Q1 2021 Park Aerospace Corp Earnings Call
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Thank you at this time I will turn todays call over to Mr., Brian Schwartz, Chairman and Chief Executive Officer Mr. Sure you May begin your conference.
Thank you very much operator welcome everybody. This is Brian welcome everybody to first quarter carpet school.
With me as usual not far above our CFO.
So I'm just.
Just want a bench and till we now to earnings of course this morning.
If you don't have the presentation up in front I mean do you want to go get Oh, there's instructions and the earnings release itself as to how to access. The presentation also watch on our website I think under shoulders and may be presentations or something like that I'm sure you find if you look.
She wanted to get that because that will make the coal lot more meaningful.
Also there were a supplemental information, which is attaches so for national information, which is attaches appendix one to the presentations so.
So.
Sorry.
For those of you.
Attended or participate or listen to our fourth quarter comp school, which was on May 14, you know they want to do pretty great detail about the virus and the economic crisis any impact on aerospace industry core we're not gonna goal rollout I think that would be.
Not that productive unfortunately, the how to best context for this call.
Probably to have some reference to prior call, but for US to go back what were they gotta would happen to our call and I don't think anybody so for that problem and may not be included not being up for that but we're not going to rehash all of it Oh, we'll do a little review somebody go over some updates and of course will answer questions. So one we just get right into it.
I'm going to be or for the presentation and go through it for you when referring to slide number. So when I was asked or dislike choose those are our that's our forward looking disclaimer information.
You're familiar with it I would think but if you have any questions or give us coal and we'll go through and through that with your slide three.
Quarterly results were getting right into it. So yes, we have the history of the quarters for last two fiscal years, plus Q1 is in a yellow at the right column you can see our revenues or to your EBITDA you see our gross profit in.
Gross margin a little bit booked 30%.
Let's see a reference little bit on a lower in the page or what we said about Q1 during our fourth quarter conference call may 14th.
Center sales estimate was gonna be 12 million to 12.5 million, So where a 12 to 13, we came in kind of middle of that range. Our EBITDA estimate was 2 million fish. We did that is stuff because as we discussed great. Great went during our fourth quarter call lot of uncertainty going or business right now and in New York, especially Ministry should we put the issue.
On the end of the 2 million and we came in at a two month 364, So I guess, that's kind of in the.
2 million ish range.
Remember a forecast philosophy is one of your forecast when all play what we consider to be a game, but given the low numbers will get being behavioral. We tell you. We think that's going to happen assuming we're going to work very hard in Durban, we can make it happen, we're not trying to make it easy for cells. Okay, let's keep moving here when we go to slide four.
Our top five customers. This is for Q1 and if you remember these are actually have the same customers that were the top five customers for last fiscal year.
His alphabet orders so we're not commenting on the order except I think you all know that emerus is going to be the top customer for park.
<unk> aerospace.
So the touch software blade is a pack free missile you see that the picture at Nice picture then talk right.
And that's the latest generation what should be what used to call. The Patriot missile, which is designed to shoot down hostile incoming missiles remember during our Q4 call.
I mentioned that.
We received 25 to 525 letters from Department Defense for military contractors, saying were expected to stay open well this might be an example, as to why we are expected to stay open I doubt that the.
Military wants to run out of Patriot or Patrick muscles anytime soon.
Hey, our core multiple or programs, maybe insurers and things like that for abortion aircraft Gulf re program. There is one of them accredo. So that's an important customers well and.
We are the main supplier maybe to maybe the sole source supplier I'm not sure, but many supplier anyway for all the drone program soldier tangible drones and target drone deploying Nobel three which is the picked and bottom right picture here, our vendors Middleware America Aerostructures system or mouse, which was a subsidiary of June.
Nation, but that were sold last year airbrush, sorry, how much was sold less your estee engineering aerospace, which to large large Singapore based aerospace company and we have a picture of the Comac 919, which is one of the bottom left which is one of the numbers programs, our northern group and a multiple programs are actually up well.
One of the items is GE aviation for their engines and other is whether Mr rate homes, which would be for I think for Boeing aircraft, maybe others as well, let's move on to slide five if we could please.
So.
It's a little comparison here kind of interesting I think book at our Pie chart I remember last quarter, we kind of took our pie chart, which had kind of more breakdowns and supplied into three key areas, which we thought it would be meaningful in terms of understanding.
Our business so.
The top PPI charges, just a pie chart you saw from our best present, our fourth quarter presentation. This is for less fiscal year.
We put the revenues and aside just Musa want you to have a perspective here. We go to work Q1 Pie chart very interesting remember Q4, we said we're going to focus on military that was one of our objectives. So.
Obviously military percentage, one way or partly be commercial and business aircraft went down so military obviously went up but do the math here for a second.
Just look at the dollars forget about the percentages so last year three 5% of.
The $60 million, that's about 21 million I think thats the number.
And the first quarter, 53% of a 12.2 million, that's 6.5 million up annualized 26 million.
So in a very tough market, we actually grew the military segment dollar wise not sure just percentage wise up quite nicely. Some of its luck because some of that so much as timing in terms of one to programs or.
Our produced just it's lumpy.
Quarter when.
We are producing one program this quarter maybe not.
But nevertheless.
Nice job by our salespeople, all three or four of them, but we are pretty small cell group just yet we're still group told you saw the announcement a couple of days ago, New sales Guy. So that's good.
So.
Let me Supers anything else note, let's keep moving here, let's go slide six.
So.
Slide six and seven are really.
Pretty much are.
Slides that were in our Q4 presentation.
You see up topics as revisited because we thought well, let's take a look and see how we're doing we're talking about different factors that could affect what will the recovery of the different industry segments aerospace industry segments, we supply into a military.
You are their supply chain disruptions that haven't affected us really very much we've heard about them for instance, with respect to the F 35 or program we're not on.
Park program seem fairly strong steady so far and as we are you said, it's actually better than that we grew our.
Military business, such as percentage wise in terms of the Pie chart, but actually dollar wise in Q1 as compared to the quarterly rate from last year. Our commercial aircraft to this is that on the pick a winner for park a jet fuel prices and we spoke but that last time will that's actually gotten better I haven't checked this morning yesterday as lower $40.
Not to Jeff.
The crude is $40 Ribeiro, but obviously, that's going to drive the jet fuel prices.
During the lower prices are disincentive for airlines.
Buying new workloads.
Company the economy economic recovery, so we've come a little bit of.
What is it too once it's almost two months, maybe some eight weeks of central last call and things of develop so the economy's being reopened one concern I want to highlight though is that.
<unk> decreased four teams that are being.
Put forth by the so different governors at different states.
Quite concerned about it.
Quite concerned that actually could.
Absolutely shutdown the economy again, let me assure you can open up a beauty shop.
But.
Most business relies on Interstate commerce, and it's become difficult actually with all these orders all these quarantines that are being ordered by different governors.
So I hope that the Governor's do the right thing for the country in the economy, because we destroyed economy.
And then we'll really know the world we're really no.
What darkness is we don't want to do that so I hope everybody, we'll think about what's best for the country in the world and not just.
The maybe myopic core or small minded about it it is concerning though because the things we are getting better you know when the commercial.
Aviation area.
Actually a little bit more quickly than people expected people getting on planes you know what let's see may was better than April June was better in may.
In July was expected to be better its head.
Lynch.
June but with all Lisa.
These 14 orders were concerned about what the impact because you know you cant travel from one state to another without locking down like yourself down quarantine for two weeks ago, it's going to pretty big disincentive from doing that for doing that so we'll have to see what happens with that but I just want to flag, that's kind of a newly.
New thing.
Concern.
So I don't know, but just want to flagged.
Down to the bottom of page, we're going to cover everything Europeans like I said this is really slide from less.
From a less quarter, who just want to want to update you want it. So generally the news is actually pretty good commercial aviation industry was improving a little bit more quick lighting to most people expected not to where it was show before the crisis, but people are getting back on planes, let's see what happens with teams quarantine orders.
Single aisle to bottom versus wide body, we covered us a lot and I think it's pretty well pretty clear that single aisle is going to recover more quickly and more strongly let's go to slide seven this relates to business aircraft.
Again slide from last quarter.
Just update your jet fuel prices, probably not much of an issue. Okay reopened economy economic recovery, yes, it's interesting that same kind of pattern.
So in terms of busy business aviation usage.
May was better in April June was better than May and we're expecting July to be better, but now they're serious concern about these.
This quarantine orders. So whats you what happens I spoke to a couple of a executives from two different.
From business aviation.
The old yesterday different companies and I posted from the same thing, which I was surprised about one interesting. They said that actually the smaller judge Andrew recovering in terms of sales more quickly than the larger jets larger jet like to global 7500, which is an important program for park is probably the largest business jet by.
So interesting I said well you know the you got the individual owner operators. They can write a check for smaller playing these are not cheap airplanes, only $5 million to maybe $12 million.
But the corporations that by the real big airplanes that are could cost were $50 million, they're kind of.
Sitting tight you're not ready mixed commitment yet.
So we'll see what happens and that was before we had this this this issue raised regarding the.
The quarantines and both the Guy said this quirky there or are you seeing impacting your business from a quarantines already.
And it just seems a two three week event. So this year real concern and like I said, hopefully discovers we'll do the right thing to think about what's best for the country in the world.
But we'll see.
Okay, so well social assistance, they fear factor concerns for commercial aircraft benefit business aircraft of course, it well I mean, obviously, if somebody's in a position to.
To buy an operator business aircraft, that's going to be or a preference that we might have considering.
Issued supplying one airline see stage.
Well this is aircraft recover before commercial aircraft. The I do not know that people at different opinions, but it's an interesting topic to discuss let's see slide eight.
When we go to slide eight let's talk but GE aviation, we always have to do that these such an important portion of our business.
So what we go through the individual programs because.
I think it'd be helpful to put to utilization perspective, obviously, we'll start with an 80 20 Neal family and you can read up top to different variants of the through 20 deal family. All a mutually 0.8 engine in all these are park programs. So.
Last quarter, we mentioned that Airbus and announced the reducing production.
By one third no I think.
Production rates predicts from 20 was maybe 60, along I think thats rights to reducing about one third then it was something confusing to happen, but I think last week as well maybe 40%.
But I read that the difference between 1040% relates.
More to how the measured the output on a weighted basis, rather than any kind of new caught so I think they've got some attention on much or what it means a little bit vague. One thing I can tell you is for us.
We had been a touch recently I just a couple things go I think with my counterpart at airbrush.
And.
They were see to forecast recently from a share Boston, San Fran, which actually move some numbers up.
I can't give the numbers on that's not wouldn't be appropriate I'm not look do that moves that number up new moves the numbers up up in 2021 actually significantly and in 2020 as well the caveat of 2020 is that I remember the whole inventory thing we've talked the last time the burned down so it's kind of muddy the water is not clear.
Sure how its going impact us in 2020, yet but those are.
Surfaxin reporting to you.
There's a lot of it permit different information out there, some which consistent so I'm just not completely consistent but now you know pretty much.
Most of what I know.
The news on this aircraft there is actually positive.
From what was your.
Bombarded global 7500, we're just we're talking about down with respect to business aircraft with pest were 20 engines.
This one is the biggest unknown for us I'm not sure what's going to half with this program. We hope on Bharti is pushing the program hard to get this is really the big new aircraft there the companies.
A lot investments aircraft futures vary depending on the success of this aircraft and also even though it. So smaller engines park has a lot of content per engine dollar content per engine on the passport 20 engines for the global 7500. This is a question mark for US in terms of where things are going to short term. Some 47 eight no change approach.
Graham rates.
Not sure how long the equity to disguise will be produced but they're not that reduced the rate in my opinion, so produce at the rate, which is six airplanes per year.
We have four engines for airplane at 24 engines per year.
We produce at rate until such time is that cancel program hopefully that number will but there is some talk and maybe it's even trade gossip little bit that.
That Boeing may be pulling the plug in two years Boeing isn't as refused as far as I know to confirm that they have not they've not confirmed that news.
My feeling is two years as one time, even if it is true so hopefully somebody else will comment on order.
So I'm sorry, these airplanes for cargo did not really being sold for passenger anymore. There, it's really a cargo sale.
So I believe GPS as a number of almost water and hopefully somebody else will decide to what are some more.
To me I'm, mostly involved with the sub 47th my favorite airplane, but also just you know.
Our first shipment.
On the GE aviation programs, a first program, we got qualified or was there. Some 47 eight our first shipping was on leasing February 28.
2014, 11 PM I'm never going to forget that day, where that time.
So we hope of last forever, but have been around for a long long time Warner Floorplan. Comac 919. This is one I said I suggest you pay a lot of attention too.
This has lead once the engines so more to the Athree 20 different variant.
Comeback is pushing this program forward, our understanding is actually pushing pretty hard.
Maybe part will be some trade wars that makes them, even more the Chinese or more mode motivated.
This is a real prestige thing for China.
The next one who will talk but the Comac RJ 21, a minute touch a regional jet mostly sold within China. This not when not if this is not for China. This is for the World. This is this has to compete with the seven to resell the Max and Athree 20, China wants to be a player in the global aircraft.
Commercial aircraft market. This is there.
Rental rate.
To the big time.
A lot of prestige involve.
We're trying to not just come back for the country China.
So there are pushes program very hard I'm not going to give you an estimate as to when it actually get certified in production right now we're doing development work.
You can check for website and see what they say about it.
One a little piece the good news as parse Lightning strike protection turtles, now use and program. So it's good because that means wherever unit, we have more content.
So this is a this I think there's a really important potential program for part of the picture as to some 40 70, sorry to digress, but you seem themselves always loved us picture abuse, who seem to person standing kind of under the two engines you get us feel for how you would use engines are and how you see some cells or.
Well sculpted.
Trailing edge of the so muscles.
Our Comac A.R.J. 21, Thats a regional jet has the.
Also GE engines Cfthirty 410, a engines. This program is stronger proceeding will actually our told that the comment to try to move up this program well, okay not down up.
So.
Obviously, the supply chain has to be able support at but coal Mac is different than the other aircraft manufacturers, they're not going down at all not they're going off for trying to go up okay. I just want you to understand that like Boeing up like Airbus.
So and also this is the next a program. We're told that used to qualifier lightning strike materials. I think you know this but our lightly tried materials or are you on the east were 20 program were sole source actually just point on the issue 20 program, which is good.
Let's see what do we go over to slide nine and ER.
Slide nine Triple Sevenx and this is not a good story for us maybe for anybody.
So remember last time, we told you all oppose were cancelled Triple Sevenx program for the parks Fios production schedules pushed out further Boeing and announced a rate reduction for the program than park was recently advised by GE that they do not currently other funding to continue support parks qualification activities. So.
And this is not an immersive organization to GE aviation program that we've become more pessimistic much program of late and we had not included none are planning. So this doesnt affect any of our internal forecasting because basically we are not including any thing for this program, we're not giving up yet hopefully you will.
Get back and again and come up with the funding to complete the qualification, but we don't know that's kind of a question work, but it doesn't play into any our think any of our thinking a short term lets say this year next year.
Next item Park wears on slide nine park recent arranged with Emirates to maintain baseline production levels to preserve parks ability to ramp up production when needed in this kind of important this relates to hot mill almost all of our production for the GE programs are hot melt resin supports a solution.
So.
We were kind of getting some vives that well, maybe we were just kind of they would shut touch only upward shutdown production for us for the next quarter or two because there's so much inventory to system. So we spoke to ever asked we so thats not going to work we need to have the baseline amount of production per month water keeper Hot melt are pushing going we.
Highly train crews and knew we shut everything down we'll lose that.
Fiber investment these crews and just what when you to ramp up that's not going to work. So they weren't they jump on immediately and talk about I'm ready to respond and in fact pushback at all he realizes the problem. So we reached an agreement or let's say I understand it's on a written agreement handshake just to the minimal amount of production that we will do for promote.
And that's by unit that's not by dollars. That's why we get down to our load forecast for Q2, it's kind of a theres a range there because we don't know to dollars will be based upon you can speak students are what drives to production needs of the.
Hutton all departments. Just so you know we have Oh, we retain three cruise one of the cruise was transferred to solution and we'll talk about a little later on we go to or customer flexibility program, which helped a lot. So that's what we need that's our baseline. So we can ramp up where we need to ramp up and we're going into the second.
So I don't think that that days too far off.
Now.
Just for a perspective.
Last year less Lear, our GE Aviation program 28.9 million lets say rounds at 29 million, but 60% of the revenues were attributable to a 320 family but.
21 million, let's say there was about 1 million for the Triple Sevenx program. So let's take that off the list 28 million. That's nice number because if you divide by $470 million you have to concept. So last year about $7 million of revenue per year on the GE aviation programs I mentioned that so you can have some perspective.
And what we're saying is going on this year.
So.
Q1, those are just that's an actual 4.1 million, obviously quite a bit down from 70 million.
And then Q2 now we're estimating 2 million to 2.5 million that's based upon that minimal that minimum rate that we said we need per month production rate, we need per month in order to.
To sustain and keep intact all the capability that we built over.
Five years old our people.
Hotmail Department, so thats, a very low number but thats, what we said we need as a minimum.
No.
What's the message here.
That number as well well well below.
On market requirements not based upon an increase based on what we know now what do we know now we know we talked about the through 20, we talked about maybe a one third reduction acre 20, we also talked about the forecast. We just got it goes up the global 7500, that's a question Mark we don't know 77.
7478, that's not going anywhere that's flat from next two years Comac 919, probably not affected this year.
Because there are still doing the development hasn't certified yet, but pushing for aggressively coal Mac RJ 21, pushing it up not down triple Sevenx not a factor. So if you take into account just the end market requirements now not talking about any recovery at all based one those specific.
Programs.
Got to really 2.5 million you Didnt close.
As a problem we're facing.
The rest of supply chain, I guess as well my guess I'm going to give you guess on this.
Is that if you looked at just supply keeping up with the end market demand of today.
That number is four to 5 million not 2 million.
Four to 5 million. So that's a guess a lot of variables and like I said, the passport 20 that 7500 as one of those variables, but I want to understand that speaks to really key point.
So what's going on of course, it's the inventory so burned down as inventory everywhere. We talked last time now the whole kind of thrust of the aerospace Mark will push up push up push up more more more more and then already got pulled out more under all of us nervous left a lot of inventory.
So at some point, though that inventory is going to be normalized and then what than the end market is going to have to drive the production requirements.
We have to keep over the on market.
So my concern is this I'll just tell you I think the supply chain there's demoralized.
Kind of their survival mode, maybe feeling sorry for itself, maybe not pay attention as much as they should.
My feeling this is just a feeling how can be wrong, well sometime if tomorrow, let's say the market does you to me approval next.
12 months at some point, there's going to be that Dave reckoning.
For the inventories normalize and production have to match you had a market requirement my belief is that could be wrong. That's later on this year.
My other belief is that a lot of companies the supply chain are going to get we're going to really be caught off guard.
We were still going to be told in well, we've got a problem need to double triple your production.
And I think a lot of companies not going to be prepared to do that.
We are going to be prepared to do it that's why.
These guys and said we cannot allow our hot mill capability that we built over five years decimated that's not going to work.
Also working with our suppliers to make sure variable to support this inevitable.
Change inevitable unless the market takes a big step down the end market takes a big step down and requirements assuming the on requirements don't get better.
And just what we have now there's going to be a dead reckoning, a crossover point and our production is going to have to go up significantly or what I said, probably four to 5 million. That's an estimate there were 2 million and in Q2 that said baseline production level that we agreed to.
With the Emerus so 10.
Q3, Q4, that's really going to be a function. When this crossover point happens and we don't know that.
And this again is assuming there is no no recovery nothing gets better. It also assumes as it gets worse, but as soon as I think it's better so.
I would just be a wild guess my guess is in Q3 Q4, that's going to look more like Q1.
Not like not like last year 7 million based on end market is not that level of 7 million.
But that 2 million is not sustainable unless the market takes a significant drop down and market I wanted to understand these dynamics because they are really important for park I think we're also important for supply chain like I said it my sense is that a lot of folks and supply chain and demoralize, maybe dual fuel and kind of bad from cells and not really paying.
Attention to what they need to think about for their future maybe from survival mode or future. As you know if we can make payroll next week I don't know so I'm not criticizing people you know.
Yes.
Everybody has their own issues to deal with and I'm not criticizing anybody to pretty difficult time, but I wanted to make sure you get that this slide is probably most important slide for this presentation, let's go on slide 10.
Yes, some bought perspective on commercial aircraft industry. This is just review.
Single aisle versus wide body kind of beaten to death, a little bit here.
Distorted the trend in place for signal I mean, it's kind of like.
Unanimous everyone believes a single aisle going to recover before wide body widebodies used for those long international flights. So there are underway so flights at this point.
Basically all the flights are domestic using a single aisle is not to 20 miles.
There are three major so our programs they through 20, the Boeing 737, Max Comac 919123 checked to those three boxes. Those the boxes. We think we want to check we hear that seven through some Max there may be getting certified again in the Bakken business, we hope that they do we wish him the best.
We're not in that program, though.
So we wish following only the best.
Hopefully they'll get the airplane certified unplugging again, we're not program, but we're on those other two programs, which we believe our it programs. So we believe if you're interested in commercial aviation, which we are you got to being single aisle, if you're interested in single aisle visa to programs you want to be so it's those park checks to this research.
Boxes right. So we already covered that.
Believe were quite well position and as I said already watch out for the 919, because this is a juggernaut my opinion coming because of that as a full force of not just coal Mac the whole country, China behind it very big prestige.
Aircraft bridge for churn slide 11.
Okay. So what is our strategy what strategy being the was it just Sofia two way of saying we plan to do.
Okay. So a double down triple down a commercial aerospace were not back.
We're not backing down we're doubling down a commercial aerospace people want to fly again.
And.
Sometimes out of a crisis Cummins opportunity. So what do I mean by that so some airlines are going to innovate and make it fun and interesting and.
For people to fly on them.
Make passengers feel safe and actually look forward to getting on the planes and some won't so we'll just be the survival mode. So this is.
I think I'll capitalism is supposed to work the ones that innovate do good job they will not only survive they will thrive and the ones that don't innovate and get back into defense mode and survival mode, maybe they won't make it but it's all K because that means that the better ones will survive and this is good for the future of commercial.
Aerospace commercial aircraft in my opinion.
We believe commercial aircraft will be one of the great worlds great industries for many years to come.
Part just going through the presentations are partly single aisle aircraft is place to be so we covered that only five tons ready.
Excited we believe we are ideally positioned on the two most attractive single programs recover that and we believe the glory days of aviation still to come we want to be part of it.
So.
The timing of the recovery commercial aviation.
Is uncertain, we don't know what's going to happen I'm not sure anybody does.
We watch we pay attention, but we don't know.
But to us its little less important.
What's important to US is we think Worsley vision is so important so critical such an important industry for many years to come and we want to be part of it. So if it takes a year to recover thats fine two years to recover that's okay for us we just want to be there.
So next item, we want to emphasize and focus on programs and opportunities in military aerospace markets, especially in this program some opportunities in opportunities. So we already talked about the fact that are sales in.
In Q1 were relatively good in the military area, what do we might be by this so we're interested in niche programs, maybe a little more out away programs our programs a little bit hard to finally get.
With are easier to protect were less likely to be interested in a big program. What do you have to refine it because it's so big solar budget. So late that gets a lot of visibility.
Theres, a government change or something like that who knows what will happen. These big high visibility programs.
We don't want to be blown around the wind we want to be on programs that have.
Real staying power.
Or not and vulnerable so thats, what we try to do what it takes more work, it's harder, but it's worth it.
As part parks balance sheet and cash to our advantage we covered that in some detail in our last quarter calls one that we skip over that any questions about.
No.
We haven't spoken about this and while it's not that it being in this company thought that it's not part of US It just hasn't come up in her presentation.
Ben short told me about this culture each strategy for lunch, Peter Drucker, So that I guess.
I like that so in other words.
Of all kind of great strategies, but your culture. Our company cultures are just company culture. What does this company me to west it's not a generic thing it's companies need something specific to us. It means doing with others are unwilling or unable to do you mean, saying, yes, what other say no I mean, not accepting mediocrity going for great News, we believe mediocrity visa chip.
Always we believe great. This is a choice to although which the more difficult choices to make.
If you go for greatness, you need to be prepared to overcome many obstacles and setbacks.
And our path to greatness can be along the path.
Big issue run across many daughters, and nonbelievers, along the way, but that's our a little our culture thing be in this company and it's something we're very committed to its something thats kind of palpable intercompany, we something went that spoken about a lot.
And that's something we keep reminding ourselves of we need to drive our sales force ourselves to be the niche company.
Slide 12 financial forecasts, so we were through a long term forecast.
During our last call and the reason is simple, whereas which line. We just don't know so we don't want to just put something out there just a guess so thats kind of silly. It doesn't doesn't help you doesn't help us I don't know if anybody says wait to talk there's so much uncertainty and the.
Global economy, and aerospace industry that it'd be just really kind of silly for us to update a long term forecast what do we think about a long term forecast generally, though what we're going to so trying to grow military we're still going up to commercial programs.
The impact.
Sorry, the commercial recovery.
The commercial aviation your space recovery is going to impact our loan from forecast because we have so much.
Of our company's invested in a commercial.
Aircraft.
So at some point I made this comment last time kind of interesting to think about.
Or not.
We're not posting on our prior long term forecast that was withdrawn, but we feel it's more like moved to the right at some point will resume that long term forecast, we just don't know when.
How much of a move through right now as of year. Two years, we don't know and we're not going to speculate about that piece. It's not worth that we just don't have real good feel for that but we feel all the principles and drivers for the long term forecast are still in place just move to the right our thoughts about our quarters. So this is kind of interesting.
Q1, those are just the facts actual Q2, so we're going to give you some issues numbers just to think about.
For sales were thinking about $9 million ish rebid.
1 million ish.
Obviously lots on the certainty. So we've got to emphasize that is part of it we just giving you some perspective.
We have little more 90 million.
Shipped and book for Q2, but the issue so normal times LT. Good we would have to with trouble getting to 9 million booking and shipping another whatever eight or $9000 from quarter. What's the risk is that the bookings where you have could be cancelled or pushed to the right you know could be pushed out.
I understand lot of Pushouts and cancellations of late so that's why there's a risk and that's what we go the is part of it it's really driven mostly by topline once you know topline and we could figure out the bottom line, you know more or less as far as Q3 Q4 concern.
Big Big question, Mark can be partly dependent upon what happens with commercial aerospace industry, partly depend on when all the inventory has burned down when that day reckoning takes place where the industry. So all you know we kind of screwed up with stretch. This thing out to for now we're going to scramble to recover number is going to double or production not going to.
So, but maybe just wants something to think about and I got to tell you to make sure they understand lots and lots and lots lots of caveats here.
Yes, we're just speculating I want you understand that I want to make sure.
It's clear, but as you may want to just think two three in Q4 may look like Q1.
But that is.
Very speculative I am just putting out there just to help you think about things a little bit okay.
So when we go to slide 13 updates on park, how are we doing.
Well, our New York offices open I guess, we went through phase whatever in New York and were able or New York office. So our folks are new Yorker, smallpox and Youre doing great.
Kansas continues to be fully operational never end shut down.
Customer flexibility program I mentioned that.
We have 75% participation. This reelect cross training program, you've heard our employee we have a number of job categories, you get trained and another category up to the testing get approved you actually get a financial incentive so some of our employees or maybe three or four approvals, but this is really so important to.
Remember I said that are we move whatever hotmail crews to solution. They had they were they already had approval to work in solution and when things are very unpredictable and very dynamic. It helps so much the bill people moved from one department to another one department to another it makes us.
So more to more flexible so much more responsive so much more productive and so it's helped a lot. We've had no layoffs, we likely offset not part of us we have reduced or our headcount or people count through attrition and we have let go with some people that we didn't feel right for park, but no layoffs of we.
Kind of.
Today, we just feel strongly about we want people to believe and fuel they can build filled future where the company so layoffs or something that are almost like against our religion. Now we're not guide so we can't ever guarantees and there would be layoffs, but it's something we're very very reluctant to do.
And so far.
We've not done them and we have no plans are doing lay offs and like I said not gone. So it can't guarantee that will never happen, but it's very much.
Yeah.
Much we're much opposed to the concept of layoffs, we don't like it don't like it we want people like I said to believe they had the ARPU to build a future with our company and link people off it's not really consistent with that concept for a much as it so.
Well, let's keep going here or parks people can you do very well under difficult circumstances, yes, it's pretty well.
It's pretty difficult with all the stress and anxiety in the world W might vice most people don't watch TV very much because it's all bad.
But no people need to come to work need to focus and do their job through the best they can find ways to better every day as we say.
A few.
Come to work at the other day, you've made something better for the company even small everybody. We're talking about that's a good day for you. If you haven't that's not a good day.
Tomorrow, you come back and you more dedicated to mix would be better that's what role about a park.
Major expansions, just a little update member $18 million or budget.
Spent 10 million so far 8 million to go and inspect completion early next calendar year is coming along nicely. We had some delays during the wintertime with weather, but it's coming to look dicey really looks like an expansion right now let's go to slide 14.
Potential significant opportunities for park, so I just want to be clear none of these things or in the bank. These are.
Interesting and significant opportunities so the be 52.
This has been around even longer than the sub 47, the be 52, the re engining to be 52.
Potential opportunities for park in connection with that re engined program Comac that Chinese company is developing a twin aisle aircraft onto non like I said, they want to be a player.
Global.
Global aircraft business always want to be a player you'd have a single aisle, but you also want to have a twin aisle and wide body.
Then JV in Asia, we spoken about that before we havent grown up recently, we're not just can you bring it up every time, but it's still a active discussion and maybe be something would happen next year, we're still working on it.
Three things are potentially big opportunities for the company, although none of them are in the bank. So none of it's possible nothing will happen, but just want to put that out there.
It was a big things some victories.
Yes.
But but but we still love the small opportunities there is nothing too small for us it's funny because.
I just want things end up being big things since your aggregate, though you're not important enough for us.
I'm not going to pass judgment too much and others, maybe a little bit, but all I can tell you that in us that's on how we look at things.
If we are being made to feel like you do not matter not essential let us know maybe we can help you imagine told people are not essential how long would you tell people you not essential how does that work. That's a work you know.
It's a very strange world, it's not a world I would ever expected.
So your supplier, making you feel like they're doing you will favor doing business with you that's not very much fun.
We've been there and we know dislike so and maybe you want to talk to US all over customers are essential to us.
So like sometimes to say we're Catholics when it comes to customers. We don't believe him divorce with that kind of customer we take on customer for life I think a divorce us, but we'll number divorce that whenever say their customer you know what you're kind of small we got some big fish to Fry go find somebody else. We know we've heard his story just recently where somebody in our industry did just that.
That they've got a big program the toward their customers of other customers go find somebody else in that we can't deal with you anymore.
That is so like.
The key to us that kind of thing we would we would even them every and consider doing that.
Lastly, we don't believe into horsemen becomes the customers at park, we're continuing to Gulfport.
I'm not letting up we tend to make this hour time, we're not waiting feeling saar for ourselves.
Not the Moralized, others May falter, but park is not going anywhere okay. Thanks for listening to the long presentation and now operator, I think we're ready for questions.
As a reminder to ask a question do we need to press star one on your telephone to withdraw your question principally on key please come back when we compared to any roster.
Once again, ladies gentlemen, if you wish US question at this time. Please press Star then one are you touched on telephone.
We have a question from Nick Repurpose Stella within our management your line is open.
Hello.
Good morning.
Second question.
On the dividend policy is your intention to.
Keep paying me Tencent quarterly dividend and.
No.
I know this is hard to forecast level would you think you would actually.
After.
Being a situation where you would burn cash.
And generate cash thank you so much.
So at this point, we're not thinking changed your regular dividend, we discussed at last quarter.
So no tough we would continue evaluate but our positions. This one is continue their regular dividend that's based upon more looking after this year or internal forecasts.
So with this year, we probably will cover the dividend.
We probably have some limited positive cash flow, but it will cover the dividend.
I think we're okay with that.
It's important to wash through continued dividend that's not a guaranteed change.
But.
That's our perspective this point so.
Because that is your question Dick or is there anything else that can help you with.
With that question.
No that's basically.
One other thing.
And again I'm looking at.
Nothing's gap.
At one point.
An investor had done.
Requested grass seed considering share repurchase now I do believe all that cash is a good asset to have especially into trouble groups are you seeing any more opportunities.
Coming up from our acquisitions is there anything out there looking more appealing in these troubled times and.
Just address share repurchase.
Not worried six or type or something like that is that something you might consider thank you.
Okay. So let's take those questions reverse.
So that's hypothetical but yell at me or how that at one no sure.
As a stock goes lower obviously, there's your purchase becomes.
More.
Interesting.
As far as the acquisition Mark is concerned so what were advised by the bankers who work with is that you probably need to wait until a couple of months maybe the fall.
Maybe like September October timeframe for some of these opportunities that kind of come out of the would work.
We just be covered this in or less coal that's why didn't go into detail on this call, but it's something very important I mentioned, just kind of briefly using our cash and our balance sheet toward advantage, but we've been.
We've been frustrated with the acquisitions for a long time had cash for awhile.
Valuation, so just not look right to us.
And I think was a bit of hindsight, we are right in the world was wrong you know.
So the image maybe running silent lease we were told well you. If you want to get in the game you got to pay. These these multiples and everything I think I'd mentioned last time, we look to companies that were actually were the asking prices was maybe five tons revenue and there were sulfur five times revenue not was of course, but in many cases, we saw the announced.
We are quite strong.
We just don't.
These are not cure for cancer companies, you know I mean, maybe thought that were but we did.
So what we're looking for something more central to our business is something that would be not to direct competitor would be added four businesses different capabilities different product lines, but still central to our business got great tangential and.
We've been looking looking looking but we've been frustrated because the evaluations have not been right.
And maybe some things were looking for weren't available as well, we're hoping that maybe opportunities will develop in the next couple months. We're told by the bankers from investment banker and work with that they think it's probably before because when they actually to me is that the the sellers have to go through some kind of.
Process of adjusting their realities in expectations to realize that whatever they thought they are worth before that's kind of irrelevant.
And also some of these companies may be a financial distress because the other factories.
There's a lot of debt corporate America, everybody knows that and maybe some big high profile companies would get build out but we're not buying those companies were buying smaller companies I mean, parkside something like that so.
So the probably not going to have the opportunity to get a lot of health and government, which is fine. So we're hoping to be optimistic we're hoping as the appeal of bye.
Something important at a good values may be even distress values. So we're sitting tight we have seen a couple things.
In the last couple of months.
But we sell throughs early results, maybe the valuations still high and also there are a little more peripheral not so central and aerospace obviously, well I should say, obviously, you're on aerospace, we would look out sort of aerospace, but less central to what we do now.
So we look I think we decide maybe not for us.
So Nic does that help with your question.
Thank you so much I just want to send.
I'm very appreciative of your conservative stewardship.
Thank you know.
Thank you were that add to that input appreciate it.
Thank you. Our next question comes from Hillary with Roubaix Capital. Your line is open.
Hi, good morning.
Hi, Chris.
Just wanted to ask with with all the disruption.
That's out there in the industry do you see.
That creating opportunity for your.
Bid on new business or is it more a situation where.
Everyone is more disrupted and just trying to deal and manage their own.
Business commitments or.
Whatever the pipelines are as they recover.
I think it's a little bit of a mix, but unfortunately, there's a lot of.
Companies in the aerospace industry right now Theyre, just I think feeling very.
For a defensive.
And.
Survival mode.
So that could be a little frustrating we're doing everything we can we we reach out to customers. All the time, we're not going away looking for opportunities looking for opportunities, but you know what it's not.
This black and white there were there they are definitely our opportunities I think especially in the military area, where it seems that the funding is still pretty good.
So.
We have to keep at it can be frustrating sometimes for their sales guys. You know Mcallen said look we know where the customer we're not doing anything now we've got no money when I know funding, we're just trying to.
Survived through tomorrow, Okay. We'll call you back next week, we're not going to go away and we'll make a pest of ourselves, but there are opportunities that I don't want to be over overly generalize.
Chris, but I think.
Probably more than military or defense area dense and the commercial civilian.
The good all industries are affected by the economic crisis pandemic, but military seems to be doing better the funding is there.
Do programs are.
We initiated.
Qualifying new suppliers so.
I don't know well I guess it the answer your question is not so black one source and certain kind of mixing but from our perspective like I said, we're going forward, we're not going to relent, we're not going what up and yes. It will be a pest I mean, we will keep on what we do how can you help we help I know, sometimes I'll just say one other thing sometimes the first answer as well.
Our.
Thus, we can do but you need a follow up question well what do you mean, but what are your issues. What do you struggling with don't accept know for an answer.
So I mean, obviously, you've got to be flight and respectful not not belligerent, but don't accept know for Nash in other words, they may not even think present opportunity newstar discussion wait a minute what about that over there maybe you can help with that.
We're looking for a little things looking for big things I mentioned last quarter. There was a couple of initiatives that we're taking on another it's to do more ourselves rather than farming. These things out.
We don't be specific because it's going to its kind of sensitive thing. So we're looking at those kind of opportunities at all those are not huge ones, but they're nevertheless opportunities as I, just said small big either way, it's okay with us.
Okay. Thank that completes my question. Thanks, So much has a good rest assured.
Summer.
Thank you very much Chris.
Thank you and Im showing no further questions at this time I turn the call back over to Brian shore for any closing remarks.
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Thank you operator, and thank you everybody for listening in New York during the summer when you probably have other things you might prefer to be doing so even though the world continues to be a kind of a challenging place still want to wish you a really good summer hopefully you'll get away a little bit gets amar north and.
We'll talk to you again at least in terms of a quarterly call in a couple few months, but in the meantime, you call. So anytime you have any questions. So you take care have great day.
Right.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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