Park Aerospace Corp.

Good morning. My name is Shamali and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp third quarter fiscal year 2026 earnings release conference call and investor presentation. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, simply press star, then the number two. Thank you. At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, Operator. Welcome, everybody. Happy New Year. This is Brian. Welcome to the Park Aerospace Corp. Fiscal Year 2026 Third Quarter Investor Conference Call. I have with me, as usual, Mark Esquival, our President and CEO, correction, COO. I gave you a promotion there, Mark, sorry. And just so a little housekeeping stuff, we announced, released our third quarter earnings release, or published our The third quarter is released right after the close. You want to get a hold of that because in the release, there's link information to access the presentation we're about to go through. The presentation is also posted on our website. So we have a lot to cover when we get started. We have our dilemma. We have a lot of new investors, a lot of veteran investors. So how much do we cover? The background stuff is always a little bit of an issue. We'll do the best we can. Also, I just want to mention that we did file an S3 registration statement with the SEC after the close as well. So we're going to get started with the presentation. We have a lot to cover. Obviously, at the end of our presentation, we'll be happy to take any questions you might have. So let's plow ahead. Slide two, forward-looking disclaimer. If you have any questions about this language, please let us know. Let's go on to slide three, table of contents, fiscal year 26, Q3 investor presentation. We're about to go through that. And then the supplementary financial information in Appendix 1. We're not going to review that or cover it, but if you have any questions about it, please let us know. As has become our practice in recent quarters, we're featuring the James Webb Space Telescope, runaway supermassive black hole, 10 million times the mass of the sun. That sounds pretty big to me, being boosted from its galaxy at 108. Sorry, 1,000 kilometers per second, which is about 2 million miles an hour. Thank you, James Webb, Space Telescope. The James Webb was produced with 18 Park proprietary Sigma struts. James Webb is now orbiting, I think it's called a brain's orbit, about a million miles from Earth. Okay, let's go on to slide four, our quarterly results. Let's just focus on Q3, where we just announced the sales, 17,333,000. Gross profit, 5,903,000. Gross margin, 34.1%. Adjusted EBITDA, 4,228,000. Adjusted EBITDA margin, 24.4%. We're not going to go over the history, but we provide it to you for perspective. the park quarters i mean what do we say about q3 about our q3 accord we just announced during our october 9 2025 q2 investor call sales estimate was 16 and a half to 17.5 million so we came in within that range that's just an ebitda estimate was 3.7 million to 4.1 million uh so we came in a little bit above that range Just want to remind you that when we provide you with these estimates, we don't do what's called guidance that I guess everybody else does, almost everybody else does. When we tell you, we give you an estimate, we are telling you, Mark and I are telling you what we think will happen. We don't provide any fudge room so we can, you know, we reduce what we think by 10% so we can come in and beat the number and be heroes. We don't get involved in that kind of stuff. So I just want to always remind you when we talk about our estimates, what they mean, what they don't mean. Okay, let's go on to slide five, quarterly results continuing this, the Q3 considerations. All right, we always have to talk about the Aryan Group Business Partner Agreement because it has an impact upon our quarters. It gets a little tedious, but I think we need to explain it. We entered into a business partner agreement with Aryan Group. They're a wonderful French company. We've known them for about 20 years. They're, I think, a JV between Safran and Airbus, a large company. That was in January of 2022, under which Arian appointed Park as its exclusive North American distributor for their Raycar of C2B fabric used to produce ablative composite materials for advanced missile programs. So this is, you know, a lot of people consider it to be the Cadillac of C2B. There's a category of fabric that's used for blade, as they call it sometimes, for missile programs. So this is why we have to talk about it, because let's just go into it. We had zero sales of the fabric in Q3. OEMs buy the fabric or stockpile the fabric because they're trying to protect their very critical missile programs. but they have to buy it from us since we're the exclusive distributor in North America. The OEMs, we buy the fabric from Arian, our partner, and then we resell it or sell it, rather, to the OEMs for a small markup, right? And we don't even deliver it to the OEMs. We store the product, the fabric, in our factory, as a favor to them, I guess. Because ultimately, they don't need it. They're going to give us the releases at some point to go ahead and take that fabric and produce the pre-print material with it. So small markup, I probably shouldn't put this print in here because it's not going to explain it. Even smaller is a percentage considering tariffs. This is because we pass through all the tariffs that are significant, but you pass through on a dollar-per-dollar basis to go into our sales line but we don't provide a markup on the tariffs, that would be kind of ridiculous. So that actually makes the markup percentage even lower, if you follow what I'm saying. So we had zero sales of fabric in Q3, and we had a little bit more than a million dollars of sales of the materials manufactured with C2B product in Q3. So when we produced the prepreg, that actually results in very good margins. So when we have significant sales of material, not too significant of fabric, that's actually a plus for our bottom line. But the opposite often happens, and we'll talk about that when we talk about our Q4 forecast. We have a lot of sales of fabric, not as much of materials that will drive down our margins. It's all good. It's all wonderful. It's ultimately everything that we, all the fabric that we sell to the OEMs, and they stockpile, we will end up producing. That's the reason we keep it in our factory. But the timing kind of distorts our quarters sometimes. That's what we have to talk about, unfortunately. Let's go on to slide six. Total mis-shipments in Q3, approximately 740,000. That number's up quite a bit. It was caused principally by international freight supply chain and customer spec and engineering issues. So what was going on here? Industry challenges are re-emerging as industry recovers and program ramps accelerate. This is actually a good thing, good news. You know, after the pandemic or when the pandemic started, it was a mess because the supply chain was so screwed up. And after a couple of years, we kind of got back to something that would be more acceptable, which is okay. But now that the industry has, is recovering and the programs are ramping quickly. Now the supply chain, the industry is actually getting a little bit behind the power curve again. That's what's going on there. So actually, it's good news. That impact of tariffs and tariff-related costs and charges, maybe Mark can help us with this. Go ahead, Mark.

Yeah, this is a very eventful update again, which is, I think, a good thing. We have minimal impact on tariffs in our Q3, just as we've had previously. I think we talked about it. We price our materials on a short-term basis, most of our business, so we're able to pass them on if we do get them. The second bullet, possible future of impacts. Again, this has been quiet again for us the last few months, or it seems to stabilize as far as what's coming our way. That doesn't mean there could be changes to that, but as far as the near term, I probably think the bullet would be pretty similar to the first one. you know, going forward in the next few quarters, but you just never know, but there's minimal impact for part at this point.

Okay, thanks, Mark. Let's go on to slide seven. Keep moving here. This is a slide that our veteran investors are familiar with. Every quarter we share with you our top five customers, and we do a little picture of what's associated with each of these companies, the top five companies alphabetically. The 737 MAX, you know, we've said in the past we don't have much content on that. That's actually... NORIAM, that's a weathermaster radon that NORIAM produces for the 737 product line. So what else do I want to talk about here? I guess maybe, oh, the Valkyrie. Yeah. So we've talked about the Valkyrie quite a bit over the last few years. This is a creative program that we're on. But the recent news is the Marine Corps just selected a Valkyrie for its Collaborative Combat Aircraft Program, Loyal Wing sometimes it's called, So that's very good news for Kratos and also for PARC. The PAC-3, that is an AA item, and the Airbus A320neo, that's obviously Middle River. Sikorsky, Sikorsky, and Nordham, we already talked about which program is associated with Nordham. Let's go into slide eight, our pie charts here. So the comment is always that if you look at fiscal 21, which is really the pandemic year, The pie chart is quite different. The other year is kind of very similar year over year. People ask if the military piece of the pie chart will grow, and it might, but commercial is growing too, so we're not sure. My expectation would be that business aircraft as a percentage would maybe shrink over time. So let's go to slide nine. Park loves niche military aerospace programs. This is a slide that we include every quarter as well. And these are not necessarily the biggest military programs, Ron. These are just things I want to share with you. As we mentioned the last couple of quarters, we feel less comfortable giving many specifics about these programs, but these are all programs at PARCC. is associated with. Let's see. The only thing that I would mention for recent news is the Standard Missile SM-6 program. The Navy just awarded Raytheon a contract to boost the SM-6 production. This is all public, so you can look it up yourself. I don't think we need to comment on any other programs here. Let's go on to slide 10. This is another slide that we've included for probably, I don't know, a dozen presentations. So a lot of you are very familiar with it, no real change to it. GE Aerospace Jet Engine programs, major program opportunity for PARC. Firm pricing LTA from 19 to 29 with Middle River Aerostructure Systems, MRAS, which is It's currently a sub of SD Engineering Aerospace, a Singapore aerospace company. But when we got all these programs, they were a sub of GE Aviation, now GE Aerospace. That's why these programs are all related to GE engines or CFM engines. We built a redundant factory for them in exchange for agreeing to give us the LTA through 29 programs. What programs are we talking about? The first, if you look at the bottom left side of the page, the first five are all H320neo aircraft family programs. They're all the same engine, LEAP 1A engine. which is a CFM engine, the 747-8, that airplane is no longer being produced, but there's still spares that were involved with the COMAC 919. COMAC is a Chinese aircraft company with Leap 1C engines. The 919 is COMAC's offering to compete, a single aisle to compete with the 737 and the A320. On the right-hand side of the page, 909, that's also a a Comac aircraft, and that's a regional jet, and that also has a GE engine, of course, the Bombardier Global 7500 Passport 20 engine. The picture here is the 747-8. As you can see, engine nacelles. We like this picture because it just gives you a perspective on the size of these nacelles, and everything you see there is made with park material, and a lot of what you don't see inside the nacelles are made with park material as well. on that 747 program. Let's go on to slide 11. So more on GE Aerospace, we're continuing. Let's skip the first item. Second item, tank case containment wrap. This is for the 777X, GE 9X engines for 777X. That's produced with our AFP material and other composite materials. And let's go on to the third item, MRES Park LTA, which we already mentioned, was amended to include three proprietary PARC film adhesive formulation product forms, and the last item, Lifer Program Agreement, which was requested by MRES and SDE. Remember, SDE is the owner of MRES now. And we've said agreement is under negotiation for a few quarters now, but this time it's on us, you know, because the MRES team wanted to get together with us in December, and we said, look, we've really got to focus on this expansion of And the expansion is for their benefit, you know. So we said, can we delay the next meeting on the LIFA program a couple of months? And they said, fine. So that one's on us. We can't blame anybody except us, the fact that this is still an open item. As we said previously, we'd love to have the LIFA program, but we're okay either way. Let's go on to slide 12, continuing with the update. This is an update on GE Aerospace GenEngine programs. So let's start with the A-20neo aircraft family. That's the big dog of all the GE Aerospace programs that we're on. As of November 25, Airbus had already delivered 4,275 A-20neo aircraft. And everybody says a huge backlog of these aircraft, 7,900 as of, I guess, September. That's a total of over – when you look at how many were delivered and what's in the backlog, a total of over 12,000 airplanes. That's huge. And look at the delivery history here at the bottom half of the slide. We won't go through the numbers. But you can kind of see what happened is that they were ramping up. As the program was growing and then hit the pandemic and, you know, kind of hit a brick wall and the ramp up was slowed down a little bit. I think they're ramping up much more aggressively now. In December of 25, they delivered 97 airplanes, which is a lot, but they plan to deliver even more. You probably read about this, but the 830neo has issues with fuselage panels and also software that was caused by solar activities, which reduced the deliveries. Those issues have been resolved, but nevertheless, they're probably held back to deliveries in 2025. Let's go on to slide 13. This is the key thing. Airbus is targeting a delivery rate of 75. Remember, we're at 50, 51, 75 per month in 2027. That's obviously, doing the math, a 50% increase over where we are now, which is a lot, considering it's a very large program. It's 50% of a lot. On October 7, 1925, the A320 aircraft family became the world's most delivered commercial jet. That was surpassing the 737. And the A320 aircraft family continues to rack up new orders. The game-changing A321XLR, we've spoken about this in the last few quarters. Maybe I won't go through each item, but if you have questions about it, please let us know. This is a pretty exciting game-changing aircraft for Airbus. And this is part of the A320neo family. I just want you to understand that. What are the approved engines for the A320neo aircraft family? There are two of them. One is the CFM LEAP-1A engine. That's the program we're on. The other one is a Pratt & Woody GTF engine, PW1100 engine. G engine, we're not involved in the PRAT program, only the CFM program. On slide 14, we supply it to the, well, we just talked about the first item, the first bullet item, okay? Second bullet item, so basically if you look at the market share of firm engine orders between the CFM Elite 1A On the Pratt engine, you know, and this is for the A320 program, of course, the LEAP, CFM LEAP engine has a 64.5% market share, you know, much more than half. So, and it has been that way for a while. The LEAP market share is much more than the Pratt market share, which is good for part because we're on the LEAP program and not the Pratt program. At that delivery rate of 75 airplanes per month, that 64.5% market share translates into a lot of engines per year, 1,161. Just so you understand, this 64.5% is based upon all orders, all backlog for both engines. We're talking about thousands and thousands and thousands of airplanes, so it's not a number that's easily distorted by numbers. Kind of a small perspective, a short timeframe perspective. Let's keep going. The Pratt engine, unfortunately, continues to struggle with serious reliability issues. I just read an article this morning that these reliability issues are expected to continue. Now, for the LEAP engine, reliability has been a selling point. Reliability is a very, very key thing for an airline. Reliability relates to how much downtime an airplane has related to maintenance. So if these airplanes are down for maintenance or inspections for these engines, that's a real bad problem because when the airplanes are underground, they're not making money. And airlines, their margins aren't that great. They cannot afford to have excess downtime. And that's why the reliability issue is a real serious problem. I don't know what's going to happen, but one might even speculate that because reliability continues to be a problem with Pratt and the CFM LEAP is doing well with reliability, that could drive the market share potentially even more to the LEAP side of the ledger. CFM has significantly ramped up production deliveries of LEAP engines, including LEAP 1A. That's really significant because we talked about Supply chain restrictions, holding back the market, holding back deliveries. There are a lot of different things, but what was mentioned most often were engines. So the fact that CFM is ramping up the LEAP engine is a good thing because that will help Airbus ramp up the A320 NEO program, which, of course, is what we want. Slide 15, what are we doing here? As of September 30th, 2025, there were 7,900 vehicles Firm LEAP 1A. See what I'm talking about. These are a lot of engine orders. Firm LEAP 1A engine orders. So, you know, we were recently told that our customer was given an indication as to how many engine, how many nacelles, basically. That's where they produce nacelles they need to plan to produce for this program. And we can't disclose that number, but it is significantly more than 7,900. significantly more. The 8 through 20 NEO aircraft family program can end up being our largest program. We'll see, but over the course of the program, it could be. I don't know everybody's different opinion about this, but I'll give you my opinion, which is probably not worth much, but my opinion is that Airbus will be making these airplanes with these engines in 2040. We'll see if I'm wrong or right. COMAC 919 is a Chinese aircraft, single aisle. We talked about that. It also has a LEAP engine, LEAP 1C. And this is the single aisle to compete against the 737 and the A420 aircraft. Comac is expected to fall short of its 2025 delivery target. Not surprising. It's a Chinese company, so sometimes they have historically had some trouble kind of getting their programs up and going. Target shortfall, they say it's caused by supply chain, whatever, you know, international production issues, international trade production issues. So I don't know. Let's just go on to the next slide. I don't think we need to be – let's go on to the next slide. We're still on to 919. COMAC is increasing manufacturing capacity to achieve production rates of 150 in 27, 200, and 29. Now, if you look at that juggernaut slide further down in the presentation, we're assuming 150. We're assuming a top set of 150. But COMAC is building capacity for 200 per year. COMAC reportedly has over 1,200 orders for the 919. Now, let's look at the 909. This is a regional jet. and again produced by COMAC with a GE engine, a different type of GE engine, of course. So according to the state-run Global Times, 175 909s have been delivered, the 909 operating routes have expanded to 12 Asian countries, which is good because originally these airplanes were thought to be, well, China-only airplanes. That's obviously not happening. I mean, COMAC doesn't want it to happen anyway. 909 aircraft now carry over 30 million passengers. That's a lot of passengers in these small airplanes. There were approximately 385 open orders. So here's a good thing to talk about, because this aircraft has been at rate for a couple years. So it took Comac a while to get to rate, but they're at rate. They got there. That's the key thing. So with the 919, maybe it'll take a little bit longer from the get to rate, but my opinion anyway is they'll get to rate, and it'll be very good for PARC. These are starting from basically zero. So let's go to slide 17. The Bombardier Global 8000 variant, the 7500 variant, it was just certified and first delivery last month. The fastest civilian aircraft since the Concorde, 8000 nautical mile range. The 777X with G9X engines. The 777X tech program has amassed a lot of hours, a lot of flights. Boeing reportedly has over 600 orders for the aircraft. The certification test program is moving into phase three of the TIA, which is important. I mean, I'm not going to know what that means. I'm not an expert anyway, but it's an important step along the way to getting the aircraft certified with FAA. Slide 18 is still in the 777X. Boeing now anticipates FAA certification entry into service and first delivery in of 777X and 27. This airplane's delayed too, so we can't all just say, well, the Chinese are sometimes late with their aircraft. The Boeing CEO has indicated that 777X aircraft and the engines are performing quite well. Mentioned increased FAA scrutiny as a key factor in their certification delay. I think what he's really getting at, I think he wants to be nice about it, is that the FAA is being more stricter because of the issues with the MAX, the 737 MAX. Why don't we go on to slide 19. Here are some numbers, GE Aerospace programs. This is why we emphasize a lot because it's a big deal for PARCC, the GE Aerospace GenEngine programs. We won't go into the sales history. You can see it here for your benefit. Q3 sales were $7.5 million. Our forecast for Q4, $3.25 million to $8.25 million. And for the year, $29 million to $29.5 million, just kind of adding down. And you can see that there's a recovery going on here in fiscal 20, almost $29 million, and it's kind of fell off a cliff during the pandemic. There's been a real struggle to get back to that level. It's only now that we're at that level this fiscal year. And my feeling and sense is that this number will move up quite aggressively over the next two or three years. Let's go on to slide 20. Okay, this is now talking about PARCC, not just GE. This is all PARCC. PARCC's Financial Performance History and Forecast Estimates. So in the top part of the page, in yellow, fiscal year 26-23, well, we already gave you those numbers. And then we have estimates, forecast estimates. Remember, we said this is not guidance. This is what Mark and I think is going to happen through Sometimes it's wrong, sometimes it's higher, sometimes it's lower, but we're telling you what we think is going to happen. Q4, $23.5 million to $24.5 million EBITDA of $4.75 to $5.25 million. Now, a lot of smart people are thinking, well, what's going on here? Q3 sales were 17.3 million. Q4 sales, a lot more. Q3 EBITDA, 4.2 million. So why isn't the forecast for Q4 EBITDA a lot more? We have a lot more sales. Well, you've got to look at the footnote. There's two asterisks. Forecasted to include approximately 7.2 million C2B fabric sales. So that's that small market, very, very light margins. And that's what's going on there. That's what you need to understand. That's why with those kind of sales, we're not seeing much higher EBITDA numbers. And then while we're at it, let's look at the total for forecast total for 26. This is just adding down, taking into account the Q4 forecast, 72.5 million to 73.5 million. And here's your EBITDA number. And again, look at the footnote, three asterisks forecast to include approximately 9.8 million of C2-bent fabric sales, mostly in Q4, it looks like. All right? Okay, let's go on to slide 21. So this is just some history on the right-hand column, the 26 forecast estimate included, the estimate we just went over with you, so we won't go over that again. I think what's interesting is look at the top line of sales starting in 17, 18, 19, 20 went up 10 million approximately per year from 17 to 20, and then it fell off a cliff. Because there you have the pandemic and the supply chain issues and the industry chaos that resulted for a long time. And even last year in 25, we still had barely gotten back to that fiscal 20 number. Now we start to see in fiscal 26, we start to see some acceleration getting out of that rut that the industry has been in for a long time, like five years. It's been a long five years, I would say. So it is what it is, but it's been a long five years. Let's look at the notes down here. Supply chain limitations affecting your, your industry. That's what we just, discussed when we looked at the sales numbers ramping up, of course, for the juggernaut. And again, reminding you, the fiscal 25 sales include $7.5 million of C2B fabric, and the 26 sales include $9.8 million of C2B fabric. Very important to understand those things. And until now, I should just go back and say, The OEMs have been stocked by lots and lots of C2B fabric, much more than what we're producing in terms of how that would translate into producing prepreg with the C2B fabric. So let's go on to slide 22, change gears a little bit. Our buyback authorization and activity, an update. Okay, so we announced in May 22 our board authorized the purchase of 1.5 million shares of our common stock. Under this authorization, Parker's purchased a total of 718,000 shares of its common stock at an average price of $12.94. So you have to say we're some kind of geniuses. I mean, considering the stock prices now, I mean, I don't know what you think, but we probably should be invited on CNBC or maybe to talk and be a guest lecturer at the Wharton School of Economics. Let's keep going. We don't have to talk about it. Well, except that we didn't buy any stock in Q2 or Q3. We haven't bought any stock so far in Q4. Let's go on to slide 23. Trying to rush here a little bit. Sorry. Our balance sheet cash and very incredible cash dividend history. We have zero long-term debt. $63.6 million of cash at the end of Q3, 41 consecutive years of uninterrupted regular quarterly cash dividends, and now paid $608.6 million or $29.72.5 per share in cash dividends since the beginning of 2005. We're kind of sneaking up on that $30 per share number. Park founders always kind of like to include this photo with the cash dividend history because this is really at the beginning of Park when we really had almost nothing. We started with basically nothing. Let's go on to slide 24. It's a lot of money, a lot of dividends, I would say, for a company to start with basically nothing. Slide 24, financial outlook for GE aerospace generation programs, the juggernaut. We've used that term for a while now. The timing, we're not sure. The juggernaut is coming as now with a capital N-O-W. Can't be stopped. Better be ready. Let's go on to slide 25. I'm rushing a little bit. I just want to stop and say for a second, for some of you new shareholders, if you want a more detailed explanation of some of these things, please just call us. We happen to go over these items in more detail. We're kind of rushing through them. We just want to get to some of the newer items toward the end of the presentation. Slide 25, so we're talking about engineers per year assumptions, and there is a footnote explaining how we came up with those assumptions. Revenue per engine, that information is provided to us by our customer, and the annual revenue per program just multiplying across. We end up with a total of $61.8 million per year. at the outlook year. So a couple notes here. Our revenue per engine unit estimates are updated. We've been given updated information from our customer. And here's something we haven't really touched on, why the engine units per year assumptions may be conservative. Let's just try to explain this quickly. 1820 NEO, let's look at that one. We have 1,080 engines we're talking about per year. That's based upon 75 airplanes per month, two engines per airplane, a 60% market share for LEAP. Just do the math. That's 880. All right. So that's based on how many A320 airplanes will be built with LEAP engines. Do you think that every engine itself structure that's produced will end up with those engines? That would be a really ideal situation, but You know, something called scrap and fallout and things get rejected sometimes. We're not taking that into account at all. We're not taking spares into account either. So that's why this assumption about NGUs per year might be a little conservative. I just want to touch on that, okay? Slide 26, we don't have to go over this. These are all footnotes related to how we computed the numbers and did the math on slide 25. Let's keep going. Okay, now we're to changing gears completely. Warren Peace Park's new juggernaut. Actually, that term, the new juggernaut, came from one of our investors. We liked it, so we decided to stick with it. Some of this is a review from last quarter. Some of it's a little new. Unprecedented demand for missile systems. Missile system stockpiles have been seriously depleted by the wars in Europe and Mideast. There's an urgent need to replenish those depleted missile system stockpiles. According to Wall Street Journal reporting, the Pentagon is pushing defense OEMs to double or even quadruple missile system production on a breakneck schedule. That's a direct quote, obviously. The list of Pentagon targeted missile systems include the Patriot missile system, the LRASM, and the SM-6, Patriot probably being a particular priority, APARC actively participates in all of those missile systems. Review of and update on the Patriot missile defense system. That's the big one for us. Also, we focus on it because it's public. We're not providing any confidential inside information. Everything we're providing you is based upon public information. There's just lots and lots of public information about the Patriot missile system. You know, President Trump talks about it sometimes. The large deployment of PAK-3 Patriot missile defense systems, largest, sorry, in history, occurred in response to Iran's ballistic missile strikes on our forward air base in Qatar. That was, I guess, a few months ago after we bombed Iran, bombed our nuclear sites. On slide 38, so what happened here is, we moved the Patriot missile systems to Qatar in anticipation of this attack from South Korea and Japan. But I don't know if South Korea and Japan are so happy about that. The Department of War wants a very significant increase in Patriot missile stockpiles in Asia. So we just took a lot of them out of Asia. So obviously we've got a problem on our hands in terms of Patriot missile systems availability. Israel's and Ukraine's supplies of Patriot missile systems have been seriously depleted. as a result of those wars. Recent news from U.S. defense OEMs, including RTX, Boeing, Lockheed, L3, indicating significant ramp-up of Patriot missile system production. It's apparent that U.S. plans to do much more than just replenish the depleted stockpiles. On September 3, 1925, Lockheed's Missile and Fire Control Division received its biggest contract in history, a $9.8 billion, with a B, award from the U.S. Army. That's the branch that uses the Patriot systems for about 2,000, just a little less than 2,000 Patriot missiles. It's a lot. Flight 29, here's some big stuff. Flight 29, all new. January 6, 2006, what was that, about a week ago, yeah, about a week ago, Lockheed announced it reached a seven-year agreement. This is all being driven by the Department of War. With the U.S. Department of War to increase its Patriot pack-free missile segment enhancement, MSC interceptor, these are basically Patriot missiles, production to a capacity of from 600 to 2,000, 600 to 2,000. You see that number? Over the last two years, this is even more interesting in a way. Blockade already increases production of Patriot, Pac-3 interceptors by 60%. So doing the math, if it was increased by 60% to get to 600, that means it was 375 two years ago. So we're going from, I'm just doing the math, 375 to 2,000. Get those numbers? It's kind of unheard of. The new seven-year agreement framework is designed to encourage Lockheed and its suppliers to make the capital investments necessary. This is a theme, again, for Department of War. They want the Defense Department to be making capital investments necessary. rather than paying dividends and buybacks and stuff like that, necessary to boost production capacity, the levels needed to support to dramatically increase factory missile program requirements. Do we need encouragement? No. We don't need any encouragement. We're already building our factory. We'll get to that in a minute. We're planning to build a factory to support this program. Lockheed reportedly supplied factory missile supplies, sorry, missile systems to the U.S. and 60 other countries. There are a lot of countries that want this system and aren't getting it right now. Breaking news. This is this morning. The U.S. Department of War is investing $1 billion in L-3 Harris solid rocket business, that's Airjet, to boost critical solid rocket production for Patriot and other missile systems. This is a separate report. A new separate publicly traded company will be created in connection with this investment. This is a big deal, and it's a big deal for Park as well. But you see what's going on here? This is Department of War driving all this stuff. It's new world order, as we say later on in the presentation. Let's go to slide 30. The story continues. So what do we have to do with the Patriot Missile System? Park supports the factory Patriot Missile System with specially-deblated materials produced with Aering Group. There's an Aering Group name again. They're proprietary C2B fabric. This one probably should be in bold, but we're trying to be modest about it. Park is sole source qualified for specialty ablated materials on the PAC-3 missile system program. You just think about that. Then think about all we just talked about, what we discussed regarding this program. Park has recently asked to increase our expected output of specialty ablated materials for the program by significant orders of magnitude. So how are we going to do that? We'll fully support this request with the additional manufacturing capacity provided by parks, major facilities expansion discussed below. We didn't need any incentive or encouragement. We're already there. Okay, let's keep going. Now we've got to go back and talk about the area group a little bit more, not from the perspective of how it affects our quarters, from a kind of bigger picture perspective. We have agreements with Aering Group, a really wonderful French aerospace company, JV between Airbus and Safran, relating to their proprietary C2B fabric used by Park to produce a plate of composite materials for the Patriot missile system and other missile systems. Then we entered into a business partner agreement. That's what they call it. because they referred to us as their partner, very nice, with Arian in January of 22, under which Arian appointed Park as its exclusive North American distributor of their C2B fabric. Slide 31. On March 27, 25, we entered into what they call a new agreement with Arian under which Park agreed to advance €4,587,000 to Arian against future purchases by Park of C2P fabric. Now, that was a 50-50 deal. Park, this advances to be used by Arian to increase its C2P manufacturing capacity in Europe. They kicked in the same amount. We went 50-50 on this investment to increase their capacity in Europe, and we already paid our first installment of that amount. Aaron Group and Park are partnering on a study to investigate the economic and other considerations relating to potential establishment of a major C2B fabric manufacturing facility in the U.S. PARC committed to contribute, again, it's a 50-50 deal, 350,000 euros to the study. We expect that amount to be expensed in our Q4. Originally, we said Q3, it's probably going to be Q4. But that's another 50-50 deal. This is something we're partnering on this study. At the bottom, PARC is engaged in ongoing discussions with airing group relating to potentially significantly increasing C2B fabric manufacturing capacity in the U.S. to support critical Department of War missile programs, including the Patriot Missile System Program. It's very important that we highlight this because there's a significant need for much more C2B fabric capacity. So it's very important that this additional capacity be installed to support these programs as they ramp up aggressively. Let's go on to slide 32. So we've referenced the Patriot missile system. I already explained this a little bit. It's a very high-profile, well-known, numerous other critical missile programs. currently in production or in development, which PARCC is actively supporting. Unfortunately, many of these programs are too confidential or sensitive for us to identify at this time. But please understand that certain of these programs represent very significant revenue opportunities for PARCC over long periods of time. So last thing on war and peace, how about the U.S. defense industry's new world order? We talked about this a little bit. President Trump wants to increase the U.S. defense budget to $1.5 trillion, with a T, in order to build our dream military. So this is a two-edged sword for the defense industry. What is it? Somebody give us and take us away. Here's to take us away. But according to President Trump, the defense industry needs to get its act together So buybacks, dividends, no, why don't you invest in defense programs, CEO, even the CEO of pay limits. So there's been a real issue with the aerospace industry generally. programs getting um being not on time and not in budget and i think that the department of war doesn't really like that very much they're asking the defense industry to kind of get its act together well what do we think about the new world order we think it's great parkinson's is great it's wonderful flight 33 okay let's talk about our new plan sorry it's going on so long um I'm rushing as you probably can hear through this as quickly as I can. Park's new, major new composite materials manufacturing plant. So now we're going to give you a little bit more information about this new plant. We're planning to build a major new composite material manufacturing plant. The new plant is being designed to be fully functioning and integrated, a fully functioning, sorry, and integrated composite material manufacturing plant. It will include the following manufacturing lines, solution treating, hot melt film, hot melt tape, confidential manufacturing lines, and support equipment. The new plant will also include full production, lab facilities, office space storage, and freezer and ancillary equipment necessary to support all plant manufacturing activities and operations. So it's like a fully integrated plant with everything that's needed. The new plant is being designed to produce and support parks completely Composite materials product line, including film adhesives and lightning strike materials. Slide 34, the plant is not being designed currently anyway to produce our composite parts, structures, and assemblies. Plant size, it's getting pretty big, 120,000 square feet. This could change, but that's our current guesstimate on the plant size. When the plant is complete and operational, get this, new plant will approximately double parts current composite materials manufacturing capacity. So that's, you know, you can see why the plant is that big. When will the new plant be completed? Well, we have some internal discussion about that, maybe debate, but let's just say for now the second half of calendar 27, and when will it be operational? What do you mean by operational? Not fully ramped up, that means we're producing and selling some product, you know, some product that's been qualified for production and sale. Maybe second half of, let's say, calendar year 28 would be a target for when the plant will be operational. Estimated capital budget for new plant, approximately $50 million. What's the timing of the capital spend on the plant? Again, this is planning in flux. At this point, fiscal year 27, that's the coming fiscal year, probably 60% of that money. Fiscal year 28, maybe 30% of the money. Fiscal year 29, maybe 10% of the money. That's how the money will be going out the door. How will we fund the capital spend for the new plant? Well, with our cash, with our cash flow, and to some extent from the offering that we just announced, if that offering is successful. But is the new plant project dependent on the public offering discussed below? Absolutely not. We're doing this. There's no question about it. Nothing has to be decided. It's going to be done. We're just finishing the planning. It's not dependent on anything. It's something we're committed to doing for very good reasons for PARC and for our investors. Okay, let's go on to slide 35. Stolen a new plant. Where will the new plant be located? We have a finalist location in Midwest, but we're still waiting for approvals from local community, economic development. These things, for us, go much more slowly than we'd like. Why are we building this new plant? Well, that's obviously the $64,000 question or maybe the $50 million question. Our juggernauts, plural, you know, both our juggernauts we've talked about require it. Our long-term business and sales outlooks require it. Significant additional composite materials manufacturing capacity is required to support our juggernauts and long-term business and sales outlooks. And we're doing this to ensure we continue to have the manufacturing capacity needed for Park to be Park. So we're doing this to ensure Park is able to continue to be the company of yes, the can-do company, the yes-we-can company. So we're not looking to become a mill. We're not going to abandon how we got here, why we have the great, in my opinion, success we have, why we have more opportunities than we could ever handle. So it would be really foolish for us to abandon how we got there and become a mill company where, you know, we just run our factory like a mill and then somebody wants, a customer wants something, okay, we can help you out maybe a year from next month. I'm not exaggerating. That's really what happens in this industry. That's not for us. Let's go on to slide 36. What are our calling cards? Flexibility, responsive, that's an urgency. So we're doing this to ensure Parker's able to continue to do those things which got us here. it would be a very unfortunate mistake for us to abandon the things which got us here, a very bad mistake. So our new plan needs to be designed with being park in mind, meaning being flexible, being responsive, having urgency, saying, yes, we can. You need something, we're going to move everything around. We were just talking yesterday, maybe Friday, about whenever large customers, they want to move so many things around. If it was any other supplier, we'd say, well, sorry. We don't ever say sorry. Sure, we'll move everything around a lot. It requires us to juggle a lot. It requires production to juggle a lot. But that's what we do for a living, okay? And that's why we have the success that we have, in my opinion. When our new manufacturing plant is complete and fully operational, what will PARCC's total composite materials manufacturing capacity be? Well, you know, it's a question that isn't so easy to answer. It depends on how do you define manufacturing capacity. Park being park manufacturing capacity, that means run the business the way we want to run it so we have that maximum flexibility, responsiveness, and urgency. If we run a factory like a mill and just plant it six days a week, 24 hours a day, we could do that, but then our flexibility is almost nil. But park being park manufacturing capacity, maybe about $220 million. Park being park manufacturing capacity, but pushing it to some extent. Still being park, but pushing it to some extent. About $260 million. These are preliminary estimate numbers. We've been asked by a number of investors, please give us some help here. Please give us some perspective on the manufacturing capacity. The maximum sustainable manufacturing capacity, this is what we don't want, would be about $315 or $20 million. That's not what we want. So when you ask And we haven't asked what the manufacturing capacity is. We have to say, well, it depends what you mean by that. Let's go on to slide 37. And I just want to say these are numbers we're working on. We're doing a massive amount of work, you know, marking the guys on the expansion plan. So a lot of work has been done, but we're not quite finished with everything. And even after we're finished, things can move. You know, mix can change and things like that, which will affect capacity and sales. Slide 37. parts long-term sales outlook for composite materials including film adhesive materials and lightning strike protection materials and so we got to say again what does this mean it's our numbers approximately 200 million 200 million okay but how is this outlook computed it's really important to understand what this means because it's not a forecast it's an outlook and this is how this outlook was computed With line items that are known items, these are known sales and known programs and known customers. There's no other category. There's all line items of known opportunities, known customers, known programs. That's how it's computed. That's what that outlook includes. What does it not include? So do you think that in the next three or four years, will there be no other opportunities like six months from now or a year from now or tomorrow? We'll get a call from an OEM about a program they want us to work on. My guess is it'll probably be tomorrow because we're getting so many opportunities. They're not including any of that, which we don't know what comes. So it's important you understand it's not a forecast. It's just an outlook, what methodology that we use. What are the high and low risks of the outlook? So I think we feel pretty confident about the line items in the forecast, but it's possible that That will, you know, either we're on those programs or we'll get in those programs. Those programs will be ours. But it's possible those programs won't pan out to the level that we're being told by our customers. You know, maybe they won't be as strong. Maybe it will take longer to ramp up. I don't know. It's possible. So there's risks on the low side. What about the high side? The high side is all those things we just talked about, things we don't know yet, that are definitely going to come. There's no way – we haven't provided another category in our forecast or outlook, rather, the way we computed it. Just things we know about. What's the target year for the outlook? Well, that's another controversial question internally. I think we're saying fiscal year 31, and I'll tell you I would say the end of fiscal year 31. Fiscal year 31 sounds like a long time from now, but it starts four years from now. That means for us to be able to be at that level, everything has to be ramped up. The plant would have to be fully built, the new plant, and qualified. All the programs have to be qualified. We'd have hired all the people, all the staffing, and we're fully ramped up. To me, to do that in four years, that's a little aggressive. That's why I think what we should think about to be a little more conservative is the end of fiscal 31, which is more like five years from now. It doesn't mean we want to be sales, but to be ramped up that level, probably I would think to be more conservative, we might want to think five years from now rather than four years from now. Thoughts about our ROI for parks investment in the new plant, $50 million. We're not going to go through what the bottom line impact is now, but, you know, you think about it. This year, what is $72 million of sales? We're talking about $200 million of sales, $50 million investment. You could probably do the math a little bit on your own. We've got some real smart investors. We're not going to go through that number now, but we think that the ROI would be extremely attractive that we wouldn't, we doubt any investor would ever have a problem with it. Let's go on to slide 38. Parks newly announced public offering. Just touching this quickly. Today, sorry it's going on so long. Today we filed a form S3 registration statement and prospective supplement with SEC for a $50 million at-the-market public offering of Park's common stock. What's the purpose of this offering and financing? Well, first of all, to replenish a portion of the $50 million that we plan to invest in our new composite plant, composite materials plant, that's part of it. But very importantly, to ensure that Park has the necessary funds to be in a position to take advantage of and exploit key opportunities currently being presented to PARCC and new key opportunities as they arise in the future. The availability of funds necessary to exploit key opportunities has been a key strategic advantage to PARCC. So, you know, you're probably thinking, well, can you give me an example? Yeah, I can give you an example. We talked about GE Aerospace, you know, how many hundreds of millions of dollars of business was represented. Well, remember what happened. GE said to us, it was GE at the time, not STE, yeah, we'll give you the LTA through 2029, but, Clark, we're concerned because your sole source qualified these programs. We want you to build a redundant factory. And then if you commit to doing that, we'll give it the LTA. And we said, sure, we'll do that. We didn't say sure, but we got to go see if we can get the money or go to banks. It would have been terrible. Because GE, if they're smart, would think, well, I don't know if we're going to get the money. Let's go talk to somebody else. That never happened. Because we said right there on the spot, yep, we'll do it. And we had the money to do it. It was about $20 million at a time. I think we believe if we had to do that plan now, it would probably be twice as much based on inflation. We are quite sure it is in Park's and our investors' very best interest for Park to be able to continue to exploit such opportunities as they arise in the future. Just a little interesting information. I don't know, footnote. You know where our last public offering was? It was, well, Martina found a tombstone in our office. It was March 6, 1996, 30 years ago. It was a $100 million convertible note offering that was converted to old equity, almost old equity. I think 96 of it was converted to equity. Underwriters were Needham, Robin Stevens, and Lehman, who we have until the last two. Anyway, just a little interesting history. Sorry to go on for so long, everybody, but operator, we have to take any questions at this time to the extent there are any.

Operator? Thank you.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up their handset before pressing the star keys. And again, if you have any questions, you may press star, then the number one on your telephone keypad to join the queue and ask a question. And it looks like we have no questions at this time. Therefore, I'll turn the floor back over to Mr. Brian Shore for closing remarks.

Thank you, Operator. Thank you, everybody, for listening. We apologize that the presentation went on so long. There's a lot to cover. Please feel free to give us a call if you have any follow-up questions. Some of the items I think we kind of skimmed over a little bit quickly, so feel free to give us a call. We'd be happy to help you out with any follow-up questions. Have a good day, and once again, Happy New Year. All the best to you and your family in 2026. Goodbye.

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