PKE - NYSE

Good afternoon. My name is Vaughan, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Park Aerospace Corp. Second Quarter Fiscal Year 2026 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 your conference.

Thank you very much, operator. This is Brian. Welcome, everybody, to the Park Aerospace Fiscal '26 Second Quarter Investor Conference Call. I have with me, as usual, Mark Esquivel, our President and COO. We announced the earnings right after the close. In the earnings release, there are instructions as to how you can access the presentation we're about to go through either via link and you also can link information in the news release and also on our website. If you want to pick that up because we're going to go through it. It will be a lot more meaningful if you have the -- listen to us, if you have the presentation in front of you. So we have quite a few new investors in the last quarter, they've come on board and out of consideration for them, I think we should go through some of the legacy items more carefully. I think in the past, the legacy items we just kind of skim over on the assumption that most people have already are familiar with them. Veteran investors, just please be patient with that. Another item I want to cover with you is that on Tuesday, I had some unplanned oral surgery, and I'm not really feeling that great. So I hope you can bear with me. And if I need Mark to take over, I'm sure he'll be very willing and able to do that. Questions at the end after we're done with the presentation, we'll take questions. And please do ask them. We love questions. Actually sometimes lead to questions are more meaningful in the presentation. We go through a presentation, we don't know whether you're liking it, not liking it, interested, disinterested, or you have to sleep, but the questions are always more helpful because then we know what people are really interested in what they're thinking about. So why don't we go ahead and get started with the presentation. Slide 2 is our forward-looking disclaimer language. We're not going to go through that. But if you have any questions about it, please let us know. Slide 3, table of contents. Starting on Slide 1 is our Q2 investor presentation, which we're about to go through now. And in Appendix 1, we have supplementary financial information. We're not going to go through that, if you have any -- during the call, but if you have any questions about it, please let us know. It's become our practice now or pattern, I guess, to feature the James Webb Space Telescope in our table of contents. So what we're talking about here, James Webb Space Telescope discovered, Cosmic Dust, which shouldn't exist outside its Galaxy, but shouldn't exist in quotes because I think we're developing a common theme here is so much that we believed about the universe and its origin, which just isn't true. Sorry, folks, not true James Webb saying, well, you could believe whatever you want, but this is what's really going on. So here's another one of those. Thank you, James Webb Space Telescope. The James Webb Space Telescope was produced with 18 Park Proprietary Sigma Struts. Let's go on to Slide 4. Kind of more nitty-gritty stuff here. So quarterly results, let's look at the right-hand column, second quarter that we just announced sales, $16.381 million, gross profit, $5.116 million; gross margin, $31.2 million. So we're happy about gross margins over 30% or maybe I should say we're unhappy when they're not over 30%. And it's good that they're over 30% because there are a couple of things we'll talk about in a second that dragged down our margins. Adjusted EBITDA, $3.401 million and adjusted EBITDA margin, 20.8%. What did we say about Q2 during our Q1 call on July 15. We said our sales estimate was $15 million to $16 million. So we came a little bit above that. EBITDA estimate $3 million to $3.4 million. So we came in kind of the top of the range of the EBITDA estimate. I just want to remind you, especially for some of our new investors that this is not guidance. We don't do guidance. When we give an estimate, we're saying to you, this is what we think is going to happen. Now we could be wrong, but this is what we think. There's -- I don't know, let's call it practice. We have different terms for it, but let's call it practice where everybody does it almost where let's say it's going to be 100, they think it's going to be 100. They go out with 90, that's their guidance. So then when they come out -- when they come back with 100, they come out of 100, then they're heroes. And I don't know. We think that's not worthy of our time. So when we give you an estimate, we're saying this is what we think is going to happen. We're not giving you a number which we plan to beat, okay? Let's go on to Slide 5. Q2 considerations. We always talk -- well, always in the last few quarters about ArianeGroup, it has impact on a lot of things, including the quarter. So we entered into this business partner agreement with ArianeGroup. It's a very large aerospace company in France, a great company and they're a JV between Airbus and Safran, I believe. And in January '22, we've been actually working with for 20 years. They appointed us exclusive distributor of their RAYCARB C2B fabric. That fabric is used to produce ablative composite materials for advanced missile systems programs. Now we sold $1.65 million of that fabric in Q2. As we previously explained, we sell that fabric to our defense industry customers for a small markup. What's going on here is the defense industry customers are stockpiling the C2B. We're the exclusive distributor, though, so they buy it from us. We buy it from -- we're a distributor, not a rep. We buy it from Ariane and then we resell it or sell it, I should say, to the OEM. But it's kind of a strange thing because we keep the C2B fabric in our plant because the OEM eventually ask us to produce prepreg with it. So even though we sell to them and they own the product, it's kept on our plan. The markup is small. So we have a significant amount of C2B fabric sales, that's going to push down our margins. And we sold $415,000 ablative materials manufactured with C2B fabric in Q2. Now the margins on the ablative materials that we produce those fabric very, very good, very good. So that's the offset. But it's still -- the ratio of sales of fabric to ablative materials manufactured with the C2B fabric are still at a balance, right? So more fabric than materials, [indiscernible], let's call it. What's the reason? I already said because the OEMs are stockpiling this product. A more normal kind of ratio will be 40%-60%. So 40% would be the materials and 60% would be the fabric. That's not always going to be exactly it, but just to give you a sense. So you see that the ratio is much more than 40%-60% here. And that's going to drive down our margins. So let's talk about -- let's go to Slide 6 rather. We're still on the topic of C2B fabric requalification by one of Park's key customers of the C2B fabric. This is kind of -- has been a big deal for the last few quarters. And Mark, like we always get Mark the hard stuff to talk about. Can you help us what's going on with that?

Yes. So we actually do have an update this time. I think the last couple of calls, we said we're waiting for approval. So we do have approval. We don't have full approval. We have approval at about 90% of the specification. Not to get too technical, there's -- there's a requirement within the spec that has a lower and an upper range. They were somewhere in the middle. They moved down closer to the commercial specification as we call it, which gets us back into production at 90-plus percent of everything we have. So what we're doing now is they're currently testing that last 10%, which will probably take another 9 to 12 months. So we'll continue to talk about when we get that approval. But as far as the program is concerned, we're back in business, we're back running. And we're back to, I would say, normal typical rates that we were running prior to this, I won't say issue coming up, but this recall coming up. So -- and we actually expect to see some upside in the coming quarters, and Brian will talk about some of that news as well. But I guess the story here, the message here is we're pretty much back in business with running at our normal levels.

Okay. Thanks, Mark. Good news. Let's keep moving here, production versus sales. To bring this up because this has been an issue in prior quarters in terms of the impact on the bottom line. But in our Q2, our sales value of production, we call it SVP, that's not inventory value. That's the value of production at sales price. It was well matched with our sales, and that's a good thing. That means it's really very -- no meaningful, no impact on bottom line. When our sales exceed our production, that is by a significant amount, that is a negative impact on the bottom line, but no impact in Q2. And then last thing we'll talk about in terms of bottom line impact, significant ongoing expenses. This is something we had in our presentation for several quarters now. It's not going away anytime soon. We are operating our new manufacturing facility in Q2, including all these other expenses. And this is significant. So that's why I was saying that the gross margin being over 31%, I think that's actually not bad because there's 2 factors that hold it down. One is the expenses related to the new plant. The other is the, let's call it, excess C2B fabric compared to the C2B material sales. Total missed shipments, a little bit of a surprise here, $510,000, that number is way up. But last few quarters, we keep talking about international shipment issues. That's not the issue this time. This time, it's something different. It's customer certification and testing delays. It's a little bit of a new story here. It happens sometimes and it just happens. It's nothing we can do about it, not our fault or anything like that. But sometimes it just delays insurance of certification and engineering work and testing delays. So that had a meaningful impact upon our shipments in Q2. So let's go on to Slide 7, impact of tariffs and tariff-related costs. You know what, I should say net impact, I say that to Mark earlier, it should say net impact of tariff and tariff-related costs because we have tariffs, it's just that the net impact takes into account the pass-through. So very minimal in Q2 hardly anything. But that's the net impact. That's not the total tariff. That's a net impact because of the fact that we pass the tariff cost on. And then the future impacts, I think we'll get back to that later, and Mark will help talk through that later on in the presentation. Why don't we go on to Slide 8. So this is a slide we do every quarter. As you know, some of you veterans are probably tired of top 5, and it's kind of the usual suspects also. It's like, all right, GKN, Kratos, MRAS, TexTech and Nordam. TexTech is not -- is kind of a little bit a new name for us, but the rest are usual suspects. The Global 7500, that refers to Nordam, the A321XLR, that's an MRAS program. Kratos, obviously, is Kratos and the 787 Dreamliner, that's actually GKN. That's for the GEnx-1B engine. So it's a GE engine, but it's not part of the MRAS LTAA, which we'll go into that later. Let's go on to Slide 9. So here, we have our estimated revenues by aerospace market segments. We call them our pie charts. I know you, but I like -- because I think they tell a little bit of a story. Fiscal '21, that was the pandemic year where the commercial aircraft was -- remember, were airplanes, pictures of like 737s with like 2 people on them, and they were basically everything parked, not flown at all. And then after that, the pie charts seem to be fairly stable. Interesting -- what will be interesting is to see what will happen in the future because the commercial is going to be accelerating because the programs are on as those programs ramp up, but military will be accelerating a lot. Business probably could go down as a percentage. We'll see about that. Let's go on to Slide 10, Park Loves Niche Military Aerospace Programs. So we have a little pie chart here. Radomes, missile systems, unmanned aircraft, all niche markets for us, some markets, but even aircraft structures are niche markets for us. So we actually changed -- we used to call it rocket nozzles, I think we changed the missile systems because the missile systems, we supply into more than just the rocket nozzles, other aspects of missiles that we supply into. I think we used to call unmanned aircraft drones, but I think the more politically correct term is unmanned aircraft, but there's no change in there. You know what? And other than nice pictures, and you can see what the programs are. We really are not going to talk about these programs anymore. It's just not really appropriate for us to say very much about the programs, except understand, please, any picture we show you, that means it's a program we're on, not a program we like or a cool picture or something. Okay, you got it. Let's go on to Slide 11. GE Aerospace Jet Engine Programs. Again, a slide every quarter. But for the benefit of some of our new investors, let me try to explain quickly. So we have a firm LTA requirements contract for '19 to '29 with MRAS, Middle River Aerostructure Systems, a sub of ST Engineering Aerospace. You see we're sole source for composite materials for all these programs, but they're all GE programs. So what's going on here? If you look at all the checked items below, they're all GE engine programs. And what's going on here is that even we got on these programs with GE Aviation even before 2019 when MRAS was owned by GE Aviation, now GE Aerospace. So we got on these programs even before that. There were predecessor LTAs before this '19 to '29 LTA. And then I think about 5 years ago, GE sold MRAS to ST Engineering, which is a large Singapore aerospace company. So that's the explanation there. Redundant factory, you know about that when -- I guess, around 2019, GE said to us, look, Park, we're going to put -- give you this 10-year agreement for sole source and all the stuff, all these great programs, wonderful programs, but we really are concerned about redundancy. So would you please build another factory? And we said, yes, we check that box. That's been done. I'm not going to go through the individual programs, maybe except to get to talk about the first 5 are really all A320neo family aircraft programs. All right. Do you have any questions about the specific programs, let us know. Let's go on to Slide 12, just to keep moving along here. Item -- the first item on Slide 12, we're just continuing here. This is -- I don't know, a little bit of a nuance here because this is -- this program was mentioned in the prior slide, but this is a different component. And this also is part of our GE Aerospace LTA not necessarily the -- not the MRAS LTA. So I'm probably getting only technical, not necessary. Fan Case, this is something we should talk about for a second. This is for the GE9X engine for the 777X airplane. This is produced with our AFP material and other composite materials, automated fire replacement. That's what the AFP stands for. It's a robotic way method for producing composite structures. And this is planned to be included in the Life of Program, MRAS Life of Program agreement. Next item, we had a 6.5% weighted average price increase in our MRAS LTA effective January 1. That was already built in the LTA a long time ago. And next item, Park, the LTA was -- Park MRAS LTA was amended to include 3 proprietary film adhesive formulation products, and those are now undergoing qualification. Then Life of Program agreement requested by MRAS and STE. So we're still negotiating this, I guess. And I think there is a meeting that's being planned for next month. We'll see what happens. As I said to you many times, we're okay either way. This is requested by STE and MRAS. It's something they want. They want the stability of long-term supply. But either -- we're okay either way. If we do it, that's fine. If not, we'll be fine as well. And it's still under negotiation. I don't want to give you the wrong impression. It's not like -- we've been actively negotiating. It's like we talk about the 3 months go by. And so I think now we're planning to have some get together in December -- sorry, November to hopefully get through this. We'll see. We'll keep you posted. Item -- Page 13, rather, Slide 13. So let's talk about an update on some of these GE Aerospace Jet Engine Programs, includes A320neo family. That's a wonderful, wonderful program that Park is on sole source qualify. And let's talk about that program. Airbus has a huge backlog of these airplanes, over 7,000 of them. That's a lot of airplanes, a lot of airplanes. And let's just talk about the -- we can take a look at the aircraft -- the A320neo family aircraft deliveries. We're not going to go through each year, but you can see what's going on here. With the amount of orders that Airbus has, we'll get to in a second, they would be at a much higher rate than this. They'd be at 75 per month. What's holding them back is issues with supply chain. So this year, year-to-date, average at 44, but don't get fooled by that because they usually kind of make their year in the last 3 months. And if you look at September, you can see what's going on here. They're already -- the Airbus is already ramping up to 59 were delivered in -- 59 A320neo family aircraft delivered in September. Let's keep going. Slide 14, just continuing here. The -- importantly, the engine supply bottleneck, remember, I said that one of the big issue is supply chain restrictions. That's what's preventing Airbus from ramping up to their target of 75. We'll get a min at 75 per month. CFM, they have another engine, but let's just talk about CFM, the LEAP-1A engine, reportedly improving that it's getting better. And I think that's a deliberate focus by GE and CFM, which is a very good thing because that's probably the most significant restriction to Airbus' ability to ramp up to that 75. They'd be up there now based upon how many orders they have. So that's very good news actually. As we already alluded to, Airbus is targeting a delivery rate of 75 A320neo family per month. And you could see that they're still at 50 to 55. So they still have a way to go, quite a way to go. Two engines approved for the A320neo aircraft. We're on the CFM LEAP-1A engine. We're not on that. We have nothing -- no content on the Pratt & Whitney GTF engine. And so I guess that covers the second bullet item. We supply into the A320 family aircraft using the LEAP-1A engine. According to the second quarter 2025 addition of Aero Engine News, which is kind of like a viable for us anyway, the CFM LEAP-1A market share with -- compared to the Pratt market share of firm engine orders for the A320neo family was 64.7%. And those are firm orders. That's not speculation or hopes and dreams. Those are firm orders. So you could see that the CFM has the large -- larger market share of the engines for the A320neo aircraft. I have the delivery rate of 75 A320neo family aircraft per month, that 64.7% market share translates into 1,165 LEAP engines per year. That's a real lot of engines and lots of revenue for Park at that point. Slide 15. As of June 30, 25, a few months ago, there were a little over 8,000 firm LEAP-1A engine orders. These are not airplanes. These are LEAP-1A engine orders where we're sole source qualified over 8,000. If you want to look at Slide 29, you get a feel for what our revenue per unit is, do get your pocket calculator out and do the math, you can see what that's worth to us. Those are just the firm orders that are on the books now. So this is a big deal for Park. The Airbus A321XLR, this is a variant. We're still talking A320 family, okay? We're not off to a different aircraft. This is part of the A320 family. This is recently introduced, supposedly changing the air map of the world. Why is that? Because the payload and range capability of this aircraft are very unusual for a single aisle. So it allows a single aisle to compete against wide-bodies, but obviously at a much lower cost. So that's why it's changing the map of the world. Quantas is very involved in the program, American Airlines, Iberia Airlines. The reason I highlight this because a lot of airlines are buying this airplane, why am I highlighting this? They call it a game changer. But what's really, I think, very impressive to me is that they say they claim they've had almost no AOGs. -- That's aircraft on ground after almost a year. That's really a big deal because normally, for the first year or 2, it's all kind of bugs you have to get out of a new airplane, a new design and the airplane sits in the ground a lot. And it's kind of you just expect it. And it's not good because when the airplane on the ground, the airlines aren't making any money. And you kind of expect that if you get an airplane that's been recently certified and delivered. But here you go, they're saying almost no AOGs. I've never heard of anything like that. That's quite impressive. Boeing has no response to this aircraft. Let's go on to Slide 16. So still on A320 here, folks. Airbus plans to open a new A320 aircraft family final assembly lines, FALs in the U.S. and China this month, in the next couple of weeks. So these 2 new FALs in combination with the existing FALs in Germany and France will provide Airbus with the manufacturing capability to achieve its 75 A320neo aircraft per month delivery goal in '27. So this is nice because Airbus is -- they're putting the money more of their mouth this year. These FALs are -- they're a big deal. So that's good news. And then breaking news, October 7, this is the day in my oral surgery, I think, yes. So the 2 big things happened on October 7, just 2 days ago, the A320 aircraft family became the world's most delivered commercial jet ever. Of course, that means that it beat out the 737. -- Not just the MAX, this is the 737 family versus the A320 family going back to the beginning. So that's pretty big news, I guess. Comac 919, that's a Chinese-made aircraft. Again, with a LEAP engine, this is a different variation of it, this LEAP-1C engine. Comac is targeting -- this airplane is designed to compete -- single aisle designed to compete against the 737, A320. They're targeting 30 919 aircraft deliveries in '25, but recent unconfirmed report saying they're probably fall short of this target. I can't tell you I'm very surprised. I probably would have -- to be just totally candid about it, I would be more surprised if they met the target. I'm not going to go into why, but I'm not surprised or really disappointed. Malaysian Airlines, AirAsia has confirmed in advanced talks to purchase these airplanes. Why is that important? Why am I focusing on that? Because there are a lot of airlines that are buying this airplane. But the reason I'm focusing on is this is a non-Chinese airline. This airplane is certified by the Chinese FAA, I think called CAAC or something like that. So the thought was originally these Comac airplanes would be China-only airplanes. Well, that's not what Comac wants. They're selling the airplane outside of China for operations outside of China, which will require certification by the FAA and EASA, the European Aviation Authority. So that's why I highlighted this AirAsia thing. Let's go on to Slide 17. They plan to achieve a reduction rate of 200 airplanes by 2029, and Comac claims to have over 100,000 orders for this airplane. This airplane does not have 2 engine options. It's all LEAP in terms of the engine that's certified for the airplane. Comac C909, again, Comac, the Chinese company. This is a regional jet. And this airplane was introduced a while ago. It's already pretty close to that rate. But what's interesting here, they delivered the same kind of topic really, Lao Airlines, Vietjet, Air Cambodia signed up. Again, what's the theme here, non-Chinese airlines. So originally, the thinking the Chinese -- the Comac airplanes are going to be China only, but that's obviously not what Comac wants. 777X, Boeing 777X, we have to slow down a little bit to talk about this one. This is an important program for Park. Test program has advanced over 1,500 out flights and nearly 4,100 flight hours. That's a lot. That's good. This picture was taken by a friend of mine a couple of few years ago when the 777X was doing cold weather testing in Fairbanks. Good place to go for cold weather testing. So let's talk -- let's go to Slide 18, sorry. Boeing reportedly has 565 open orders for the airplane. Boeing had previously announced that the airplane program was on track for certification in late '25 and entry into service in '26, when the Boeing CEO recently stated the certification program is falling behind schedule. The CEO further stated the aircraft and the engine and GX engines, GE9X right -- GE9X engine are really performing quite well and that the potential delay in certification was being caused by increasingly deliberate FAA scrutiny. You get the sense there's some tension there between Boeing and the FAA. I do anyway. A key gating item for -- is the receipt of the -- what's called the type inspection authorization from the FAA because as the CEO explains, they can fly these airplanes, need to have 5 airplanes [indiscernible] for the certification program, but those flights don't really count towards certification until they get the TIA. There's a lot of boxes that have to be checked for an airplane to be certified. So they can go fly the airplane, which is good. They can learn a lot more about the airplane, but they can't check those boxes until they get the TIA from the FAA. Boeing hasn't announced any new targets for the certification and EIS, but speculation is that they'd be pushed into next year or '26. Let's go on to Slide 19. So let's talk about big picture GE Aerospace jet engine program sales history and forecast estimates. The top is the sales history. We won't go through all the history, except in Q2, $7.5 million. And I think we had forecasted in our Q1 presentation, $6.7 million to $7.2 million, a little higher. I wouldn't read anything into it. The numbers move around a little bit, but a little higher than we forecast. GE Aerospace program sales forecast -- sales forecast estimates, again, not guidance estimates. Q3, we're estimating $7.5 million to $8 million. And total for the year, we got to slow down here a little bit, $27.5 million to $29 million. Now in our prior presentation, we indicated that we're looking at $28 million to $32 million for the year for fiscal '26. But as we explained to you, that was based upon information called a build plan from our customer wasn't our forecast, was their forecast. Now we have now the current forecast, $27.5 million to $29 million. That's now Park forecast based upon what -- based upon the backlog for Q3 and Q4. Q3 is already booked. Q4 is partially booked and what we expect based on lots of experience to the additional bookings for Q4. So now this is our number, $27.5 million to $29 million. Let's go on to Slide 20, Park's financial performance history and forecast estimates, estimate singular. So we just have the history up top. You already saw this just for perspective and context. Down below our Q3 '26, Q3 financial forecast estimates now plural sales of $16.5 million to $17.5 million, adjusted EBITDA of $3.7 million to $4.1 million. That's our estimate for Q3. You have any questions about that, just let us know. So let's go on to Slide 21. This is just history, and we've showed you the slide for the last several quarters. We think it's interesting, just you can see what's going on here. Historically, you go from $17 million to $20 million like every year, we increased by about $10 million, then we got stalled out. So we're kind of in fiscal '25, we're pretty much where we were in fiscal '20. And obviously, that's because of the pandemic. The pandemic really had a very big impact on commercial aerospace. It wasn't the pandemic so much, it's how we responded to it, how the industry responded to it, especially with respect to supply chain issues that held back commercial aerospace. So -- just one other thing. We're not giving you a forecast for fiscal '26 at this time, but we believe that the number will be over $70 million for fiscal '26. We'll just give you that number, not giving EBITDA, not giving details. I think what's going on here, though, is the industry is getting religion. And it's not just an opinion, this is based upon lots of input we've received, a different kind of attitude on the part of the OEMs in terms of ramping up to meet demand and also working with suppliers and supply chain in a much more productive and in a more -- I don't know, more collaborative way, sorry, up trying to come up that word collaborative way. So it's not just a little thing. It's a big thing. It's very palpable in the industry. We'll see what happens. But to us, it seems like there's something really going on here. And we're not alone in that opinion. We're not alone in that opinion. So let's see what happens. But just so you know, we're probably looking at about a little over $70 million for fiscal '25. Let's go on to Slide 22. Okay, General Park updates. Agreements with Ariane. -- okay, we've got to slow down with Ariane again. We entered in that business partner agreement in January '22, under which Ariane appointed us as exclusive North American distributor. We already covered that, okay? But then on March 27, '25, just early this year, Park and Ariane entered -- they're a great partner. They're a wonderful partner. We love them, entered into a new agreement under which Park will advance I don't know, it's probably about EUR 5 million -- EUR 4,587,000 against future purchases by Park of C2B fabric. These funds will be used by Ariane to help finance the purchase of additional installation of new manufacturing equipment for Ariane's production of the C2B fabric in France. And that should be paid to Ariane in 3 installments, the first of which is already paid about EUR 1,376,000. That's about $1.5 million. So that would affect our cash when we reported in Q1. Let's talk -- let's move to Slide 23 rather. So the purpose of this new agreement is to provide additional C2B fabric manufacturing capacity to support the rapidly increasing demand for C2B -- in C2B fabric in Europe and North America. Just so you know, one of the big programs that uses C2B fabric is the Patriot missile program. ArianeGroup recently asked the partner to partner again with them on a study related to the potential significant increase of C2B fabric manufacturing capacity, presumably in the U.S. The study expected to cost about EUR 700,000. We split it 50-50. So that's probably about $410,000 for Park, and we'll record that in our Q3 as a special item. I just want you to be aware of that. We'll get back to this later on in the presentation, in Ariane study. Just continuing with general updates, our lightening strike protection material certified on the Passport 20 engine used in the -- used on the Bombardier Global 7500/8000 Vision jet. That revenue is about approximately $500,000 per year expected on our LSP material. We're very happy about this. Our LSP is already qualified, approved and use on the A320 and the 919, but we have not -- just -- we're getting it approved now on the Passport 20 engine and also still to get approved on what's called the 10A engine for the Comac 909. So -- and we expect that these revenues will start to kick in fairly soon, let's say, in the next couple of months. Slide 24, still updates. This is just something we covered already. We entered into an LTA with GE Aerospace and for calendar years '25 to '30. Park and then another update, Park's discussion with 2 Asian industrial conglomerates relating to Asian manufacturing joint ventures continue. We've been talking about this for a while. John Jamieson is in Asia now working on this project along with one of our other guys. So we'll see what happens. It seems interesting, but we'll see what happens. Okay, Mark, your turn. Tariff international trade issues, what's the expected impact of tariffs going forward, do you think?

I don't think much. I know this quarter alone, we had about $1,700, which we don't like to take on any additional cost, but that was mostly nonmaterial items. So going forward, again, as I mentioned before, we got ahead of this pretty early. We put controls in place to manage it. We're passing that cost along to our customers, whether it's through contracts or stuff like our POs or stuff like that or order confirmation. So I don't expect to see much. I mean it's obviously a dynamic situation. I don't think all the tariffs are completely locked in. It's been a little quiet in the news lately. But where we're at today and what we've seen so far, it's very minimal impact to our business.

Okay. Thanks, Mark. So let's keep going here. Current MRAS supplier scorecard scores, what happened? We don't have all hundreds here. Why not all 100s. Does MRAS still love us? I think they do. I think I mentioned to you in prior quarters that we're told that most suppliers would be happy to get 80s. And MRAS finds a little bit numerous that we ask, well, what happened and what are we doing -- what do we need to do to fix this [indiscernible] let's call it a technical issue in terms of how we recorded something. So we take it seriously. We're a 100 company. We're not a 99.87 country, so company rather. So we take it seriously. And like I said, MRAS, I think finds it a little amusing that we spend so much time talking about why we're not -- why we didn't get 100 on one of these 3 scores. Let's go on to Slide 25. So making customers love us, this is still in our general updates is central to what we call Park's Egg Strategy. How do we make our customers love us with our calling cards of flexibility, urgency and responsiveness by asking how high before our customers say jump. And we're not kidding about this. We will go to customers and say, what else can we do, what else can we do, what else can we do before they even ask us. Making customers love us is a boiler room thing, not a boardroom thing. And the board is on board with the strategy. We've certainly reviewed it with the board. But the strategy happens on the factory floor, not in the boardroom. That's where the rubber hits the road. It's up to all our people to make the strategy work. It's a boiler room thing. So first for this strategy to work, all of our people need to be bought into it and feel passionate about it. Making customers love us is the secret to our success. It's a hidden plain sight secret. Sometimes the most brilliant ideas are the most obvious ones with the benefit of hindsight and well, why did I think of that? I don't know. Why didn't you think of it? So the secret is kind of hidden plain sight, but it's a secret to our success. Slide 26, buyback authorization. We don't spend a lot of time on this. Let's just go down to the last 2 check items. We did not purchase any shares in fiscal -- in our second quarter. And we don't -- we have not purchased any shares so far in our third quarter to date. I don't think we'll be -- my feeling, my opinion is we probably won't be purchasing too many shares in the near future, but we'll see about that. Slide 27. Again, this is just going to review Park's balance sheet, cash and incredible cash dividend history. Long-term debt, we don't have any. We had -- we reported $61.6 million of cash and marketable securities at the end of Q2, but we also made that final transition tax installment payment of $4.9 million in Q2. In Q1, we reported cash at end of Q1 of $65.6 million. So if you take that $4.9 million, subtract it from $65.6 million, it gets you to that $61.6 million number, more or less, it explains the difference. 40 consecutive years of uninterrupted regular cash dividends. And we've now paid over $606 million or $29.60 per share in cash dividends since the beginning of fiscal 2005. This is Park Founders. The reason we placed the picture of our Park Founders here is because we started out with basically nothing or 2 guys that started the company, I think, in 1954 with about $40,000 that they had saved from more duty. And here we are paying over $600 million of cash dividends in the last 20 years or so. Let's go on to Slide 28. Okay. We can kind of skim through this because these 3 slides are exactly how the same slide that we showed you last quarter, I think the quarter before that, financial outlooks for GE Aerospace jet engine programs, the juggernaut, called the juggernaut -- the timing, we're not sure. We're going to talk about, yes, the 919 is a little slower ramping up and the 777X is having a little more difficulty getting certified. So we don't know. We don't really spend a lot of time worrying about that. But the thing is that we say it's a juggernaut, it's coming. It can't be stopped. And the key thing for us is we better be ready. If you go to Slide 29, there's no change anything here. All the numbers are exactly the same. Like I said, relate to a previous slide, we feel that GE and CFM have kind of gotten a religion that they're really focused on ramping up production and working closely and collaboratively with the supply chain. Slide 30 is just footnotes related to the prior slides. I won't go through those. If you have any questions, any of this let us know. Okay. Let's go to Slide 31, War and Peace, Park's new juggernaut and peace for the question. These slides came from -- originated in the last quarter, although there are some updates to them. The first thing I want to cover again though is we're not providing any inside information on any of these programs. All this information in these slides is based upon publicly reported news and reports. We don't give away inside information, especially with sense and defense programs. Unprecedented demand for missile systems. Missile systems stockpiles have been seriously depleted by the wars in Europe and Middle East. There's an urgent need to replenish the depleted missile system stockpiles. According to Wall Street Journal reporting, the Pentagon is pushing defense OEMs to double or even quadruple missile system production "on a breakneck schedule", partly in preparation for a potential conflict with China. The list of Pentagon targeted missile systems include the PAC-3 missile system, the LRASM and the SM-6. The Patriot missile system is a particular priority. I think you should know, the Park is on all those programs, participates in all those programs, all 3 of them. Review an update of the PAC-3 Patriot missile system. The reason we spend more time talking about this is a lot of public visibility information about it. Some of the other programs we're on, it could be quite significant, but we're not able to even mention what they are. The largest deployment of PAC-3 Patriot missile systems in history occurred in response to Iran's ballistic missile strikes on our air base in Qatar. Going on to Slide 32. What happened here? In anticipation of this, I guess we knew what was going to happen. We moved Patriot missile systems to Qatar from South Korea and Japan, knowing what was coming. And we call it the shell game, moving the systems from one place to another. That's not sustainable. The Department of War wants to very significantly increase Patriot missile stockpiles in Asia to protect bases and allies in the Pacific region. So this is not working out very well at all, is it? We take missile systems out of South Korea and Japan because we have this issue with Iran and then we depleted their systems when the Department of War wants to significantly increase the Patriot missile stockpiles in Asia. I see the problem. So just public stuff, Israeli supply of Patriot missile systems seriously depleted. Ukraine supply of Patriot missile systems seriously depleted. Other countries have been waiting for Patriot missile systems for years. September 3, 2025, Lockheed's Missile and Fire Control Division received its biggest contract in history, a $9.8 billion award from the U.S. Army for 1,970 Patriot missiles. According to the Wall Street Journal, Department of War wants suppliers to ramp up to produce approximately 2,000 Patriot missiles per year, which is almost 4x the current production rate. Didn't we say something about quadruple in the prior slide? We did, 4x production rate. So we're talking about -- well, we'll get to -- wait, and we'll get to in a second because I thought to say Park is sole source qualified. We'll get that in a second. Let's go on to Slide 33. Patriot missile systems are planned to be incorporated into the Golden Dome. And it's apparent from the reporting that the U.S. plans to do much more than just replenish these depleted systems. So next arrow item, Park supports the Patriot missile system with specialty ablated materials produced in Ariane's C2B fabric. And Park is sole-source qualified for specialty ablated materials on this program. So I was going to say at the bottom of Slide 32, this 2,000 missiles per year, that represents very significant revenue of Park. We're sole source qualified in that program. Park back to Slide 33, sorry to bounce around on here. Park has recently asked to increase our expected output of specialty ablative materials for the program by significant orders of magnitude. We can't really say how much, but significant orders of magnitude. Hopefully, that gives you some kind of feel for what's going on here. And we will fully support this request partly with the additional manufacturing capacity provided by our major facilities expansion, which we'll discuss below. Remember that Park recently entered into this new agreement going back to Ariane with Ariane for the purpose of increasing C2B fabric manufacturing capacity. It's going to Slide 34. But will that additional manufacturing capacity be enough considering what's going on with the Patriot missile. No. I don't think so. As discussed above, Park is partnering with ArianeGroup in a study related to potentially significantly increasing C2B fabric manufacturing capacity, presumably in the U.S. This is a big deal. Let me just say this. Once we're -- our partnership when the study is done, that's not the end of the partnership. I don't think anyway. That's not what we're talking about. I'm not going to say anything more about it, but let me just say it's a big deal. We covered the Arrow 3 and 4 missile systems last time, so we just kind of covered again. Not too much here. Last item, update on Park's involvement. Remember, we were second source qualified in the Arrow 3. We weren't really expecting orders. We got them. We already got them. Arrow 4 were sole-source qualified on the Arrow 4, which is expected to go into production, I think, relatively soon. Let's go on to Slide 35. This is really probably the most important slide of this whole warrant piece section of the presentation. The above missile programs are just a small representation of the critical missile programs Park is supporting or planning to support. There are too many programs to iterate here and many, probably most are too confidential and sensitive to mention for national security or other reasons. But this is highlighted or bold, whatever you and [indiscernible] . But please understand that certain of these programs represent very significant revenue for Park over long periods of time. We're disappointed we're not able to discuss these programs with you, but we can't. Let's go on to Slide 36, major expansion. So we're just going to give you a quick update here. I know we're running late with time, but we got a lot to cover here. And like I said, we got new investors, so we couldn't just skim through things too much. A major new expansion. We talked about this in the -- of our manufacturing facility, talked about this in the last 2 quarter presentations, I believe. So we're planning a major new expansion of our manufacturing facilities. It could be at Newton or elsewhere. The plant expansion will include manufacturing following lines, Solution Treating, Hot Melt film, Hot Melt tape, Hypersonic materials manufacturing. The current estimated capital budget for new manufacturing plant equipment, $40 million to $45 million. That's gone up. I forget what we said last quarter, maybe $30 million to $35 million to $40 million. Why did it go up? Well, we need another line. Extra $5 million of the [indiscernible] line because the requirements keep going up and up and up. It's quite incredible actually. So new manufacturing -- Slide 37, just continuing new manufacturing, major new manufacturing -- major new expansion of Park's manufacturing facilities. Why are we doing this? Our juggernauts require. We have a juggernaut for GE Aerospace. We have a juggernaut for defense and missile programs. Our long-term business forecast requires it. And the second bullet item under that check item is that our long-term forecast has increased since we talked to you on July 15. And also have manufacturing capacity needed for Park to be parked, our calling cards, again, flexibility, responsiveness, urgency. We don't run a business a mill, meaning that, okay, we campaign and you want something, well, we can fit you in maybe a year from December. We don't run our business that way. Urgency, responsiveness, flexibility. So it would be really stupid for Park to abandon those things because those are things that got us where we are today, all those opportunities. So it's important we have the manufacturing capacity in order to be parked for Park to be Park, the secret to our success. That's part of our theory or our thinking with respect to the expansion. And last item in bold, this is not a close call, not even close to a close call. I mean the need for what we're talking about is a need for a major expansion of our manufacturing facilities. Let's go on to Slide 38. We're just continuing on the expansion. We're not sharing our long-term business forecast at this time, but the opportunities for Park are significant. Timing is now, we must take advantage of the opportunities now. We must not hesitate or we will squander the "once-in-a-lifetime" opportunities, we have sacrificed so much over many years to develop. So this is kind of interesting. There was a Board meeting last week, and Mark was discussing with the Board some of these missile programs and he used the term once-a-lifetime opportunities. And the Board was really got the thought, well, let's come to Mark. This must be really big. Mark is not a guy given to hyperbole. It's usually the skeptical guy, which is good. You want your President to be skeptical things. That was his quote once a lifetime and the Board thought, wow, this must be a big thing then. Our objective is to have our expansion plan in place by the end of the calendar year and to be moving into the implementation phase by -- of our plan by then. Slide 39. How are we doing with Park? Let's change gears for a little bit. I'm sorry, it's going to take it so long. But like I said, we're trying to cover a lot of things here. So what are Park's objectives? This is important. How do we measure success? I think there's a lot of misunderstanding about this. So let's talk about it. We measure success. Our objectives are getting qualified and sole source qualified whenever possible on chosen special aerospace programs. These are programs we want to be on. These are the special programs, the wonderful programs. That's our success. Once we get qualified on our chosen special programs, our objectives have been achieved. We're done. And once we're qualified in those chosen programs, all in [indiscernible] , all we need to do is support those programs with what, extreme urgency, flexibility and responsiveness. That's it. Other than that, it's up to the program OEMs to determine and decide how quickly their programs will ramp. That is not something over which we have control, and it's not even our concern. We're on the program. We achieved our objective. Our objective has been achieved. And some guy wrote something about we're shifting blame or mitigation plans, and it's just kind of a total misunderstanding of how Park and our objectives and how we operate. Once we get these programs, sole source qualified, our objectives have been realized. And we -- let's talk about how have we done with our objectives. If you ask me, we have been incredibly successful. We have gotten on wonderful aerospace programs, special programs we want to be on, most of which we can't mention. You know some of them already, A320, wow, Patriot, wow, a lot of them we can't mention. Slide 40. And we were nobody as we came into the aerospace industry. We came from nowhere. We welcomed into the industry with open arms with the entrenched competitors. I don't think so. They didn't want us. I mean they were brought polite and respectful, but they clearly didn't want -- they do not welcome us. We achieved what we achieved against great odds, incredible success by getting on these programs that are the envy of the industry from nowhere, nothing, went to an industry where there's aerospace, there's a lot of entrenchment. People kind of programs, they get very complacent sometimes. That's not us. We don't do that. Are we lucky? If you ask me, we earned everything we got. Are we an overnight success? I don't think so. It's been a long and difficult road with much sacrifice along the way, but it's a road we chose. Let's go to Slide 41. I think that's our last slide, almost there folks. Very fortunately, for all of us, Park had the courage and conviction. This should be in bold. This is important to stay the course with our principles and our simple but elegant "Egg Strategy" in the face of sometimes unrelenting doubts, negativity and skepticism. Very fortunate for all of us, meaning investors, too, very fortunate that we stood our ground and our knees didn't buckle, and we did what we thought was right under quite a bit of pressure. Because if we didn't do that, we wouldn't be where we are now. We wouldn't be looking at these "once-in-lifetime" opportunities, wouldn't be, and we'd all -- we all lose out -- all lose out. So how are we doing at Park? We believe Park has done a remarkable job of positioning our company to capitalize on, thank you, Mark, once-in-lifetime opportunities we are now facing. These are unprecedented times for Park. Okay. Operator, so we're done with our presentation, and we'll be happy to take any questions at this time.

[Operator Instructions] I see we have a question coming from Nick Ripostella from NR Management.

Once again, nice presentation, nice quarter. And just a couple of easy questions. I've been thinking about Park and all the exciting things going on. How do you feel about the need for additional sales personnel? Or are you feel that everything you have there is adequate. You've got so much going on. I'm just wondering, are you covered in that area sufficiently. And the second thing is, I know you say you're not prepared at this time to share the long-term forecast. So do you think like sometime next calendar year, you can kind of give people a longer-term view of where this company could be in 3 to 5 years. There are so many things that are blossoming. You truly are a growth company. But -- and then the third thing is -- and I know this is not your primary function, obviously, but you must be on the radars of firms out here to pick up research coverage. There's so much research out there now by niche firms, and you have such a great story. I was just wondering if anything happening in that regard?

Thanks, Nick. Thanks for your questions. So let's take them in order. Additional salespeople. I think, Mark, you can chime in. We've learned a lot over the last 20 years. And I think our view on salespeople is a little bit skeptical. I think we prefer to have additional technical people, engineering people in terms of getting more business. We -- you're right, Nick, we certainly have our hands full of what we have already, but we're always interested in new opportunities, new opportunities. They're coming pretty fast and furious, but they're not coming because of salespeople. They're coming because it's a small industry, particularly in the defense side, and we have close ties with a lot of the OEMs and the military as well. So the work gets out pretty quickly. The important thing is we have engineering people to support those activities rather than salespeople that go get those -- the business. And I'm not sure that really works anyway. I don't think that -- I don't know, Mark, you chime in, that typical OEMs really are that interested in the guy bringing doughnuts and a slick salesmen. They're more interested in what you can do, how you can help us. And that's going to be more of an engineering discussion or it could be a supply chain discussion, okay, how can you support us in terms of providing a product to us. But I don't know, I'm a little skeptical about whether additional salespeople are -- we want to talk about at this point. Why don't we -- Mark, why don't you chime in? I'll take the other 2 questions, but why don't you chime in if you have anything you want to add to that, my answer on that question.

Yes, Brian, I think you're correct. I mean we work really close with the technical and engineering folks and it kind of goes back to our strategy too, they have priorities and they need to get projects done. And we work directly with them and help them develop new programs, new products, and that really helps us get business more so than the traditional, like you said, Brian, going to the supply chain people, bringing doughnuts. It's a little different in our industry. It's more technical, more engineering driven. And if you're satisfying those groups, that's how the business usually comes our way.

Yes. I think a lot of times it comes to us rather than we go into it. But it's a real kind of small close to industry and people know where to find us. Long-term forecast, I understand why you're asking that. I think what we'll try to do in Q3 is provide some information. I'm a little bit -- like a little reluctant because I think the number is going to be shocking to our investors.

[indiscernible] .

Yes. Okay. Well, let's see what we can do to give you more perspective, quantitative perspective when we announce Q3, okay? Would that be right? And we'll work on that. I'm not saying we'll give you a hard like 3- or 4-year forecast, but there's something that you could sink your teeth into a little bit more. And the research, we're here. I mean, nowhere to find us. We'd be happy to be covered. Like you said, Nick, not really our principal focus, but we'd be happy to be covered. And if anybody is interested, I'm happy to talk to them. I think we are seeing a lot more visibility in the last few months or so. So we'll see what happens. I don't believe there's anything imminent where somebody is about to pick us up right now, but we're very open to being covered. So hopefully, those...

When the revenue doubles from here, then they'll come around. That's the way it happens a lot.

Maybe. Yes, maybe you're right. Any other questions you have, Nick? Or is that covered it?

No, thank you so much. And it's glad to see that all the hard work, the stock has caught lightning in the bottle after the last quarter, and it's good. It's a nice thing to see hard work appreciated and reflected in the value. It must make all the employees and everybody feel good and the investors, obviously. But -- so thank you.

It's a good thing. Thank you very much for your input, Nick. Operator, do we have any other questions?

Currently, there are no further questions at this time. I actually see one just popping in by Chris Showers, private investor.

Brian, just, I guess, 2 questions. You mentioned the C2B material being a 60%-40% lower to higher margin mix. When the Patriot missile gets ramped up, will that be constant? Or can you get a higher mix there with the higher revenue converted material?

So I'll answer that. So what's going on here is they're stockpiling, stockpiling, stockpiling. And that's why there's -- the ratio is not really balanced. At the end of the day, though, there will be a certain amount of C2B fabric that's required to make the C2B material. But at the end of the day, it all has to kind of even out. Right now, the OEMs are stockpiling. Why? Because they're nervous. They want as much as they can get because they see where the future is going. And they're not stopping. They're going to keep stockpiling, I think. But eventually, the plan is not to just have that stuff sitting in our factory, of course, it's for us to produce the material that's used to make the rocket nozzle materials for the -- rocket nozzle structures for the Patriot missile system.

Okay. And is there timing on that, where you think that might pick up this calendar year?

Yes. I think as Mark alluded to, we had this issue with the recall and that was slowing down a lot in our ability to produce the materials, the C2B materials. The recall is pretty much complete now. So we think that's going to open things up quite a bit even in the next quarter. I mean, even this quarter, I think. So we'll see. We'll see. With the aerospace, probably most industries, though, Chris, the demand is there, but the supply chain can't turn everything on, on a dime. We can, but there's a lot of other steps along the way in the supply chain in order to be able to ramp up like with the A320, we could support 75 airplanes a month at this point if they needed it. But -- and Airbus would like to be at 75 airplanes for a month. I'm quite sure of that. What's holding them back is the supply chain, the supply chain is not able to turn on a dime. Was there another question, Chris?

No.

Good. Okay. Operator, anything else right now?

There are no further questions at this time. I would like to turn the floor back over to Mr. Shore for any closing comments.

Okay. Well, Brian again here. Thank you very much for listening in. Sorry, the call went so long. If you have any other questions, you want to call us any time, we're happy to talk to you. Have a great day. Thank you. Bye.