Park Aerospace Corp. (PKE) Earnings Call Transcript & Summary

Good day. My name is Claudia Guentert, and I will be your conference operator today. At this time, I would like to welcome everyone to Park Aerospace Corp. Fourth Quarter FY '25 Earnings Release Conference Call and investor presentation. [Operator Instructions] At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin the conference.

Thank you, operator. This is Brian and welcome, everybody to Park's Fiscal '25 Fourth Quarter Investor Conference Call. I have with me Mark Esquivel, our President and COO. Right after the close, we announced our earnings. We did a news release announcing our earnings, you want to take a look at that. In the earnings release, there are instructions as to how you can access the presentation either through a link or through our website. You want to take a look -- you want to get that up in front of you. Be sure to go through the presentation. And after we go through the presentation, which could take maybe 45, 50 minutes, just want you to be aware of that, Mark and I would be happy to answer whatever questions you might have, okay? So, why don't we go ahead. Slide 2, forward-looking disclaimer language. We're not going to go through that, but certainly let us know if you have any questions. Slide 3, the James Webb Space Telescope. It seems like we're featuring this every quarter. There's so much news. As you probably know, the James Webb Space Telescope was built with -- constructed with our SigmaStrut, which is our proprietary Strut technology. And -- so what's the news this time? We got a little bit of a picture of the James Webb in the L2 Lagrange orbit, which is about 1 million miles from earth. I believe it's pretty far away. 99.7%, that's a pretty high percentage -- pretty good odds, chance of alien -- listen to this, alien life, this is no joke. On a Milky Way planet, that's a -- in our galaxy, I guess we call it K2-18. That's the name of the planet. I'm sure you've heard plenty about that. It's only 124 light years away from earth. That's just right around the corner. It's our own galaxy. Thank you, James Webb. So what the James Webb apparently did was, it detected certain kinds of gases, which are only produced by biological processes. So it's quite incredible. What's also kind of strange -- do you hear about this on the news every night, like all day long, all night long, life on another planet, 99.7% certainty? I don't. I hear nothing about it. I mean, I don't know what they cover in the news, but you would think this would be like 24/7 news, but it seems to not be. Anyway, table of contents, our investor presentation, we're about to go through that. And then we got supplementary financial info at the back in Appendix 1. We don't go through that during the presentation, but certainly let us know if you have any questions about it, okay? Let's go onto Slide 4. Quarterly results for '23, '24 and '25 in thousands. Let's go right on to the right hand -- right over to the right-hand column. Q4, which is the quarter we just announced, sales of, $16,939 million. Important to mention that, we'll get to that later again, but $4.4 million of those sales were C2B fabric. And then we have a gross margin of 29.3%, which considering -- we'll go back to this, but the C2B fabric, we sold that and sold that only for a small markup. Considering that, actually, I was surprised at how high our gross margin is. As you know, we don't like it when our gross margin is under 30%, but under the circumstances and also the start-up costs that we'll go through, I was surprised as myself as to how high it was. I suspect the main reason was the fact that production was very strong and it exceeded sales, which was our plan. We'll talk about that in a second. What did we say about Q4 during our Q3 investor call? Sales estimate $15.5 million to $16.3 million. So, we came a little bit ahead of that range. Adjusted EBITDA estimate of $3.3 million and $3.9 million. So we came in within the EBITDA range. I got to stop and cover something, which we used to cover every quarter, and I figured, "Okay, fine, I've overdone it." But we had a couple of comments after our Q3 investor call to the effect that, well, we should pad our forecast numbers. So we got to go back and remind you that we don't do that. We don't do guidance. We don't like that. It's kind of a strange game that -- in other words, if we believe the quarter will be X, we're supposed to tell you X minus 10%. So that when we come out with X, we'll be heroes or we beat our numbers. And to us, it seems very strange. Other people, they do whatever they want. I know almost everybody else does, but we don't do that. When we give you a forecast, what we're telling you is, this is what we think is going to happen, not what's going to happen minus 10%. We don't do that. So we just want you to be aware of that, and we don't feel like changing it. We also feel it'd be a little bit strange for us if we're telling you what -- we tell you that it's going to be X minus 10%. Well, that's not really honest, is it? And we have a thing about integrity. I'm not saying other people don't. I'm just saying that's for us. So when people say, "Oh, why don't you pad your numbers?" Understand we're not going to do that. Though when we tell you, give you a forecast, we're saying this is what we think will happen and we'll be wrong sometimes and sometimes we clearly are. But the time we tell you that, we're saying this is what we think is going to happen. So we just want to remind you of that. We used to discuss it every quarter. We haven't in a while, but maybe we need to remind you again. Slide 5, considerations for Q4. So let's get right to it. Production versus sales; remember, in Q3, we explained that our Q3 sales value of production, we call it SVP. That's not inventory value, that's a sales value, were $1.2 million less than our sales. At Park production, SVP absorbs a significant amount of cost to produced inventory. As a result, we're just reviewing Q3 for perspective here, the Q3 production "shortfall" had a significant impact on our Q3 EBITDA. The Q3 production shortfall was on us. We said that during our Q3 call. In other words, we just missed a number. We had a production target; we didn't get it. That's on us. We missed our target. But we also said we intended to reverse that in Q4. Well, we did reverse it, and that is on us as well. So, we take the responsibility for missing the target in Q3. Our people should get the credit, I think, for hitting the target -- our target in Q4 and doing a very great job with that actually. So in Q4, our production exceeded our sales, adjusted for RAYCARB fabric, which is not something we produce anyway, as you know, by $1.4 million. That was our target. Now, that's really helpful. That drops a lot of dollars to the bottom line, probably $350,000 or more to the bottom line in the quarter, just as we had a big drag in Q3, there's a big plus in Q4, which is what we wanted. On to Slide 6, the excess production in Q4 had a significant positive impact on our Q4 EBITDA. And this is important. The excess production also allowed us to build back our finished goods inventory to more acceptable levels by about $1 million compared to Q3. Way too low at the beginning of Q3, because we're selling off our -- selling from our inventory rather than production. Now we built back our inventory and finished goods to levels we think are more acceptable. Ariane Group, just reviewing here. As you know, we entered into this business partner agreement with them in '22, under which they appointed us as their exclusive North American distributor for RAYCARB C2B fabric used to produce ablative composite materials for advanced missile program systems. Now, we already covered this, but we sold $4.4 million of C2B fabric in Q4. That's actually $500,000 more than we predicted in our Q3 investor presentation, up being more than that. And believe it or not, $7.5 million in all of '25. That's a lot. That's a whole lot. It really burdens our P&L. As we previously explained, we sell C2B fabric to our defense customers for a small markup. So, they're buying a lot of the stuff, they're stockpiling it, obviously. Doesn't take a rocket science to understand that even though this is rocket science, that's what they're doing. So Slide 7, Park sold -- so this is the flip side $420,000. It's not $4.4 million, but $420,000 of ablative materials manufactured with C2B fabric in Q4; $2 million in '25. So that's really good, because when we look at it incrementally, that contributes a significant amount to the bottom line, probably over $300,000. So that helped the bottom line a lot as well that we at least had some C2B material sales. As we previously explained, our margin for producing and selling ablative materials manufacturing with C2B fabric are significant and bold. Requal; Requal, one of Park's key customers of C2B fabric. So I got to stop for a second. You read those transcripts, you do it at your own risk because we have no responsibility for those transcripts. There's an automated, computer AI, I don't know what, but there are so many mistakes in those transcripts. Sometimes I'll go read a transcript. I don't know what the hell I'm saying. I can't - what am I talking about here? I can't understand. There is so many mistakes in those things. So, we don't take any responsibility for that. So the transcript was for Q2, Q3 or other call, talked about a recall of C2B, which is a real bad thing. There is no recall. We went back. There was no reference, it was all Requal and no recall, both in the presentation as well as in our comments. But then it was picked up by articles who then talked about a recall of this product based upon the transcript was incorrect. So I just want to warn you, if you read those transcripts, you do it in your own risk because we take no responsibility for them. Now, what's the status of Requal? A lot of people have been asking me that. That's a hard question. So I'm asking -- I'm going to ask Mark to help us figure that one out. So Mark, can you tell us what the status of the Requal is?

Yes. Hello, everybody. The status here is, the specifications has not been updated. What that means is it's still in the works. Where the testing is not in Park's hands, it's in our customers' hands, just so that's clear. But we are being told they should be completed this month at the end of May. I say that with a little bit of caution because these things have slid in the past. So, I just want to throw that out there. But we're looking to get an update at the end of the month. I can tell you, there is some good news. All the testing that has been completed, which is the majority of it, is compliant to the specification. And so, we're hoping that the very few tests that need to be done by the end of the month will fall in that same population. So, essentially, we're anxiously awaiting, just like everybody else to get the results and we're really hoping that they meet the target at the end of the month. But like I said, it's really out of our hands. It's in our customers' hands. But we continue to communicate, we continue to check on the status, and we'll do that again as we get towards the end of the month, which is in 2 weeks. And hopefully, next time we talk, next time we have a call, we'll have an update for you all.

Okay. Thanks. Yes. So we're being transparent. We're just -- all we can do is tell you what we are told by our customer. I think in our last call, we said March, but that's what we're being told. Obviously, that didn't happen. So we'll see what happens here. And then the next item. This is a repeat item for the last few quarters. Just reminding you that we're ramping up this new factory, even though we don't need to for capacity reasons, we're ramping up to get the factory ready for the Juggernaut as we call it, and that's costing, that's burdening our P&L. Total missed shipments during the quarter $175,000, mostly, surprise, surprise, international shipment issues. Well, that's actually improved. That's not great, but I think we had a couple of quarters, it was over a$1 million. So I guess that's moving in the right direction at least in that quarter. Slide 8, impact of tariffs and tariff-related costs on Q4. There were none. Future impacts, we'll get back to that later on in the presentation when we talk about some updates, okay? Let's go on to Slide 9. Top 5 customers. This is kind of a tradition for us in alphabetical order. Donna is the one who does the slide. Yes, you probably get -- some of the people in the audience could probably cover this better than I could. Aerojet Rocketdyne, that's the Patriot Missile. The Middle River, I guess we're using the A321LR commercial aircraft. Kratos, obviously, the Firejet. Nothing for Tex Tech, too confidential. Nordam Group, the Bombardier Global 7500. The aerial target aircraft, it's unmanned. They try to get men and women to fly the target aircraft, but didn't get any volunteers. Okay, that's my attempt at humor. Let's go on to Slide 10. I won't -- I promise I won't do any more of that. So Slide 10, this is our estimated revenues by aerospace market segment. And you can see that we talk about this often. '21 was a little different due to the pandemic. But the '22, '23, '24 and '25, the pie chart looks pretty similar. Let's go on to Slide 11. This is [ Elena's ] project, Park Loves Niche Military Aerospace Programs. And as we always comment, radomes, rocket nozzles and drones are niche markets for us. But for us, even Aerospace Structures is a niche because that's kind of -- that's our focus. And this doesn't mean small. It means something special where we have something special to bring to the table, which means normally that the margins would be nice and attractive for us. We don't need to cover each one of these things and we're going to be a little bit less open about what our participation is in these programs, except I'll comment on the Halcon SkyNight. That's a UAE program. So that's been in the news recently, UAE. So I thought you'd be interested in that. And then we see 2 references to the Sentinel GBSD. That's ground-based/[ strategic ] defense. And this is a replacement of the Minuteman program from the '60s. We have on the top right, the warhead -- reentry vehicle for the warhead and then the missile itself, missile system itself. And these are installed in silos around the country, hundreds of them is what's intended. And I think you know what these warheads carry. So you can look it up if you want. But it's not a very happy kind of thing to talk about. So, let's go on. Having said that, maybe bring the audience down a little bit. Let's go on to Slide 12. That's called MAD, mutually assured deterrent or something like that, right? Remember that from the '60s, anybody remember that? Slide 12, GE Aerospace. This slide, we share with you every quarter just kind of for background. Firm Pricing LTA from '19 to '29 with Middle River Aerostructure Systems, which is a sub of ST Engineering Aerospace, we explain this every time. Redundant factory reduction, you know that. If you look at these programs, we're not going to go through them. But what the common theme is they're all related to GE Aerospace programs. So, what's the connection here? I think you know that. When we got on these programs, Middle River Aerostructure Systems MRAS was a sub of GE Aerospace. Now it's a sub of ST Engineering, which is a Singapore company. Let's go on to Slide 13. Top of the slide. Also sole source on primary structure component for the Passport 20 Engines. That's through the GE Aerospace LTA, not the MRAS LTA. Fan Case Containment Wrap for the GE9X for 777X aircraft. That was produced with our AFP materials and other composite materials. And this is intended to be included in MRAS Life of Program Agreement. Not in the LTA, this actually occurred after the LTA was entered into. Let's see, Park MRAS LTA, we covered this, provided a 6.5% weighted average price increase January 1. And also, it was amended to include 22 Park Film Adhesive Formulation Product recently. Life of Program Agreement requested by MRAS and STE, so we're still working on that. I think the last time we spoke, I told you actually the ball is in our court and we're getting pricing to the extent we could, long-term pricing from our suppliers so we could provide pricing to Life of Program pricing to MRAS and STE. We've done that. So the ball is kind of back in their court. This is some -- we're happy either way. We're happy to stay with the LTA, the current LTA or go to Life of Program. This is something requested by MRAS and STE, but we're happy to do the Life of Program as well. Either way, we're happy. 14, Slide 14. Okay, we're talking about some of the programs. A320neo family. That's the big dog, as we say. Airbus has a huge backlog for the A320neo aircraft, 7,256. That's a lot of airplanes, I'm telling you. And then we have a little bit of history of their A320 deliveries. Yar-over-year, you can see that it's gone back up to about 50 per month in '24, a little over 600. But what's holding it back is the supply chain issues that you know about. We talk about it almost every time. The bottom item, they're targeting delivery rate of 75 A320 Airbus' family aircraft per month at 27. Why they're not there now? Well, it's because of supply chain issues. They have over 7,000 orders. They'd be happy to be at 75 per month or 900 per year now, but they haven't been able to get there yet. They're targeting 2027. They haven't been able to get there because supply chain is the limitation. Slide 15, with the approved Engines for the A320, you know about this. We got the Pratt engine, the CFM LEAP-1A engine. We're on the CFM LEAP-1A, not the Pratt. According to the Aero Engine News, first quarter Aero Engine News, the LEAP-1A market share of firm engine orders, these are thousands and thousands of orders, ladies and gentlemen, 65.2%. That's a nice market share. When we get to the Juggernaut slide at the end, we use a 60% market share, which we're being conservative, but it keeps me, it went up a little bit, it seems like maybe it will move back down. I don't know, it moves from quarter-to-quarter, month-to-month. But at the delivery rate of 75 airplanes per month, 65.2% LEAP-1A market share translates into 1,174 engines per year LEAP-1A engines per year. If you look at the Juggernaut, we're only assuming 1,080. So it's a lot more than the Juggernaut. As of -March 31, '25, this is again Aero Engine News stuff, there were 8,196 firm LEAP-1A engine orders. That's as of a couple of months ago. Now of course, Airbus and CFM, they want to sell more airplanes and more engines. This is just what's on order, firm order now. Now -- so these engines will be delivered, I think. What's that worth to Park? It's worth about $0.25 billion to Park, and that's not it. I mean they -- like I said, I'm sure Airbus wants to sell more airplanes and Airbus and CFM wants to sell more engines. Let's go on to Slide 16. This is a variant of the A321neo family, the A321XLR. It's off of the races. So this airplane has been delivered. It's in operation. They're operating it on new routes, which are never been used by single aisle. This is a single-aisle airplane. I guess I should have said that. And the key thing here is that it has a range and payload capability of a wide-body. So this airplane has been used on what was previously a wide-body route, like maybe a 787 route, but much less expensive to operate. So this is why CNN, I don't normally spend a lot of time with CNN, but this time, I like them, A321XLR is changing air map of the world. And what that means is that these single aisles are operating on routes that used to be the exclusive purview of wide-body airplanes, which are much more expensive to operate. That's a big, big deal. Boeing has no response and none planned. So that's an important program for Parks. Slide 17, let's switch over to China. The Chinese Comac, the Chinese aircraft company, C919, that's a single aisle that they developed to compete against the A320 and 737. They're just ramping up now. They're targeting 30 deliveries in '25. They're not going to get to 900, but we'll see how far they go. They plan to increase their production capacity to 50 airplanes this year, plan to achieve production rate of 150 aircraft by '28, report to have over 1,000 orders for these airplanes. Comac aiming for EASA certification in '25, that's significant because, see, EASA, that's like the European FAA, European Aviation Certification Agency, because there was this belief and theory that these Chinese airplanes were going to be China-only airplanes that we just operate in the Chinese market. That's clearly not what Comac is thinking. So the fact that they're saying they're going to get EASA certification is a big deal, certification outside of China. Trade conflicts; people ask about trade conflicts. Well, can Comac produce that at 919 without U.S. suppliers? The answer is absolutely not, absolutely not, absolutely not. And if the U.S. suppliers were cut off on the program, in my opinion, I'm not the only one has its opinion though, that program would die forever, immediately. And it's such an important prestige program for the Chinese; they're not going to let that happen. It's a good thing that there's a trade where there's, what do you call it, a mutual interest dependency where we need each other. So, the Chinese will not let that happen. So they're going to need to continue to source these key components from a U.S. supplier. That's my opinion anyway. Slide 18, staying with the Chinese Comac 909, that's the regional jet. It's a little smaller jet. And look what they're doing. They have it delivered to Lao Airlines and Vietjet in Laos and Vietnam. So, they're not Chinese. So what's going on there? In other words, again, everybody was saying, "Oh, these are Chinese-only airplanes." I don't think Comac believes they are. The 777X with the GE9X engine, test flight certification program reportedly progressing well. 777X test program amassed more than 1,300 flights. That's a lot and 3,800 flight hours. They're targeting '26 for -- Boeing is certification, first delivery. Let's knock on wood on that. Let's hope that happens. They reportedly have 521 open orders. That's of about last week. But did you hear that Boeing, they hired this new high-powered sales guy. And that guy, he just got an order for 30 airplanes from Qatar yesterday, I think Qatar. I pronounce it both ways. Did you hear about that? Their new high-powered sales guy. So they have to add that 30 to the 521. Slide 19, GE Aerospace program sale history. So, you're familiar with these numbers. At fiscal '20 before the pandemic, we popped out at $29 million. We're kind of clawing or trying to claw our way back $25 million, $24.7 million, not quite there yet. The Q1 forecast, $5.2 million to $5.6 million. That's not -- that's kind of a little bit anemic. I wouldn't read too much into it. Quarter-to-quarter, there is a lot of issues related to inventory management and things like that to move the numbers up and down that aren't really indicative of longer -term trends. The forecast for '26, we're going to stay with this $28 million to $32 million. That's what we gave you last quarter. Although you could see we're starting out slow in Q1. That forecast is based upon the information provided by our customer. And actually, a customer provided us 3 scenarios; low, middle, high. That's a low scenario. I don't know, maybe we'll have to adjust it down later on if we continue with this, like Q2 looks similar to Q1, we'll have to see, because like I said, we're getting off to a little bit of a slow start, but we're staying with this forecast for now. Okay, Slide 20. Now we're talking about Park's financial performance history and forecast estimates. The history; you know the history, so we won't spend a lot of time on that. We already talked about the quarter, we already talked about the fiscal year. So why don't we just go right to the forecast? Our forecast for Q1, $15 million to $16 million in sales, $2.5 million to $3 million of EBITDA. That's our forecast for Q1 for Park. We already talked about how the historical sales, how much C2B content was in historical sales for the last year and last quarter. But if you look at the last footnote on the slide, we're also talking about $1.2 million of C2B fabric sales expected in Q1. So of course, that affects our bottom line and holds our bottom line back a little bit. Let's go on to Slide 21, historical. So now we're looking at historical results with a fiscal year emphasis. And we already pretty much covered most of this, $62 million. Oh I know, this is a good slide to look at to get perspective about using our new factory. Because if you look at '25, our sales were $62 million, but about $7.5 million were C2B that's not produced. So that means equivalent to about $55 million. And go back to fiscal '20, $60 million. But the new factory didn't exist at that time. So all that $60 million was produced and sold with our existing factory. So you see what's going on here. We used a new factory. We're bringing the factory online because we're ramping it up for the Juggernaut, but it's holding our P&L down. There's a lot of extra cost involved with bringing a new factory online. Just is a good illustration of that, I think. Let's see what else we got here. Important thing is, supply chain limitations. Yes, again, look at the top line. Sales, $31 million, $40 million, $51 million, $60 million; really moving in the right direction. Then look what happened. We got all caught up with a pandemic and we're just trying to crawl our way back now. Ramping up costs for the Juggernaut, we talked about that. And then, we talked also about how much of our fiscal '25 sales were C2B fabric. Let's go on to the next one, Slide 22. Some general updates. New agreement with Ariane. So we talked about our existing agreement. The first check item, we already covered that, so we don't have to cover that again. Next check item. Then we entered into a new agreement just recently. And under this agreement, Park will advance or is advancing Ariane EUR 4,587,000. And why are we doing that? Those funds will be used by Ariane to help finance the purchase and installation of new manufacturing equipment for Ariane's production of C2B fabric. That amount is to be paid to Ariane in 3 installments, the first of which was paid in Q1. That's equivalent to about $1.5 million. So again, when we get to our Q1 balance sheet, you'd be looking for that $1.5 million expenditure to be reflected in our cash. The purpose of this new agreement is to provide the additional C2B fabric manufacturing capacity necessary to support the rapidly increasing demand for C2B in Europe and North America. Slide 23, more general updates. This is kind of a nice one, maybe not a huge deal, but our lightning strike protection materials was certified on the Passport 20 engine for the Global 7500 business jet. It's worth about $500,000 per year and that will kick in later this year. We're very pleased about that because it was taken for so long. I never would say this to anybody, but in my own mind, my little private moments, I was probably just giving up on whether it's ever going to happen at all. So that was surprisingly good news. When someone called me and said, "Hey, you know, this got certified." I said, "What? That must be a mistake." It wasn't. Park's ablative composite materials are sole source qualified. We talked about this before. That's the next-generation Iron Dome. And then Park entered into an agreement with a major OEM to license technology used for hypersonic missile programs. We understand we're the only licensee. Phase 2 of manufacturing trials and testing of the licensed technology continues. We mentioned the same thing last quarter, so I appreciate it, Mark, if you can give us an update on how the trials were going.

Sorry about that, I was on mute. Didn't want to have any background noise. So, the trials on this are going really well. Again, we licensed the product, so the formulation work was done ahead. So what the Phase 2 is, we're building laminates, we're making material, and we have a partner for that as well, because this will require investment once we get to the point that we've industrialized the project or the product. So, we are building panels now. We're making material. I think we're getting to the place where we're going to start testing the materials because it takes a little bit of time to figure out these processes. This is an Ox-Ox product. It's not a standard epoxy, which is the majority of our business. So, it's taking a little bit of time to figure out how to process these materials. It's a lot different than what we're used to. So feel like we're making really, really good progress with it. And the next steps maybe in a few months, maybe about 6 months, we'll have a better update, where we're at once we kind of button up the processes and get some of the test data and potentially have a product where we could release a data sheet, meaning that we can go to the public with it. In the meantime, we are talking to a few customers, a few OEMs, a select few partners just to kind of figure out what their needs are with this product. And that helps us develop our test matrix and helps us decide what kind of panels we need to build. So -- but again, we're being very selective who we're talking to because we don't want to go out to the market when we're still trying to work out the details of the product, the fine-tuning of it. So like I said, maybe about 6 months, we'll have a better update and give you guys a sense of where we're at with this project. So -- but it's -- we're definitely making progress with it.

Okay. Thanks, Mark. Why don't we go on to Slide 24? We covered this last quarter, expecting about $5 million per year from the new LTA with GE Aerospace, which is different than the MRAS LTA. So, we're in discussion with 2 Asian -- large Asian industrial conglomerates related to Asian manufacturing joint ventures. This will be a joint venture to do what we do in Asia, produce prepreg for aerospace. They approached us, both these companies. We're in active discussions with them. We're not intending to contribute any cash. It would just be our IP. We'll see how it goes. Maybe it will happen, maybe not, but I thought at least we mentioned it to you. Current MRAS supply scorecard, 100, 100, 100. That's what we need. We need that100, 100, 100. That's very unusual. I think we discussed that before, but that's kind of our mindset. That's our philosophy, is we don't -- we're not looking for 99s. We're not looking for 99.9s. We're looking for 100s. That's all that -- if it's less than 100, we're unhappy. And we'll be talking to the customer about, okay, what happened? How do we fix it? I'm not kidding, 99.9%, we're going to talk to the customer. I've been told a lot of -- most suppliers be happy with 80s. Tariffs, back to you, Mark. All the hard ones get to Mark. Tariffs, international trade conflicts, expected impact on Park. We said in Q4, there was no impact, but let's talk about what we think going forward about tariffs.

Okay. Tariffs, I guess, just like everybody else, we're all learning and trying to sort this out. We feel like we did a pretty good job getting ahead of it. When we saw it coming, I think it was like early March, we started updating our order confirmations, our quotes, putting a note on there, telling customers that, if any tariffs come our way, we're going to pass them along to them. And to date, we've been pretty fortunate. We haven't seen too many letters come from suppliers. We've had a few, but there has been no impact to our business. Essentially, I think there's been 1, maybe 2 we had to pass along to a customer. The rest, we were able to mitigate the tariffs with inventory on hand. Obviously, when you carry inventory, you don't have to pay a tariff because you have it there. So we're able to get those orders processed and shipped out without buying new material. And then -- so the next step was, well, now we have to update our cost if we have tariffs, which is, again, it's only a few materials right now. So, our quotes are reflected of that moving forward. So the customers will be paying the new price when they place orders. So, essentially, we're just, like everybody else, we're trying to figure this out. But again, we -- I think we've done a good job getting ahead of it, and there has been no impact to the business. But again, there's more to come. This thing is still pretty dynamic. We're not sure how it's all going to shake out. So we'll probably have to give you maybe another update on the next call as well to see if that has changed. But, again, we feel like we're in pretty good shape with this, and we continue to talk to our suppliers, and we don't see anything else coming our way, but I can't say that with 100% confidence, but we feel pretty good about where we're at today with this. So I think that's the update.

Okay, thank you. Let's move on Slide 25. So we covered this last quarter. We said we have a new emphasis on defense markets and programs. Why is that? Well, there aren't any new commercial aircraft that we're even aware of. Well, the 777X, we're on that; the 929, we'll never get on that. I'm not going to go into that now, but that won't happen. But we see significant opportunities in the military defense markets, especially related to missile programs, what's our focus on ablative and hypersonics? How is that emphasis working out for Park? Well, actually remarkably well, and we'll get back to that a little later on in the presentation. Slide 26, recent questions from investor. We love questions. Often, we think, well, 3 or 4 other people are probably thinking or maybe 30 or 40 other people the same question. They just don't want to ask it. "Will the C2B fabric manufacturing equipment funded, in part, by Park's Advance to Ariane Group be located at Ariane's facility or Park's facility?" That will be at Ariane's facility. "Who will own and operate the new equipment?" Ariane will. Next question on Park. "The Park/MRAS LTA provided for a 6.5% weighted average price increase, does the LTA provide for any further price increases through 2029?" No, except for price increases related to increases in costs of certain raw materials Park uses to produce products for MRAS. "What about Life of Program agreement?" Well, with Life of Program agreement, a little bit different because there are different price adjustments to the Life of Program agreement. If we enter into it, maybe we will, maybe we won't. But like I said, we're happy either way. We're happy with Life of Program. We're happy with the current LTA." You mentioned that Park is a true-blue American Company, and that, to Park's knowledge, only one of Park's competitors is an American company, who is that?" We believe Hexcel is an American public company. We're not aware of other -- Hexcel is a much larger company, but it's still a competitor. We're not aware of other competitors that are owned -- are U.S. owned. Let's go on to Slide 27, Park share buyback. So, history, we spent -- let me just kind of go through this quickly, so we don't get too bogged down. But this May 23, 2022 authorization, we spent $9,296,000 on it. We're spending some real dollars on this thing now. And then in Q1, it is not reflected in our Q4 report. In Q1, we spent another -- spent $2.1 million or $2,165,000 just in Q1 alone. We'll see that again in our Q1 report when we talk about our Q1 cash. So -- and just so you know, that $2,165,000 included in that total $9,296,000, okay? So we continue to buy back stock. Well, let's revisit that. Park's incredible cash dividend history, yes, and we cover this every quarter, I think. 40 consecutive years, over $600 million since, in the last 20 years, $29.47 per share. It's quite incredible for a little company like Park. Here, the founders started their company in '54 with, I think, $40,000 that they had left over from war duty. So, that's a company that has paid over $600 million in cash dividends in the last 20 years. Let's go on to Slide 29. Okay, here is a big one. Yes, I would say it's a real big one. New manufacturing expansion of Park's Manufacturing-- major new expansion rather of Park's Manufacturing facilities. Park is planning a major new expansion of our manufacturing facilities. The planned expansion will include a plant, and it could be at our Newton, Kansas campus or elsewhere. We have our road warriors out there now looking at other locations, Kansas versus remote. It will be a very difficult decision to make because the economics of Kansas would be better, but there are other, maybe non-quantifiable factors, which would make remote better. So we're going to have to figure that out. We're working on it now. Will it be a challenge to recruit additional employees? Oh, yes, it will be a challenge. That's one of the reasons we're looking at remote as well because we think, well, maybe if we have 2 locations, it might be easier to staff up to the extent we need. The plant expansion will include the following new manufacturing lines; solution treating, hot melt film, hot melt tape, a hypersonic materials manufacturing line and support equipment. Mark was just talking about that. Let's go on to Slide 30. Preliminary estimate capital for the -- estimated capital budget for the new manufacturing plant and equipment, $35 million plus or minus $5 million. So we're talking about some very, very big numbers here for Park; very big numbers. So, why are we doing this? Our long-term business forecast requires it, that's why. Significant new business opportunities for both hot melt and solution composite materials, defense and missile programs are drivers. Remember a few slides ago where you're asking, how is that working out for us? Well, it's working out for us pretty well. So, our focus is paying off big time. Why are we doing it again? Have the flexibility to be in a position to take advantage of new opportunities as they arise. But we're not in a position to take advantage of the opportunities when they arise, we're not going to -- we won't get the opportunities. Have the flexibility to provide 100/100/100 support and service for the GE programs. Very important for us. We don't want 99.9. We need a 100/100/100. And we're feeling a little tight actually even on the GE program. So that's one of the drivers of this decision to do this major expansion as well. We're thinking and planning for the long term. And we're thinking and planning for our future. When you think about capacity, you got to think 5 years out. It takes 3 years to build a plant and you got to do trials, get qualifications; 5 years at least 5 years, probably better to use 10 years. So when we think that far out, we think, yes, we need to do something here. It's very important. It's a great opportunity, but we don't want to miss it. Go on to Slide 31. Interesting stuff. Others may do things differently. They may wait until the opportunities are mature enough and risk missing out on them as a result. But as you know, at Park, we're not like the others. So, we're in control of our destiny. We have our own cash to do this with. We can do things for our future. I was talking to a business guy in our industry, Mark knows him well. And he was really upset because he was saying that his company is not investing in the future and they've lost a lot of major opportunities because when these opportunities arose, it was too late. They not made the investment and they lost them. So we're not that kind of company. We are in control of our destiny. We have our own cash, and we're taking advantage of it. And nobody can stop us from doing it, doing the right thing for our company and our future. Not sharing our long-term business forecast. We're not going to give you the sales number at this time. We'll get back to that. And we have a lot of internal work done on this. So it's not, we don't have, we're just not sharing it. A lot of different scenarios. But suffice it to say for now, we're putting our money where our mouth is by making this major investment in our future. What about the ROI? Very significant, very significant. We're using our own cash. ROI, very significant. Cash flow, very significant. Very significant. I think back -- and I'm sorry that call is going on a little bit long here, but actually have a lot to cover. Over the last 5, 6, 7 years, we received from bankers, M&A opportunities. I know it was aerospace; it's like, it was so superficial. Oh, Aerospace, that means it's right for Park. Of course not. Just means its aerospace doesn't mean it's right for Park. But we saw businesses where they were sold for $120 million, $130 million, $140 million. The sales were $20 million. So it's really good we didn't go there because now we can -- we're talking about some real ROIs here. I don't know what the ROIs would have been for something with investments like that. These are some real ROIs, very significant. With this major new investment change, are we thinking about our cash? Maybe. And maybe we'll get to that in a couple of slides, buybacks, JVs, where we said those JVs, we told the JV partners, well, we're not contributing cash, we'll contribute our IP, but not our cash. What about the high-level conceptual financial outlook included in our recent quarterly investor presentation? What happens to that? We'll take a look at that. So, let's go on to Slide 32. So you see, when you look at this slide, this is the reason we felt we need to talk to you about this now because there are 2 slides in our prior presentations. This is one of them. You see where it says major new expansion project, $35 million. In the prior presentations that was $7.5 million for a treater. So we felt, well, that certainly wouldn't -- we shouldn't -- we couldn't present that slide to you again. That would be so wrong. So our other option was to delete the slide, but we thought if we did that, that would alarm investors and cause angst, and we don't want to do that either. So here is this new slide. And this is one of the reasons we felt because of things we covered in our prior presentations, we really needed to tell you about this now, this major event now. Well look at our cash, we had $68.8 million at the end of the quarter. So the $5.1 million, you know about that, that's a payment that we make the IRS in June. Buyback in there, first quarter, $2.2 million. Advanced payments to Ariane, $5 million, about $1.5 million already in the first quarter. and then we have $35 million for this major expansion, give or take $5 million. So that's a lot. It's $47 million, and we got $68 million. Just doing some simple high-level math here, that says after we spend all this money, we have $21.5 million left. So, that's good, we have no debt. but it's not like we have $200 million left anymore. And the other thing I want to mention is that cash flow. So we will be building back that number especially after this expansion is done and we start to utilize it properly, the cash flow will be quite significant as will the ROI. So we'll start to build back the number. Let's go on to Slide 33. All right. So, this is something that we cover every quarter. We're not going to go into great details. We call this financial outlook for GE Aerospace jet engine programs, the Juggernaut. What's the timing for the Juggernaut? We don't know. Not sure, but it can't be stopped. We better be ready. We know it's coming. Let's go on to Slide 34. This slide is almost the same as the prior slides relating to the numbers for the Juggernaut. We just added something for consistency, miscellaneous GE programs, $2,750,000. So what we did was we wanted to make this slide consistent with the prior slide which had the GE sales history because GE sales history includes all GE program sales. This Juggernaut slide did not include some of the GE program -- sorry, GE Aerospace LTA sales. So we're now including in this last item, miscellaneous GE programs. These are under the GE Aerospace LTA, not the MRAS LTA. It's a little confusing, but we just wanted to make it apples-to-apples. So the numbers kind of reconcile with the historical sales. We can go on to the next slide and just look at Footnote 9 because Footnote 9 describes this new item. Multiple Park composite materials products supplied into the GE90, GEnx and GE9X engine programs under Park's LTA with GE Aerospace. Again, not MRAS, GE Aerospace. Let's go on to the next slide here. And this one, Slide 36, this is something we presented in the last few quarters. This is, again, a reason why we felt we needed to talk to you about this major expansion, because we have big question marks here. We have non-GE programs incremental sales question marks. If you look at the footnote, that number was $15 million in the prior quarterly investor presentations. That number is blown out the window, blown out the window. We're not going to talk about the number is, but that number is gone. So we couldn't provide the same slide to you. It would just be wrong to provide a slide, which talks about $15 million of incremental sales. We're not giving the number now. I want you to know that's something that is very different here. And obviously, the total would be very different as well. Right, but it's simple math, let's round GE programs up to $60 million, the non-GE programs has been maybe around $30 million, give or take, that's $90 million. Then the $15 million incremental, that's $105 million. Well, that number doesn't work anymore. But we're not giving you a new number, but we're telling you that it doesn't work anymore. And that ties into why we're communicating to you about this major expansion initiative. And actually, that's the end of the presentation. We're not going to go through the appendix. So, thank you, everybody, for listening. Operator, Mark and I'd be happy to take questions now if there are any.

Operator: [Operator Instructions] First question comes from Nick Ripostella from NR Management.

Can you hear me?

We can hear you.

Congratulations on a decent quarter, and it's pretty exciting what you're suggesting there with this new expansion. So, I just have a couple of general questions. With regard to tariffs and I know it's hard, but in the big picture, just your best guess at how it might play out in terms of the airlines and Airbus, for example. So, if you can comment on how you think it -- I know it's hard to answer, but there's just so much different opinions on how it might work out. And there's a lot of tough talk going around, but your best guess. Secondly...

Go ahead. Sorry. did you finish your question?

That's the first question. The second question is, if you could just, there has been a lot of talk and a lot of sell-side research on supply chain still and engine components. Do you think that those issues have mostly resolved themselves at this point? I mean, GE has been pretty positive and -- so just your further thoughts on that? And then do you think -- what would be your biggest worry in terms of delaying the Juggernaut at this point? And I know that's also a difficult question. But as Airbus, when they reported recently, I think we had an e-mail back for they're not backing down. So, there is optimism there. So anyway, those are my questions.

Thanks, Nick. Okay, I'll try -- we'll try to take them in reverse order. You were -- I think the last question was, what is the biggest obstacle to Juggernaut occurring? So, I don't know. I mean, I think it's more really a question of when than if, that's my opinion. I don't see the Juggernaut not happening. I don't see the scenario under which it doesn't happen. But you could argue, and obviously people do, about when it will happen. Airbus says, if we're talking about the A320, they have their input, other people want to be skeptical. And you know what, personally, I'll say, I kind of got tired of listening to it because there's just so much noise and noise and noise, like, who cares? I mean, we just have -- from our perspective, we just have to be ready because we believe it will happen. And every expert has an opinion. I get these e-mail services with all these aviation experts. And I don't know who pays them because, I mean, I don't know what their opinion is worth, but my opinion is [indiscernible]. On the supply chain stuff, yes, you probably heard that Airbus is building gliders again. I think it's 17 gliders, I'm not sure. I think that's a number that they produce this year. Gliders mean that they're producing airplanes and no engines, and thanks to who rather, that did all the engines for the A320. Now what I'm told is there a little bit of bright news is that, in the first half, more engines have been going to the -- just supporting existing airplanes with spares and that kind of thing. And that's not supposed to happen. That's supposed to go away in the second half. So in that way, the engines that are being produced will be going to new airplanes, not the spares. That's what I'm told anyway. But it's like -- it's not really wonderful news to hear that Airbus has built 17 gliders, A320neo gliders because they just can't get the engines. So it's still -- the supply chains with the engine company is still obviously an issue. And I just hope they figure out a way to get their act together and not just for Airbus, but for obviously, for Comac and Boeing as well. So, I don't know if that's a good answer, but that's best answer I can provide. We'll have to see. I think they'll have to get their act together at some point, but I don't know when. Maybe that's a similar answer to the answer to the first question. Supply chain, you're asking now, not our specific supply chain issues -- sorry, the tariff issue, talking about how tariffs, I think that's the question will affect the industry generally. And again, like you kind of intimated or implied, everybody has an opinion, you turn the news on, now fighting about how tariffs will affect the world over the next whatever years, and I don't -- or maybe months, weeks. I don't have a -- I mean, I have nothing that I could add to all that because there's so much -- so many opinions out there. As you know, the GE Aviation programs that we're on, except for the 777X relate to airplanes that are made by foreign companies, Canadian, European and Chinese. So there are some tariff questions that could and should be asked about how the tariffs will affect the sales of airplanes but -- and the supply of the equipment into those airplanes. But I don't know. I guess for whatever, my -- the $0.02 opinion is, I would say that I feel like these things will be sorted out at some point because there's -- the economic -- global economic need is such that it will be necessary to sort these problems out one way or another. But I could be wrong. It's just my opinion. Mark, do you want to add anything about tariffs?

No. I mean, everybody we talk to, I know he's asking the airlines and the aircraft companies, but I think we're all looking for answers. I think there's really no --yes, I don't think anybody wants to stick their neck out and say this is what's going to happen. So I think we're all just kind of sitting back and just waiting for this all to kind of vet itself out. And hopefully, it's sooner rather than later. That's all I really got on that.

Okay. So, you see, Nick, our combined input is, I'm not so much more brilliant than news program these days, but...

Okay. Can you still hear me?

Yes.

One other thing. So, I mean, you used the word tight with regard to -- a little tight with regard to your current manufacturing footprint. And so, is it safe for me to think that you have a high level of confidence of what you're doing in terms of a major expansion even before the Juggernaut has really come to play. We're not -- it might be a year, it might be 1.5 years, it might be 2 years before they get to 75 months. But it's certainly not inhibiting Park in any way. You're going to go forward with your investments because you see the opportunity right now. Is that safe to say?

Yes. So, exactly right. We're okay now. We're not we're having trouble keeping up now, but we have to plan for the future. And when you're talking about manufacturing capacity, especially in aerospace, for our kind of business, you got to think 5 years. So you got to think, "Well, how much capacity, manufacturing capacity will we need in 2031?" 2026, '27, '28 doesn't matter because we need to be ready for 2031. And if we don't get ready for 2031 now, we will be in trouble and we'll miss out on things, and we could end up being too tight and disappointing customers and that's just not our way of doing business.

Right, right. But all while you're thinking forward as a shareholder, it's reasonable to assume you'll have higher sales in the next couple of years, in any case, absent some kind of, I don't know, calamity we can't think of. The company will be growing while planning for 4 or 5 years. Is that reasonable to assume?

So the question -- I think the answer is yes. But the question is this, you take the capacity we think we need in 2030, '31, okay? So we're building toward that number. Is there a straight line between where we are now to that point? Or is it kind of a squiggling line? And We don't know, Nick, the way we look at it, it doesn't really matter because we have to think 5 years out capacity-wise. And if we feel we don't have enough, then we feel we definitely do not have enough. We need to deal with it so that we get to that point, we'll be where we want to be. Not only to be able to handle the programs we know about, but what about new programs, new opportunities that come our way? Like I said, our friend is so upset with this company because they didn't invest for the future. So when programs came around, they lost some. We don't want to be in that position. We want to be in a position where the new opportunities, whatever they may be, we can take advantage of them if we want to, if we feel they're right for Park.

All right. Well, my suggestion is those folks in Washington that care about American manufacturing, they ought to be talking to the guys at Park, because you're thinking of the future with American jobs and it's a beautiful thing.

Well, thank you very much for saying that. I doubt anybody from [indiscernible] will be calling me anytime soon, but let's see.

But you're exactly what they're trying to make a point of.

That's true. I agree.

At this time, there are no further questions in the queue. I would like to hand the call over to Mr. Shaw for closing remarks. Thank you, sir.

Thank you very much, operator. Thank you everybody, for listening. Thank you for hanging in there to the extent you're still on. We're actually a little over an hour. Have a good day. If you have any follow-up questions, feel free to give us a call. Thank you. Goodbye.

Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you very much for joining us. You may now disconnect your lines.