on May 22nd in the company news release. We'll get back to this when we talk about the forecast for the park generally. So let's keep going for now. Slide 27, burndowns, aerospace industry management, inevitable day of reckoning. So we've been through inventory burndowns. You're probably tired of hearing about them. We're certainly tired of talking about them. We have discussed at some length the very strange inventory management practices of the aerospace industry. I think I had a different term, not strange, but I decided to be a little nicer about it in one of my earlier drafts, I mean. You're probably tired of hearing about those things, too, and we certainly are. And we at the Lythro know these burndowns and strange inventory practices certainly can cause serious and even extreme distortions and disruptions to business planning and expectations. But ultimately, the distortions and disruptions are, as a matter of inevitability, temporary and transitory in nature. Why is that? Because the end program demands have to take over at some point. I mean, it's inevitable. It's just pure math. Let's go on to slide 28. Sooner or later, the inevitable day of reckoning, we call it, will come. Sooner or later, the demands of the aircraft and programs will take over and drive our business levels and activities. That has to happen. It's inevitable. And here's the thing. From what we're hearing now, I mean, really recently, that day of reckoning is coming rather soon, sooner rather than later. We heard just recently in 25, we're talking calendar years, Pretty big jump for a day-through-20 program. Pretty big jump. We've been kind of languishing with burndowns and inventory adjustments. Oh, yeah, now our inventory has been burned down. We don't have any more. I mean, the customers, the inventory they hold of our product is fairly low. They can't really burn it down anymore. But now we hear, oh, they have some finished structures inventory, or they do what their customer does. Yeah. It's a little bit exasperating. But, you know, our customers have been told to get ready for a pretty big jump in 25. And they've also been told that at 26, the end of 26, Airbus will be at that 75 airplanes per month rate. So I have a feeling that this day of reckoning is not far off. We'll see. But the good thing is that although we did not know when the day of reckoning would come, We knew it was coming. It's inevitable as far as we are concerned. It could not be stopped. It's like the locomotive that can't be stopped, the freight train. Good thing that at PARC we did not wait. Good thing that we are already ramping up for the day of reckoning, ramping up for the coming juggernaut. Let's go on to slide 29. Okay, here we go. PARC financial history and our estimates. We won't go through the history because we already kind of covered it. This is a little year 24 Q4 in totals. We already talked about those numbers. But let's talk about the forecast for Q1. This forecast was before the storm. You know, it's really a shame because Q1 was looking at a real nice quarter. Why is that? Mostly because all those kind of things that affected Q4 None of them were affecting Q1. The production levels plan to be at least at the sales level. And actually, you know, I was thinking we'd be at the top of the range for both sales in Q1. So the timing of this storm was very unfortunate because Q1 was looking like a nice quarter. But we better go ahead and slide 30 and read that big footnote. The 25 Q1 sales estimate is based on fully booked sales for Q1. The 25 Q1 EBITDA estimate is based upon those for Lubick sales. However, the Q1 sales and EBITDA will be impacted by unknown amounts of storm damage to the company's facility reported on May 22nd, 24 in a company news release. Although as reported, an unknown amount of fiscal Q1 sales will slip into Q2 as a result of storm damage. The company is not expected to lose any sales or business as a result of storm damage. Let's talk about this a little bit more. So it was a pretty big event for us, but our people did a really fantastic job of getting the factory up and running. All the hot melt lines in both the old and new factory are fully running, the tape lines, the film lines. We're about to restart the solution treaters. I'd say pretty incredible job on their part. Pretty incredible job. But the number, I'll just guess at this point a little bit, but my guess is the top line is going to be in the 13th, not 16th. So major, major impact on the quarter. We typically produce a lot at the end of the quarter, ship a lot at the end of the quarter. And we don't have any inventory, so We only could sell what we produce, and we're not able to produce based on what the factory could produce. Last week, the P&L looked pretty ugly because we hardly produced anything, but we had a full staff. Everybody got full pay last week. We had everybody come and help clean up and stuff like that. But the recovery is going really well, except it's going to be a mess for Q1. Too bad these things happen. People did a great job, in my opinion. The key thing for me is that nobody was hurt. That was the key thing for me. So let's go on to slide 31. Park Financial Outlook – sorry, Financial Outlook for Park and GE Programs and Update. We don't have to go through this in detail. We've gone through this pretty much every quarter. Just one thing. What's the timing for the outlooks? We kind of already covered this. Not sure – But the juggernaut is coming, can't be stopped. He better be ready. I think maybe pretty soon. Maybe not this year, calendar year, but I would think next year. So meaning calendar year 25. We'll see. So let's go on to slide 32. This is the juggernaut slide, and we won't go into detail because we covered this three or four times already. A couple of points I want to make. A320, NEO, we're assuming 1,080 units. And that assumes 75 airplanes per month, but also assumes a 60% market share for the LEAP engine. Remember we said it's about 63.2? I forget what the number was exactly. So what we're doing is we're bringing that to 60, and the reason we're doing that is We don't have to change this every quarter because every quarter the market share is going to change. This way we'll just use 60, which is a little bit of a lower number, 60%, but that way we don't have to change the presentation every quarter. So I don't know if that was a good decision or not, but that's what we've done. And you can see this highlighted in footnote four. One other change that was made is we upped ARJ 21 to 72. Remember I said that they delivered 35 airplanes last year? The prior, that's equivalent, obviously, to two engines. Sorry, to 70 engines, two engines per airplane. All these programs are two engine airplanes. And, well, we think we need a couple more for spares. That's probably still pretty conservative. And they're still trying to ramp up to some extent. 919, you know, remember, COMEX said they're going to be at 150 units per year per four or five years. Well, that's going to 300 engines, not 200 engines. So generally speaking, we think this is relatively conservative. The GE9X assumption, we're not going to provide how many units we're talking about, but I think it's pretty conservative, actually, in my opinion. So That's that, the juggernaut slide. Let's go on to slide 33. We'll go through this pretty quickly. We just updated the slide, financial outlook based upon the growth estimates of programs, which were sole source qualified. You can read the footnotes. We'll kind of explain the math, but we start with our base case of fiscal 24, and then the incremental program sales. I mean, we only had about $21 million in fiscal 24, so a lot of incremental GE program sales. $15 million. We decided to remove the reference to specific programs because we felt uncomfortable. We felt we're doing disclosure for customers and maybe they don't want that. So we just lumped it all in one number, $15 million. Incremental sales of $7 million. Last year, it's for non-G programs. Last year, $35 million approximately. So we're assuming that a 20% increase over the course of whatever, three or four years. We think that's a pretty conservative assumption. And the rest is math. Except the $4 million, I'm bringing it. I think the last time we did it, it was maybe $2.5 million. But this is based on $11 million EBITDA, which is such a depressed number based upon the ramp-up of our costs as we ramp up our factory and ramp up our costs to prepare for the jargon. So it gives us an approximate EBITDA estimate outlook of $35 million. And slide 34 is all the footnotes. I won't go through this. It's just math. But really, if you have any questions, let us know. Slide 35 and 36. These slides were in our Q3 presentation. I think exactly like this new major new manufacturing project initiative. The only new item is the last item on 36, manufacturing project initiatives under active review and discussion with a customer. The point we're making is that this is a pretty active project, and the customer is highly motivated, so we think there's a pretty good likelihood this will actually happen. This is a major project for PARC. as we outline in these two slides. Let's go on to slide 37. As I said, we had a nice little event to celebrate our 70th anniversary in the factory. Top left, doing a little presentation, the history about Park for employees, discussions about how Park is a special company. We've done some really incredible things over the years. And my point to them is that even if they've only been with us a week or a month, they're part of the Park family and they share in all those accomplishments, all those incredible things, just like anybody else does. Top right. So after the presentation was, I was told the presentation, a number of employees came up to me and, you know, said some very nice things. And one guy told me, I don't remember exactly how he said it, but Park's meant so much for him and his family and thanked me for that. And I'll tell you, you know, running any business is parked on unusual. A lot of stuff, crap you got to deal with. But those kind of things make it all worthwhile for me. This young man came up to me and introduced himself and said, my name is Javaris. And he said, I work at a treater operator. I've been here for one week. I said, oh, so he's the newest employee. So I said, all right, Javaris, then you and I will cut the cake. We had a nice cake we had for the event and we cut it together. And then the bottom picture is obvious. That's just a company photo of all our employees, at least the ones that are based in Kansas. Unfortunately, Mark wasn't able to be there, but everybody else who you normally see in Kansas was there. I'm actually in the back row because the tolls people were, like Corey organized the photo session. He said the tolls people needed to be in the back row. So if you can find me, let me know in the back left. And operator, that concludes our presentation. So if there are any questions, we'd be happy to answer them.

Thank you. Well, now we conduct a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions.

Thank you. Our first question is from Nick Rapostella with N Auto Management.

Please proceed with your question.

Good evening. And Brian, I'm glad, as you said, no one got hurt from the storm. And thank God it wasn't any worse. I just have kind of a big picture question. You know, given the programs you're on and the future, and the potential new opportunities. I'm just wondering, do you think Park will continue to be a debt-free company? Or at some point, you know, would you consider borrowing money? And the reason I ask this is, you know, if the stock weren't reflecting the potential possibly you could be more aggressive in repurchasing shares. And I'm not saying today, but if the stock does not reflect the bright future, stays where it is or goes lower, would you consider being more aggressive and then maybe levering up? Thank you.

Thanks, Nick, for the question. So, interesting question. Yeah, the stock price, I mean, I follow it when we follow it. I mean, it's hard to figure out why it might be going up or down. I agree with your implications that it's certainly a little echo there. Hello? Okay. It went away. Operators, there's an echo on the line at this point. I don't know why. I'll continue talking. It's very distracting. So the stock price, I don't know why it goes up or down a little bit, but I certainly agree with the implication that it doesn't reflect the value of the company. And I guess my way of thinking about that is that ultimately you'll have to. And I think ultimately, you know, as the numbers pan out, the numbers we're talking about, that the world, the market, will recognize the value of the company. Until then, I guess we'll just do the best we can to explain what we're doing, and some people will understand it. Maybe some people won't agree. I don't know. As far as going to debt, Nick, right now we don't see a need to do that. We completed our expansion. As you know, we paid for it, and that itself will lead to that very significant increase uptick in revenues, as we call the juggernaut. This other project we're talking about, I think we talked about maybe $6 to $10 million of capital, but what we didn't talk about is working capital. We're talking about capital equipment and the plant and that kind of thing. But the working capital could be a lot, like $15 million or something like that. So that gives you a little additional perspective. Would we go into debt? I'm sure we felt that it was a legitimate reason to do it. And there's some opportunity that was important enough that required us to go into debt. So, you know, generally speaking, we've not been a company that's had debt. It's not been You know, our philosophy is to have cash. We've always had cash, and we feel good about that. And, you know, you certainly feel good about it when you go into, like, these, what do you call it, black swan things like a pandemic. But we're not so philosophically opposed to debt that we wouldn't consider it if the circumstances we felt were compelling.

We go into, like, these, what do you call it, black swan things like a pandemic. But we're not.

Okay, I'm not sure. Okay, thank you.

Our next question is from Chip Rui with Rui Investments. Please proceed with your question.

Hi, thanks for taking the question. Can you talk a little bit more about the potential storm recovery aspect? You say you have extra staffing. How much of that can really be recovered potentially in your second quarter and third quarter? and both from a revenue and a profit point. I imagine some of the profits are just burned because you have to hang on to your staff, which is understandable. And then secondly, on that extra opportunity that you talk about, is there any time frame for when you expect that to be a bid or potentially awarded?

And thank you. Okay, thanks for the question. We don't expect to lose any business, and all the business that we're supposed to do, all the sales, let's put it that way, they were lost in Q1. We'll be in Q2. It won't go into Q3. The profit story is a little different. Let's say, just hypothetical, let's say we end up at $13.5 million in Q1 when we're thinking to be over $16 million. The bottom line will be a lot different than if we planned $13.5 million. It was kind of even across the quarter. Then We're running for towards $16 million, and then the last two weeks, everything goes down to zero. So there's some amount of profit which will not be recovered, even though all the sales won't. We won't lose any sales. All the sales that were lost in Q1 will be in Q2. I don't know if that answers your question, and I can't quantify that. I try to quantify the impact. well, maybe I didn't. I, if I, if I didn't, I intended to, so let me do that now. Um, we're thinking that, uh, sales wise that we're probably, you know, you know, being the 13th, um, when we were planning on 16. So we're thinking of losing over $2 million of sales in Q1. All that will be translated into Q2. The profit stuff is much more difficult for us to estimate at this point. Even though we're at the end of the quarter, it's still a bright dynamic situation. As far as that new project is concerned... It's not a matter of award. It's not like we're competing for it. I just want you to understand that. But the customer's needs are for that project to be up and running by 26. So that's kind of a time frame that you might consider. It's from their end, not from our end. That's not a lot of time, actually, because there's a lot to be done to get there.

Okay, and just following up on that, if you're not competing for it, is it business that you think you can get or that you hope to be awarded? And if they want deliveries in 26, like when would you need to start allocating capital? Later this year or early next year? And on the storm insurance, was there any insurance of any kind, either for capital or business interruption?

Yes, we have insurers. The wind damage insurance, which comes under wind damage, our deductible is quite high. And we did that intentionally because when we think of insurance, do we have cash, a good balance sheet? We think of the catastrophic loss. We don't want to bet against the banks. We set our deductibles pretty high in the theory that if we set them lower, obviously, they're premiumly much higher. And ultimately, insurance companies are going to win because they always win. Right. There's a pretty high deductible, but we still expect to have some insurance recovery, and there is business interruption insurance that's included, but we don't have amounts at this point because it's a very difficult price to quantify, you know, the loss, not only in terms of business interruption, but the repair of the facility. You know, the roof itself is intact right now, and it's secure, but it still eventually needs to be replaced. So on that question about that project, it's a customer that we're very close to, and I'm not at liberty to describe which one. They're talking to us exclusively at great length about how this would be done. Their timing is 26. That's what, from their perspective, that's what they need. I've got to be careful. It's a very confidential project, so I don't want to say too much about it because I don't want to give it away. But, yeah, I mean, it's a good question. I would think that Next year we would need to start ramping up the capital in order to meet that requirement by maybe the beginning of next year. It still may not happen, but I think there's a high likelihood it will happen because the customer is very motivated and they're not talking to anybody else about this.

Thank you. There are no further questions at this time.

I'd like to hand the floor back over to Mr. Brian Sharp.

Thank you. This is Brian again, of course. Thank you very much for listening in. Have a good afternoon. And if you have any follow-up questions, please feel free to call us. We'd be happy to try to help you with them. Have a good afternoon, and we'll talk to you soon. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.