Operator: Presentation. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press star two. Thank you. At this time, I will turn the call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.
Brian Shore: Thank you, operator. This is Brian. Welcome all, to Park Aerospace's fiscal 2027 Q2 investor call. I have with me, as usual, Mark Esquivel, our President and COO. We just, I guess right after the close, published our Q2 earnings release. In the earnings release, you will find instructions as to how to access the presentation we are about to go through, either through a link, and it is also on the website. You want to pull it up in order to make this presentation discussion more meaningful. It is kind of a common theme for the last couple of quarters. We have a lot of new investors. I think last call, we had about 170 people who participated in the call. We have a lot of new investors. We have a lot of the veteran investors.
Brian Shore: We have to find a balance between the old and the new. We will do the best we can to maybe find a middle ground or compromise. Obviously, the legacy investors probably do not want to hear the same material being covered every time, but some of the new investors may find it more interesting and useful. We will do the best we can with that. After we are done with the presentation, we will be happy to answer your questions. Why do not we get started? Let us proceed on to slide 2, forward-looking disclaimer information. Let us know if you have any questions about forward-looking disclaimer information. Slide 3, our table of contents. First of all, slide 1. Sorry, the first item in the table of contents is the investor presentation, which we are about to get to.
Brian Shore: There is also a supplementary financial information attached as Appendix 1 to the presentation. We are not going to go through that information, but let us know if you have any questions about it. As usual, we feature the James Webb Space Telescope in our table of contents. The James Webb Space Telescope recently identified a mysterious new class of cosmic objects called black hole stars. They look like gigantic stars which shine up to 100 billion times brighter. That sounds like a lot to me. Thank you, James Webb Space Telescope and PARK. James Webb was produced with 18 PARK proprietary SIGMA STRUTS, as you probably all know. Let us go on to slide 4. We go from the sublime to the mundane here. Here are the Q2 results. Let us just go through the right-hand column. Q2, the quarter we are just announcing. Sales of $20,791,000.
Brian Shore: Gross profit, $7,135,000. Gross margin, 34.3%. We like that. We like our gross margins to be into the 30s. Adjusted EBITDA, $5,285,000. Adjusted EBITDA margin, 25.4%. What did we say about our Q2 during our Q1 investor call? We said our sales estimate was $19.5 to $21 million. So we came in within the range, maybe kind of toward the upper end, but within the range. Adjusted EBITDA estimate, we said $4.3 to $5.1 million.
Brian Shore: So we came in a little bit above the range with our EBITDA number. Significance of our forecast estimates. We remind you of this fairly often. When we give these estimates, we are telling you what we think will happen. Sometimes we are wrong, sometimes we are not, but we are telling you what we think. Mark and I usually spend a lot of time going through this and come up with the ranges for you.
Brian Shore: We do not pad the numbers. I know a lot of other people do that. We do not give you a number and then subtract 10% from it, so when we announce the number, we can beat it. That is just not what we do. We understand that pretty much everybody else does that. But we are not like everybody else, as you probably know. That is actually a Kinks song, if you want to check that out. Pretty good one. Slide 5. Quarterly results. We are continuing here. We are mixing things up a little bit. I maybe should have explained it at the beginning. We are changing the sequence of things, and we are changing the content a little bit just to try to make it a little more interesting for you. I do not know if it will be successful, but that is the objective here.
Brian Shore: What we are doing with this slide here, slide 5 at the top, is we are talking about some key product groups that we will circle back to in many cases. C2B fabric, we cover that a lot, $1.5 million of sales. Ablated materials produced with C2B fabric, $1.8 million. Often, we discuss those two numbers because, if they are really out of sync, out of alignment, they could distort the quarterly P&L.
Brian Shore: But those numbers are fairly close, so we are not going to get into that. But just for your information, we always like to know. Missile system programs, $5.7 million. Obviously, we emphasize missile systems a lot, so we thought you would be interested in that number. Advanced composite materials for our GE Aerospace GE9X programs, $8.3 million. We will circle back on that. We cover that every quarter. And here is something a little interesting with what we provide for you.
Brian Shore: Our Q2 sales value of production, we call it SVP, was $21.1 million. That is not inventory value, that is actually sales value. And that is a modern-day record, we think, post-sale of our electronics business. And that is a really good thing, and we got to give a lot of credit to our factory people, our floor people, for producing and getting out the door that much product.
Brian Shore: That is actually a pretty nice accomplishment under maybe not ideal circumstances, but when are there ideal circumstances? And we wanted to acknowledge our production people. In terms of how much product was produced during the quarter. One other thing we never cover in these investor calls is EPS. We do not get into that, but we just wanted to mention something to you. It will be discussed in more detail with our 10-Q, which I think will be filed on Tuesday.
Brian Shore: Monday's a holiday, so you can look forward to it there. You might have noticed already, and I just want to get ahead of this a little bit, that our tax rate for our Q2 was quite low. It was 18.6%. That's not a normal tax rate. There are significant benefits from stock option exercises which took place in Q2. There were a lot of stock option exercises in Q2, significant benefit. Our normal tax rate without that benefit, the stock option exercise benefit, if you will, for the tax rate, would be probably around 26.5%, something like that. Just so you know, if we had that more, let's say, quote-unquote, "normal tax provision" or tax rate, rather, of 26.5%, probably looking at $0.19 rather than $0.21. Like I said, we're reluctant to get into EPS stuff.
Brian Shore: We don't normally cover that, but I thought it's such a significant difference in the tax rate that you'd probably be interested to know, have that information. If you want more information about that, you really should call and talk to Gus and Chris. Like I said, when we publish our 10-Q, there'd be a little bit more information about that particular item. Okay, let's not get too hung up on that, though. Let's go on to slide 6, our top five customers for Q2 in alphabetical order. Let's see. Let's tie the customers to the pictures. The easy one is Kratos, the BQM-177A, that's a target unmanned aircraft. That obviously ties to Kratos Defense & Security. Airbus A320neo with LEAP-1A engines, that ties to Middle River Aerostructure Systems, we call MRAS. Let's see, the Patriot, we talk about that a lot, PAC-3 MSE, defensive missile system.
Brian Shore: That's a two for the price of one. That ties to AAE Aerospace and L3Harris Missile Systems. That's nice and efficient. The bottom right, Bombardier Global 8000 business aircraft, and that ties to the Nordam Group. Okay, let's go on to slide 7, more pie charts. Nothing too remarkable here, pretty consistent, so let's not spend too much time on slide 7. Let's just keep moving. Let's go on to Of course, you have questions. Let us know later, but we're going to move to slide 8. This is a little more interesting. PARK loves niche military aerospace programs. This is a slide we give you every quarter. This is Elena's project. She always does a real nice job. So the pie chart is interesting because look at the missile system percentage. It is growing. This is just one quarter, so we'll see what happens quarter-to-quarter.
Brian Shore: These things change, of course, but we even talk a lot about missile systems, and missile systems as a portion of the pie chart is growing. We won't go through a description of the photos, individual programs, except we always say that we don't provide photos of programs that we're not somehow involved with. But we used to give you more information. Right now, at this point, we don't feel we can do that. It's just too sensitive. We just don't know where the line is as to what we can say and what we can't, so we don't want to push the envelope too much. Let's go on to slide 9. Okay, GE Aerospace jet engine programs. Like I said, we're changing things up in terms of sequence a little bit, try to make it a little more interesting.
Brian Shore: This slide's a little different than it was in the past. PARK's advanced composite materials are sole source qualified on multiple engine nacelle and thrust reverser components of the following GE Aerospace and CFM engine programs. Quickly, there's a Boeing 747-8 with a GEnx-2B engine. Those are for spares. That program is canceled. LEAP-1A engine for the A320neo aircraft family, that's the big kahuna. LEAP-1C, that's for the COMAC C919. That's a Chinese single aisle. CF34-10A, that's for the COMAC C909. That's a Chinese regional jet. The Passport 20, we already talked about that, the Bombardier Global 8000 aircraft with the Passport 20 engine. What's going on here? PARK has an LTA requirements contract through the end of 2029 for the above programs with MRAS, a sub of ST Engineering Singapore. What's going on here? These look like they're all GE programs.
Brian Shore: Got to read the little footnote. Footnote, MRAS was formerly a sub of GE Aerospace, so that's the connection. When we got on all these programs, MRAS was part of GE Aerospace, and then I think in maybe 2018 or 2019, GE Aerospace sold MRAS to ST Engineering, which is a large Singapore aerospace company. PARK is also exclusive supplier of AFP composite materials for the fan case for the GE9X engine for the Boeing 777X aircraft. Let's go on to slide 10. Update on GE Aerospace jet engine programs. We're starting out with the big kahuna, the A320neo aircraft family. We're not going to read the variants for you, but you can see them for yourself. As of August, Airbus had delivered 4,741 of these airplanes, and they have a backlog of firm orders, 7,571. That's just a huge, huge program.
Brian Shore: Probably the biggest ever for commercial aircraft, so we're fortunate to be on that program. Here's the history of the ramp-up. You can see what's going on. They were ramping up the program until they hit the skids with 2020. That's the pandemic year. Then clawing their way back. 2025, 607 airplanes were delivered. 2026 year-to-date, you don't want to annualize this number. That's not a good idea. You can do it if you want, but that's not how it works because these aircraft companies make the years, if you will, in the last couple of months. What's significant is that that number is quite a bit larger than the same period from 2025, which was 333 deliveries in year-to-date August of 2025. That's good. It means that GE is in ramp up. GE Aerospace, sorry, I'm a little tired.
Brian Shore: GE Aerospace and Airbus are ramping up this program, which is good news. Slide 11. Okay, what are we doing here? Airbus is targeting A320 aircraft family delivery rate of 70 to 75 per month by the end of 2027. Remember the prior page, I think we say 2025 was like 51 per month, so we still have a way to go here. Stabilizing to a rate of 2027 thereafter. Approved engines, this is important. These are two approved engines for the A320neo aircraft family. One is the CFM LEAP-1A engine. That's the program we're on. We're on the A320neo aircraft family with the LEAP-1A engine, CFM, and we're not on the A320neo aircraft family program with their Pratt & Whitney engine. So we covered that in the first and second bullet item. Here are some interesting info. Third bullet item.
Brian Shore: The CFM LEAP-1A market share of firm engine orders for the A320neo family of aircraft was 66.9% as of 30 June. The CFM LEAP-1A market share continues to grow very nicely, and in the prior quarters, we explained why that is, what is going on. We are not going to go into it here, but if you have any questions about that, let us know. The key thing is that the LEAP-1A market share, that is the program we are on, continues to grow.
Brian Shore: I think when we started these presentations, it was maybe less than 60%, I do not remember, but it has grown quite a bit and it continues to grow. There is huge, huge backlog, so there is a lot of ballast, if you will, in that market share. It is not easy to change the market share so much month to month or quarter to quarter. Nevertheless, that is what is happening.
Brian Shore: At that delivery rate of 75 A320neo family aircraft per month and at 66.9% market share, that translates into 1,204 LEAP engines per year, which is a lot of damn engines, pardon my French. Let us go on to slide 12. Still with the same program as of 30 June, there were 8,546 firm LEAP-1A engine orders. That is a heck of a lot of engine orders. I think if you go to slide, what is it? Slide 16, you could kind of figure out what that is worth. You can do your own math. Because in slide 16, it tells you what a revenue per unit is. Let me just say, it is a big number. That is not it. That is just the firm engine orders. That does not mean that is it. Obviously, they are going to take more orders as time goes on.
Brian Shore: Let us continue on slide 12, a different program, the COMAC C919. That is the Chinese aircraft with a LEAP engine. It is a LEAP-1C engine. They reportedly have over 1,200 orders. You can see their deliveries. They are trying to ramp up. I am sure they are not achieving the rates that they want. Their deliveries are expected to ramp to 59 and 28 and 93 by 2030. Those are airplanes, not engines, by the way. This is the single aisle, the Chinese single-aisle airplane that is designed to compete against the 737, the A320. Let us go on to slide 13. The 777X with the GE9X engines. This is a very delayed program, but still a very important program for PARK. The test programs have amassed over 1,700 flights. That is a lot. Over 4,000 flight hours. That is a lot.
Brian Shore: Quarterly, they have over 670 open orders for the aircraft, and Boeing anticipates a certification entry to service the first delivery next year. This has been pushed back a lot, a lot of delays, but just my opinion is I have some optimism that this will happen next year, which would be really important for PARK. It is an important program for PARK. So a nice picture of the 777X undergoing cold weather testing in Fairbanks. A friend of mine took that picture. Let us go on to slide 14. GE Engine program sales history and forecast estimates. We do not go through all the history. Do not need to do that. But what you might look at is, look at fiscal 2020. That was the year before the pandemic, just about $29 million. It took up to fiscal 2026.
Brian Shore: If you look at the right-hand side of the slide, kind of halfway down, 2026 to get back to that $29 million number. We really had a setback with the pandemic, and it took us a while to even get back to the pre-pandemic numbers for these jet engine program sales. In our Q2, $8.3 million of sales, and our forecast for Q3, this is a GE engine program sales forecast, $8 to $8.5 million. For fiscal 2027, the whole year, we brought that number down from 3.2 to 3.5. It was a little higher. That number was based upon the input we have from our customers, called a build plan.
Brian Shore: We haven't got a revised build plan, but we're a little skeptical as to whether we'll achieve that build plan because we have for the first two quarters in the books, we've got a forecast of Q3, and we're trying to be a little more conservative in terms of where we're going to go with the fiscal year. We'll see what happens. All right, let's go on to slide 15. The GE programs outlook, we call our juggernaut, PARK's commercial aircraft juggernaut. This is our first juggernaut. Remember, GE Aerospace Engine programs. What's the timing for the commercial aircraft juggernaut? For a long time, for years, we were saying, "When's it going to happen? When's it going to happen?" We don't know. We'll see. But we're no longer saying that. We're saying the commercial aircraft juggernaut is here because the programs are clearly ramping. Commercial aircraft juggernaut drivers.
Brian Shore: What are they? They're the A320neo aircraft family production as it ramps up to that 75 airplane per month, the expected certification and entry into service of the 777X, and COMAC's planned ramp-up of the C919 aircraft. The two GE Aerospace programs, the Global 8000 and the C909, those programs are pretty much at rate, so that's good, but they probably are not going to be key drivers in terms of the ramp-up of current rates, the current revenues, rather, to that aircraft juggernaut kind of revenue level. Let's continue. Here is a slide. Was it slide 16 we're on? Yep. Continuing with the juggernaut. Here is kind of how we lay out the juggernaut and get to that $62,340,000 number. There are a couple changes here, though, in the assumptions.
Brian Shore: Slide 17 has footnotes in terms of how we computed, how we arrived at assumptions, and how we did the math. But we actually increased A320neo to this 1,200 units because we decided we really should look at the current market share. We're holding off using 60% market share, but we thought that doesn't really make any sense anymore. We brought down the number for the C919 just because they seem to be struggling to get that level. Remember, these are engines, so you got to multiply the airplanes by two, so 200 engines means 100 airplanes. We do the math, and we get to $62.3 or $62.4 million, like $62.3 million. That compares to about, what, $30 million last year or something like that. So it's still a long way to go in terms of the ramp-up.
Brian Shore: Slide 17, these are the footnotes I referred to. We are not going to go through these. Any questions, let us know. Slide 18. Okay, we are changing gears, and we probably have to pick up the pace a little bit. Missile systems. The good news about missile systems is there really, even though there is so much going on for us with missile systems, it is a frenetic pace for us to keep up with, but there is not a lot of new developments that are being reported in the presentation as compared to Q1.
Brian Shore: So a lot of this is just review. It is our new juggernaut. Next big thing, missile systems, PARK Missile Systems niche, we call it. We specialize in design and manufacture advanced composite ablative materials used to produce solid rocket motor structures for critical missile systems, including the Patriot MSE, Patriot missile system, which we talk about a lot.
Brian Shore: We also design and manufacture advanced composite material to produce other missile systems components. Depletion of the depleted, we covered this last time. It is well understood, widely known that the missile system stockpiles have been badly depleted by all these horrible wars that we have been involved with the last couple of years, running empty, replenishing the depleted stockpiles. So there clearly is a highly urgent need to replenish depleted stockpiles. But is that it? Does it end there? Maybe not. Let us go on to slide 19. Okay, here we go. Quadrupling the production of the exquisite class of weapon systems. Quadrupling, that is quite a concept for our aerospace industry. Usually it does not move that quickly in our experience. On 6 March, beginning of the year 2006, President Trump met in the White House with seven top defense contractors.
Brian Shore: At the meeting, these contractors were reported agreed to quadruple production of the exquisite class of weapon systems as rapidly as possible. That is really quite something, kind of shocking. The Patriot missile system, of course, is head of the class, of the exquisite class of weapon systems, plus other things that other programs PARK is on. Let us talk about Patriot, the Patriot MSE Patriot missile system. PARK is also a source-qualified for advanced composite ablative materials for solid rocket motors for the Patriot MSE missile systems program. The Patriot missile system interceptors have been extensively and very effectively used by US allies in the Middle East, including all these countries. And why are they using them? Because the bad people are shooting missiles at them.
Brian Shore: So they have been using the Patriot missile systems to intercept and destroy the incoming missiles, the ballistic missiles that are being shot at their countries, launched toward their countries, and in particular, civilian population centers. Let us go on to slide 20. The Patriot MSE missile system. It is an extremely effective missile defense system, very high rates of successful intercepts and destruction of incoming ballistic missiles and other threats.
Brian Shore: But the stockpiles of those Patriot MSE missile systems have reportedly been badly depleted by all these horrible wars. I do not think we are talking out of school. We are not talking about anything confidential, no inside information here, just it has been widely reported that the system stockpiles have been badly depleted by these horrible wars. And the thing is that the Patriot missiles, they do not do any good if they are not available, as wonderful as they are.
Brian Shore: According to reports, there were dozens of people killed recently in Ukraine by Russian ballistic missiles incoming, which Ukraine was not able to intercept and shoot down because of a serious shortage, that is their terminology, of Patriot missile interceptors. It is just heartbreaking. These are people that died. It is not funny. It is heartbreaking. On 6 January 2026, this is now kind of following on, what are we doing about it? What is our government trying to do about it? Lockheed announced it reached a 7-year agreement with the Department of War to increase the Patriot MSE interceptor production capacity from 600 per year to 1,000. Well, that is quite an assignment, 600 to 1,000. Let us go on to slide 21. More activity by the government.
Brian Shore: 13 January, like a week later, the Department of War announced it is investing $1 billion in L3Harris' solid rocket motor business, to boost solid rocket motor production for the PAC-3 MSE and other missile systems. This is all public stuff. We are not talking out of school here. ArianeGroup of France, let us talk about them for a while. ArianeGroup is a joint venture between Airbus and Safran. Ariane is an iconic and legendary missile launch system development and manufacturing company with very deep legacy technology. Ariane's rocket and missile system programs include Ariane 6 heavy lift launcher used by the European Space Agency, the M51 submarine launch, ballistic nuclear deterrent missiles. This is a very special company. Our relationship with them and its predecessors go back to the early 2000s. We are very proud and fortunate to be their partner.
Brian Shore: Like I said, they are a very special company, very special people, wonderful people, actually. We just want to go on the record to make sure everybody knows how we feel about this wonderful company, how privileged we feel we are to be connected with them, and how privileged our country should feel to be connected with Ariane. So let us go on to slide 22. Ariane produces a proprietary fabric called Raycarb C2B, which is used to produce ablative composite materials for advanced solid rocket missile programs. We are sole source qualified on the solid rocket motor for the PAC-3 MSE missile program, for specialty ablative materials produced with ArianeGroup's proprietary C2B fabric. So we are qualified with our prepreg material, but it is also qualified with Ariane's C2B fabric.
Brian Shore: PARK entered into a business partner agreement, that is what they call it, Ariane calls it, with Ariane in 2022, under which PARK appointed Ariane as its exclusive North American distributor of their C2B fabric. I think informally, we were doing that for a long time, but they wanted to formalize it. That was that key for them, not us. On 27 March 2025, we entered into what they call the new agreement with Ariane, under which PARK agreed to advance Ariane EUR 4,587,000 against payments for future purchases by PARK of C2B fabric. We paid the first installment in our fiscal year 2026 Q1. We will get a second installment in our fiscal 2027 Q1. Let us go on to slide 23. Our third installment is basically being paid now. We actually accelerated that. It was supposed to be April next year. It is now, I think, next month.
Brian Shore: That was in exchange for Ariane increasing the allocation and pulling in the allocation, accelerating the allocation, then also in exchange for at least our asking if they could even do more. We have a wonderful relationship with these people, and it has worked very well. What is the purpose of this EUR 4,587,000 advance payment? To fund 50-50 with Ariane in the construction of additional C2B fabric manufacturing capacity in France. This additional French manufacturing capacity is about to come online in 2028. Approximately half of it is for us and half of it is for them because they need it for their own programs at Ariane. So we went 50-50 on this additional capacity. We are 50-50 on the output. Unfortunately, this additional French manufacturing capacity is not the adequate support to ramp up the PAC-3 MSE program, not completely anyway, to that 2,000 interceptor per year rate.
Brian Shore: Now what do we do? Let us go on to slide 24. I will try to pick up the pace a little bit here. Sorry, I am taking too long. On 18 July, this is all covered at our last Q1 investor call. This all just happened right at that point. 18 July, PARK and Ariane entered into a term sheet agreement relating to the construction and establishment, this is big, by Ariane of a US-based C2B fabric manufacturing plant with expected capacity more than adequate to fully support the needs of the PAC-3 MSE missile program at that 2,000 interceptor per year rate. The term sheet agreement provides a definitive agreement, also will need to be entered into before the end of the year. What is the significance of the signing of the term sheet? I mean, before the definitive agreement is signed.
Brian Shore: Based on the term sheet signed by Ariane and PARK last July, Ariane is proceeding with the construction and establishment of their US-based C2B fabric manufacturing plant. That is really important. Let us go on to slide 25. That is providing a term sheet, 100% of the output of that US plant. The US plant will be allocated to PARK, which we will use to support the PAC-3 and other missile programs.
Brian Shore: That is really important because the capacity in France, we share that with Ariane. This capacity is all for us and our programs. Also, under the terms of the term sheet, PARK has committed to invest $25 million in the ArianeGroup's US-based manufacturing plant. Now, it is not equity or debt kind of investment. The $25 million investment will be made by PARK in the form of advanced payments to be fully applied against future purchases by PARK of C2B fabric.
Brian Shore: $25 million advance payments are expected to be made by PARK in 2026 and 2027, expected to be applied by PARK against future C2B fabric purchases beginning in 2030. Why do we do that? It is kind of a strange thing to do, you would think. Why did PARK enter into the term sheet agreement with Ariane? Why do we make the commitment to $25 million advance payment commitment? Because it was necessary to provide Ariane with the green light to proceed with the construction of a US-based C2B fabric manufacturing plant. We at PARK believe it is urgent that ArianeGroup rather, builds this US plant as soon as possible. Let us go on to slide, what is it, 26 here? Yep, slide 26.
Brian Shore: Top, although not at liberty to disclose the specific Raycarb C2B fabric manufacturing capacity expected from ArianeGroup's US plant, when the plant is complete and online, its manufacturing capacity, together with the Raycarb C2B fabric allocation from ArianeGroup's European operations, will be more than adequate to support the needs of the PAC-3 MSE program at the 2,000 interceptors per year rate, and numerous other critical missile programs. What is the timing of the ArianeGroup US Raycarb C2B, rather, fabric manufacturing plant in the US? According to ArianeGroup, their US plant was originally expected to take four years. That is a long time to be completely online. But ArianeGroup recently agreed with PARK to accelerate the timeline for the completion and bringing online of their US plant by six months, in exchange for PARK's agreement to accelerate the $25 million advancement payment schedule.
Brian Shore: It is very good news because we want to get that plant up and running as soon as possible. As a result of this recent agreement, PARK is now expected to make advance payments of $20 million this year and $25 million next year. That is all to be applied against future purchase by PARK of Raycarb C2B fabric. This is all obviously dependent on us entering into that definitive agreement, which is expected to happen before the end of the calendar year. Let us go on to slide 27. Okay. Just for the record, want to cover this, even though we are in business to make money for our shareholders, thank you very much, it should be obvious, it is not all dollars and cents for us. There is more to it for us.
Brian Shore: As we have already alluded to, every time a PAC-3 missile is launched and successfully intercepts, destroys an incoming ballistic missile, it is likely that there are people who are alive and walking around on the Earth, who otherwise would not be. Lives are being saved. This is reality. This is not a theory. This is not some interesting paper or some kind of video game. That matters a lot to us. Okay. It matters a lot to us, so that motivates us a lot. We do not like seeing people getting killed when they should not be getting killed. But, let us talk dollars and cents for a minute anyway. Under the terms of the term sheet, PARK is expected to purchase a significant amount of Raycarb C2B fabric from ArianeGroup during the period of 2030 to 2036. So why is that a good thing?
Brian Shore: Well, it is a good thing because PARK will also be expected to sell all that fabric to its prearranged customers under prearranged arrangements with the customers, with our distributor's markup. But in addition to that, PARK will be expected to manufacture and sell ablator materials produced from that Raycarb C2B fabric for those customers. So what kind of ROI do those sales of fabric and materials represent for PARK? Well, we are not going to disclose that specifically, but let us just leave it at this. It is a very, very good business deal for PARK, and you should be happy about it, from a business perspective. Very good. Let us go on to slide 28. Okay, changing gears here, talking about our new plant. And again, this has all been covered pretty much, not too much news here.
Brian Shore: July 2017, we entered into this lease agreement for land at the 18 acres at Tulsa International Airport. That is where our new site will be. There is also going to be land for space for additional plant, if needed in the future. Plant size, 150,000 square feet, approximately. The budget outflow. Sorry, the capital budget, $65 million, cash outflow, $10 million in 2027, and $45 million in 2028, $10 million in 2029. You probably noticed that this got pushed out a little bit. I think last quarter we said $25 million in fiscal 2027. It takes a little longer to work through all the incentive agreements with Tulsa and Oklahoma. They are wonderful people. They are not a problem. It is just longer than we expected.
Brian Shore: The good news is, if you look at the last arrow item is that facility is still expected to be complete in 2028, and production shipment is supposed to commence in 2029. So that is not pushed back. Fiscal 2029, I should say. Slide 29, continuing here. Plant designed to produce our full product line. Second arrow item, expected to, this is important, approximately double PARK's current hot melt prepreg and film adhesive manufacturing capacity. That is used to support GE Aerospace programs and other commercial aircraft programs. Here is the key thing. By staffing up our existing hot melt manufacturing lines in Newton, Kansas, in our Newton facility, we will be able to support the ramp-up of GE Aerospace programs and the other commercial aircraft programs and hot melt programs we support. We will be able to do that, and people are asking about that.
Brian Shore: How are we going to bridge the gap until our new plant is online? We can do that with our plant in Newton by staffing up our lines. But the additional hot melt manufacturing capacity provided by our new Tulsa plant will be necessary to more properly and sustainably support those GE Aerospace programs and other commercial aircraft programs. So we will be able to get through the transition with our current plant, but it is really good our new plant is coming online soon. It is the same, really, almost the exact same story with the solution treating on slide 30, manufacturing capacity. We are tripling our solution treating manufacturing capacity with the new plant. That is used to support, among other things, missile system programs, the solution treating manufacturing capacity. It is the same story.
Brian Shore: By staffing up the existing solution treating lines in our Newton, Kansas facility, we will be able to support the PAC-3 program at the 2,000 interceptors per year production rate. Because that, according to what our customers are indicating, we are not going to give you the specifics. We are still going to be at that rate well before our new plant is online. But we can handle it. But to keep others, the additional solution treating manufacturing capacity provided by our new Tulsa plant, still be necessary to more properly and sustainably support the PAC-3 program and other critical missile programs in the future. Why are we building the plant? Pretty obvious, it is because of our commercial aircraft juggernaut and missile systems juggernaut. They require it, and also to enable, facilitate, and promote PARK's growth and development as a company for the future. Okay, so slide 31.
Brian Shore: Here is where we kind of mix things up again. These slides were somewhere embedded in the middle of the prior presentation. PARK's financial performance history and forecast estimates. We will not go through history. We already did that. Q2, so we already talked about Q2, $20.8 million sales, $5.3 million EBITDA, adjusted EBITDA. Our forecast estimates for Q3, $21 to $22.5 million of sales, $5 to $5.8 million of EBITDA. Let's go into 32. We show you this slide every quarter, except the new things. We are including the first 6 months year to date in the right-hand column. We will continue that, next quarter will be the first 9 months, just for information. When we continue, let's go on to slide 33. Recent public offering, you know about this. There is no news about this. It was already complete when we did our first quarter investor call.
Brian Shore: It was a $50 million at-the-market public offering, ATM, I guess they call it. We sold 1,812,000 shares at an average of, or for proceeds of $49,996,000, average share price of $27.58 per share. That at-the-market offering was actually complete, I think in June. Let's go on to slide 34. Our last slide thankfully, I guess. PARK's balance sheet, cash and cash dividend history, saving the best for last. PARK has zero long-term debt. That is really important to us. I am not saying we will never have debt, but debt is kind of against our religion. I sometimes watch financial news. All the small companies with all the debt, they are struggling. It is the Magnificent Seven, or whatever they call it, are doing so great. Well, I do not know about that, but we are not big believers in debt either.
Brian Shore: PARK reported $114.75 million in cash and marketable securities as of the end of Q2. That is a lot of money, I agree, but remember, as we previously discussed, we plan to invest $65 million on our major new Tulsa manufacturing plant and $25 million in ArianeGroup's US plant in the form of advanced payments. Now, $25 million eventually comes back to us, but that is 4 or 5 years.
Brian Shore: You add 25 and 65, you get some real numbers there. I just want to mention something we have not mentioned before, which maybe is obvious to you, but the $65 million, so those were the capital assets, that is the equipment and the factory and everything else. That is not the working capital, and that is not the start-up costs, which are going to be significant. That is over time. That is not just day one, but just keep that in mind.
Brian Shore: When you look at it that way, $114.75 million is a lot of cash, but maybe it is not all that much, actually. PARK has paid 41 consecutive years of uninterrupted quarterly cash dividends. That is a nice thing for us. Saving the very best for last, PARK has paid $616.4 million or $30.10 per share in cash dividends since the beginning of fiscal year 2005. I always like to juxtapose that last comment to the picture of the PARK founders back in the 1950s in a plant in Flushing, New York, actually. Not our first plant, our second plant. These two guys, the founders, started the company with basically nothing, I think a little money left over from war duty. I guess you could say PARK has come a long way from those early days.
Brian Shore: I do not want to spend a lot of time on this, but I still think it is important for all of us at PARK to remember where we come from, because those beginning days were so important for us and really set an example for the way we want to deal with things, deal with problems, deal with obstacles, deal with hurdles, roadblocks that come up every day today. So, okay. I think that ends our presentation. Yeah, it does. Operator, I would be happy to answer questions to the extent there are any.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. Our first question comes from Jim Ricchiuti with Needham and Co. Please proceed with your question.
Jim Ricchiuti: Thank you. Good afternoon. First off, if my numbers are right, it looks like you had very strong growth in Missile Systems, both sequential and year-over-year. So are these levels sustainable, or should we anticipate continued variability until we really see this missile ramp underway in earnest?
Brian Shore: Hey, Jim, we are breaking up a little bit, but how are you doing? If you look at slide That is fine. Slide 32, a good question. I think it is sustainable, and the reason that you want to look at slide 32, look at our sales. From 2017, 2018, 2019, 2020, we were growing pretty aggressively, $10 million a year, more or less. Then we hit fiscal 2021, the pandemic, and that really kind of slowed us down for several years. It took us through to 2025 to really get back to the levels of 2020.
Brian Shore: I think we are back on that trajectory, and I think it is pretty aggressive, probably more aggressive than it was before. It is going to be our challenge to keep up with the growth, both in the missile programs as well as the GE programs. I think we talked about the Juggernaut of $62 million for the GE programs. Last year was maybe, what, $30 million, $31 million, something like that. So there is a long way to go there, and certainly a long way to go with the missile programs as well.
Jim Ricchiuti: Brian, hopefully you can hear me clearly a bit. I wanted to also go back to the commentary regarding your full year sales too. I know with the GE programs, you had a stronger Q2, I think, versus expectations, and yet you are trimming the full year. It sounds like you are being conservative, but again, this is based on build plans that you get. So I am just trying to understand that a little better and reconcile that.
Brian Shore: Well, unfortunately, Jim, you are breaking up quite a bit. But I think you are asking about what the GE programs forecast. Let me see if I can actually pull it up for you. The history, if I cannot find it quickly, I will not.
Jim Ricchiuti: Slide 14.
Brian Shore: Okay, thank you for that. Slide 14. Okay, thank you. So you are asking if the growth is sustainable, whether it is being conservative. I do not know. The forecast for fiscal 2027, $32 million to $35 million, I do not think that is we are trying to be conservative there. I do know there is a lot. What we can tell you, Mark and I could tell you, is there is a lot of energy toward ramping up these programs, especially the A320neo program. And then if the 777X gets certified next year, that program will have a lot of growth as well, pretty quickly, I think.
Jim Ricchiuti: Got it.
Brian Shore: Like I said, we have fiscal 2026. With that, the last full fiscal year, at $29 million, and the Juggernaut at $62 million. So a long way to go with the GE programs.
Jim Ricchiuti: Good. Thanks. Apologies for the back in the queue.
Brian Shore: Was there something else, Jim? We are having trouble hearing you.
Jim Ricchiuti: Yeah. I am sorry about the connection. I will jump back in the queue. Thank you.
Brian Shore: Okay. Thank you, Jim.
Operator: Your next question comes from Trevor Walsh with Citizens. Please proceed with your question.
Trevor Walsh: Great. Hey, Brian and team, thanks for taking the questions. Maybe just to revisit that last question, just to clarify. We saw you took the full year GE number down, and I understand a lot of moving pieces, but your Q3 number looked kind of right on with what we were expecting, so it seems like it is maybe a little bit more uncertainty with Q4. Is that a fair statement? Beyond that, are there any specific programs that are kind of creating that uncertainty, or is it more just kind of broad-based of just kind of what you are seeing within the group as a whole for GE?
Brian Shore: Okay. I think we're misunderstanding this. No, just do the math. Look at Q1, Q2, and Q3, and then it would be a big jump in Q4 to get that number. The forecast that we provide was based on what's called a build plan. They're probably just ramping it up a little more slowly than they originally planned. But I think it would be a mistake to read anything other than a pretty aggressive ramp-up from this information. We're just trying to be more realistic with Q4. There's nothing holding back Q4. But we're thinking, well, maybe Q4 will be similar to Q3 and Q2, in that range anyway. We could be wrong.
Trevor Walsh: Okay, cool. That makes sense.
Brian Shore: We're just trying to be realistic. Not trying to be conservative, realistic. But again, I want to emphasize, I think it would be a mistake to interpret this information in some kind of negative way that things are not going well, the programs aren't ramping up as quickly as possible. The key thing, I think the key challenge, it's not us, would be our customers, is their ability to keep up with the program ramps. It's a challenge. These are manufacturing companies, so it's a challenge for a manufacturing company to ramp up so quickly. But I would also say, I don't want to beat this horse to death too much, that we're clearly out of that pandemic mode where everything was just kind of going sideways for so long and we just weren't seeing any growth at all. The growth is aggressive.
Trevor Walsh: Yep. Okay, fair enough. That makes sense, Brian. Appreciate the color. Maybe switching gears to missile systems a little bit. I appreciate the color around how the Newton facility can just generally support in this interim period before Tulsa gets up and running, both the full extent of the GE ramp and then as well as the PAC-3 2,000 rate. But obviously there was just a big announcement with the Navy and Raytheon around SM-6, which I know you guys have some content on. PAC-3 is not the only game in town. Is it fair to say that as these other missile programs ramp up as well, that the Newton facility can also support those? Or do you get to a point where you have to make some decisions about what lines you're doing and just maybe talk more broadly?
Trevor Walsh: I know there's sensitivities around it, but just how comfortable you feel given the pace of the ramp, how Newton can get us through to when Tulsa is up and running.
Brian Shore: Well, we've probably overemphasized the PAC-3 program. We do that because there's so much visibility about it, so much known about it. We have companies publicly talking about the rates, which is a little different than some of the other missile programs. Since we're sole source on the materials for the solid rocket motors, it's easy to key into the discussion about the PAC-3. As I was going through it just now, I was thinking, yeah, we're really emphasizing PAC-3 maybe to the detriment of a lot of other programs that we're working on. PAC-3 is clearly the largest program that we have now. There are many other missile programs that we're working on. Mark and I were just talking about that, and it's a lot to keep up with.
Brian Shore: At this point, the answer is we plan to be able to handle everything with the Newton plant, but that will be by stretching, by staffing up the solution treating lines quite aggressively. We plan to be able to get there with the PAC-3 as well as the other missile programs. I think we'll all be very relieved when the new capacity in Tulsa comes online, because we'll be stressed to get to that point.
Trevor Walsh: Got it. Great. Super helpful. Maybe one more from me, and then I'll hop back in the queue. Good to hear that Ariane is able to pull forward their timetable around the build-out for their facility. It seemed like it just took an additional infusing of funding and commitment from you to do that. If things got really dire from just everything requiring CQV, is there a scenario where that can be pulled forward even more with additional funding, whether it's from you or some other kind of third party to help.
Brian Shore: Yeah.
Trevor Walsh: again, move that along, or is that kind of is what it is at this point?
Brian Shore: That's a funny question because people keep asking that. I think the answer is no about money. That's all it is. What we did is we pulled forward our advanced payments. We didn't increase our advanced payments. We pulled them forward. We accelerated them in order to help them get their plant up running more quickly. Is there an opportunity for Ariane to squeeze that timeframe, let's say 4 years, 3.5 years, less than 3.5 years? I don't know. I think it would be a challenge. I think it would be difficult. I'm not saying it's not possible, and maybe a couple of months here or there, but significantly, my guess is probably not. It's not a matter of money either. That's not the issue. The reason I'm-
Trevor Walsh: Yep
Brian Shore: kind of laughing is because people have offered that on what would it take, and it's not money.
Trevor Walsh: Yep. Got it. Okay. Perfect. Thanks, Brian. Appreciate that. Had the questions. Thank you.
Brian Shore: Thank you.
Operator: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. Your next question comes from Fabio Wolfinger with Switzerland. Please proceed with your question.
[Analyst]: Good afternoon, and thanks for your presentation.
Brian Shore: Hello.
[Analyst]: Hello. Good afternoon, and thanks for the presentation.
Brian Shore: Sure.
[Analyst]: I'm calling from Zurich. As you told, you lowered your full year sales forecast for some of the programs. For any shipments that have been delayed, have customers confirmed new delivery dates, or are you still assuming those sales will return? Looking into fiscal year 2028, do your latest customer schedules support faster sales growth than this year, or should investors lower their growth expectations for that year as well? I'm asking especially about the difference between confirmed orders and expected demand. Could you give a rough breakdown of the reduction and tell us when you expect any delayed sales to be recovered?
Brian Shore: I'm not sure I know what you're referring to in terms of reduction and delays. We haven't provided a forecast for this fiscal year or next fiscal year, but I'm not sure I understand what you're getting at in terms of these delays or reductions you're referring to. I'm sorry. Maybe you can clarify, or yeah.
[Analyst]: No, I was listening about and I thought about some programs accounting for reduction approximately for these engine programs, right?
Brian Shore: The engine programs? I don't know what to say about it, the engine programs. If you're talking about the fact that we broke down the full year forecast, maybe that's what you're referring to. Yeah, I think now I understand. For the GE programs. I thought you were referring to the forecast for all PARK. Yeah, we brought that down by a couple million. Like I said, I think the original forecast we provided was based upon the build plan we received from our customer. We weren't aggressive with it. We didn't round up or anything like that. We're just saying now, based upon the fact we have two quarters in the books, and we have a forecast for Q3, that we want to bring the number down a little bit to be realistic.
Brian Shore: The ramp, in our opinion, is going to happen. Whether it moves a couple of quarters here or there, I think is not relevant. When we start talking about the GE Aerospace juggernaut, I think our main point was, we do not know exactly what the timeframe is, but the key thing is it will get there, and we better be ready for it. I think, the second question about this, I think we are really over-reading or overly focused on the fact that we brought that number down a little bit. I do not think it really means anything in terms of long-term big picture. Those programs are still there, and they are still ramping. I think it is not a function like the, we talked about the COMAC program, the C919, so maybe that is what you are referring to.
Brian Shore: That program is a little delayed, but I do not think we had really big expectations for that this year at all. It is not a function of the programs themselves, it is a function of how quickly our customers can ramp up their production. We can meet their requirements. PARK is not the problem. I do not think it is the end market either. I do not think it is the programs or how many airplanes the OEMs are able to sell.
Brian Shore: I think it is just a function of how quickly the industry can ramp up. That is really been the story for several years now as you are trying to emerge from the pandemic. You probably know this, but Airbus had this target of 75 airplanes a month for years ago. They really were struggling to get even up to 50, maybe past 50. It was not that the market was not there.
Brian Shore: Look at the backlog they got. There are so many airplanes sold. It is a function of the industry ramping up production, not even PARK only, but the whole industry ramping up production to get to those rates. I think I would say that maybe we are overthinking this annual forecast because clearly the vibe, if we look at it that way, we are getting is that there is an aggressive ramp-up going on. I know when we talk to our customer, they are talking about very aggressively ramping up. I guess I would say maybe we are wrong. Maybe we are being too conservative. Maybe the original build plan will end up coming true.
Brian Shore: We do not get revised build plans every year from them, so we have not gone back to them and said, "What do you think about the build plan?" We are just trying to be a little bit more realistic based upon Q1, Q2, and Q3. I think we do not want to overthink that or read too much into it, let me put it that way. That is my opinion anyway. The GE Aerospace juggernaut, as we call it, I think, is very much intact and very exciting for PARK.
[Analyst]: Okay. Thank you very much.
Brian Shore: Yeah. Thank you. I'm sorry I didn't understand your question at the beginning. It was just I was.
[Analyst]: No worry.
Brian Shore: Thanks.
[Analyst]: What about the GE Aerospace outlook since July? That is what I'm asking.
Brian Shore: Yes, got it. Thank you.
[Analyst]: Okay. Thank you.
Operator: Thank you. This now concludes our question and answer session. I would like to turn the floor back over to Brian Shore for closing comments.
Brian Shore: Okay, this is Brian again. Thank you all for listening in, and thank you for the questions. It has been very nice talking to you. Please give us a call if you have any follow-up questions. Happy to help you with that. Take care. Have a good day. Bye.
Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.
