Q2 2021 Park Aerospace Corp Earnings Call

Finally, I would like to welcome everyone to the park Aerospace Corp's second quarter fiscal years 21 earnings release conference call them Investor presentation.

Michael I placed on mute to prevent any background noise.

After the speakers remarks, there will be a question answer session. If you like to ask a question. During this time simply press Star then the number one on your telephone keypad.

If you would like to withdraw your question press the pound. Thank you at this time I'll turn the call Brian.

Brian Shore, Chairman and Chief Executive Officer, Mr. Shore, you May begin your conference.

Thank you very much and so there's still a broad insurance, which Brian.

With me as usual NASCAR Barber CFO welcome to our second quarter Investor Conference call.

So we filed our earnings release. This morning, I think about 630, New York time.

The important.

Axis that and also in an earnings release or instructions after.

How to access the presentation that will be going through and it's really recommended you get the presentation in front of you make the so called lot more meaningful also drifted up why are their supplemental financial information not too attached to the presentation as an appendix one I think it's called Oh, sorry.

So just a little bit of a.

The.

Dr comment Oh, So Q4, Q1, Kohl's Q4 of last year Q1 of this year or one of the great detail about the impact to the virus and economic crisis on pork on the aerospace industry. That's we will touch on those things today, but we're not going to go back and rehash everything interest you know too much Oh, we.

Try to do on these calls what kind of mix it up a little bit we don't try to cover everything these presentations take a long time to go through a state has is so we can't we don't really Oh I tried.

I tried to cover everything from mix up like I said, but at the end of the presentation all of which we will take questions. When you feel free to ask any questions you want to buy the topics you want.

So we're going to go ahead and start the presentation and like I said after we're done with that.

We'll go right to questions I want to give you a little warning, though I think they will take at least half an hour to go through the presentation show a buck or why don't we just get right out of it and.

We'll go to slide two please that's or forward looking disclaimer language, let us know if you have any questions about I didn't call. Once you afterwards of course, a slide three get right into it here HM the just from.

Just from 21 Q2 results show so it's <unk> highlighted obviously, the right hand column with the yellow highlight so we're showing the effects of the downturn in the aerospace industry, particularly our commercial aircraft and we could see the topline.

9 billion 250000.

The gross profit is down our gross profit margin is down double up 3% not where you want to see how do you have a dollar a 1 billion 418000, Oh, what do we say about or Q2 and during our Q1 investor call. What did we say we said sales estimate now.

<unk> million ish, EBITDA estimate 1 million ish or so we came a little bit better than predicted but within the range and issues there because as we explained when we have when we discuss these indications are forecast lot of uncertainties. So we put this year just because you want to be clear that we're guessing a little bit.

With these things because there's so much uncertainty in the market the new industry or we just do our best showed you should there not for you know for humor, but to make a point or forecast philosophy I think we touched on this almost every quarter. We just want to remind you that we give you a forecast we're telling you. What we think is going to happen to the best of our ability yes.

Finally, we're working hard and doing the things we need to do or do not not easy forecast and that's the point, we don't give a forecast. So we can be heroes and beat the forecast it looks like we did a great job. We know it's a common practice, but we kind of feel that would be not right for park views one of our key principles.

Keep principles is integrity and not me to tell the truth is we're not going to tell you something other than that we believe we could be wrong, but we tell you something we're going to tell you. What we believe would just want to remind you about that okay. Let's go on to slide three our top five customers in alphabetical order.

<unk> Aerospace I think they're in top five put off and one of the key programs to work on through a your spaces. The Pac three missile our needs are rocking all whole sort of missiles or picture of a Pac three missile system. This is to shoot down in coming and I mean, I'm missiles, and the choose by or.

Country, the U.S., but also our allies in some cases GKN is a large contractor and wonder.

And one of the major major programs that we work on three g. into Sikorsky that tree or CRO structures, and we see a picture of the Black Hawk bottom right. That's an iconic aircraft I'm sure. Most you've heard of a black Hawk, that's one kratos defense and security systems. They are in the top five quite often these days I think last quarter. We showed you.

Picture of Duval, Cori, which is a tactical drone. This is a company makes drones. This is a this is BQM 167, eight is a target drone and we produced the arbitral to use to produce the structures for these drones I believe were the well we've been told by them, where the main supplier of preparing.

Charles for older drone programs.

May get another large contractor wonder we work multiple programs with Meg one of them is the Yankees.

Yeah, you 18, growler pictured on the bottom left here, it's a derivative of the F. 18, I'm sure. You know do you have to 18, Oh. This is electronic where of warfare jamming aircraft and pork supplies exotic rate all materials into that program a middle River Aerostructures systems.

Well, we won't go into exploration of them right now that we will discuss later and remind me remind you that middle were used to be a subsidiary or GE aviation, but now to a subsidiary of estrogen or aerospace, which is a large Singapore aerospace company I want to be going to slide five here.

All right. So we were getting these pie charts. These days it kinda liked a music to tell a story top.

Top one is just last fiscal year, yeah, but the bottom line I think is interesting compare the bought detergent interesting to bear that are the top Pie chart was last year and a bottom Pie chart, which the first six months of this year and you can see the obvious which is that a military as much larger commercial.

<unk> for smaller and business aircraft. This war as well the military is larger not only because it is in its own right, but because our commercial aircraft is way down so as a percentage military went up a business aircraft. The you know the key program that Ron. This is aircraft is actually the global 7500 bombarded global 7500 through.

Oh that.

Oh, that's through both Emirates, and GE aviation programs, the little quiet, but we expect that to actually be moving up. So they are just your current percentage should increase.

I'm, not saying go back to 2%, but it should it should increase.

So I think that covers our written on slide five you want to cover when we keep moving slide six.

Okay like I said, we're getting into the pie charts, you any pie chart crazy, but again I think they tell kind of a nice story in a in an easy format or sold.

So this is new Pie chart, we haven't done this before we're taking military and this is for the first six months that's to go back to.

Go back to slide five the bottom Pie chart military that's a 51% taking that and saying okay. Now lets break down that 51% for the same period. The first six months of the current fiscal year and this is in for saying. This military is a focus for US let's talk about some of these things special mission a those are often modified aircraft for a special military.

Missions, a rock and nozzles a those are blade is off or you know with are designed to withstand very high temperatures of course one is.

When these rocks are fired.

Very high temperature check to be have to be withstood a strong ones. I think you know drones are and.

On your cost structures, that's all over the lot rudel homes or.

Specialty in casings for radar antennas and it's very important that the casing is very transparent doesn't dissipate the signal doesn't distort the signal when it comes we make rate all materials for.

For commercial aircraft as well, but when it comes to military much work exotic the materials are much more exotic so let's look at some of the pictures for the fun of it Oh Park loves so niche military programs absolutely do I know most of program entry, we focus on R&D, which you need to look back to the Pie chart leisure nichey categories, except aircraft.

Structures, which could be more more volume oriented except eminent aircraft structures, we focus on what would be more niche you were not going after like the F 30 fives structures for instance.

So V 22, osprey that so arbitrage used and some restructures and aircraft.

Tuesday aircraft, we spoke about this before it's actually were making some very strange parts.

For this aircraft, which were not really in a position talk about.

This is a modification of some 47 as probably most you can tell I believe there maybe four of them.

So this is interesting work.

We're told that if the and this is an example of special mission sorry, because to some 47. This modified for special mission purposes. We're told that yes, the commander in chief ever gets on one of these airplanes, that's probably not a good day because the one of the purposes of these are plants is to.

Control and direct military operations in a nuclear war. So you could put this in a category of big deterrent for something really bad.

Again, something really bad happening the global Hawk, that's a drone obviously you can see that end up there.

You might remember this because this is one of these was shut down by the Iranians not too long ago.

So and that's I guess good for park, because that means we have to be replaced.

With a more pork materials and our materials used for the structure on a global Hawk aircraft. Okay. Why don't we go onto slide seven.

So, let's talk about our three market segments, and some little more detail, but before we go into that there is a nice picture on the left hand side here and it was.

And it was provided to us currency, David Clark <unk> company. So David Clark most pilots know David Clark as a manufacturer of headsets I bought my first David Clark had said and 96 when it first became a pilot.

But obviously the also produced these these suits for air crews for NASA and the Air Force. So this is.

So this is a really innovative wonderful company. So for the city suits might be for you I think 40, Ryan space program also for the UK to I don't know if you know that you too is currently flying if you might look up Gary powers for reference to the you too when the XR 71 Blackbird was flying.

Used for the XR 71 W. B 57, that's Canberra very old airplane that choose for very high altitude operations. So the key thing here is that the common the very high altitude.

Suits and we supplied the materials used to produce the helmets. We also do what's called Kitting for this company. They asked US if we could help out kitting, we said sure.

So this is a really great example of a niche program managed customer on a child with military application for us not a lot of volume, but we love working with people like this so let's talk about military aerospace. So I'm, we're continuing to focus on these niche programs and opportunities its enhanced focus your for pork partly.

Resulting from significant downturn the commercial aircraft industry. What is one of the me what's going on here.

You, probably got tired of hearing it but pretty cold. It we would talk on these calls about how stressed we were keeping up.

Keeping up with the programs are ramping steeply we didn't have our expansion online yet we're still don't really pushing pushing pushing we never got behind we never have hung up a customer, especially armrests, but it was a lot.

Lots of brute force lots of effort just to keep up during that time I think there were there were months, where we were just flat out at or.

Full capacity, where we had no.

No extra room at all to move up so it took a lot of work and it was.

Very demanding but.

But as a result, we just didnt have the bandwidth to focus and all the things like knowledge room to really want to focus on but we just werent able to do that now with the downturn in commercial it's.

It's opened up for us the opportunity to focus more on military which is really a good market for park, because it's kind of a it gives us more nichey opportunities Dan Oh, the large commercial structures do as a company, we like to focus on nichey programs and opportunities one available so.

So well so just one thing to watch and understand military for us being niche is different a rhythm than commercial will be one or a commercial program like they grew 20. Just wanted just wanted every week every month you keep running running running military stuff is not the way some quarters be active in other quarters, maybe if I could one quarter may be dormant.

For a couple of quarters that doesn't mean that there is anything wrong not just to the pace and more in the river rhythm of military programs, so with military for us our quarter to quarter. It could jump up and down which is not the case with commercial normally commercial would be fairly predictable with Oh, we could have a strong quarter with the military next quarter.

Could be down next year, if that could be up but that's because of the rhythm and and how these programs work like I said some quarter could be active the same program could be dormant for two quarters than active again, let's.

Let's move on to slide eight continuing.

Continuing with their end market focus business aircraft. So our plan is to continue to support the GE password.

2020 engine program for the bombarded global 7500, another business aircraft programs were currently qualified work and also to continue to focus on developing new niche business aircraft opportunities.

So Oh this segment should grow with the global Sobi 500 is quiet that program is required in Q1 and Q2, what we've been told that it's being pushed up at this point also interestingly the business aircraft industry or not so bad business aircraft sales are actually holding up pretty well we talked about this.

In prior quarters I won't go into details about the dynamics of the business aircraft industry as compared commercial but just wonder flagged thats, where your commercial aircraft that's kind of the big one for parks, let's talk about that almost everything you read is negative news is all seemingly all bad you can't.

You can't find too many good articles about commercial aircraft industry or commercial aviation or commercial airline.

Airlines.

What is it all bad for park. That's the key question for US anyway are all commercial aircraft programs created equal maybe not so GE aviation commercial aircraft jet engine programs represent approximately 70% of parks commercial aircraft revenues in the current fiscal year to date.

Fiscal 21, and Q2 year to date.

Talking about the GH GE aviation commercial aircraft portion because GE a four g. again should remember we also supply into that global 7500 program, which is.

His aircraft not current we don't consider that in our commercial aircraft segment I think last year that 70% would be higher. So point is a big portion of commercial aircraft for us ties into the GE aviation programs. So with that in mind, let's take a look at GE aviation jet engine programs, which parks supports perspective.

Perspective on parks positioning in their commercial aircraft industry, let's go on to slide nine this slide.

This slide you've seen before so we're just kind of reminder, abuse, we're going to talk again about GE aviation.

So remember we have a firm pricing lpa with Emirates through 2029.

Yes, as you know is or sub Dusty engineering. We're building are we done factories support that program.

And we're going to update you on that were done in factory a little later on and as you know do simple things, we've talked about before a through G D.

These GE aviation programs were sole source.

On the first four items or let's call that the Athree hundred 20 Neo family all of the leap one engine.

Just want to 747.

After that we have the Comac nine one on the RJ 21. They are 21 is a regional jet 919 are still being developed and of course, there is a global 7500, which we discussed a couple of times already top right on slide nine. We also remind you that we produce a prime restructure for the past 420 for the global.

Every 500, which is not part of the Emerus LTAC, that's actually for GE aviation.

So what are we going to see.

When we go on to Slide 10, sorry, Slide 10, let's let's do an update on these individual programs to put them in a perspective the super important. So the first item we talked about the Athree 20 deal family of aircraft for the leap one engines, what as Eric said, so what they said to my knowledge is reducing Athree hundred 20 production.

From 60 per month free call went to 40 per month.

Reducing by one third well Airbus dropping their shoe a lot of speculation.

Around about what Airbus might or might not do what we don't know what we know with what they've said, so far and I want to remind you Airbus is not Boeing Boeing has come out with a news recently that were bringing their numbers down further, but Boeing and Airbus are competitors, but my opinion is there our opinion.

We're positioned very differently in the commercial aircraft industry.

So what we do.

What we know we have been told.

The age from 20 program is being reduced by one third.

The global 7500, Okay, we keep going back to this news is actually relatively positive last quarter. I said. This is the biggest question Mark in terms of GE aviation programs, but the news is positive we understand Barbara Lombardi is trying to push this program up.

Up to levels.

Which are higher than pre cold levels, because they're getting this product. This I don't know all all speculate regarding this aircraft and the market's been certified and they want to get going so that's.

So that's my opinion anyway as to why but they are definitely trying to push it off or what we're told some 47 eight so very sadly bowling and outdoor going to terminate production of the squeaky clean the skies in two years in 2022, but the key thing for US is there no change to production rates expected till then you're not going to taper down they're going to be production ready to say.

Per year 24 engines per year, we hope some will come in and decide to buy more of these airplanes, but at this point the sevenforty seven level for us as compare to pre covert Comac 919.

That's the single aisle competitor.

That to the.

Hey, Threetwenty 737, that's still in development you might.

You might want to look up.

Coal Mac website, when they expect that.

Playing to be certified and production, so, but it's a very important but potentially very important program for park.

But probably not going to affect.

Well, let me say its not going to affect this year, except for some small quantities to do some development work next year I don't know what to see about that next fiscal year Im talking about so lenders Calmac RJ 21. This is an aircraft in production, it's a regional jet and that program strong and proceeding well.

And I just want to remind you comac is different or not like the western aircraft manufacturers are they're not reducing production at all as far as I understand I think.

I think you're trying to push push it up.

Chinese commercial aviation I think is pretty much recovered so.

So.

What does this all mean.

In terms of the global 7500, and the RJ.

I have to be able to work out deals with GE.

Gration nor to push these programs up because GE aviation will have to produce the engines, but that's the impetus for the.

For the for those two programs so look at the whole thing we have let's.

Get to the day for 20 in a second but the global submitted 500. This is compared to pre co would try to push up some 47 flat as compared to pre coal with Comac 919 point, if we shop will probably another factor. This fiscal year, maybe next fiscal year Homeaway R.J. 21, trying to push up as cure period coal pretty cold level.

And the Athree 20 down by one third.

So okay average all those things are they grew 20 is going to be the biggest portion.

So we'll have more of the weighted average what's the average would see a reduction.

It's not going to be one third because you have one three reduction per day through 20, everything else is being pushed up or flat I don't.

I don't know I want to be conservative lets say, its a 30% reduction maybe 25% reduction.

Alright.

These are just the facts that we know it's important when we talk about commercial we're talking about park commercial not just commercial generally so let's keep going because we're in a savior slide 11 continued.

Continuing the update so we have an arrangement we touched on this last time with Emirates to maintain monthly minimum baseline production levels to preserve parks ability to ramp up production when needed. This is important for park nm rash.

And just FYI.

Emerson Park agreed to defer decembers production to allow park to perform major maintenance on key manufacturing line necessary to support the program. That's our hot melt take lying ahead of required major maintenance.

That actually which was being deferred a little bit probably a little bit too long.

So what's interesting though is that.

Is that this minimal baseline level is approximately one third of free.

Pre IPO with level one third okay support do you keep that number in mind. One third is we're going to try to pull this all together into second next item GE Aviation program revenues for were about 29 million or an average approximately 7 million per quarter last year pre called level 7 million per quarter.

So.

So we're comparing that to one so one third of that went through that sorry, remember our arrangements with them rushes to go to one third.

Pre call the levels that would be what do the math like 2.3 million just divide 7 million by three so its about one third of about two point threemillion, Okay that number keypad and you had in your mind No question based on analysis of the specific JG agent programs with pork supplies into what should parts revenue expectation.

To support those programs.

Well, we just on the prior page include.

Concluded that maybe for us our average GE aviation program and market is down by 25% maybe 30% so.

So we take 7 million.

Reduce it maybe by 25, 30%, let's round the number they wish you were looking at 5 million per quarter.

5 million per quarter, but we had this number 2.3 million.

Based upon the minimal we agree to with them right Thats half that number is less than half.

So what's going on here something as a match, let's keep going slide 12 to try to bring this.

Oil into focus so let's look at the quarters.

Q1 was 4.1 million, that's under that $5 million number, but Q1 was a transition quarter lower things started out pretty strong.

Pretty strong and deteriorated during the quarter. These are fiscal quarters Q2, 2.9 million why is it above the $2.3 million, which we didnt make our deal with Emirates until the end of June so that in June we actually ship more than that average if you say 2.4 million per quarter that'd be 800.

Possibly hit hundred thousand dollars.

Per month, right and you follow the math here.

So that's the reason why Q2, a little higher than Q3.

Remember, we did produce one of the three months. So we say normally would be about 2.3 $2.4 million based upon per quarter based upon your range, who have with with.

With Emerus well, it's only going to be two thirds of that because we didnt produce in September rolling producing October November. So Q3, we're talking about only $1.5 million only two months worth of the quarter 1.5 million. Approximately these are approximations user is trying to numbers I can tell you. The question Mark there because there is a lot.

Got it.

Uncertainty with some of these forecast Q4, which say well three months, we should be it maybe 2.3 $2.4 million based upon the minimum arrangement, we have minimum production range, we have with emerus. Okay.

Okay, so what's about making sense here.

2.4 million then we just say 5 million, what's on making sense, let's keep going on a reflections on GE Aviation program forecast for Q3, and Q4 and beyond what's going on two significant divergence from and mismatch between our greed to minimum monthly baseline production amounts and.

Current end market requirements for GE programs would park is on that is that kind of rough number guesstimate 5 million after.

We estimate compared to 2.3 2.4 million.

Very big divergence, so something has to give and what we have here is inventory destocking and probably read a lot about this aerospace it's pretty significant is pretty massive our opinion as many companies in aerospace supply chain are demoralized, they're trying to just go through the week, they're not thinking ahead they are underserved.

Arrival mode, not not paying proper attention to need to ramp up on inventory de stocking, yes, I mean look if they're trying to get through the next week or two you know, they're not really going to be thinking about three or four months from now because their answer is going to be why shouldn't bother with that if I don't get the next two weeks.

The day through much of that was irrelevant no its a.

No. It's a tough position a lot of companies in the aerospace supply chain Orin affords.

Fortunately Park is not in that position, we discussed last quarter. We did I think we asked the question is whether just locked in I think we gave you some thoughts about whether it's luck or not but here is.

Well here's the thing.

Just can't last forever inventory can't go below zero, that's not mathematically possible. It's just simple math and maybe it's a ticking time bomb at some point the Destocking passed the end so let's go to slide 13.

Abrupt and steep ramp up by supply chain could be required inventory destocking ends.

Important I understand that this ramp up would be a function of the end of it and build inventory restocking and is not dependent on or function of recovery of the commercial aircraft industry.

We're saying based upon the program analysis, we went through a couple of pages ago. This is the reality, we're not saying we're waiting for this a reality based on any recovery in the <unk>.

In the commercial aircraft industry, that's a different matter no Airbus drops another shoe they reduced the forecast further to go back and do the math again, we're talking about what we know now reality, what we know now more media question for park is not when the commercial aircraft industry will recovery will happen, but when industry supply chain.

Inventory will be normalized and one inventory de stocking will and well what happened. That's a really good question, we don't know the answer to that.

But my opinion.

Just partly an opinion I don't have the facts, we don't enough facts to given the answer with certainty is that it can't really go.

Past the end of our fourth quarter. It just doesn't seem like that's possible from the information we do it we have a lot of information. We just don't have all the information so based upon the significant information we have not talking about the supply chain generally first because I'm talking about the supply chain that were part of supplying these programs.

Yes.

There is a possible.

Possibility.

That this destocking could end the end of the calendar year I can't see how could go past the end of the fiscal year. So we don't know and obviously, that's going to affect our quarterly forecast, which will get into the second.

Our opinion supply chain, maybe taken inventory down to dangerously low levels watch out.

That means there will be no cushion when there's only there's this.

They have reckoning wait a minute where our inventory is down to very low levels. Now we have to start supporting the end market at the end market requiring levels, what im going to do it could be a little bit of a panic on the other problem. They have to consider is that some members of the supply chain may not be able to respond.

May not be ready.

Biggest there in that go to the Moralize Malays kind of mindset.

Not park parking is working hard to be ready.

But it could be very interesting and it could be dramatic it could be abrupt. We don't know we use the word could boost we're not sure.

Gee programs just want to go back operating at less than half of what is required to support the end market programs. That's a big deal and the math just says that can't last forever, but asked to stop at some point and when it stops what's going to happen.

Is it going to be pretty abrupt is going to be pretty steep will the supply chain be ready, we don't know, but we'll be ready at least.

At least that's we're working very hard to be ready and also work with our suppliers as well to make sure we're not quite sure.

Quite short.

Why don't keep going I think we kind of went through that analysis and I'm sorry. It took several pages to kind of pull together a slide 14, just a little bit of a refresher slide a single aisle versus wide body. A trend is already in place favoring single aisle that wasn't before colvin industry experts and analysts.

Whatever the worse.

If the sarcasm believe market for single aisle aircraft will cover before wide body aircraft market. This look I believe people would appeal on many of the analysts it's not rocket science, because you look at a commercial aviation and actually doing somewhat better when you talk about domestic travel inside the U.S., maybe inside Europe short distance in Asia what.

Suffering badly international travel domestic travel still not recovered completely but it's a lot better if you talk to people fly domestically, we say hey, you know those airplanes are pretty crowded the airports are pretty crowded maybe not recall that a crowded but crowded but international flights almost nonexistent, what's the point here those domestic flights or single aisle.

Now those international flights are wide bodies sure, there's really very little requirement.

For wide body airplanes at this point and that's why you know.

And then was for an opinion, but that's why it's pretty obvious that single aisle is recovering more quickly than our wide body major single aisle programs, there's three big ones. They threw 27.

Some 37, Max the 919 weren't to the Threem goes into two or three that we think we want to be on.

It grew 20 great program.

Dr program, nine onenine pay attention to that one.

Because they're playing catch up the Chinese but not a lot of prestige involved in this airplane means.

Means a lot to them to get their plate in the market and be successful or the Max hopefully a little boring.

Boeing will.

Find a way to get things back in line.

And recover.

But I guess, they're even their Boeing is indicating that things are going to be pretty rough for them for a long time, So we park.

So are we we part we part we checked part checks through the three single aisle boxes.

And our opinion as you'd want to be in single aisle aircraft. Those are the two boxes you want to check.

We believe single aisle as the place to be in commercial aircraft industry and we believe we are ideally positioned on those two most attractive single oral programs. Let's go to slide 16, a little update on park here, how are we doing well first let's talk about the expansion.

Total budget approximately $18 million, our spending to date about 11 a quarter million.

Spending to go that we do and they ask about six and three quarters million. So.

6.75 million.

Completion expect first half two.

2000, the calendar year 2021, maybe Ron March our this is pushed back a little bit little bit of delay partly weather you know lot of wind, which Youd say boy you know, what's the matter with you how could you touch that sort of new flash or theres lot of when in Kansas I agree and also but here's another thing Colby travel restrictions, that's actually a problem for us Bill.

A lot of the equipment is a very sophisticated elegant equipment, we're having a stall it's not ordered off the shelf. We saw specially designed for park. So it's really important that the manufacturer come in when the equipment is being installed and we're bringing it up and bring it online.

And some of these manufacturers are not from the west or overseas Europe, and it's very difficult to get these guys to be able to travel to U.S.. So robin will troubles that we're trying to work through it but that's why we think there could be some delays in finishing one will the plant be qualified and actually production from Russ.

This year, we're done plant from rents will be used for other things with the purposes redundancy for MSC amorous programs at GE too I guess.

Well, it really depends on Empress and how quickly they want to move with the qualification how much attention how much resource they put into it because people have to work in the qualification it's kind of a team effort within Emerson Park My guess is.

My guess is maybe they're a little distracted right now so they may not make this the highest priority obviously you don't need for capacity at this point.

So we're not sure obviously, we'll push them, we'd like to get qualified we ended the year, but.

Maybe a more realistic scenario is the beginning of calendar year or 22.

Okay. So let's go on to Slide 17 Park continues to be fully operational throughout the pandemic, Our New York Office open our Kansas or manufacturing facility continues to be operational it's been operational from day one.

Remember we told you we got those 25 letters from military contractor, saying, we're expected to stay open not that were essential that we can stay open we are expected to stay open. If you think about some of the programs we talked about earlier in the presentation maybe you.

You can understand why that is our customer flexibility program has been instrumental in helping park effectively and quickly adjust to changing and unpredictable business environment. Currently 81% participation. This is like a a cross training program.

A large portion of our people or participate in that program.

Mark Special people continue to do very well under difficult circumstances 'cause it right here we have a.

Treater crew.

First on one of our first shift to solution treater cruise.

Actually interesting just one of these guys.

It's not normally on that crude one of these guys is is normal.

Normal job is hot mill taught mills.

Film I believe but through the quest customer flexibility program. He moved over to this solution.

Crew so.

I just want to let you know we have a 111 people at this point Sony's so for a 111 are there my heroes. These are unsung heroes to come to work every day and do their jobs, they're not fooling around no whining no complaining.

And you remember working.

Specialty and solutions on these military programs so.

Some of which we discussed at the beginning the presentation. So we cannot discuss these programs protect us and our allies.

A very important programs inside of their everyday Dan.

Dan and day out.

No one ignore complaining and that's the whole group on 111 of US right now.

So just want you to know that we paid.

We paid all hundred 11 of our folks and putting that be $125 bonus for Q2 wasn't a great quarter, but we met our objectives and the bonus was paid to these four guys as well as everybody else.

Let's go onto or less slide 18.

So in summary, slide the world has been badly damaged and it is a very troubled place. This time I'm not going to go into what that means because I think we all know what it means.

But a park we continue to Gulfport.

Not feeling far Saar for ourselves, we're not hiding away waiting for the will get better we're not letting up.

Others May falter, but we are not going anywhere.

Mark is a strange and unusual company, we're not like others, we play for peaks we don't.

We don't give up on quit.

We are here to fulfill our destiny.

Last item of interest is that park one public on November 17, 1960. So this November 17, we will have been public for 60 years inter.

Interesting little.

Well no is that.

Separate.

The members Seventys My birthday, I Didnt know that park went public on my birthday, obviously.

I was born before that 51, but remember 70 as my birthday. When it came to work of park and 98 I was going through some will files and I found to this in this file was just kind of a.

So a tombstone ed with the edges of it not even quite properly right.

Right jagged edges, we put it in a medically sealed the.

I don't know a case so it would not.

Not the K further core or.

Further just color I looked at this and I said, the learner 17, nobody ever told me that the company went public on my birthday. So I found out about it I found out about it not 90 60 with a 19 year to year.

So that's the end of our presentation and thank you very much for listening hanging in there I know these get for long operator, we're now ready for questions.

Thank you as a reminder to ask a question you need to press star one of your telephone to withdraw your question press. The tacky. Please stand by what we see how the tuning roster.

So once again Thats star one to ask a question at this time.

We have a question from Brad Hathaway with Fairview Your line is open.

Hi, one quick just clarification I may have missed it but on slide 15 could you talk a bit about the Q3 and Q4 expectations.

You know something I did miss that I apologize right over that.

So when we go back to slide 15, I just want to skipped over that slide you know have a prince out in front of me and I must just missed that slide.

I apologize so thank you very much for bringing that to our attention yes.

Yes, so what we're talking about for Q3 is 10 million ish and again, we use that issue because there is a lot of uncertainty based upon the things we've been discussing particularly the de stocking and when that Destocking will end and for EBITDA, We're talking 1 million ish, which was our forecast for Q.

Forecast for Q2, or Q2 forecast was nine and one.

So you're going to ask the obvious question at least I would well why is the number or the EBITDA number a little bit down in Q3, considering the revenue numbers, a little bit off and that's been.

That's because the product mix so the less favorable in Q3 as compared to Q2, that's not a trend.

On the product mix goes up and down quarter to quarter based upon what programs are active at this point, maybe a little higher than 1 million ish, but that's what we're thinking about for Q4, we have our internal numbers, but we're not going to provide them. At this point. This would really be just guessing there's too much uncertainty again, the key uncertainty well its two things one is.

It is a market do generally but this is key thing. It's a very big driver is that destocking. When it ends that could have a dramatic impact on the topline also the bottom line as well and again I. Thank you very much for bringing this to our attention on I'm sorry, I missed this but let me talk about our long term forecast for a minute as well so we are.

Back on slide 15, we accrue or long term forecast on.

During our Q4 May 14, 2020, investor call and the reason was that we just sell through is too much uncertainty and we just be guessing. If we didn't think we doing anybody any favors, but just coming up with a guess it just doesn't help anybody to do that we're still not ready to.

Reassure our long term forecast, we believe the fundamentals that were in place with the prior long term forecasts are generally still in place.

Question is how much do the right things move.

No that doesn't apply we're waiting waiting around for things got better and that's not an all working hard on.

Everything that we can control, which is a lot of.

But we're still not in a position we don't feel to give you an update a walk from forecast that would be meaningful and we the one just got tenants and down the bottom.

On the bottom of slide 15, so our current thoughts about a long term forecasts more generally we bought her pie charts again to kind of give you some perspective and I guess the point of this is that commercial aircraft.

It will be driven to some extent by that Destocking factor. We continue to go after commercial aircraft programs for Nichey business aircraft same thing a military we feel is our big opportunity right now.

That's where we're focusing a lot of our attention so that.

So that doesn't quantify the long term forecast, but as I mentioned in a prior slide it actually is.

Good thing in the sense that the courseware aircraft industry is down because it gives us the opportunity to focus on things that we'd like to focus on another strategic.

Another strategic for park long term I think that I really apologize Brad from this and I don't know what happened, but I think what happens I have two pages stuff together and I just flipped over some soul glad that you asked me that these would have been horrible I missed covering this slide a pretty important slide.

Got a problem I was slightly panic that Ida spaced out for a minute so glad to hear it wasn't just me so.

So one other question for you.

One other question for you.

With regards to M&A I think last time, we spoke last time, you spoke and our last quarter call you talked about having a little more visibility in what the M&A landscape might look like in September and October. So I'm curious your view any update there and kind of how you're seeing the opportunity set out there for kind of using some of your capital.

Very interesting question. So we have been active we've been looking and a little interesting anecdote here about a year ago or let's say last fiscal year. I think it was you know sometime last last calendar year.

We looked at a couple of companies over being auctioned by bankers and we did bid on them and we bid probably like half what they were sold for and we we learned that there are sold for abuse are bought by public companies to do the price was disclosed they were to somebody that we actually stretch to get there.

Number with a bit of a high side, maybe our numbers too high.

So you know we were told that the bankers that you're not going to you're not going to make it in this this auction, which okay. Fine then moving on but we were starting the year that they actually sold the business for the numbers of bankers cut 'em indicated to what they said you have to get to this number more or less you know how they do it and well we're not going to do that and then.

No business were actually sold for.

There are approximately those numbers that range now.

Before we looked at another business, let's say a couple months ago or so maybe maybe this summer which is also being sold by a bank or was this more business and Oh, we do.

We did provide that number is going to provide a preliminary being as they call. It a nonbinding bid and.

The banker said will log numbers too low and we said all right well and he gave US a number we'd use to get to know how to do this kind of stuff and we say well we don't we're not the move that number up. This is the number we feel is a proper number by the big difference is that business was not sold.

So not only was it that's over a higher number was not sold them all so.

So I think the business was removed from the market. That's what those are interesting because last year everybody anybody is bidding for these businesses. This year, maybe not read that or at least this time frame, maybe not maybe but we don't have so much competition as you know day wheel, we feel happy you know that we bid that we provided which is a preliminary number.

Binding bid, we felt was a proper valuation.

But it was interesting that it wasn't what by somebody else at twice our number was booked by nobody. We also are looking at another business now that was actually the spot at auction one of our large customers put us onto it. They let us know that there was a company that that they are aware of that.

That might be for sale. So we contacting ownership directly we're talking to them that may or may not happen and we'll see but we happen active but we're also being disciplined we're not just going to throw money at something and it seems like right now as compared to last year.

We're in a much better position to get a proper value for a business in an acquisition well, what we consider to be a proper value as compared to like I said last year. So I'm glad you asked that question ears.

Lease our alumina perspective seems to be an interesting difference and.

The M&A world.

Got it great. Thank you for that detailed response.

Do you mind, if I ask one more question.

As many as you want.

Great. Thank you. So I guess the question is kind of.

Possibility for the company to gain market share over the mid term because of the demobilization of I guess, the rest of the supply base and maybe some of your competitors I mean do you see that is giving you all kind of relative strength you see a change.

Chance to be kind of define more niche programs it might fit for par for park.

During that period.

Is that something you were kind of excited about.

Absolutely that's our objective like I said, we're not we're not going.

Going to sleep or not doing sarver itself, we're going forward out there.

You know when they say take an Asian kick in you know what we're looking for business. Unfortunately right now.

Unfortunately, right now we can't call physically and most customers. They just don't want to.

Is there and you know how that with with cold but of course, so a lot of it is for work and we make ourselves nuisances, but we're not going away and we keep looking for new opportunities new opportunities new opportunities.

Yeah, our our sales folks need to be energized because that's what it's about and we do want to take advantage of this opportunity were maybe others aren't paying attention or maybe demoralized were not so.

Absolutely absolutely I, just a wonderful thing since you mentioned.

New programs. So that I should mention is that we took a military we will be spoken by a military or quite a bit interim.

Interesting development is that there's only two domestic suppliers of composite prepared materials in the U.S.

In the U.S. So park is one of them. There is no larger competitor all the other competitors are foreign owned owned by foreign companies and we're wondering and hoping actually that that could work toward advantage. We think it should but obviously, we'll we'll take advantage of anything that is made available to us.

So I just wondered Ed.

Great well, thanks for all the detailed responses and thanks for all the efforts in what must be a tough market.

Thank you for input bread.

Thank you and I'm currently showing no further questions I'd like to turn the call back over to Brian Smith for any closing remarks.

Thank you operator, and thank you everybody for listening in appreciate being able to go through a quarter.

Every quarter with you and any comments you have but our presentation, let us know I mean like I said, we're not we don't try to cover everything we try to cover what we think might be of interest each quarter, and it's going to be different each quarter as well.

And of course any questions give us a call you can reach.

And I today, we'll be around and available. So thanks again have a great day, and we'll hope to talk to you in the near future take care.

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

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