Q2 2022 Park Aerospace Corp Earnings Call

[music].

Good morning, My name is Michelle and I'll be your conference operator today at this time I would like to welcome everyone. The Park Aerospace Corp, second quarter fiscal years wanting to earnings release conference call and Investor presentation. All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there'll be a question answer session if you'd 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.

Thank you at this time I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, You May begin your conference.

Thank you operator, this is Brian and welcome everybody to our second quarter conference call with me.

Our balance sheet, Paul as usual of course.

As most of you know we are we announced their earnings this morning and that earnings release, there are instructions as to how to access the presentation, which we're going to go through now via webcast. The presentation is also posted on our website and I think you really want to have a copy of the presentation in front of you always have to go through it to make this call more meaningful as usual.

We tried to provide insight interesting perspective, we can't cover everything we don't spend a lot of time thinking through.

Dry data numbers are actually you know really not when we tried to do with these presentations and want to warn you. This could be a long one but I think the last three or four out there and it could be like a 45.50 minutes, so hanging or if you can imagine I will be happy to answer questions and what we don't go through the presentation. So let's get started on slide two this is.

Our forward looking disclaimer, but let us know if you have any questions about our disclaimer language slide three is a table of contents. We have three dependencies, which are attached to the presentation. We're not going to go through those at this time, but again, let US know if you have any questions either at the end of the bar.

At the end of the presentation or you can call us later.

Slide four.

We get into the.

Part of the stuff we go right with the number so are we just announced our fiscal year 'twenty to Q2 as you know our sales were $13 million 618, and look at the right hand column here.

Bob at 4 million 400, 411 gross margin of 32 or 32, 4% down from Q1 as you can see I'm, probably more or less at the level of the last couple of years.

And I think that we are indicated that gross margins would come down in Q2, when we did our Q1 call.

Adjusted EBITDA of 3 million to one or three 2000, and our adjusted EBITDA margin of 27 crushed 23.7%.

So what do we say about Q2 during our Q1 investor call on July eight we said our sales estimate was <unk> 13 in the quarter to 14, a quarter million. So it seems like they came in within the range there and our adjusted EBITDA estimate was a 3 million to $10.0 million again, we came within the range or forecast.

What should we cover this every quarter I just want to say I'm not sure how much of this stuff. We should go over biggest thing what lot of you were pretty familiar with us, but you know, but we still go over some of the basics just in case, you forgot or in case, we have some new people dialing in which we hope to have forecast philosophy is a little different we don't provide numbers that we can be.

We feel that it's a little bit of a silly game, we know almost everybody plays it but we don't we give you a forecast we gave you a range we're saying to you. This is what we think is going to happen we could be wrong, but we're saying to you. This is what we assume it's going to happen not easy happened, but it happens to them. When we do we normally do which is work very hard with a lot of dedication and commitment.

So we're not trying to give you a number that we can beat and that'd be heroes later on and we think that's kind of silly and almost you know just not not worth your time. So just wanted to remind you that let's go on to slide five.

Lots of factors, which affected two two.

You want to go through and throughout this presentation. These will be kind of things. These are be repeating themes sales are a central component for missile programs. We discussed this over the last several quarters.

Q2, we had sales as a component of about $1 million remember that's a low margin.

This is.

We have the relationship with the supplier it's in oversea supplier.

Some of our customers and Oems that are on these missile programs in the US asked us to buy the product for them, we have the relationship with the supplier overseas.

These are critical programs and then we sell the product, which we sell our product to the customers. So there's a mockup of ball, but its a quite low margin now the flip side as we discussed many times is when we actually use that product and produce the we call ablative ablative prepress and the margins are quite high now once we sell the product.

Do these customers they can do whatever they want with it but the expectation is that it'll be used by us to produce the comp.

Posit materials for these will play their programs for them at some point in your future. So it flips when we produce the materials good margin when we sell the central component.

Basically a mock up low margins, so our second quarter, our low margin 100, sorry, $1 billion of sales of that component difficulty sourcing key raw materials. Yeah. This is this is a big theme over $200000 actually I missed sales because we couldn't.

And your ability to source materials, we needed and then international shipment difficulties another $200000 in Michelle's in Q2 in other words. This is stuff going out and not come again, we have overseas customers, we couldn't get international shippers to ship all the stuff I mean, our people are really good at that too really good at it we still couldn't ship $200000 of product.

It was protested overseas for us it's very simple.

We ship a product we invoice it and then we recorded as a sale in that quarter, we can't ship it could be a sale in the quarter, so $400000 approximately miss there.

And that doesn't sound good, but here's the thing we had over a million dollars additional dollars at risk in the last couple of weeks of the quarter.

So our people did a.

Really a fantastic job of U S Mi.

Getting this stuff done a lot of brute force a lot of moving things around a lot of juggling a lot of logistics.

But it.

It was a little bit of a nail biter rush because theres a lot more at risk all based upon these same factors.

At the end of the quarter.

So lots of brute force.

Daily battles plus.

Plus we're dealing with a COVID-19 quarantines. Fortunately everybody's Okay. You know nobody has really got really sick. This time around but that reached havoc with our production scheduling and planning.

Because you know what happens in somebody's wife tastes positive then they have to go home and their whole crew has to go home and.

We have to work around all that stuff.

It's not complete so this is just a light that we want you to be aware of and I think our people did a pretty terrific job in dealing with these kind of things domestic freight issues, yeah international shipment difficulties domestic freight issues.

Okay.

Supplier Hudson terribly can't get.

If somebody does a deliberate to us we're talking about driving up the kids city train yard to go pick.

Pick up some of the materials or sell that we couldn't do that would you say well, let us what we're talking about it additional cost for expedited freight shipments. So yeah, it's kind of like little weird in all of our suppliers couldn't really getting the product to us and they said Oh, well Westwood, we can get you something but then were expected to pay the expedited freight which okay. You could say that's kind of interesting perspective, but.

There are actual cost their cost escalations.

If you're paying attention to.

Going to the World Wash Your journal financial news listen to other companies. These are not going to be surprised if this is kind of day to day life of a company that you're manufacturing in the U S. Not just in aerospace I don't think either raw material cost increases yeah. There are a lot of them are most of their covered when we enter into an LTA with the customer normally it's based upon LTA, we have with the suppliers.

No L. T. A well then we got new quotes for customers, who normally go to make an adjustment based upon raw material cost increases, but not always covered a general freight cost increases mostly covered not always covered in terms of our P&L.

Sorry in factory supplies.

Yeah, no I always covered.

There's risk in terms of manufacturing supplies cost for those supplies will go up and up and up and miscellaneous other costs. Yeah. All of the what you can tell me what they are utilities wages benefits insurance you name. It it's a very strange environment. We're in in my opinion I'm talking about just generally as a country, we probably would have been able to increase our.

People count remember, we've talked with every every quarter, we'll give the specifics later on.

Good news, but there is a two edged sword here because obviously you know the people count goes up the cost goes up as well. These are not any kind of excuses at all we don't run into that kind of acute thing we don't like that but these are factors that we thought you would want to know about so let's go on to slide six I want to talk about on slide six this is our no annual Hum P&L.

History going back to 2017.

You can take a look on a well to look at on slide 34, and our forecast for the current fiscal year fiscal 'twenty. Two if you want to compare it to the prior years, but let's just move on and let's get going here on slide seven.

So.

We were not including this information for a couple of quarters in one of our important shareholders. So you know, we really really like to see this information every quarter. We said sure. So here we go.

Mark.

So our long term debt. This is our balance sheet cash cash did in history and capital allocation strategy, sorry, I forgot to read the caption Parker's zero long term debt park $813 million of cash and marketable securities at the end of our Q2.

We've got spending to go to complete a major expansion of about two and a quarter million spending to date about 17 in a quarter million dollars and we spent about in $1000 in Q2.

So and no tax transition payments, we've talked about those in the past you know match better explain that can I am but they have to do with.

Hump tax law, and Oh, sorry overseas cash so, let's see we have $14 three that we owe some $6 million that has been paid to date and $8.0 million in our fiscal was paid in the second quarter our debt.

That those payments are to be paid to $17.0 million through calendar year 2025 of course, you always have every quarter or like a little over $2 million plus regular dividends. So you can think that think about that as well in terms of cash outflows.

Parks cash dividend Parkman, we've maintained our regular 10 cents per share quarterly cash dividend throughout the pin debit connecting them a crisis I don't think everybody did that park has paid 36 consecutive years of interrupted unearned interrupted uninterrupted regular quarterly cash dividends without ever skipping a dividend or reducing the dividend amount of <unk>.

Yes, it's a long presentation, sorry park has paid $548 million or $86.0 to 575 cents per share in cash dividends since the beginning of our.

Fiscal year 2005.

Go to slide six another 10 cents per share regular quarterly cash dividend was declared on September 13th payable November four just shows record record on October one 2021 so.

Can we go with this cash dividend paid on November four 2021 Park will have paid $550 million in cash dividends since the beginning of fiscal 2005 with three exclamation points I don't know what you think but you know for a small company like park, that's a heck of a lot of money.

But we get it don't tell me what you did from yesterday tell me where are you going to do today and tomorrow. So now we go to parks capital capital allocation strategy or a fancy way of saying what are we going to do with all that money. It for those of us that aren't really living in the Wall Street, a financial World I think that's what it means so acquisitions and potential collaborations.

<unk> continues to watch and track certain potential acquisition opportunities, but also strategic targeting of certain aerospace industry segments or product lines, we've talked about this.

Last time, so we identified areas we want to go into that we think are strategic rather than just reacting to stuff that comes out with it.

Transom from bankers, let's say parks reached out to several companies who continues to reach out to companies in the targeted segments. So we're still at it we're still trying to Mexico.

Next let's go on to the next slide slide nine potential strategic investments and major aerospace and aircraft programs. A park has reached out to a certain large Oems regarding strategic investments a major new aerospace programs. So this is really interesting.

These are household names oem's and eurosport to industry or we're aware of new programs out there.

Rick maybe they haven't been announced yet so we've reached out to them and asked if we could work with them on these programs.

Partly by making investment obviously, we would also want that business as part of the discussion.

So, let's keep going Colicroot every dollar of its cash through much dedication and sacrifice on the part of many parks people over many years parks money is not easy or cheap money. It's not easy economies you go with us. So we will not invest our cash casually or do a deal gesture the sake of doing a deal that money you know when it comes hard.

My feeling is your tenant you're going to tend to be much more thoughtful much more careful much more serious about how you spend it you know, it's not going to be a let's just kind of throw money around for this thing or that thing a cool idea that somebody had if or when we do a deal or invest our cash in an acquisition or some other form us strategic investment. We will feel is the right thing to do for park.

And its owners, meaning you well.

Well I guess somebody who are not shareholders with many of you are Ah slide 10. Okay. This is our you know one of our standard slides in our presentations our top five customers kind of a fun thing, let's start with Aerojet rocketdyne, there, but it was quite a bit recently that goes with Northrop Grumman ground based strategic deterrent S. C. B S. T. If you heard about that.

It's a really big deal, we're very happy to be on this program and.

And we hope to get more penetration into G. B S. T. This is the next generation I see BMS is very important for our company's country's defense Aero matrix composites window of a picture offer a matrix here, but there are multiple programs tradeoffs they seem to be the top five quite a bit and we have a picture of their you tapped.

22, a drone.

We're told by grade ores that we are the main supplier of composite materials for their drilling programs. So anyway here, we usually try to find a different picture.

Quarter, but you say you seem to me to talk quite a bit Oh.

K Middle River Aerostructures system infrastructure system, we know that is there's plenty plenty of stuff without them and the rest of the presentation to dwell on it here, but we got a nice picture of some 47 eight engine of cells in the bottom right.

Those Michelle just either all made with park materials and Northern group, but we featured where group. It doesn't program last quarter I think this time, it's a top right. The passport 20 engine now whats interesting is that we produce the materials for the michels for.

Thruster versus for this engine through mras, but this is not Emirates. This is and this is a component of the engine itself.

Pardon restructures are primary structure of the engine and this is produced by the northern two who are the passport 20 engine, which goes on the global 7500.

Long range business, yet, let's go on to slide 11, Okay. So here's our and other standards slide that we have in our presentations our pie charts, we have 'twenty or 'twenty, one that we have.

Two for the first two quarters.

And just for comparison, you know look at hobby.

The pieces of the pie have moved around the.

The commercial as you know back dominating.

I shouldn't say dominant that's not right, but much.

Much more significant than it was let's say in 'twenty. One that's not so no I don't think it's to be a big surprise to anybody military maybe a little slower we hear generally not for us due to budget issues, Although I guess the Senate Armed Service Committee just.

<unk> released its full markup and it's worth it's down to us I can tell you about it good for many of our programs screwing the Valkyrie.

For us military it's really going to be the programs, we're on and which ones you're active which ones are not military for us is very different than commercial commercial, especially they're much programs, they're gonna be running running running every month every week, a really but military you know we can do it on a really good program it'll be active one quarter and then it will be active next water and it will be act.

The following quarter, obviously, we have no control over that so that's why the military revenue could be a little choppy, but it's not to me anyway, a function of the military market getting stronger or weaker we think it is just fine from our perspective also a niche programs around we we'd like those we think they're less sensitive to the big budget fluctuations there.

Are these programs, sometimes get caught up in a business aircraft for us that's mostly a global 7500, that's a big dog for us in business aircraft, although we do supply into other like Gulfstream in Falcon and <unk>.

Citation type programs.

In business aircraft has been quite good so for the last I don't know six eight months, maybe nine months.

For maybe obvious reasons you know people are.

To have fly on business jet prefer to do that rather than airlines are commercial will go into much more deal detail about commercial throughout the presentation. So let's keep moving here they only get bogged down slide 12. This is when a little fun slides that we do every quarter is a lane and Donna or project, we have a lot of fun with this this is not necessarily the big.

Military programs, but you know there are programs, we think you would find to be of interest.

The top left so we're in the Pac three program, just really kind of a fun thing or interesting thing for us after 35, providing tracking data of an incoming missile tube ground based interceptor and pack screen weren't even a factory program for a long time I think we mentioned it many many times.

Then the next one to the right.

Navy anti 41 vertical launch system, and we actually produced materials and parks was program, but we're not really at Liberty.

Liberty to talk about it very much except this is a really nice picture of you should see them. The actual missiles being launched from the deck of the Navy ship. A next one the C 27, J spark medium range surveillance aircraft. So this is a rate on materials for the coast Guard and then have you asked or hypersonic missile blade a mature.

It's probably not surprising there and that Spacex Falcon heavy really nice to be on this program. We go to get more penetration to the space of programs, but we're not really in a position to talk about what we do with that program the.

The niche programs, we consider radar with rocket and thousands of drilling to be the niche military programs, that's where like a focus let's go on to slide 13, Okay changing gears here update on our major expansion in Newton, Kansas.

Total budget moved it up to $24.0 million I think last time, we said it was $19 million and so it's creeping up a little bit spending to date, but 17 in a quarter of millions, but I need to go add it up you know everything is totaled 19 half that's two in a quarter of million to go. So we know where the expansion is complete the way. It works is that theres hold backs with some of the.

The suppliers when things get signed off and certified then the final payments or release. That's why you know there's still some money to be paid out manufacturing trials in progress, which is a good qualification runs expected to begin probably around Thanksgiving. So we're saying December.

We push forward with a major expansion when many others are slashing their capital spending maybe to zero. Good thing. We did we had we'd be in a world of hurt right. Now originally so expansion was redundancy as you remember, but based upon everything going on we really need this expansion for capacity as well and we figured it out now we've been a big win.

Mobile because you don't do an expansion in building.

Get the building or the equipment designed equipment get the equipment are certified and released that the factories are qualified in six months, that's not that's like a three year process. So we didn't start keep going we'd be in a reopening of a real problem on our hands right now so a good thing we made the right decision one thing that's a little new here the picture is.

The bottom picture you see the the existing facility in the middle with the new officers. The facility. The left this new facility and this little building the right that's actually something <unk> been wrong.

We never really talked about it but I wanted you to see it it's.

It's about 10000 square feet tends Tensity aircraft works, that's our R&D facility and the name we came up with the name is kind of a little bit of a secret thing, but anybody can guess, how we came to the name.

Well, maybe we'll send you a at least a dollar or something like that alright, and then the middle picture. That's the new building with a new office sorry, the existing building with the office expansion seats. Two stories now building top who's the new building.

On slide 14.

So commercial aviation updates and developments changing gears again onto commercial aviation the first.

Item, we had in prior presentation higher jet fuel prices and environmental concern provide extra motivation for airlines to move more quickly replace less fuel efficient legacy single aisle aircraft with more fuel efficient modern single aisle aircrafts, such as the Airbus <unk> hundred 20 Neil.

Next item domestic so these this is new stuff and we're going to try to give you a perspective here so what's going on with the commercial.

Aerospace commercial aviation market domestic commercial aviation activity was recovering nicely in all major markets, but the delta variant negatively impacted recovering in August and September the passenger traffic was down in August and probably September as well September Hudson fully reported but that's the expectation so tight in the.

China domestic aviation market was probably impacted the most of the major markets based upon the Delta variant outbreak in China, but the U S domestic aviation market as well as other major markets have also been negatively impacted by the adult area.

The full U S domestic aviation recovery, meaning back to pre Covid I guess, that's what we mean by that.

It would have which had been predicted to occur in the first quarter of next year or even earlier, maybe the fourth quarter of this year, maybe it pushed to the right to some extent by the Delta variant my feeling as well.

Very minor amount that's my feeling let's go on to Slide 15, and then we can talk about this more why will it be a minor amount if at all Willis temporary setback negatively impact airline orders from the airplanes produced by a large commercial aircraft manufacturers well I don't know if you're running an airline I'm not.

Well you have to do airline business in the long term plan and you don't just you know water an airplane and buy it.

In two weeks, so if there's a two or three week, sorry, two or three months setback and private passenger traffic.

Data and you're running an airline you really going to change your order patterns youre going to push out orders you're gonna cancel orders that we're not talking about at the beginning of the pandemic wonder is massive uncertainty, but everything this is a very different situation. My feeling is that if you're running an airline you make that decision to push out or cancel orders under these circumstances as you probably know.

Wrong business disruption you run into airlines large commercial aircraft manufacturers Boeing Airbus change or adjust our production schedules based upon this temporary setback I'd be shocked that test. They did that I would be very quite surprised in any event. We have not seen any evidence of this and are all enrolling patients with a delta variant be trending down but in November.

And so I was gonna predicted by shirt experts.

People are saying, it's trending got already a lot of people, saying that a lot of data to support that.

Also you know there are other countries that got that start with adult ovarian before us like India, I think U K and we look at their patterns. So I think there's a lot of expectation that the delta Varian is kind of winding down and you know by the end November even.

End of October we'll see it winding down even more so my feeling is that yes. It did affect passenger traffic they say that in a let's say August September but my feeling also has this had no impact upon our commercial aerospace.

Aerospace business International commercial aviation has started to recover to some extent based upon some loosening of travel restrictions and increase vaccination rates, but big but it's still significantly still significantly lags domestic aviation recoveries International commercial aviation is still expected to take a number of years typically recover slurred cover it means a pre COVID-19 level.

I don't know, maybe three or four years with people thing, let's go on to slide 16, I think our single aisle commercial aircraft are designed to service the domestic aviation markets as well as shorter range internationally Aviation markets Park believes single aisles, the place to be in commercial aviation at least for now yeah. We feel were in a right place because single aisle.

That's the <unk> hundred 20 family, that's like the probably I don't know aircraft with a decade, maybe for multiple decades going back 919. Those are all a single house three interesting questions. How will G. E. G. Aviation's rise engine of element affect the commercial aircraft industry in the future have you heard about this.

G aviation.

Rice engine, it's actually it's not even G aviation or that's not correct. Its a T. F M, which is the partnership between GE aviation in San Fran So that's actually not correct, but.

The people, we work with Boeing to develop a new single aisle aircraft to compete against the <unk> hundred 21 extra law, which Airbus plans to introduce in 2023 last one will come back 990 certified in China before the end of this year, we're not going to go into these items because we just don't have time. These would take could take 15.20 minutes out to have a proper discussion.

These items I, just want to put them out there because they could be important in terms of what happens in the future and the commercial aviation industry and markets. Let's go onto 17. This is slide you seen men almost I think every quarter.

Some minor modifications were not going to cover it just in the same time, except a couple of items. So just the basics here, we have a firm pricing L. T. A requirements contract from 2019 through 2029 with Middle River Aerostructure systems Mras, a subsidiary of S. T Engineering aerospace.

So what is this about when we entered this contract mras, what's the city or a G aviation and then it was sold to S. T Engineering Aerospace I think about three years ago, but that's why all the programs. We're on two mris are GE aviation or CFM type.

Graham G aviation tie in that.

That existed before the sale by GE aviation of Embarassed S. T engineering, we've done in fact, when we talked about already construction is complete so our deal with G.

She aviation and Mras was as soon as they sign this LTA and we're going to go ahead and build a factory and of course, we did that.

Even though it was just a human shake, but you know of course, we live up to our commitments. So let's not go into the rest of the items here do you have any questions about the room. Please ask legendary Boeing 747, eight engineers solves a love this picture because especially this guy in the background you can show you. How huge. These are these are the cells are these are all part materials that go on.

These are the cells lots of content.

<unk> 18.

Update on GE aviation jet engine programs. So, let's do an update now it's going to take a little while so we'll try to go through as quickly as possible. So the <unk> hundred 20 Neo family of aircraft. This is the big Big Dog. He's had the leap one of engines, it's ramping steeply we got this in the last.

The investor presentation, but let's just quickly go through it in May two on May 27 at May 20, Some news release Airbus stated <unk> hundred 20 family Airbus confirms an average age from 20 family production rate of 45 four months in Q4, that's basically now Q4 of this year and it's one of them mentioned that it's been at forties throughout the pandemic that's where.

They held at 40 and they call on suppliers, you know close to prepare for the future by securing a firm rate Ah 64 by Q2 of 2020.364, so it's moving around quite a bit anticipation of continuing recovering market. Airbus. It's also asking suppliers to enable scenario or 70 by Q1 of 'twenty four.

Longer term Airbus investigating opportunities for rates as high as 75 for 2025, there's a little picture of the day through 'twenty deal. So those are very big numbers, So let's get going on slide 19.

As at the end of August 2021, CFR meeting leak whenever one engine had a 16.25% share of firm orders for the <unk> hundred 20 Neo family of aircraft, but I have to source of that is the euro and your news, which is kind of like the Bible for for commercial aircraft engines.

The.

The <unk> hundred 20 family of aircraft.

Two engines that are certified for the program. One is the CFM leap one area you have almost flat. So this is the share we're talking about shared that the CFM leap one engine has.

That's our program the CFM leap one we're not in the craft program. So that's the CFM is good for US we don't supply into the crack homerun.

So, let's keep over here, assuming a 60.25 CFM.

Sure.

To me, Matt and that's those are the facts now we don't we're not predicting that but future we don't know what happened.

Future, but this is the current share and there's a big backlog, it's not like it's a few planes of thousands of planes thousands pension center of an ordered 75 <unk>.

<unk> hundred 20 Neo aircraft family per month rate, that's the way we're talking about the prior slide represents a significant increase over the number of units forecast in our long term forecast so let's talk about that housekeeping.

And a long term forecast.

That we have for memories.

<unk> hundred 20 units, sorry, 820, if we do the math and kind of back into the math, it's equivalent to 57 airplanes per month 57, <unk> hundred 20 airplanes per month assuming.

Sure that assuming that the 62, 5% share for instance, and doing other computations 57 compared to 75. So that represents it's a lot higher like I said I think it's over a 30% increase over the.

Our forecast our forecast tops out at that assuming 80.57 number in 2024, we're not that number yet we're not that number in our forecast shifts or forecast tossed out in 2024, assuming a 57 rate, but Airbus is saying they wanted to get to 75. So.

The big Big Big number the differences millions of millions of dollars per year for par difference between 57 to 75 will happen I don't know, but I want you to be aware of it because it's a big big deal as far as I'm concerned now, there's some tension with Airbus suppliers, particularly engine suppliers.

There's some tension has developed over the aggressive ace III 20, Neo aircraft family forecasted ramp up there's historically been tension between aircraft and engine manufacturers about production rates based upon diverging economic drivers for the aircraft and engine makers, what does that mean.

The aircraft makers make their money by selling airplanes the engine makers make their money by servicing the engine not buy sell men's and so there's a tension that existed for a long time. This is not a new thing so here's the point the engine makers aren't so anxious for the aircraft maker to come out with the next generation airplanes.

They want to keep servicing our legacy engines on the legacy airplanes CFM also supplies into the legacy.

<unk> 37 in the legacy acreage 'twenty with our C up 56 engine don't Wanna keep getting some life out of those engines. So if everybody says wait a minute, we're going to really up our production plans for the meal that means those airplanes you can have retired and then.

G bushes the revenue.

And our margins from the service of those engines because the airplanes are gonna be retire you get the dynamic it's a pretty important to understand that if you're into commercial aerospace.

Slide 20, then on July of July.

29, 2021, Airbus CEO stated he has disappointed at some partners. Many suppliers are challenging to ramp up. He further stated we have a backlog of more than 6820 Neo family aircraft I don't read a 40, which was the rate there at you know until I guess this quarter that means 15 years of production.

A rate of 16 in these 10 years, that's a long long time customer who do not want to wait that long we have to go Oh. This is S. I see I think of it as a misquote it but that doesn't make any sense. So I think he said above 60, it's a pretty odd she said above 60, otherwise it wouldn't make any sense. You. Further stated we expect the supply chain to ramp up at a much faster pace.

So here we go we have a little tension here as I said.

The aggressive ramp up its partly based upon their success of days for 'twenty one deal a D. C. You also commented on.

On July 29 that Airbus wants to be capable of production share of 820 deals significantly about 50% through share of 60%. So you want my opinion is what will happen is just my opinion and I could be wrong. My opinion is that if Airbus can sell these airplanes G or CFM will supply the edges and why don't we think that.

Okay, because they share this program with Pratt so.

If CFM digs their heels and says well, we're not going to supply that many engines to support the airplanes that you want them produce Airbus Airbus and say, okay. That's fine I'll get a crack maybe crack and help us out in that case, what happens to CFM pay they don't get any revenue from servicing new engines, because we're not selling the new engines on them.

These programs and the old airplanes, a legacy airplanes, you're gonna be replaced anyway, but with with deals that are produced with the manufactured with Pratt engines St. Louis you're the way. It's just my opinion I could be wrong, but my opinion is that just going to do a lot of had went back and four at the end of the day.

Airbus is sell these airplanes G or safran change definitely many CFM will support it.

Airbus also recently announced that are resuming work on new suddenly wanted to loose with <unk> hundred 21 D. O aircraft. So maybe they're they're putting your mouth money where their mouth is not just talking about trying to move the rates up there they're investing so let's go on to slide 21.

The XLR 821, XLR, we spoken about this.

For several quarters now so this is supposed to be in service in 2023.

And as part of that part.

Probably a big driver of the aggressive forecast.

<unk> hundred 20 Neo family of aircraft. That's just considered to be in the 821 deal. There are 450 or over 450 orders ready is it a game changing aircraft, yes, it could be I think probably.

Because with this range of 5000 over 5000 miles and the city capacity over $27.0 seats.

Well it really replaces.

Some of the wide bodies on some of the shorter international flights at much lower cost so you're going from let's say North America and Europe.

And again in the wide body, where you get on an extra or much lower cost for the airline with the SLR and they still have quite a bit of seating capacity.

Let's see what happens a key question is this a single house.

5000, plus that statute mile range $227.0

Seating capacity market being ceded to the Airbus.

<unk> hundred 21 extra alloy that refers to what a Boeing is going to develop an airplane compete against it so.

And our last item there is.

Back to the eighth week 20, Neo family generally 95 orders in August which is not bad let's go on to Slide 22. These are still these are still G aviation or.

Sure.

At G. H programs are in this case again, it's a CFM program. So come back nine when nine we've talked about that quite a bit of interesting dynamic here. A recent reports U S export controls the strong progress of 91 nine like Commack, almost immediately responded by saying no. It didnt really those export controls didn't make that much of a.

Difference and they were doubling down on their certification timeline before the end of this year, if they're saying they're going to have to your airplane certified this year that would be in China for <unk>.

Deliveries, but nevertheless, they're sticking to it so let's see what happens maybe by the next conference call when we'll know it.

What would have happened so but this is an important potential program for parks, so, let's see what happens with it but that's the dynamic there.

Slide 23, let's go through this quickly we can the global 7500 with the passport 20 engine is ramping up. This also is.

We're planning to have our leidy strike material certified for this airplane next year, which is a good thing also those are high margin product for us and the.

Commack ear J 21, that's a regional jet that's a ramping up as well.

Last one is the 7.7, we talk about this every.

Quarter end.

Pictures the temporary seven it's kind of a sentimental things restroom reasons, we discussed probably in the past, but Boeing enough theyre going to terminate some 47 program next year.

So that would be a real sad thing for us I mean, we will have to have a digital for them.

But I also want to remind you this is less than $2 million of revenue for us. So we emphasize a lot, but it's less than $2 million that program is less than $2 million of revenue for us per year slide 25.

Okay.

Quick one review this commercial aerospace industry to melt melt down mode.

Sorry industry meltdown in review.

Why don't we just kind of skip to the end you can read all the different items here, we know about it it was really Armageddon.

Marshall Aviation industry commercial aircraft industry, both almost all the news about the industry back at the beginning of the pandemic was very negative aviation analysts and commentators predicted that the recovery will not come for many years or may never come never come rather at the end of the day scenario, you know pretty dire stuff pretty dark stuff.

That was being talked about and believed also slide 26 result of yesterday's attitudes companies in the commercial aircraft supply chain laying off thousands of people and once the bunker survival mode production slashed or even halted.

Thoughts about industry recovery, how to handle it we're just not in the minds of many probably most companies in the supply chain was all about survival for them since a week or was that a recovery if any with so far in the future. It was not worth thinking about but surprise surprise people got target being locked down vaccines were developed as promised and people start flying again flagging.

For domestic flights and lots of people remember these flights renting so all of a sudden people wanted to get on these planes again, so it was kind of a big change.

And as a result airline companies wanted to buy airplanes again, no one at the beginning of the pandemic airline companies just didnt want airplanes, one airplane piece, there's so much uncertainty about what the future was but now they want to buy airplanes and a lots of airplanes and somebody needs to produce the thousands and thousands of components, which go into these airplanes airplanes at the airline companies want to buy now.

Let's go on to slide 27.

But the commercial aircrafts supply chain was quite very flat footed in the bunker survival mode is not in the mindset to quickly ramp back up to meet the renewed demand plus since the supply chain companies had laid off such a massive numbers of employees, who did not have the workforce to meet the industry ramp up anyway.

Try to hire back the employees they laid off what has been widely reported that has not been so easy plus the government was paying people not go back to work so that didn't help either what's the result of all this the whipsaw effect in which the commercial aircraft industry supply chain was caught flat footed in a struggling and some cases badly to meet the unexpected increased demands.

On the commercial aircraft industry as it recovers so kind of a whipsaw.

Whipsaw, because they were kind of clamping down in the survival mode. Then all of a sudden now we need to ramp back up again.

And the response has been you know I would say a lukewarm. This is today's commercial aircraft industry supply chain dynamic, it's a difficult one 526, but at park, we did not file a doom and gloom news, we did not by the end of the page where in hand or is it will be said. This is interesting. This is what we said on may 14th 2020. This is.

The beginning of the pandemic the beginning of the crisis when confusion uncertainty and fear reigns Supreme just read this I'm not going to need it for you but go through it quite interesting we were not going into the bunker mode. We were in the Gulf War mode.

And you know what we were pretty much alone I don't remember too many people that were you know.

[laughter] joining the.

I don't know what you call it the mission that we're wrong.

But we.

The last item when we got one for you. We believe the glory days of aviation. We're touring we tend to be part of it let's go on to slide 29.

At Park.

Although we do not know when we believe the commercial aircraft industry recovery would come and we wanted to be ready for it it would be a part of it we're not giving up on commercial aircraft industry was quite the opposite for us actually so we made arrangements we talked about this before with him rest to maintain minimum monthly baseline critical mass production levels to preserve possibility.

Ramp up.

Our production we need this is critically important if we went below these levels, we have a real problem on our hands because we would not have the critical mass to ramp back up and it would be a problem for us big one proper amyris Big one had problems where someone's aircraft manufacturers big one and even though lay off a widespread present pervasive and we didn't really know anybody wasn't laying off.

People and of course, you'll aerospace industry, we lost we laid off nobody none of our people for all the darkest and seemingly hopeless stays in the commercial aerospace industry turns out the decision not to layoff any for people with really important for park because when we laid off people. We would have we'd be in such bad such bad condition in terms of try.

To ramp back up it would be very very difficult for us slide 30.

G Aviation jet engine programs.

The ones where park is on ramping up fast so GE aviation jet.

Jet engine programs.

The park is on sorry, the Pakistan are ramping up and.

And the ramp up to like me, Steve just for perspective, we shared this with you last quarter looking at Q3 of 2021.1.8 million then move for two quarters to Q1, 2022.7 million. That's a four times increase in two quarters four times in a quarter. That's a very very significant for a manufacturing company.

We're not just selling stuff we have to make it we have to get the raw material, we have to produce it we have to test it with a ship it.

A very big challenge very Big Challenge.

Just.

That's why I, so fiscal year 'twenty to Q1, and Q2 already at pre Covid levels.

Already.

If you look at Q1, and Q2 and the ramp up is still a long long way to go and important question. How is the commercial aerospace manufacturing supply chain responding to the steep ramp.

I would maybe give it a C minus not so great. It's an issue and challenge push everyday fly three one how spark responding to the GE aviation program steep ramp up all about our people and the Ah.

Tried to Russia, even faster here, because I know, we're going really long a corn head count of 114 were at 151 O five last quarter. So we're ramping up our head count a little bit, but still a challenge and we are still a number of people are looking to hire.

To set forward and one step back in terms of the hiring process.

So parks people stepped up once again, that's what parks people do in order to get everything done in Q2, we already talked about the challenges that we haven't had to be able to come so I won't go back over those again.

Once again, thank goodness for parks customer flexibility program won't go into the details but this program is when we talk about almost every quarter. That's been really critical to park, especially as you try to ramp back up slide three to how spark responding to the junior English program steep ramp up continue all butter people, we can't say enough about our people thank goodness for.

Parkway people without them could get the job done park is fortunate blessed to have such great people and every part first and received $150 bonus or his or her dedication and outstanding work during a.

Second quarter, well earned and deserved a lotta boot forest last supply chain issues freight issues Covid quarantine issues.

Logistics planning Big challenge, but through dedication loyalty and commitment we were able to meet our objectives for Q2.

So slide 33 rushing as quickly you see the numbers are not much discussion about it.

The only thing I would say is that.

This is G forecasting of course, it's difficult quarter to quarter because of the inventory practices things can move from one quarter to others can move forward move back that makes them more difficult to me one of the big questions, though is when will.

The numbers ramp up to meet the especially the forecasted numbers that.

Airbus is coming out with that when you spoke about earlier in your presentation.

A mismatch here, we're not operating anywhere near those levels. So at some point other Airbus is going to bring those numbers down or number is going to have to go up.

But can't it can't be both ways. So something is going to have to give is it going to be in the fourth quarter, it's going to start in the fourth quarter I don't know hard to say, it's really hard to say if I had a feeling about it.

As you know, but at this point I'm, just saying it's out there it's kind of hanging out there that we know something's Gotta give something's got to happen unless everybody says wait a minute we changed your mind or bring our numbers back down to 55 or 57.

Per month.

Maybe that's a different story, but unless Airbus backs off backs awful lot Something's got to give because we're nowhere close to operating a level to support that program and the other programs. We've talked about as well that are ramping up slide 34 again, you know the numbers are pretty straightforward. So I won't go into them in any great detail I just mentioned in Q3, we expect.

$400000 of blade of sales that's good Oh.

Q4, though we expect about two and a half million dollars of the critical central component sales, which you know not great margins, but also about $1 million of the sales of NUPLAZID materials, which are relative margins.

Same question Oh, if you want to go back and look at all the factors that we talked about regarding to Q2.

Slide five go do that because they apply for Q3 and Q4 of those factors haven't gone away once we keep talking about.

Same question, though about the GE programs, particularly Airbus at what point is the.

At what point as our production going to match their requirements at this point, it's not matching at some point something's going to have to have and like I said, they're gonna bring your numbers down or we're going to have to move our numbers up when that will happen I don't know, but its out there its kind of looming out there and we're ready we're ready to go.

Obviously, what our challenges with our supply chain that will continue but park is ready to go as I said, it's really good we can stop that expansion going to slow it down very important for park, let's go on to Slide 35, 36, and these are the last slide So let me go through them fairly quickly, but they are important to watch changing gears a lot here what matters the most of it.

Park, we're deeply saddened by what we see and hear in our world. Today, We're told that people work for all of them do not matter were told they are expendable. We were told they're gonna be sacrificed for some loosely defined or undefined greater good so to us it's really tragic.

But we understand we're a small company and what we say or what we believe but it doesn't matter all that much about these larger issues, but what matters a lot because what we say and think about our own people. So at park are people not expandable at park are people matter. The most at park are people are everything.

At Park, our people our family, we do not turn them back on family are people not be forsaken are people not be sacrificed a park our people our precious Clark were most fortunate when it comes to our people and I always say this a lot.

But it's because I needed a lot let's go on to slide.

Our last slide which is 36.

At Park, our people work for a living and that's what they do with park our people make money for our owners that is what they do it's something that our people are committed to I'm talking about all of them now.

Well, we made money every quarter or throughout this pandemic.

And economic crisis.

I really do that.

I don't think so I think most companies in the aerospace supply chain, probably did not do that.

Not an accident not look.

It's based upon serious commitment and dedication.

Serious commitment and dedication.

So just wanted you know that park is a strange and unusual company Gulf a wonderful wonderful and special people.

Mark we're not like the others at park, we play for keeps so we always feature always.

Always at least the last few quarters, a picture of one of our crews in this case, we're featuring two cruise customer service and purchasing planning teams. When we go from left to right Jordan Teresa, Jonathan Chris Dakota, Sara and Atlanta. So are these people you know all the things you've been talking about throughout this presentation. These people were on the frontline.

So with all the supply chain and she training shoes international freight issues juggling customer orders quarantine issues production planning and then the possible environment. Because you know normally what you want some visibility and production planning you don't want things that change every every week every day, but these things that kept coming up.

Let's say you know Kobe quantity you can't predict that so lots of juggling a lot of moving schedules around.

Big job Brute force was probably no.

We are aware of the quarter for these people, but this group of thought to it that we met our objectives for Q2.

They always.

Upon ways to overcome the obstacles. So thank you very much sorry to take so long I was really rushing you probably made it difficult for some of you who followed me. So it's gone so quickly maybe skipping over things, but operator, we're now done with our presentations. So are there any questions we'd be happy to take them.

As a reminder to ask a question. Please press Star then one.

Your question has been answered and you'd like to remove yourself from the queue press the kind of key.

Again, Thats star one to ask a question.

We have a question from Brian Glenn.

I'll cut squint your line is open.

Hi, Brian.

Hi, Brian how are you doing.

Good how are you.

Thank you.

My question is that there's two questions. The first is that thank you for the walk through of course, there's always the first is around the.

Our supply chain.

You alluded to it a little bit is there a chance that you guys who are more than adequately prepared for a ramp that you are held back by.

The rest of the industry I know Airbus had several thousand when more suppliers for that program.

No not all of our sole source. So there is some ability to toggle.

But is that a real risk going forward that you see potentially material and then the second question.

Is around.

I know you haven't put in place guidance, yet or brought it back but if we go back to pre Covid I know during Covid you guys worked on some military programs and there was some added efforts there you talked about the lightning strike material or ignored them. That's on the passport 20 that looks like a new program that that may have.

Hum.

That's happening and.

So commercial aside if you think about the long term without getting into numbers is there kind of a net add in terms of the programs you might be on or that you are on versus if we go back to 2019, when you had that forecast in place.

Okay. Thanks, So let's see the first question is supply chain and that could be an issue for us ramping up.

I guess at least you know applied we are sole source on these all these GE aviation programs, including the Airbus <unk> hundred 20 family programs.

So I think the risk of are being replaced is nonexistent.

These existing programs.

We were getting at.

But there certainly is a major challenge for us spending as our supply chain.

We're ramping up.

You know, we're also doing trials and everything else. So it's even more work there.

So it's a major challenge and no one will this kind of thing even out I don't know if you know a.

A lot of reporting about it when will the suppliers kind of catch up and kind of get their rhythm back I don't know maybe towards the end of the year, that's what you're reporting about that but of course, it's a case by case thing we have three or four major suppliers that we use for these these GE aviation programs and we.

We need to look at each one individually somebody doing well some are struggling.

And you know and I don't know how else to answer or acceptance of it. It's just a major effort.

Sometimes brute force effort.

So.

But the other side of the equation I guess is our people are very determined and very committed to finding ways to make things work and we've been able to do that for the most part are so I don't know Brian I'm not sure I answered your question adequately or is that kind of information you Richardson or something else that you're looking for there.

That was helpful. Yeah. I know you guys are sole sourced with respect to the Chi program. Yeah. It was just around people even suppliers even outside of your vertical right they're supplying into.

Oh.

Yeah, that's it.

Totally outside of your control.

Got it.

Right and if bottlenecks everybody.

So what do I know.

I understand that question. So it's a really good one.

Let's say, we got everything organize our suppliers, okay, but if I'm a <unk>.

Airbus is not able to source other key components are somewhat going to be on airplanes.

I get what you're going for well that's a really good question I don't have they don't have a crystal ball on that one I. My my feeling is it just my feeling is it's going to be ugly messy for a while my feeling is at some point if the supply chain are saying. These are very large companies that don't really you know aren't agile.

Move that quickly at some point, everybody will catch up and kind of get used to the new rhythm of new rates and everything else when that will be is a good question I don't know but.

But I think probably just give you my it's almost speculation my feeling is towards the end of the year, we'll start to feel that things are getting better not solve not that it won't but he issues and I'm not just talking about our supply chain I'm talking about when you were asking about the supply chain for these airplanes, which are like I said, thousands and thousands of different components.

We're required to make these airplanes.

I know, you're probably not surprised to hear this but you know Airbus rates since they have a massive function that deals with our supply chain management and they spent a lifetime of supplier to try to.

Identify where the risks are and trying to focus on them I'm sure. It doesn't surprise you that that's a problem with any good OEM would do.

So.

Hope that helps.

And also what else I can do yeah now and the next question Yeah. We haven't reissued our long term forecast you have Brian, but maybe in the third quarter, we'll try that we were a little bit uncomfortable.

Uncomfortable now because there's a lot of uncertainty the things we've talked about throughout the presentation, but absolutely. Yes, you know the programs, we're working on and developing over the last year and have since the pandemic started those aren't just temporary things yourself a factory and those are things, which we are we hope and expect will have long.

Impacts to US now in aerospace I just wanted to add you Gotta do this because some of the program to run they're going to go away you know so even though just kind of.

Break even.

Keep the same levels do you need to keep getting new programs, but our objective of course is not just to kind of maintain or levels are to increase Roe levels or sales levels are the leidy strike. Good example, touch commercial of course and.

We hope that we also get a lightning strike on the AAR Jake 'twenty, one that's the commack a regional jet once we get a life strike on that program. If we can then we'll have a clean sweep of all line strike on these programs I'm strike, that's actually from its fairly significant revenue, but also quite good margins.

Product, we really loved showing.

But then there is lots and lots of military programs. We talk about them you know every quarter, we have little picture and some of them are a little some of them may not be little and you know you've got to get your foot in the door to get US started with some small content and you try to grow with the larger larger content.

I had a picture of Gvhd Gvhd is a really big deal and also Spacex we haven't feature of those programs before so that's good we're getting on those programs and we're not just going to stop once we penetrate would want to do more and more and more for US you know, it's always good to get to do something with us.

Customer spend we kind of show our stuff we can show how we service how we respond and how we support our program. It's much more difficult to say look you know put us on your program because were doing all these things as well everybody says that but once we get a chance to actually start to work with the customer and we can demonstrate how we feel we're different than other.

Suppliers or many of our competitors.

Understood. That's very helpful. Thank you and your team for the efforts on behalf of shareholders.

Thank you for those comments.

Again, Thats star one to ask a question.

Our next question comes from Brad Hathaway with fan you. Your line is open.

Okay. Thanks for the time and thanks for all the detail on the call.

One question was really on the call you mentioned that initially the new facility was mainly going to be kind of backup capacity, but now you are really going to need. It is there any way and kind of big picture numbers to think about the total kind of.

Revenue capacity you have win win that new facilities online.

So we talked about that before.

I think we said, it's about $60 million of capacity new capacity, but remember you know probably remember because we havent published for two quarters I don't think but in the factory. There was a big area and you know we're talking backwards not like little room, a huge area that set aside for another line it could be.

Hot melt wine or a solution line. So if we decide we need more capacity to be very easy to dropdown and we don't have to go build a new factory the factories, where he built the equipment. That's already been designed because we were we just bought the equipment. So it'd be easy to drop in a new line there.

So it could be ramped up to much more than that at that point. So the thing that I was saying I just want to make clear is that the factor was originally agreed to with GE aviation and Emirates as redundant factory wise that we just talked about being sole source could take three years to qualify.

Composite materials supplier on these major commercial.

Commercial aircraft programs three years, so it's kind of a scary thought what happens if something happened to one of them in fact are factory rather.

You know what it's like really scary thought I had this discussion with people before and if they it's kind of like the room gets real quiet.

So they asked US very understandably you will build them in the factory, which we did if you look at the little photograph.

The new factory exactly separate building that has joined with a passageway.

For moving people and material that has a fire on both sides. So it's kind of a best of both worlds, who manages one factory, but its actually two factories are totally redundant. So if something happens in one factory or one line. The other the other line the other factories available but.

That was the original concept, but because business has ramped up so much and it's getting stronger and stronger it's no longer a matter redundancy, which is really critical in aerospace when you're sole sourced or something it's also a matter of capacity. So what I'm, saying is that it's really good. We did we did because we were starting now we will.

Wait a minute we have a problem with capacity now we'd be in a world of hurt because it would take US three years ago, approximately three years ago build a factory you know they have been designed let's say, we're starting from the from the beginning.

And then we have to get the machines go through trials you got to get machines are signed off on by the supplier and then qualification, which also doesn't even though it's totally a plant qualification in vitro qualification still takes a long time, so I'm thinking maybe three years' timeframe, but then we'd have a real problem on our hands, who would be it would be too late and we would not have enough.

Capacity I don't think.

Got it that's helpful and is there any more color you can give us kind of on the M&A side, and just kind of anything you're seeing out there love to hear more about hey, you have up there.

Yeah, the M&A side so.

We can do to work in this area the strategic area that we've identified and we might have mentioned it but these products are products are used to make a composite structures by our customers, it's not composite materials or other things are used.

Other products that are used to make composite structures. So that's one area. We focused on we probably contact and I mean, not I don't know if you haven't done their number but about a dozen or more of these companies.

And we continue to reach out to other companies and we.

We keep trying.

So that's and that's something where we feel real good about it because we feel it makes so much sense for us to be in that area. The challenge is to find the right opportunity because you know obviously lifetimes you contact somebody and thank you very much for not for sale that kind of thing so he's not auctions, where something's for sale, we stepped backwards, putting it up for sale. So.

It's a little more difficult from that perspective, there are a couple of companies that we're kind of watching.

[noise] tracking to see how they're doing there may be public and watching how they're doing and you know kind of maybe the timing isn't quite right yet.

Thinking about them.

And then there's this other area, we talked about which is more of a kind of joint investment with very big Oems and new aircraft programs.

Which we had discussions which is beginning discussions with one of these big Oems, but we've reached out to two.

You know the first discussions as you know in the beginning discussion, but with very high level people. My felt there was a serious interest in airport. They know what's pretty well off so it sounds like who you are so.

Hopefully, we're hopeful that would be a good avenue for our investment and really a great opportunity for parks feature.

Thank you thanks for all the efforts.

Sure.

There are no further questions I'd like to turn the call back over to Brian shore for closing remarks.

Thank you operator, and thank everybody for listening in I'm, sorry, It went so long.

Every time, we try to at least I tried to make a little bit more compressed, but I don't I'm not quite sure had not been very successful have a great day, Matt and I are available call US anytime you have to talk to you. Okay. Good day. Thank you.

This concludes the program and you may now disconnect everyone have a great day.

Yeah.

Okay.

[music].

[music].

[music].

Okay.

Good morning, My name is Michelle and I'll be your conference operator today at this time I would like to welcome everyone to the Park Aerospace Corp, second quarter fiscal year 'twenty, two earnings release conference call and Investor presentation.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question answer session. If you'd 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.

At this time I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer, Mr. Shore, you may be.

And your conference.

Thank you operator, this is Brian and welcome everybody to our second quarter Conference call with me Nustar CFO as usual of course.

As most of you know we are we announced their earnings this morning and that earnings release, there are instructions as to how to access the presentation, which we're going to go through now via webcast. The presentation is also posted on our website and I think you really went up a copy of the presentation in front of you. Obviously go through it to make this call more meaningful.

As usual, we tried to provide insight interesting perspective, we can't cover everything we don't spend a lot of tire kicking through dry data numbers, that's really not what we tried to do in these presentations and want to warn you. This could be a long one I think the last three or four happen it could be like a 45 to 10 minutes so hanging.

If you can and then I'll be happy to answer questions more don't go through the presentation. So let's get started on slide two this is our forward looking disclaimer, but let US know if you have any questions about our disclaimer language slide three is a table of contents.

Have a three appendices, which are attached to the presentation, we're not going to go through those at this time, but again, let US know if you have any questions either at the end of the bar.

At the end of the presentation or you can call us later slide.

Slide four okay now we get into the.

Part of this stuff. So I would go right with the number so are we just announced our fiscal year 'twenty to Q2 as you know our sales were $13 million 618, I'm looking at the right hand column here.

Gross profit for 400.411 gross margin of 30 to 32, 4% down from Q1 as you can see probably more or less at the level of the law.

Last couple of years.

And I think that we are indicated the gross margins would come down in Q2, we did our Q1 call.

Adjusted EBITDA of 3 million to 132000, and our adjusted EBITDA margin of 27 are crushing 23.7%.

So what do we say about Q2 during our Q1 investor call on July eight we said our sales estimate was <unk> 13 in the quarter to 14, a quarter million. So it seems like they came in within the range there and our adjusted EBITDA estimate was a 3 million to $10.0 million again, we came within the range or forecast.

What should we cover this every quarter I just want to say I'm not sure how much of this stuff, which go over being and staying with what a lot of you were pretty familiar with us, but you know, but we still go over some of the basics Jess.

You forgot or in case, we have some new people dialing in which we hope to have forecast philosophy is a little different we don't provide numbers that we can be we feel that's a little bit of a silly game. We know almost everybody plays it but we don't we give you a forecast we gave you a range we're saying to you. This is what we think is going to happen, we could be wrong, but we're saying to you.

This is what we think is going to happen not easy happened, but it happened to me. We do we normally do which is we work very hard with a lot of dedication and commitment.

So we're not trying to give a number that we can beat and that'd be heroes. Later on we think that is kind of silly and all of a sudden you know just not not worth your time. So just wanted to remind you that that's going to slide five.

Lots of factors, which affected two two.

You want to go through and throughout this presentation. These will be kind of things are these are be repeating themes are sales of virtual component for missile programs. We've discussed this over the last several quarters.

Q2, we had sales of a component of about $1 million remember that's a low margin.

This is.

We have the relationship with the supplier it's in overseas supplier.

Some of our customers and Oems that are on these missile programs in the U S assets to buy this product and for them, we have a relationship with a supplier overseas there.

A critical programs and then we sell the product.

We sell a product to the customers. So there's a mark up in fall, but its a quite low margin now the flip side as we discussed many times just well, we actually use that product and produce the we call. It a blade of a blade of prepress and the margins are quite high now once we sell the product to these customers. They can do whatever they want with it but the expectation is that.

It'll be used by us to produce the composite materials for these later programs for them at some point in your future. So it flips when we produce the materials good margin when we sell the central component.

Basically a mock up low margin so our second quarter, our low margin I'm, sorry, a $1 million of sales of that component difficulty sourcing key raw materials. Yeah. This this is a big thing over $200000 actually I missed sales because we couldn't.

And your ability to source materials, we needed and then international shipment difficulties another $200000 Michelle's in Q2 in other words. This is stuff going out and not come again, we have overseas customers, we couldnt get international shippers to ship all of the stuff I mean, our people are really good at that two are really good at it we still couldn't ship $200000 of product.

We protested it overseas for us it's very simple.

We ship a product we invoice it and then we recorded as a sale in that quarter, we can't ship it could be a sale in the quarter, so $400000 approximately miss there.

And that doesn't sound, good, but but here's the thing we had over a million dollars additional dollars at risk in the last couple of weeks of the quarter.

So our people did a.

Really a fantastic job of U S Mi.

Getting this stuff done a lot of brute force a lot of moving things around a lot of juggling a lot of logistics.

But it was a little bit of a nail biter, Russia, because there was a lot more at risk all based upon the same factors at the end of the quarter. So lots of brute force.

Daily battles.

Plus we're dealing with a COVID-19 quarantines fourthly everybody's Okay. You know Nobody's really you got really sick.

Time around but that that reached havoc with our production scheduling and planning.

Because you know what happens if somebody's why it got tastes positive then they have to go home then your whole crew has to go home and.

We have to work around all of that stuff.

Theres not a complaint. So this is just a light that we want you to be aware of and I think our people are pretty terrific job and are dealing with these kind of things domestic freight issues, yeah international shipment difficulties domestic freight issues.

Okay. The cost it is hard to supplier hasn't terribly can't get.

Somebody does deliver to US we were talking about driving up the Kansas City trained ready to go.

Pick up some of the materials ourselves that we couldn't do that I'd be saying, let us when we were talking about it additional cost for expedited freight shipments. So yeah, it's kind of like little weird and our suppliers hurt really getting the product to us and they said Oh well last one that we can get you something but then were expected to pay the expedited freight which okay. You can say that's kind of interesting perspective, but.

There are there are actual cost their cost escalations.

If you're paying attention to anything going on in the World Wash Your journal financial news listening. Other companies. These are not going to be surprised if this is kind of day to day life of a company. That's in manufacturing in the U S. Not just in aerospace I don't think either raw material cost increases yeah. There are a lot of them are most of their covered when we enter into an LTA with the customer.

And let's face it the LTA, we have with the suppliers are no L. T. A well then we got new quotes for customers, who normally don't make an adjustment based upon raw material cost increases, but not always covered a general freight cost increases mostly covered not always covered in terms of our piano man Oh, sorry in factory supplies.

Yeah, not always covered so there's risk in terms of manufacturing supplies cost for supplies and go up and up and up and miscellaneous other costs. Yeah. All of the what you can tell me what they are utilities wages benefits insurance.

It's a you know very strange environment. We're in in my opinion I'm talking about just generally as a country. We probably would have been able to increase our people count remember we've talked with every every quarter. We'll give you specifics later on that's good news, but there is a two edged sword here because obviously you know the people count goes up the cost goes up as well.

These are not any kind of excuses at all we don't we're not into that kind of a huge thing we don't like that but these are factors that we thought you would want to know about so let's go on to slide six I'm going to talk about on slide six. This is our no annual Hum P&L history going back to 2017, you can take a look on a well.

On slide 34, and our forecast for the current fiscal year fiscal 'twenty. Two if you want to compare it to the prior years, but let's just move on and let's get going here on slide seven.

So we.

We were not including this information for a couple of quarters in one of our important shareholder said you know, we really really like as soon as the information every quarter. We said sure. So here. We go Parkers are zero long term debt. This is our balance sheet cash cash dividend history and capital allocation strategy, sorry, I forgot to read the caption Parker's zero long term debt park at hunting.

$13 million of cash and marketable securities at the end of our Q2, our spending to go to complete a major expansion of about two and a quarter million spending to date about 17 in a quarter million. We spent about $800000 in Q2, so and no tax transition payments, we've talked about those in the past.

Match, better explain that can I am but they have to do with Trump tax law and Oh, sorry overseas cash. So let's see we have 14.3 that we owe some point 6 million.

Has been paid to date and $8.0 million and physical was paid in the second quarter are that.

That those payments are to be paid to $17.0 million through calendar year 2025 of course, you always have every quarter it like a little over $2 million plus regular dividends. So you can think that think about that as well in terms of cash outflows, our parks parks cash dividend.

We've maintained our regular 10 cents per share quarterly cash dividend throughout the pandemic and economic crisis. I don't think everybody did that park has paid 36 consecutive years of interrupted uninterrupted interrupted uninterrupted regular quarterly cash dividends without ever skipping a dividend or reducing debit amount I'm rushing because it's a long presentation sorry.

Park has paid $548 million or $26.75 per share in cash dividends since the beginning of our.

Fiscal year 2000, and its five Oh, let's go to slide six another 10 cents per share regular quarterly cash dividend was declared on September 13th payable November four to shoulders record record on October one 2021 so.

Here, we go with this cash dividend is paid on November four 2021 Park will have paid $550 million in cash dividends since the beginning of fiscal 2005 with reactivation points I don't know what you think but you know for a small company like park, that's a heck of a lot of money.

But we get it don't tell me what you did from yesterday tell me where are you going to do today and tomorrow. So now we go to parks scaffold with our capital allocation strategy. The way of saying what are we going to do with all that money for those of us that aren't really in living in the Wall Street, a financial World I think that's what it means so acquisitions and potential collaborations park continues to watch.

And tracks or potential acquisition opportunities, but also strategic targeting of certain aerospace industry segments and product lines. We've talked about this last time. So we identified areas. We want to go into it that we think are strategic rather than just reacting to stuff that comes out with it.

Transom from bankers, Let's say park has reached out to several companies who continues to reach out to companies in the targeted segments. So we're still at it we're still trying.

Next let's go on to the next slide slide nine our potential strategic investments and major aerospace and aircraft programs.

<unk> reached out to a certain large Oems regarding strategic investments are a major new aerospace programs. So this is really interesting. A these are household names Oems in the aerospace industry are well aware of new programs that they're considering maybe they haven't been announced yet so we've reached out to them and asked if we can work with them on these programs.

Partly by making investment obviously, we would also want that business as part of the discussion.

So, let's keep going car crooned every dollar of its cash through much dedication and sacrifice on the part of many parks people over many years parks of money is not easy or cheap money. It's not easy economies you go with us. So we will not invest our cash casually or do a deal gesture the sake of doing a deal that money you know when it comes hard.

My feeling is your tenant you're going to tend to be much more thoughtful much more careful much more serious about all your spend it you know, it's not going to be a let's just kind of throwing money around for this thing or that thing a cool idea that somebody had if or when we do a deal or invest our cash in an acquisition or some other form is the change of investment. We will feel is the right thing to do for park.

And its owners meeting you.

Well I guess somebody who are not shareholders with many of you are Ah slide 10. Okay. This is our you know one of our standard slides in our presentations our top five customers kind of a fun thing, let's start with aerojet rocketdyne, but it moves quite a bit recently that goes with Northrop Grumman ground based strategic deterrent S. C. B S. T have you heard about that.

That's a really big deal with brakes I'm happy to be on this program and we hope to get more penetration at the G. B S. T. This is the next generation I I C band is very important for our company's country's defense Aero matrix composites window of a picture offer a matrix here, but there are multiple programs.

Tradeoffs they seem to be in the top five quite a bit and we have a picture of their you tapped 22 a drone.

We're told by grade ores that we are the main supplier of composite materials for their drilling programs. So anyway here, we usually try to find a different picture every quarter, but you say you seem to me to talk quite a bit Oh, Okay Middle River Aerostructures our system infrastructure system. We know that is there's plenty plenty.

That stuff without them and the rest of the presentation to dwell on it here, but we got a nice picture of 747 eight engine of cells in the bottom right. Those Michelle just see they're all made with park materials and our new Oregon Group, but we featured where a group of different program last quarter. I think this time, it's the top right. The passport 20 engine now.

What's interesting we produce the materials for the michels for thruster versus for this engine through mras, but this has not embraced this is and this is a component of the engine itself.

It's a oh pardon restructures are the primary structure of the engine and this is produced by the Northern Italy, who are the passport 20 engine, which goes on the global 7500.

Long range visit yet, let's go on to slide 11.

So here's our other standards a slide that we have in our presentations our pie charts, we have 'twenty or 'twenty, one and we have 22 for the first two quarters.

And just for comparison, you know look at hobby.

The pieces of the pie have moved around.

The commercial as you know back dominating.

Well I shouldn't say dominant that's not right, but much more significant than it was let's say in 'twenty one.

That's not so no I don't think should be a big surprise anybody military made me a little slower we hear generally not for us due to budget issues, Although I guess the Senate Armed Services Committee, just released its full markup and it's worth it's down to US I can tell you about it good for many of our programs grow and develop.

For us military it's really going to be the programs, we're on and which ones you're active which ones youre not military flash is very different than commercial commercial, especially they're much programs, they're going to be running running running you know every month every week.

But military you know we can do it on a really good program it'll be active one quarter and then it will be active next water and it will be active in the following quarter. Obviously, we have no control over that so that's why the military.

Revenue could be a little choppy, but it's not to me anyway, a function of the military market getting stronger or weaker we think it's just fine from our perspective also a niche programs around we we'd like those we think they're less sensitive to the big budget fluctuations that are these programs, sometimes get caught up in a business aircraft for us.

That's mostly a global 7500, that's a big dog for us in business aircraft, although we do supply and to other like Gulfstream in Falcon and citation type programs.

And business aircraft has been quite good so for the last I don't know six to eight months, maybe nine months.

For maybe obvious reasons, you know people are able to have fly on business jet prefer to do that rather than airlines are commercial will go into much more deal detail about commercial throughout the presentation. So let's keep moving here they only get bogged down slide 12. This is when a little fun slides that we do every quarter is there's a lane of Dod or your project.

We have a lot of fun with this this is not necessarily the biggest military programs, but you know their programs. We think you would find to be of interest.

The top left so we're in the Pac three program I'm, just really kind of a fun thing or you know interesting thing for us after 35, providing tracking data of an incoming missile to ground based interceptor with tax free weren't even that factory program for a long time I think we mentioned it. Many many times then the next one to the right our U S.

Avi NK 41 vertical launch system, and we actually produce materials and parks was program, but we're not really at Liberty.

Liberty to talk about it very much except this is a really nice picture of you should see them. The actual missiles being launched from the deck of the Navy ship. A next one the C 27, J Spartan medium range surveillance aircraft. So this is a rate on materials for the coast Guard and then have you asked or a hypersonic missiles laid them out.

It's probably not surprising there and then Spacex Falcon heavy a really nice to be on this program. We go to get more penetration to the basic programs, but we're not really in a position to talk about what we do with that program. The niche programs, we consider radar with rocket nozzles and grown to be the niche military programs, that's where like a focus let's go on to slide 13.

Okay changing gears here update on our major expansion in Newton, Kansas totaled.

Total budget moved it up to $24.0 million I think last time, we said it was $19 million. So it's creeping up a little bit spending to date, but 17 in a quarter of million spending to go add it up you know everything is totaled 19 half that's two in a quarter million to go. So we know what the expansion is complete the way. It works is that theres hold backs with some of the.

The suppliers when things get signed off and certified then the final payments or release, that's why you know theres still some money to be paid out our manufacturing trials in progress, which is a good qual.

Qualification runs expected to begin probably around Thanksgiving sourcing December we push forward with a major expansion when many others are slashing their capital spending maybe to zero. Good thing. We did we had we'd be in a world of hurt right. Now originally spansion was redundancy as you remember, but based on what everything going on.

We really need this expansion for capacity as well and we figured it out now we'd be in big trouble because you don't do an expansion in building getting a building or the equipment design equipment getting equipment are certified and released that the factories are qualified in six months, that's not that's like a three year process.

So if we didn't start keep going we'd be in a real we have a real problem on our hands right now it's all a good thing we made the right decision one thing that's a little new here. The pictures are the the bottom picture you see the the existing facility in the middle with the new offices. The facility and are left this new facility and this little building the right that's actually.

Something's been wrong.

We never really talked about it but I wanted to see it.

It's about 10000 square feet tens Tensity aircraft works, that's our R&D facility and then we came up with the name is kind of a little bit of a secret thing, but anybody can guess, how we came to the name.

Well, maybe we'll send you a at least a dollar or something like that alright, and then the middle picture. That's the new building with a new office sorry, the existing building with the office expansion seats. Two stories now growing top who's the new buildings that you go on slide 14.

So commercial aviation updates and developments changing gears again onto commercial aviation, but first item, we had a prior presentation higher jet fuel prices and environmental concerns provide extra motivation for airlines.

We're quickly replace less fuel efficient legacy single aisle aircraft with more fuel efficient modern single aisle aircrafts, such as the Airbus <unk> hundred 20 deal.

Next item domestic so this is new stuff and we're going to try to give you a perspective of what's going on with the commercial aerospace.

Commercial aviation market domestic commercial aviation activity was a crummy nicely in all major markets, but the delta very negatively impact of recovering in August and September the passenger traffic was down in August and probably September as well.

September has been fully reported but that's the expectation so tight in the China domestic aviation market was probably impacted the most of the major markets based upon the Delta variant outbreak in China, but the U S domestic aviation market as well as other major markets have also been negatively impacted by the adult ovarian.

The full U S domestic aviation recovery, meaning back to pre Covid I guess that will be by that would have which had been predicted to occur in the first quarter of next year or even earlier, maybe the fourth quarter. This year, maybe it pushed to the right to some extent by the Delta variant my feeling as well.

Very minor amount that's my feeling let's go on to Slide 15, and then we can talk about theres more why will it be a minor amount if at all Willis temporary setback negatively impact airline orders from the airplanes produced by a large commercial aircraft manufacturers well I don't know if you're running an airline.

Well you have to do what airline business in the long term plan and you know just you know what on an airplane and buy it.

In two weeks, so if there's a two or three week, sorry, two or three months setback and private passenger traffic.

Data and you're running an airline you really going to change your order patterns are you going to push out orders, you're gonna cancel orders and we're not talking about at the beginning of the pandemic. When there is massive uncertainty, but everything this is a very different situation. My feeling is that if you're running an airline you make that decision to push out or cancel orders under these circumstances as you probably know.

Wrong business, you, probably shouldn't be running the airline with the large commercial aircraft manufacturers Boeing Airbus change or adjust your production schedule based upon this temporary setback I'd be shocked that test. They did that I would be very quite surprised in any event. We have not seen any evidence of this and are all in their own business well the delta varian be trending down but you in November.

And so I was gonna predicted by shirt experts.

People are saying, it's trending out already a lot of people, saying that in a lot of data to support that.

Also you know there are other countries that got that start with adult ovarian before us like India, I think U K and we look at their patterns. So I think theres a lot of expectation that the delta Varian is kind of winding down and you know by the end of November.

End of October we'll see it winding down even more so my feeling is that yeah. It did affect passenger traffic they say that and Oh, Let's say August September but my feeling Wausau was just to have no impact on our commercial aerospace.

The aerospace business International commercial aviation has started to recover to some extent based upon some loosening of travel restrictions and increase vaccination rates, but big but it's still significantly still significantly lags domestic aviation recoveries International commercial aviation are still expected to take a number of years typically recover fully cover it means a pre COVID-19 level.

I don't know, maybe three or four years with people thing, let's go on to slide 16, I think its a single aisle commercial aircraft are designed to service the domestic aviation markets as well as shorter raging National Aviation markets Park believes single aisles, the place to be in commercial aviation at least for now yeah. We feel we're in the right place because single aisle.

That's the <unk> hundred 20 family, that's like the probably I don't know aircraft for the decade, maybe for multiple decades going back 919. Those are all a single aisles three interesting questions. How will G. E. G. Aviation's rise engine development affect the commercial aircraft industry in the future have you heard about this.

A G aviation rise engine, it's actually it's not even a G aviation or that's not correct. Its a T. F M, which is a partnership between GE aviation and Safran, So that's actually not correct, but.

People were blowing what Boeing develop a new single aisle aircraft to compete against the <unk> hundred 21 extra law, which Airbus plans to introduce in 2023 last one will come back 90.190 certified in China before the end of this year, we're not going to go into these items because we just don't have time. These would take you know could take 15.20 minutes down to have a proper discussion.

These items I, just want to put them out there because they could be important in terms of what happens in the future and the commercial aviation industry and markets. Let's go onto 17. This is slide you seen men almost I think every quarter.

Some minor modifications, we're not gonna coverages to save time, except are just the first couple of items. So just the basics here, we have a firm pricing L. T. A requirements contract from 2019 through 2029 with Middle River Aerostructure systems Mras, a subsidiary of S. T Engineering aerospace.

So what is this about when we entered this contract mras with Shinier and GE Aviation and then it was sold to S. T Engineering Aerospace I think about three years ago, but that's why all the programs, we're on to EM rash or GE aviation or CFM type pro.

Graham just a G aviation tie in that.

That existed before the sale by GE Aviation are Airbrushed S. T engineering done in fact, when we talked about already construction is complete so our deal with.

G Aviation and Mras was as soon as they sign it's L. T. A we're going to go ahead and build a factory and of course, we did that.

Even though it was just a human shake, but you know of course, we live up to our commitments. So that's not going through the rest of the items here. If you have any questions about the room. Please ask legendary Boeing 747, eight engineers solves the love this picture because especially this guy in the background I can show you. How huge. These are these are the cells are these are all part material that go.

These are the cells lots of content.

<unk> 18.

Update on GE aviation jet engine programs. So, let's do an update now it's going to take a little while so we'll try to go through as quickly as possible. So the <unk> hundred 20 Neo family of aircraft. This is a big Big dog. He said the leap one of engines that's ramping steeply we had this in our last.

The investor presentation, but let's just quickly go through it in May two on May 27 at May 27 News release Airbus stated <unk> hundred 20 family Airbus confirms an average age from 20 family production rate of 45 per month in Q4, that's basically now right Q4 of this year and each one of them mentioned that it's been at forties throughout the pandemic that's where.

They held at 40 and they call on suppliers and you go across to prepare for the future by securing a firm rate of 64 by Q2 of 2020.364, that's moving up quite a bit in anticipation of continuing recovering market. Airbus. It's also asking suppliers to enable scenario or 70 by Q1 of 'twenty four.

Longer term Airbus is investigating opportunities for rates as high as 75 for 2025, there's a little picture of the day through 'twenty deal. So it was a very big number so let's get going on slide 19.

As at the end of August 2021, CFR meeting leap whenever one engine had a 16.25% share of firm orders the day through 20 Neo family aircraft without the source of that is the Aero engine news, which kind of like the Bible for for commercial aircraft engines.

The.

The <unk> hundred 20 family of aircraft.

Two engines that are certified for the program. One is the CFM leap one area almost flat. So this is the share we're talking about shared that the CFM leap one engine has.

That's our program the CFM leap one a we're not in the crack program. So that's the CFM is good for US we don't supply into the crack homerun.

So lets people here, assuming a 60.25 CFM.

Sure.

Assuming that that's those are the facts now we don't we're not predicting that but to ensure we don't know what happened.

But this is the current share and there's a big backlog, it's not like just a few planes of thousands of planes thousands benches that are of an ordered 75.

<unk> hundred 20 Neo aircraft family per month rate, that's the way we're talking about the prior slide represents a significant increase over the number of units forecasted in our long term forecast so let's talk about that housekeeping.

And a long term forecast.

That we have are memories.

<unk> hundred 20 units sorry, <unk> hundred 20, if we do the math kind of back into the math, it's equivalent to 57 airplanes per month, 57, 820 airplanes per month assuming.

Sure that are assuming that the 62, 5% share for instance, and doing other computations 57 compared to 75. So that represents it's a lot higher like I said it I think it's over a 30% increase over the.

Our forecast our forecast tops out at that assuming the 57 number in 2024, we're not that number yet we're not at that number in our forecast shifts or forecast tops out in 2024, assuming a 57 rate, but Airbus is saying they want to get to 75. So.

Big Big Big number the difference is millions of millions of dollars per year for par.

With 50, 775 will happen I don't know, but I want you to be aware of it because it's a big big deal as far as I'm concerned now, there's some tension with Airbus suppliers, particularly engine suppliers.

Some tension has developed over the aggressive as 320 Neo aircraft family forecasted ramp up there's historically been tension between aircraft and engine manufacturers about production rates based upon diverging economic drivers for the aircraft and engine makers, what does that mean.

The aircraft makers make their money by selling airplanes the engine makers make their money by servicing the engine not by selling and so there's a tension that existed for a long time. This is not a new thing so here's the point the engine makers arent. So anxious for the aircraft maker to come out with the next generation airplanes, because they want.

Keep servicing the legacy engines on the legacy airplanes CFM also supplies into the legacy by some 37 in the legacy acreage 'twenty with our C. O 56 inch and don't want to keep getting some life out of those engines. So if everybody says wait a minute, we're going to really up our production plans for the meal that means those.

Airplanes, you can have retired and then Oh Gee Bush as the revenue.

Margins from the service of those engines, because the airplanes are going to be retired.

It's a pretty important to understand that if you're into commercial aerospace.

Slide 20, then on July of July 29, 2021, Airbus CEO stated he is disappointed that some partners. Many suppliers are challenging to ramp up. The further stated we have a backlog of more than 6000, <unk> hundred 20 Neo family aircraft I don't read a 40, which was the rate there right.

Until I guess this quarter that means 15 years of production at a rate of 16 in these 10 years. That's a long long time customer who did not want to wait that long we ought to go Oh. This is this S. I see I think as amidst COVID-19, but that doesn't make any sense I'm thinking you said above 60, it's a pretty odd she said about 60, otherwise it wouldn't make any sense you further stay.

We expect the supply chain to ramp up at a much faster pace. So here. We go we have a little tension here as I said.

The aggressive ramp up its partly based upon their success of days for 'twenty, one deal a D. C ill also comment and Angela.

On July 29 that Airbus wants to be capable of production share of 820 deals significantly about 50% through share of 60%. So you want my opinion is what will happen is just my opinion I could be wrong. My opinion is that if Airbus can sell these airplanes G or CFM will supply the edges and why don't we think that.

Okay, because they share this program with Pratt so.

If she affirm thinks your heels and says well, we're not going to supply that many engines to support the airplanes that you want them produce Airbus Airbus and say, okay. That's fine although the Pratt maybe prakken help us out in that case, what happens to CFM. They they don't get any revenue for servicing new engines, because we're not selling the new engines on them.

These programs and the old airplanes, a legacy airplanes, you're gonna be replaced anyway, but with with deals that are produced with the manufactured with Pratt engines St. Louis you're the way. It's just my opinion I could be wrong, but my opinion is that just going to be a lot of had went back and four at the end of the day if Airbus you sell these airplanes.

G or safran is a change to our funding CFM will support it.

Airbus also recently now to resuming work on new suddenly wanted to loose where they through 'twenty. One deal aircraft. So maybe they're they're putting your mouth money where their mouth is not just talking about trying to move the rates up there theyre investing so let's go on to slide 21.

X L. R. H 'twenty, one extra Laura we spoken about this for.

For several quarters now. So this is supposed to be in service in 2023 and as part of the park.

Probably a big driver of the aggressive forecast of the <unk> hundred 20 Neo family aircraft. This is considered to be in the 821 deal. There are 450 or over 450 orders ready is it a game changing aircraft yeah. It could be I think probably.

With this range of 5000 over 5000 of mild in the city capacity over two and 25 seats.

Well it really replaces you watch some of the wide bodies on some of the shorter international flights at much lower cost so you're going from let's say North America, and Europe, and we're getting on the wide body or you get on an XL are much lower cost for the airline with the law and they still have quite a bit of seating capacity. So.

Let's see what happens a key question is this a single house, our 5000, plus that statute mile range 225 seat seating capacity market being ceded to the Airbus.

<unk> hundred 21 extra Laurie that refers to what Boeing is going to develop an airplane compete against it.

So and our last item there is just back to the <unk> hundred 20 Neo family generally 95 orders in August which is not bad let's go on to Slide 22. These are still these are still GE aviation or.

Or.

G H and programs are in this case again, it's a CFM program. So come back nine when nine we've talked about that quite a bit of interesting dynamic here recent reports U S. Export controls are slowing progress of 91, nine but commack almost immediately responded by saying no. It didnt really those export controls didn't make that much.

The difference in there we're doubling down on their certification timeline before the end of this year, there, they're saying they're going to have to your airplane certified this year that would be in China.

China deliveries, but nevertheless, they're sticking to it so let's see what happens maybe by the next conference call when we'll know what what.

What would've happened so but this is an important potential program for parks, so, let's see what happens with it but that's the dynamic there.

Slide 23, let's go through as quickly as we can the global 7500 with the passport 20 engine is ramping up. This also is.

We're planning to have our leidy strike material certified for this airplane next year, which is a good thing also those are high margin products for us and the Commack Air J 21, that's a regional jet that's ramping up as well.

Last one is the 747, we talk about this every.

Quarter end.

Got a picture of the 10.47, it's kind of a sentimental things restroom reasons, we discussed probably in the past, but Boeing announced theyre going to terminate some 47 program next year.

So that will be a real sad thing for us I mean, we will have to have a vigil for them.

But I also want to remind you this is less than $2 million of revenue for us. So we emphasize a lot, but it's less than $2 million that program is less than $2 million and robin for us per year slide 25.

Okay, let's just.

Quick one review this commercial aerospace industry to milk meltdown mode, I'm, sorry industry Meltdown to review why don't we just kind of skip to the end you can read all the different items here, we know about it it was really Armageddon and the commercial aviation industry commercial aircraft industry. Both are almost all the news about the industry.

Back at the beginning of the pandemic was very negative aviation analysts and commentators predicted that the recovery will not come for many years and may never come never come rather at the end of the day scenario, you know pretty dire stuff pretty dark stuff that was being talked about and believed also slide 26 result of yesterday's attitudes companies.

In the commercial aircraft supply chain laid off thousands of people and wanted to bunker survival mode production slashed or even halted.

Thoughts about industry recovery, how to handle it we're just not in the minds of many probably most companies in the supply chain was all about survival for them since a leaf or is that a recovery if any with so far in the future. It was not worth thinking about but surprise surprise people got tired of being locked down vaccines were developed as promised and people start flying again flagging.

For our domestic flights and lots of people remember these flights renting so all of a sudden people wanted again. These planes again, so it was kind of a big change and as a result airline companies wanted to buy airplanes again no. One at the beginning of the pandemic airline companies just didnt want airplanes, one airplane piece, there's so much uncertainty about what the future was but now.

I want to buy airplanes again, a lots of airplanes and somebody needs to produce the thousands and thousands of components, which go into these airplanes airplanes at the airline companies want to buy now let's go on to slide 27.

But the commercial aircraft supply chain was quite very flat footed in the bunker survival mode is not in the mindset to quickly ramp back up to meet the renewed demand plus since the supply chain companies had laid off such a massive numbers of employees, who did not have the workforce to meet the industry ramp up anyway.

He's trying to hire back the employees. They laid off what has been widely reported that has not been so easy plus the government was bang people not go back to work so that didn't help either what's the result of all this the whipsaw effect in which the commercial aircraft industry supply chain was caught flat footed and a struggling and some cases badly to meet the unexpected increased demands.

The commercial aircraft industry as it recovers so kind of a whipsaw.

Whipsaw, because they were kind of clamping down in the survival mode. Then all of a sudden nowhere need to ramp back up again.

And the response has been you know I would say a lukewarm. This is today's commercial aircraft and you see supply chain dynamic it's a difficult one 526, but at park, we do not buy all the Doom and Gloom news, we did not by the end of the page where in hand, Here's what we said. This is interesting. This is what we said on May 14th 2020. This is.

The beginning of the pandemic the beginning of the crisis when confusion uncertainty and fear reigns Supreme just read this I'm not going to need it for you, but go through it quite interesting Ah we were not going into the bunker mode. We were in the Gulf War mode.

And you know what we were pretty much alone I don't remember too. Many people that were you know [laughter] joining the.

Well I don't know what you call it the mission that we're wrong.

But we the last item when we got one for you. We believe the glory days of aviation. We're touring we tend to be part of it let's go on to slide 29.

Park.

Although we do not know when we believe the commercial aircraft industry recovery would come and we wanted to be ready for it it would be a part of it we're not giving up on the commercial aircraft industry was quite the opposite for US actually so we made arrangements we talked about this before with him rest of maintained minimum monthly baseline critical mass production levels to preserve parks ability to ramp.

Production when he this is critically important if we went below these levels, we have a real problem on our hands because we would not have the critical mass to ramp back up and it would be a problem for us big one proper amyris big one in problem for some of those aircraft manufacturers big one and even though lay off a widespread chrisette pervasive and we didn't really know anybody who wasn't.

Laying off people in a commercial aerospace industry, we lost that we laid off nobody none of our people for all the darkest and seemingly hopeless stays in the commercial aerospace industry turns out the decision not to lay off any of our people with really important for park because when we laid off people, we would have we'd be in such bad could such bad condition.

Trying to ramp back up it would be very very difficult for us slide 30, So GE aviation jet engine programs are the part of the ones, we're parker's on ramping up fast.

So G aviation.

General jet engine programs.

Uh huh.

The park is on sorry to focus on ramping up and.

And a ramp up so let me Steve just for perspective, we shared this with you last quarter looking at Q3 of 2021.1.8 million then move for two quarters. In Q1, 2022.7 million. That's a four times increase in two quarters four times in a quarter. That's a very very significant for a manufacturing company.

We're not just selling stuff we have to make it we have to get the raw material, we have to produce it we have to test it with the ship it.

A very big challenge very Big Challenge.

Just FYI so fiscal year 'twenty to Q1, and Q2 already at pre Covid levels already if you look at Q1 Q2, and our ramp up is still a long has still a long way to go. The pointed question. How is the commercial aerospace manufacturing supply chain responding to the steep ramp.

I would maybe give it a C minus not so great, but it's an issue and challenge push everyday fly three one how spark responding to the GE aviation program steep ramp up all about our people.

Russia, even faster here with me. So I know, we're going really long or corn had kind of one 2014 were a 151 O five last quarter. So we're ramping up our head count a little bit but still a challenge.

Still have a number of people are looking to hire two.

To set forward and one step back in terms of the hiring process. So parks people stepped up once again, that's what parks people do in order to get everything done in Q2, we already talked about the challenges that we haven't had to be overcome so I won't go back over those again.

Once again, thank goodness for parks customer flexibility program won't go into the details but this program is when we talk about almost every quarter I shouldn't really critical to park, especially those who've tried to ramp back up slide three to how spark responding to the junior English program steep ramp up continued all butter people, we can't say enough about our people thank goodness.

Parkway people without them couldn't get the job done park is fortunate blessed to have such great people and every part first and received $150 bonus or his or her dedication and outstanding work during a.

Second quarter, well earned and deserve a lot of moot forest last supply chain issues freight issues.

Covid quarantine issues logistics planning big challenge, but through dedication loyalty and commitment we were able to meet our objective for Q2.

So slide 33, Russian as quickly you see the numbers I'm not much discussion about it.

The only thing I would say is that.

This is G forecasting of course, it's difficult quarter to quarter because of the inventory practices things can move from one quarter to others can move forward move back that makes them more difficult to me one of the big questions, though is when will the.

The numbers ramp up to meet the especially the forecasted numbers that.

Airbus is coming out with that when you spoke about earlier in your presentation.

A mismatch here, we're not operating anywhere near those levels. So at some point other Airbus is going to bring those numbers down or numbers you have to go up.

But can it can't be both ways. So something's got to give is it going to be in the fourth quarter, it's going to start in the fourth quarter I don't know, it's hard to say really hard to say if I had a feeling about it you know I will let you know, but at this point I'm, just saying it's out there it's kind of hanging out there that we know something's Gotta give something's got to happen unless everybody says wait a minute we changed them.

Mine or bring our numbers back down to 55 or 57.

You know per month.

Maybe that's a different story, but unless Airbus backs off a box awful lot Something's got to give these were nowhere close to operating a level to support that program and the other programs. We've talked about as well that are ramping up slide 34 again, you know the numbers are pretty straightforward. So I won't go into them in any great detail I'll just mention in Q3, we expect.

$400000 of blade of sales that's good in.

In Q4, though we expect about $2 million of the critical essential component sales, which you know not great margins, but also about a $1 million of the sales of the plated materials, which are relative margins.

Same question Oh, if you want to go back and look at all the factors that we talked about regarding to Q2.

On slide five I'd go do that because they apply for Q3 and Q4 of those factors haven't gone away. Once we keep talking about a same question, though about the GE programs, particularly Airbus at what point is the as what at what point as our production going to match their requirements at this point, it's not matching at some point so that they can have that and like I said.

They're gonna bring your numbers down we're going to have to move our numbers up when that will happen I don't know, but its out there its kind of looming out there and we're ready we're ready to go.

Obviously, what our challenges with our supply chain that will continue but park is ready to go as I said, it's really good we can stop that expansion going to slow it down very important for park, let's go on to Slide 35, 36, and these are the last slide So let me go through them fairly quickly, but they are important to watch changing gears a lot here what matters the most of it.

Park, we're deeply saddened by what we see in here in a world today, where told our people will work for all of you do not matter were told they are expendable. We were told they're gonna be sacrificed for some loosely defined or undefined greater good so to us it's really a tragic.

But we understand we're a small company and what we say or what we believe it doesn't matter all that much about these larger issues, but what matters a lot because what we say and think about our own people. So at park are people not expendable and parks are people matter. The most and park our people are everything or at par.

People are family, we do not turn our back on family are people not be forsaken are people not be sacrificed a park our people our precious park, where the most fortunate when it comes to our people I always say, there's a lot you know.

But it's because I needed a lot let's go on to slide.

Our last slide which is 36.

At Park, our people work for a living and that's what they do with park our people make money for our owners that is what they do it's something that our people are committed to I'm talking about all of them now.

Well, we made money every quarter there are throughout this pandemic.

And economic crisis.

Everybody to do that.

I don't think so I think most companies in the aerospace supply chain, probably did not do that.

But that was something that our people than it wasn't easy throughout this pandemic throughout the economic crisis. Our people did that made money for owners every quarter, that's what they do not.

Not an accident not luck, it's based upon serious commitment and dedication.

Sure his commitment and dedication.

So just wanted you to know that park is a strange and unusual company global wonderful wonderful and special people at park, we're not like the others a park we play for keeps so we always feature.

Always at least the last few quarters, a picture of one of our crews in this case, we're featuring two cruise customer serves in purchasing planning teams. When we go from left to right Jordan Teresa, Jonathan Chris Dakota, Sara and Atlanta. So are these people you know all the things you've been talking about throughout this presentation. These people were on the frontline.

So with all the supply chain as these trade issues international freight issues juggling customer orders quarantine issues production planning and then the possible environment. Because you know normally you want but you want some visibility and crushing plenty you don't want things to change every every week every day, but these things that kept coming up.

Let's say you know Kobe quarantine you can't predict that.

So lots of juggling a lot of moving schedules around big job Brute force was probably though.

And the way of the quarter for these people.

But this group of thought to it though we met our objectives for Q2 are they always.

On ways to overcome the obstacles. So thank you very much sorry to take so long I was really rushing you probably made it difficult for somebody who followed me. So it's gone so quickly maybe skipping over things, but operator, we're now done with our presentation. So are there any questions we'd be happy to take them.

As a reminder to ask a question. Please press Star then one.

My question has been answered and you'd like to remove yourself from the queue pastor Dumke.

Again, Thats star one to ask a question.

Yeah.

We have a question from Brian Glenn.

I'll kind of square your line is open.

Hi, Brian.

Hi, Brian how are you doing.

Good how are you.

Okay. Thank you.

My question is Theres two questions. So the first is that thank you for the walk through of course, there's always the first is around the supply chain.

You alluded to it a little bit is there a chance that you guys who are more than adequately prepared for a ramp that you are held back.

By the rest of the industry I know Airbus had several thousand when more suppliers for that program.

No not all of our sole source. So there is some ability to toggle.

But is that a real risk going forward that you see as potentially material and then the second question.

Is around.

I know you haven't put in place guidance, yet or brought it back but if we go back to pre Covid I know during Covid you guys worked on some military programs and there were some added efforts. There you talked about the lightning strike material or ignored them. That's on the passport 20 that looks like a new program that that may have.

Hum.

That's happening and.

So commercial aside if you think about the long term without getting into numbers is there kind of a net add in terms of the programs you might be on or that you are on versus if we go back to 2019, when you had that forecast in place.

Yeah.

Okay. Thank so let's see the first question is supply chain and that could be an issue for us ramping up as you I guess at least you know.

Applied we are sole source on these all these GE aviation programs, including the Airbus <unk> hundred 20 family programs.

So I think the risk of are being replaced as.

Nonexistent.

These existing programs.

What you're getting at.

But there certainly is a major challenge for us many of our supply chain you know as we're.

We're ramping up a.

Plus you know, we're also doing trials and everything else. So it's even more work there so.

So it's a major challenge and no one will this kind of thing even out I don't know if you know.

I mean, a lot of reporting about it when will the suppliers kind of catch up and kind of get their rhythm back I don't know maybe towards the end of the year. That's what I hear some reporting about that but of course, it's a case by case thing we have three or four major suppliers that we use for these these GE aviation programs and really.

We really need to look at each one individually somebody doing well.

Some are struggling and you know and I don't know how else to answer or acceptance of it. It's just a major effort to and.

Sometimes called force effort.

No.

But the other side of the equation I guess is our people are very determined and very committed to finding ways to make things work and we've been able to do that for the most part.

So I don't know, Brian I'm not sure answer your question adequately.

A lot of information you were interested in or something else that you're going for there.

That was helpful. Yeah. I know you guys are sole sourced with respect to the Chi program.

It was just around people even suppliers even outside of your vertical right, they're supplying into the fall.

Yeah, that's totally outside of your control, but you know right and if bottlenecks everybody.

Right so what.

I understand that question. So it's a really good one because let's say, we got everything organize our suppliers, okay, but yes.

Airbus is not able to source other key components are small it can be on airplanes and infectious I get what you're going for well. That's a really good question I don't have them.

Have a crystal ball on that one I my my feeling is it just my feeling is it's going to be ugly messy for a while.

Feelings at some point the supply chain. So these are very large companies that don't really you know aren't agile don't move that quickly at some point I really don't catch up and kind of get used to the new rhythm of new rates and everything else when that will be is a good question I don't know but.

But I think it's probably just give you my it's almost speculation my feeling is towards the end of the year, we'll start to feel that things are getting better not solve not that it won't but he issues and I'm not just talking about our supply chain and I'm talking about when you were asking about the supply chain for these airplanes, which are like I said, thousands and thousands of different components.

We're required to make these airplanes.

I know, you're probably not surprised to hear this but you know Airbus for instance, there, but you know massive function that deals with our supply chain management and they spent a lifetime of suppliers to try to.

Identify where the risks are and try to focus on them I'm sure. It doesn't surprise you that that's probably with any good OEM would do.

So.

Hope that helps.

And also what else I can do yeah now and the next question Yeah. We haven't reissued our long term forecast you have Brian, but maybe in the third quarter, we'll try that we were a little bit I'm.

Uncomfortable now because there's a lot of uncertainty of the things we talked about throughout the presentation, but absolutely. Yes, you know the programs, we're working on and developing over the last year and a half since the pandemic started those aren't just temporary things yourself, our factory and those are things, which we are we hope and expect will have a long.

Impacts to us now in aerospace and I just wanted to add you Gotta do this because some of the programs you run theyre going to go away you know so even there just kind of.

Break even or keep the same levels do you need to keep getting new programs, but our objective of course is not just to kind of maintain or levels to increase Roe levels or sales levels are the leidy strike. Good example, that's commercial of course, and we hope that we also get lighting.

Strike on the AAR J 21, that's the commack, a regional jet once we get a lighting strike on that program that we can then we'll have a clean sweep of all lines track on these programs I'm strike, that's actually from just really significant revenue, but also quite good margins. That's a product we really loved showing but then there's lots of them.

It's a military programs, we talk about them you know every quarter, we have a little picture. Some of them are a little some of them may not be little and you know you Gotta get your quote the door you get a star to deal with I'm gonna be so small content and you try to grow with the larger larger content.

I had a picture of Gvhd Gvhd is a really big deal and also Spacex we haven't feature of those programs before so that's good we're getting on those programs and we're not just going to stop once we penetrate we wanted to do more and more and more for US you know, it's always good to get to do something with us with.

Customer spend we kind of show our stuff we can show how we service how we respond and how we support our program. It's much more difficult to say look you know put us out of your program because were doing all these things just like well everybody says that but once we get a chance to actually start to work with a customer that we can demonstrate how we feel we're different than other.

Suppliers or many of our competitors.

Understood. Thanks, that's very helpful. Thank you and your team for the efforts on behalf of shareholders.

Thank you I'm sure those comments.

Again, Thats star one to ask a question.

Our next question comes from Brad Hathaway with fan you. Your line is open.

Okay. Thanks for the time and thanks for all the detail on the call. One question was earlier in the call. You mentioned that initially the new facility was named to get any kind of backup capacity, but now you are really going to eat. It is there any way and kind of big picture numbers to think about the total kind of.

Revenue capacity you have win win that new facilities online.

So we talked about that before.

I think we said, it's about $60 million of capacity new capacity, but remember you know probably remember because we havent published for a few quarters I don't think but in the factory. There was a big area and you know we're talking in fact, we just did not like little room, a huge area that set aside for another line.

Could be a hot melt wine or a solution line. So if we decide we need more capacity to be very easy to drop down and we don't have to go build a new factory the factories, where he built the equipment has already been designed because we were we just bought the equipment. So it would be easy to drop in a new line there.

So it could be ramped up to much more than that at that point. So the thing that I was saying I just want to make clear is that the factor was originally agreed to with GE aviation and Emirates as a redundant factory wise that we just talked about being sole source could take three years to qualify.

Composite materials supplier on these major.

Commercial aircraft programs three years, so it's kind of a scary thought what happens if something happened to one of them in fact, our factory rather I mean, you know what it.

It's like a really scary thought I had this discussion with people before and if they it's kind of like the wound gets really quiet.

So they asked US very understandably you will build them in the factory, which we did if you look at the little photograph.

A new factory, it's actually separate building that has joined with a passageway for moving people and material that has a fire on both sides. So it's kind of a best of both worlds, who manages one factory, but its actually two factories are totally redundant. So if something happens to one factory or one line. The other the other line on the factories available but.

That was the original concept, but because business has ramped up so much and it's getting stronger and stronger it's no longer a matter of redundancy, which is really critical in aerospace when you're sole sourced or something it's also a matter of capacity. So what I'm, saying is that it's really good. We did we did because we were starting now we will.

Wait a minute we have a problem with capacity now we'd be in a world of hurt because it would take US three years ago, approximately three years ago build a factory you know there've been designed let's say, we're starting from the from the beginning.

And then we have to get the machines go through trials you got to get machines are signed off on by the supplier and then qualification, which also doesn't even though it's only a plant qualification material qualification still takes a long time, so I'm thinking maybe three years' timeframe, but then we'd have real problem on our hands, we would be it would be too late and we would not have enough.

Capacity I don't think.

Got it that's helpful and is there any more color you can give us kind of on the M&A side, and just kind of anything you're seeing out there I'd love to hear more about hey, you have up there.

Yeah, the M&A side so.

When you do the work in this area the strategic area that we've identified and are particularly might have mentioned it but these products are products are used to make a composite structures by our customers, it's not composite materials or other things that are used.

The other products that are used to make composite structures. So that's one area. We focused on we probably contact and I'm not I don't know if you haven't done their number but about a dozen or more of these companies.

And we continue to reach out to other companies and we.

We could crime.

So that's and that's something we feel real good about it because we feel it makes so much sense for us to be in that area. The challenge is to find the right opportunity because you know obviously lifetimes contact somebody and thank you very much we're not for sale.

That kind of thing so he's not auctions, where something's for sale, we saw backwards, putting it up for sale. So it's a little more difficult from that perspective, there are a couple of companies that we're kind of watching.

[noise] tracking to see how they're doing there may be public and watching how they're doing and you know kind of maybe the timing isn't quite right yet.

Thinking about them.

And then there's this other area, we talked about which is more of a kind of joint investment with very big Oems and new aircraft programs.

Which we had discussions which is beginning discussions with one of these big Oems we've reached out to tool and you know the first discussions as you know at the beginning of discussion, but with very high level people. My felt there was a serious interest in airport. They know what's pretty well all sorts of like who you are so so we're hopeful we're hopeful that.

B a good avenue for our investment and really a great opportunity for parks future.

Thank you thanks for all the efforts.

Sure.

And no further questions I'd like to turn the call back over to Brian shore for closing remarks.

Thank you operator, and thank everybody for listening in I'm sorry. It went so long every time, we try and at least I tried to make a little bit more compressed, but I don't I'm not quite sure had nothing very successful have a great day, Matt and I are available call us at any time you have to talk to you. Okay. Good day. Thank you.

This concludes the program and you may now disconnect everyone have a great day.

Yeah.