Good morning, my name is Sherrie and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. Third Quarter Fiscal Year 2020 Earnings Release Conference Call and Investor Presentation. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference. .

Thank you, operator. Good morning, everybody. This is Brian. I'm with Matt Farabaugh of course, our CFO, as usual, and welcome to our third quarter conference call. Also, Happy New Year to all. So I want to tell you, mention to you that we have a presentation that’s been posted on our website and it's also on a live webcast.

It really will be good for you to get it up on your screen or your iPhone because we're going to be going through that, it will make the call a lot more be for you if you don't have it up already. And there are instructions in Paragraph 2 of the earnings release as to how to access the presentation if you haven't done that already.

I also want to mention that there is some supplemental financial information, which is attached to the presentation as Appendix 1. So you may want to check that out at some point. And a couple of other just introductory comments before we get started with the presentation.

So then I don't cover the same things each call, while we try to cover things that we think are meaningful, interesting and relevant, but let us know what you think, let us know if there are other things you like us to cover during these calls. So, these calls are for you. We're not here to promote or hype up our company.

These calls are for you and not for us, so just let us know what you think. Is there anything else you'd like us to cover, any other focus you like us to consider? Let us know. This is your time, not our time. So we'll go ahead now and go through the presentation. Matt and I will do that for you.

And then at the end of the presentation, probably take over half hour, just want to warn you, so brace yourself, then we'll be happy to take questions, alright? So why don't we just skip over to Page 2 of the presentation. That's our forward-looking disclaimer language, so just let us know if you have any questions about that later on.

And Matt will take over for a few minutes to cover slides 3 and 4. So, go ahead, Matt. The ball is in your court. .

Okay. Thanks, Brian. On January 8, the Board of Directors declared a special dividend of $1 per share payable to our shareholders, payable on February 20, 2020 for our shareholders of record on January 21. The total amount of the special dividend is approximately $20.5 million.

Including this special dividend and the regular quarterly dividend of $0.10 per share payable on February 4 to shareholders of record on January 2, Park will have paid approximately $536 million or $26.15 per share of cash dividends since the beginning of our fiscal year '05.

Park's regular cash dividend has been paid -- regular quarterly cash dividend is paid -- been paid every year since 1985. Never skipped or reduced that regular dividend. Moving on to Slide 4. I just want to walk through with you how we kind of think of our cash balance.

Although our balance sheet shows $144.2 million at the end of our third quarter, some of that cash is really committed for future use. When we had the tax law change back in December of '17, there is a transition tax that's got to be paid over a period of eight years. We're a couple of years into that.

So the remaining installment payments on that transition tax is $17.7 million that's got to be paid over the next seven, six years. The Newton expansion that we've talked about in the past has begun.

So the remaining payments here for that expansion, although it's not legally committed there is unless barring any sort of major event this is how much that we will have to pay out. It's our best estimate of how much we'll have to pay out to complete that expansion.

And of course there is this $20.5 million that we just talked about for the special dividend payment. So the way we look at the cash, although it's $144 million on the balance sheet. It's really roughly $91 million that we’ve seen it's remaining and available for any purposes that we see going forward. Alright.

I think I've covered what I needed to cover on here. .

Thank you, Matt. Very good. Alright. So I would just add that or comment, I guess that -- so what is it? What did Matt tell us? $536 million of cash dividends since 2005 fiscal year, $536 million. And we have no debt and $144 million of cash.

That's a lot of money to be paid out in my opinion by a small company like Park that was started by two guys with I think about $50,000, $60,000 back in 1954. Just my opinion, but I thought you should know that. So why don't we move on to Slide 5. And Matt was referring to Newton, Kansas, expansion and it's certainly in progress now.

The picture on the top right is actually about a month old. So unfortunately we couldn't get an aerial photo of more current area of photo of this. Actually a lot more have been done in the last month.

So the original budget was $20.5 million and the spending as Matt indicated -- sorry Matt talked about how much left to be spent $15.1 million, so we spent about $5.4 million so far. The completion is now expected the end of this calendar year, calendar 2020 and that's a delay.

That's about a four or five month delay, which we’re not very happy about caused by a couple of major things, governmental approvals, the process was more complex and time-consuming than anticipated. The governmental approval is really the FAA.

You may be surprised to hear this, but if you build a factory in airport, you need to get FAA approval for it, and that was more complex than we anticipated. Also there is a lot more additional time required to finalize contracts and other arrangements related to construction. I don't know, maybe we didn't have enough urgency.

But we've done this three times now and so we thought we kind of had the system down and we were a little surprised, this not what we anticipated.

So maybe third time for us not a charm, three times meeting that our original building, which was I guess, I think we broke ground that building maybe 2008, then a couple of years later we did our first expansion of the building, kind of the back end of the building if you look at a picture.

So this is our third shot at it and we're still not getting it exactly right. So that's disappointing, but it's about a four month delay, and that means that the facility is -- sorry, expected to be qualified in their production by the end of calendar 2021, that would be especially for our large customer MRAS, ST Engineering.

The expansion is now expected to provide $55 million to $60 million of additional hot-melt composite material manufacturing capacity. We'll talk about capacity a little later on, because I think there is some confusion about capacity, but we did push that number up.

I think the last time we spoke to you, we indicated it might be $50 million but we pushed that number up and then we push it up by increasing our uptime assumptions realistically, but we feel that we needed to do that. So now we're talking about a little bit more capacity that will be generated by that new factory.

Let me go to Slide 6, so let's get right into it estimated manufacturing capacity. So after our second quarter call, we had some questions and comments, which made it obvious to us that there was confusion about our manufacturing capacity. So we wanted to lay it out for you in more detail and kind of go into more of a deeper explanation of it.

So let's just start from the top Slide 6 -- on Slide 6 so we need to separate the different aspects -- major aspects, the components of our manufacturing operation for you in order to have more intelligent discussion of manufacturing capacity. So first let's talk about hot-melt treated composite materials.

The 60-inch film and tape line, that's the main line that we use to produce hot-melt materials. Last quarter I think we said it’s -- we had $45 million of capacity with that line. There is also 24-inch film and tape lines, $8 million of capacity. Before I proceed, I got to cover something important, I apologize I forgot.

There is a little asterisk, a footnote right at the caption level. Look what it says, manufacturing capacity is highly variable and significantly impacted by product mix.

Very important to emphasize this because our capacity is going to be -- manufacturing capacity is going to be an estimate and it's significantly impacted by product mix, not by a couple of million dollars, but it could be impacted by a lot more than that. So you just need to be aware of it, the big variables. So, sorry to back up on you.

But let's just pick up again, 24-inch film and tape line, $8 million now. The assumption here is to look at a double-asterisk is that, that tape line and 24-inch line is being exclusively used for the GE9X Containment Wrap Program that we discussed in the past.

So I want to remind you, in our program we have POs for that program end of this year, but we've not been awarded this program. This is a GE Aviation program, not an MRAS program. So remember with MRAS, we have got long-term agreement through 2029. This is not included in the long-term agreement as we've previously explained.

I just want to remind you of that though. So we're saying for purposes of this analysis, let's say we only use 24-inch line for the case containment wrap production, $8 million, but we want to make sure we're moving all the case wrap production from the 60-inch line, so the 60-inch line will have more capacity.

And we'll get into that I guess next page of this presentation. So solution treated included composite materials, $55 million. We don't talk about that too much because we're not nearly utilizing the full capacity of our solution treating equipment.

Composite parts fabrication and assembly, we really don't even think of it, because it's not the way we look at the composite parts business. We don't run the composite parts business that way. If you look at our composite parts business as a niche business, we go out for niche opportunities for parts.

We're not looking to “fill up the factory” That's not what we do at composite parts. Everything we do at composite parts are going to be good margins and are going to be niche business things that will be good for Park.

We're very fortunate we just discussed this before in the sense that we -- our composite parts operation is in the same facility as our composite materials operation because it gives us the ability with composite parts and not have to fill up the factory. We can take business that's good for us, or not take business that's not good for us.

That's a pretty unique and special thing we have. A lot of other companies of composite parts don't really have that luxury. Let's keep going. Estimated total composite materials manufacturing capacity, I think we just did the math, I got my pocket calculator out, $108 million, that doesn't include composite parts, of course.

Now there is a issue related to $45 million of hot-melt materials manufacturing capacity from the 60-inch film and tape line. So, let's go through the issues, a couple of points you got to go through to get to the punch line. So the GE program's business represents a large majority of the current hot-melt business.

We talk hot-melt, it's largely GE program. There are other customers that we produce hot-melt product for, but it's largely consumed by the GE programs. The GE programs business has been subject to significant short-term variability, peaks and valleys. This is key.

Remember for you people that haven't been with us some years, we had the burn down about five years ago, inventory went up, then it went down. And then if you remember in fiscal '19, the first couple of quarters, there was destocking going on, and then the fourth quarter restocking.

So I think we've explained this to you before, but in the fourth quarter of '19, our shipments for GE programs were 3 times what they were in the first quarter and that's because not just because the programs are growing and programs are ramping, but because the inventory ups and downs. So there's a lot of variability, those peaks and valleys.

Hot-melt material production was approximately $9.5 million in fiscal year -- sorry, in the third quarter, just third quarter. Sorry about that. So let's see, let's do the math. 9.5 times 4, what's that? Is that $38 million? Okay. That shouldn't be a problem, it's less than $45 million. Right? So I'm just taking a run rate, let's say we ran at that rate.

But let's look at the next item, but the hot-melt materials manufacturing operations produced at an annualized run rate of $45 million during the month of October and November. Why that happened? Because we got behind the power curve in September and we'll explain that later. So, the point is that it's not going to be a level thing.

In order for us to run our business, we need to have more capacity because of the peaks and valleys as compared to the average production during the year, if you follow what I'm saying. Like I said, I'm trying to give you a little more kind of our perspective on capacity rather than just superficial information about it. Slide 7.

Let's go into Slide 7, more about capacity. As a result of short-term variability, we've been talking about the peaks and valleys of the GE programs business, it may be difficult to handle the peaks with $45 million of hot-melt materials manufacturing capacity.

See the point? Now let's go to the next item, additional hot-melt materials manufacturing capacity provided by expansion will not be available and qualified for two years. We just covered that. So that doesn't sound very good, does it? We have got $45 million of capacity for the next two years.

That's not so good, but what are we going to do about it? Our solution, we're increasing our hot-melt -- 60-inch hot-melt manufacturing -- 60-inch film and tape line I should say, hot-melt manufacturing capacity from $45 million to $55 million. This is we think very achievable, very doable. Two things we need to do.

As we mentioned before, we need to move all of the GE9X production to the 24-inch film and tape line that hasn't been completed yet, obviously we have to work that with our customers as well. But that's in progress and -- in process rather. And then we're also increasing the 60-inch film and tape lines uptime by 10%, again increasing uptime.

Uptime just means the percentage of time that the machine is actually producing product. Product is actually running through it over a course of 24 hours. So, yes, 12 hours uptime, that's 50%. These theoretical numbers, so 18 hours would be what, 75%. That's what uptime means. So -- and last item, necessity is the mother of invention.

What does that mean? Until you actually need it, you don't really work hard to get it, and we're talking about manufacturing capacity here. We've been through this for many, many years in electronics in the old days as well. So this is not a new experience for us. And again I think our ability to achieve the $55 million number is quite realistic.

So it's quite a few. Let's go on to Slide 8. Okay, what's this about? Now we're talking about Q3, what happened in Q3. So the prior quarters are provided for your perspective. Let's look at Q3.

The sales were $15.847 million, gross profit a little over $5 million, gross margin $31.7 million, we will be talking about gross margin because it's getting compressed a little bit, isn't it? So -- and EBITDA $3.622 million. Going to the first arrow item.

What did we say about Q3 during our last quarterly conference call? We said our sales estimate was -- I'm rushing because we have a lot to cover, so I maybe too fast. $14.75 million to $15.75 million, that's what we said. Those were our estimates for you, and our forecast estimate. On EBITDA what we said was $3 million to $3.5 million.

So we came in both top line and EBITDA just a little bit about the top of the range. With sales, there was -- in case you want to do the math, $97,000 above the top of the range, EBITDA $120,000 above the top of the range, just a little bit. So those are the facts for Q3. And of course we're not to leave it at that. Now we have to discuss Q3.

So, let's go on to Slide 9. So again we're trying to give you perspective, kind of behind the scenes, under the numbers information and perspective. So let's start at the top, carbon fiber supply, sorry, continues to be very tight, kind of a broken record now. It's a very little slack or leeway in the system.

Parks carbon fiber in fabric raw material inventory is at a historically low levels, hand to mouth. So the supply is limited, our inventory is limited. So it's pretty obvious where we're going with this. Then remember the third item, this goes back to our second quarter call.

We had the issues with distorted carbon fiber weave and polyurethane film wrinkling in Q2 and there was associated rework with that, but that carried through into September, this September of Q3 and that resulted in Park incurring additional cost of rework in Q3.

There is a gross margin impact of that, remember the gross margins are being compressed, as I said. And the next item, the unavailability of carbon fabric and then the resource is diverted from production operations to rework operations and that in turn resulted in significantly reduced production in September.

We got behind the power curve in September, particularly for -- there you go, hot-melt product. Now the need to run hot-melt production in October, November at an annualized run rate of $45 million, that -- this resulted, sorry, in the need to run hot-melt production in October and November at an annualized run rate of $45 million.

Remember, that's what we said our manufacturing capacity is. The current manufacturing capacity limit of Park’s 60-inch hot-melt film and tape lines. So let's go to the next arrow item.

Running hot-melt operations at or close to manufacturing capacity limitations for the two full months of October and November, combined with historically low carbon fiber and fabric inventory levels required intense focus and brute force effort by our manufacturing people, great manufacturing people and resulted in manufacturing efficiencies, additional costs and reduced gross margins.

Why is that? So when -- we're still tight, we're pushing up extra capacity, not for two weeks, but for two months. It's really hard to plan effectively in terms of running operations with maximum efficiency, shorter runs, more changeovers, less predictability.

So it's pedal to the metal, I know that's kind of a silly expression, but that's the best thing to come up with. Pedal to the metal, sprinting for two months. It is not for the weak of heart or will, Q3 was not easy quarter on manufacturing floor. I guess maybe some people think it was a good quarter. For us, it was a good quarter but a tough quarter.

It was not an easy quarter. To run at right of your capacity limit for two months non-stop, that's not an easy task. Like I said not for the weak of heart or will, but our manufacturing people -- our great manufacturing people did what they had to do and they got the job done.

So I just want to comment that the shortfall in Q2, it really bugged us, it really ate at us, and when we got behind the power curve in September, but we just really didn't want to not meet our objectives in Q3. So we did what we needed to do.

And I just FYI, in case you're interested, everybody at Park received $250 bonus for Q3 and we felt that was well deserved. Let's go to -- we talked about Park's people a little bit already. Let's go to Slide 10. Park's people count. So we hired 10 additional production and lab people during Q3 and actually should say we probably started in Q2.

One is to stay up to fourth shift hot-melt operation. Remember we talked about that last quarter and then for other manufacturing and lab functions. That hot-melt tape line operation, the 24-inch hot-melt tape line operation now running 24/7, which obviously leads to right. Managing Park's people count is somewhat of a trial and error process.

What do we mean by that? We're in somewhat in uncharted waters here. We started from scratch with nothing probably I guess we probably broke ground in 2008, and we're kind of learning as we go. We're in a steep ramp. So we're I guess playing it by ear a little bit.

We always tend to run lean, Park tends to run lean always, that's just how we do things, that goes back to 1954. Park attempts to do more with less always. That's how we compete always. That's kind of something about us, we'll never change it. So we are really reluctant to casually add people. We add people cautiously and carefully as we go.

We don't ever want to lay off people. In Kansas, we never done a lay off. I can't say we never will be, because I'm not god, but we're very opposed to laying off people. Why is that? We want our people to believe that they can build a future here at Park.

And if we lay people off like they're a commodity, that's how they're going to believe that they have the ability to build a future with us. It's very key for us. The big companies, I'm not criticizing them just pointing out that difference.

They hire 1,000 people all the time, they lay off 1,000 people all the time, like it's nothing but that's not us. That's not us. So we hire people carefully because we don't want to add people unless we are convinced that those people are going to be there for the long term. The additional people though obviously impact our gross margins.

It's just a fact of life, and our people count is 135, so that's how many people received that $250 bonus, 135. Other factors which affected Q3 EBITDA gross margins. Broken record here. And this stuff you'll see in Q4 as well. Outside testing costs related to data development for new product expected to be released in near future.

Remember, our lab has a capacity as well. So we would want to do the testing in our lab, but we were getting to it. So we had -- we're paying an outside lab do the work, very expensive. GE9X program manufacturing trials development costs. This thing -- this program, these trials are really burning our P&L.

This is a lot of work, a lot of effort and not much in terms of current returns for it, I mean in terms of financial returns. Some of the product we produced is actually sold, some of it's trials and isn't sold. But it's just -- it's not a good economic thing.

Now, we hope, of course, to get the program and at that point, we'll be happy about it, it will be a good economic thing and it should last for a long time. But right, now we're paying the price. Film adhesive manufacturing trials and development expenses, that's still ongoing.

That costs us -- the cost of operating a 24-inch hot-melt line, but there's a cost to doing that as well. And legacy costs, they should end in Q4, but we still carry the legacy costs in Q3 and probably in Q4. Let's go to Slide 11. Now, we talked about what happened in Q3. Let's talk about Q4. Q4 is highlighted. The right-hand column is just addition.

That's the fiscal year, but just adding the columns the -- one, two, three, four, across. So let's focus on Q4. The forecast for Q4. $15 million to $16 million of revenue. EBITDA $3.1 million to $3.6 million. A few things I want to point out regarding Q4, because we started Q4 of course.

As of January 3, I guess that was a week ago Friday maybe, the amount shipped so far in the quarter plus the amount booked to be shipped in the quarter was about approximately $13 million. So there's a little bit of a hole to fill to get to that $15 million to $16 million top line.

Also unfortunately, it's deja vu all over again, to quote that great sage, Yogi Berra, right. We're off to a slow start in December. Two things. Lengthy shutdown for major maintenance. We have been running our factories so hard that we just haven't had the time to do the major maintenance.

I'm not talking about in a normal PMs, I'm talking about stuff that takes a couple of weeks to do. For instance, our floor was looking really kind of crappy and we just couldn't get the time to redo our floors. So, we bit the bullet and we said, look, we're doing it over the holidays, but it was quite a long shutdown.

And when you're doing the floor, you can't operate the factory of course and other major maintenance items. So, we felt we needed to bite the bullet, and take care of these things, which have been put off because we just were running the factory so hard we didn't have time to do it.

And the carbon fiber shortage, again, you're probably starting hearing this. I certainly am. But yes, the supplier was not able to meet our forecast. So fiber was air-freighted from Japan this week, so we're catching up. So here we are again. We are behind the power curve, December was a slow month.

So, we're going to have to make it up in January and February, deja vu all over again. So okay, that's our comment about the more perspective on Q4. However that's still our forecast. The things we're just discussing, obviously we take those things to account, we come up with the forecast. I will remind you that we don't sandbag our forecasts.

We give you a forecast, what do we say, we're saying to you, this is what we think will happen. We're not sandbagging it so we can beat it or something like that, other people think that's a good way to do it, but that's not the Park way. We tell you is our best ability to tell you what is true.

We could be wrong, but it's our best ability to tell you what we think will happen. Okay, so let's keep going. Factors. You know what, don't even need to read them because it's the same factors that we talked about for Q3, right. They're still in place, outside testing costs, GE9X program, film adhesive trials, 24-inch line, legacy costs.

Like I said, these should end by the end of Q4. So hopefully that item won't be there next quarterly presentation. And I want to remind you, by the way that Q4 of last year was a 14-week quarter, that's unusual. This year's Q4 is a 13-week quarter, like our normal quarters.

Every four years, we have one 14-week quarter to kind of catch up with the calendar. Let's go to Slide 12. How we doing on time? Not so well. Slide 12. So more comment about our forecast. Factors affecting predictability of short-term forecasts -- actually this is not really completely correct.

It affects not just short-term forecasts, it affects long-term forecast as well these factors. All the major jet engine company programs, the GE programs except the 747-8, my favorite airplane, are ramping or in development. Makes it very difficult to forecast, because when things are steady state, you can kind of predict them better.

But when things are ramping, then the question is well, are they going to ramp that fast, or little faster or little slower? It's much more difficult to especially for short-term forecasting to understand what will happen when programs are ramping, especially ramping steeply, because again you're in uncharted territory as well.

A severe stress in aerospace industry supply chain, not new item but this continues, it's very present, very palpable, and it makes things very difficult, because whatever we say, whatever our customers says, they have other suppliers and if those other suppliers aren't beating the timelines, meeting demands, commitments, it can slow everything down.

That's something very hard for us to predict. Because of tight manufacturing capacity to produce carbon fiber and fabric raw material inventory, and tight carbon fiber supply, there is very little slack or leeway in the system, making it difficult to recover from supplier production shortfalls. In other words, if we get behind, we have to catch up.

It's not so easy because we still have to find raw materials, the carbon and we have to have the manufacturing capacity to do it to catch up. So, we already commented what happened in Q3 and we were pedal to the metal for two full months and hot-melt. Just FYI, we're not going to, we're not updating or long-term forecast today.

We'll do that on January 15, at the Needham conference and I will be attending Needham conference, we'll maybe give a little more information at later on in the presentation and that would be the point at which you will see our new long-term forecast. We haven't quite finished it yet, so we'll do it at that point. Slide 13. Okay.

So maybe this is little more interesting kind of fun stuff. Update on major jet engine company programs. That's the GE Aviation programs. Boeing 747 is flat. How long will the Queen of Skies be produced? I hope forever, but some people think it's probably not likely. That's like I said my favorite airplane.

So if they discontinue it, that would be kind of a poignant moment for me. But we love that program. That was our first program also. Our first GE program. So it has sentimental value for that reason as well. The first shipment I think was on February 28, 2014, that was for the 747. Second item. Yes, this is a big deal. The A320neo family.

That's a 321neo, the 321XLR, that's very strong and still ramping. That's like the Big Kahuna of our -- of the GE programs we supply into. But that's not the only one. Bombardier Global 7500 with the Passport 20 engines that's ramping nicely. The COMAC ARJ that's regional jet ARJ21 with the CF34-10A engines that's ramping nicely. This is all good.

The Comac 919 with LEAP-1C engines, that's still down the road to ramp for that. And the 777X with the GE9X engines. Yes that's been pushed out. You're probably not shocked to hear that because there's a lot of news about the 777X and delays in the schedule and all kind of complicated things with Boeing right now.

So the current focus and this is coming from our customer of course for us is the development work and I again remind you that the 777X -- sorry, the GE9X that's GE Aviation program, it's not in the MRAS LTA. Top five customers, it's in alphabetical order. Let's talk about them. AAR, they've been popping up recently.

That's for multiple programs, mostly interior structures. GKN Aerospace. That's mostly for Sikorsky and GE Aviation programs. Kratos Defense and Security Systems.

I think we've mentioned we're -- we think we're the -- well, we're told by them, we're the main supplier of material -- prepreg materials for all their target and tactical drones including the Valkyrie they've announced recently. Lockheed Martin.

I got to tell you that's a secret programs, secret development program and I don't think we'll ever be able to tell you anything about that other than it's just a secret development program. Middle River Aerostructure Systems. That's the Holy Grail. We don't need to comment on them. I think you know who they are.

Let's go to Slide 14, recent developments. So, these are some big things and maybe some things of interest, kind of a combination. A major private space company, NRE is in progress. We can't say more about than that, but it's a very exciting program for Park to be on. Very happy about it.

We are qualified at a new -- sorry an initial low natural low rate production. Sorry about that. New EVTOL program, you read about these quite a bit. Sometimes they're called urban air mobility, air taxis. This is for a large OEM. So we're hopeful in that program.

We're qualified at the new Hypersonics program, and we received original POs for that, and we're not able to talk about that at this time. Here is a nice one. DC-10, KC-10 aircraft. The KC-10 is I think the tanker version of the DC-10. It's a big three-engine airplane that was developed by Douglas.

It's not in production anymore, but we're in production of a niche component, these are I guess you call spares using Park materials, and that's really key because sometimes when we produce components or parts, we're using somebody else's materials. This is Park's proprietary material. So it's a very nice thing.

This is not going to be a very large program. But we love these programs, we love it. What happened? It is too difficult, too much of a problem, too trouble for everybody else. What we do, we love that kind of stuff and we kind of raise our hands and yes we'll do it. That's kind of our -- this is we're doing business, modus operandi. Northrop Grumman.

So we've been on this program for a while, but they recently announced plans to increase the Global Hawk and Park materials are qualified in those programs. So that was in the news recently, for the Global Hawk because that was the type of drone that was shot down by the Iranians.

So this next item, yes there was a Wall Street Journal article, December 20, 2019 recent article reporting a deal for CFM manufacturing. CFM is a JV between San Fran and GE Aviation, the LEAP engines. CFM International produced increased volume of LEAP-1A engines that's for the A320neo family of aircraft, that's the Big Kahuna for Park.

So in addition to that, there has been -- so there's couple of things going on here. This is actually a market share thing. This doesn't relate -- this one doesn’t relate to the problems with the 737. I think more market share has been given to this the LEAP-1A as compared to the Pratt -- the October plan.

The A320neo family shares has two engines that are qualified, certified. One is the Pratt engine, one is the LEAP engine. We're in the LEAP program through MRAS and it looks like accordance article that CFM is a deal to take on more market share for their engine.

The other thing is, there has been reports recently that because of the 737 MAX issues that Airbus is actually attempting to increase production of the A320 family of aircraft. So, what does this mean to Park? It's hard to say because the question is going to be kind of supply chain support these increases.

Maybe we can, but we're only one component on an airplane. And the question is can the supply chain support these increases? There's a lot of pressure on the supply chain already, as I said, so we'll see. Obviously, it's a good development for Park, but it's hard for us to really understand what it will mean.

It's a positive development, not possible for us to quantify it though. Next item. Single-aisle versus wide-body aircraft. The paradigm shift. There's a lot of reporting about this as well that the trend is more towards single-aisle aircraft and away from wide-body aircraft.

There is a lot of reasons for that in terms of dynamics about air travel, which we won't go into now and you could read plenty of articles about this. This is not coming for me. But the point is that single-aisle from what it seems like it's almost a consensus from what industry analysts think it seems to be the place to be the single aisles.

And it seems like we're well positioned with single-aisle with the A320 family of aircraft and the Comac 919 aircraft. So that's very good for Park. The other major single-aisle contender is the Boeing 737, the 737 MAX aircraft. And we don't have any content we're aware of on that third platform. So I just want to say this is pure luck.

It's not like we had some strategic vision that we're going to focus on single-aisle, which we saw that single-aisle was going to be going up and wide-body be going down. It's also not just look in terms of being on the A320 and the Comac 919, as compared to the 737 MAX.

We, of course didn't -- we didn't foresee the problems with the 737 MAX, just pure luck in both cases. But nevertheless we still feel like we are positioned well in the single-aisle area, which seems to be the growth area for commercial aviation. Okay, so we're almost done. Thanks for hanging in there for so long. Slide 15.

So Park is still immersed in battling through challenges relating to steep program ramps, ongoing severe stress on the aerospace supply chain, tight supply of raw materials, operating with tight raw material inventories, and our own manufacturing capacity limitations.

But we don't quit, we don't back down, or relent, that's just not our way of doing things. Last thing, as I mentioned earlier, we'll be presenting at the 22nd Annual Needham Growth Conference. The presentation will be at 12:00 noon Eastern Standard Time. That's I think -- it's Wednesday, January 15.

And our presentation will be available via webcast in our Park's website. So we suggest you listening and look at that presentation. I think we have been to every Needham conference since the first one. So this is 22 for us. And that is the end our presentation. We're at the Thank You slide, Slide 16.

So, operator, if anybody is still listening in, we'd be happy to take some questions. .

Good morning, Brian and Matt, and thanks for taking my question here.

Yes, so since a lot of important programs are ramping simultaneously, I'm curious has your team designed or implemented a more repeatable process for some of the pain points you've mentioned?.

Okay. I think it's just kind of perpetual pain in a way, but I mean it'd be too much of a smart alec. I think the best way can answer that is that we're learning as we go and we're getting better and better at these things as we go. I don't want to tell you there's some kind of formal process, but I think we're getting better at these things as we go.

Clearly, we've been in an uncharted territory, especially for the last couple of years when things start to really ramp aggressively. But the thing is I want to emphasize, it's not just us, it's the whole industry.

And maybe I'll -- maybe I'm wrong about this, maybe it's an arrogant thing to say, but I suspect, we're probably doing better than most in terms of our ability to ramp and keep up with the ramp schedules and the reason I say that is because I know from the supply chain people, our customers that they are having a lot of difficulty with some of their other suppliers and they've been just keeping up.

.

And I think you guys did a pretty good job on disposing some of the estimated manufacturing capacity.

I guess if I kind of step back and think about as the facility comes online, what are you kind of doing differently in that facility or planning to do differently in that facility, where it could kind of ease some of this strain or pain point?.

You mean a new facility?.

Yes. .

Well, okay. The equipment -- good question. The existing facility. If we were going to do that all over again, we would design equipment differently. That equipment was designed a way back one I guess in 2008 and the AFP program is where you can really be considered at the time, it wasn't something that was very much on our radar screen.

The equipment that were -- that we ordered has been designed for today's needs. So it's much more capable for the production needs of today. And you noticed that we're looking at even a higher capacity output.

There are things we've done, which are a little bit confidential in terms of the design machine, which will allow the machines run faster, the machines to run faster as well. These machines -- more continuous process machines are the key to productivity, obviously is up. But the other key is the run speeds.

So, I think this factory is going to be much more optimized. Actually we struggle a little bit with the existing equipment just because it was not designed for what we're doing today so much. So obviously we don't use that as an excuse we make it work, one way or another, but the new equipment was designed for today's needs, not the needs of 2008.

So I think it will be a lot better. And also there will be much more capacity. So we'll have the ability not be running at full capacity, which makes your operation much more efficient use and you can plan and you could do longer runs, you just have much more predictability and your operation is going to be much more efficient as a result. .

And then one more from me and I'll jump back in the queue. I know you discussed recent development, major private space company, NREs in progress.

Have you ever maybe talked about what that NRE touches upon or what you're involved in there?.

No, I think we're probably pushing the limit by saying what we've said and we do that because we think our shareholders are entitled to know something about this, but I'd be reluctant to provide any more information at this time. Maybe, like I said, pushing limit too much, as to what the OEM would find acceptable. .

[Operator Instructions]. We do have a question from Christopher Hillary with Roubaix Capital. Please go ahead. .

I wanted to ask with some of the slowdown in the broader aerospace supply chain.

Do you think that will help you with some of the supply issues that you’ve faced during 2019?.

I'm not sure I follow the logic of that. How this slowdown... .

With the 737 MAX pause, would that help you get more of the input materials that you've seen some shortages here again?.

Okay. So we talk about carbon fiber quite a bit, and I'm pretty sure that the carbon fiber we use is not also used on a 737 MAX. But of course there is a lot of different components of supply chain. I'm not sure that's going to help us in the shorter term. Long-term, that's a different story.

If the 737 MAX never really recovers to its original intended levels, then the supply chain may adjust right, where the business is.

But short-term, qualification periods take a long time to qualify a supplier that was previously supplying or currently supplying into the MAX on an old program is very time consuming and it kind of doesn't make sense practically because we're six months from now, whatever, the 737 ramps back up and what are they going to do.

Long term is something different though, like I said. There could be a fundamental adjustment to the whole supply chain if the share, let's say, the market share between the MAX and the 320 and the Comac adjust, but I don't think short term it really will help us too much. .

Okay. And then obviously you have a very distinguished track record on your capital return that you highlighted earlier.

I thought it might be an opportunity to ask are you seeing many opportunities to do some bolt on type acquisitions to kind of grow your portfolio or give yourself some more assets that would help you as you go through this growth phase?.

We're looking at a few things. We're also looking at some projects. We didn't mention it for last couple of quarters. Remember we're talking about a potential JV in Asia, that's still something we're looking at. So there's a lot of different irons we have in the fire right now.

We're also hoping that maybe the valuations will start to come down a little bit too. So we want to keep some powder dry.

We still feel that valuations are maybe a little unrealistic and I'm not -- this is not my field in terms of M&A and business valuations but some people have said to me, people who are in that field that maybe in a not-too-distant future some of the valuations will come more in line with what might be more realistic or appropriate.

So we don't have anything imminent. That's why we want to retain -- Matt doing the math, like the $90 million of cash, but we still want to keep some powder dry because we think there are opportunities and they will continue to develop over next couple of years, but we'll see. We're not going to -- I think you know this about us.

We're not going to do an acquisition just doing an acquisition. We don't do that it has to be right for Park and right for Park is complicated.

I see right for Park in many different levels, it has to be the right kind of company, it has to be the right kind of location, it has to be the right kind of product, right kind of technology, the right kind of culture, and it will of course has to be available for sale at the right price.

So we're not just out there calling bankers and say, look, we want to get and this broker or that broker, this process or that process. We've been in a couple of processes, but we don't like them very much. I know this maybe too much information in response to the question.

The reason we don't like them is because the bankers try to rush you along and obviously they're trying to get the price up. But for us to do an acquisition, it's a serious thing. We want to take our time. We want to spend time with management. We really want to understand it's just the right thing for Park.

We do an acquisition, we're thinking we're going to own this thing for 20 years. So maybe everybody else is getting rushed to the conclusion, but when we get these processes, sometimes we just back out and say, we're not able to do distribution, we're not able -- you're not providing us with the access that we need. .

And then I guess one last one.

With a longer-term horizon, what are some of your thoughts on how your manufacturing capacity is developing? Do you feel like the current plans encompass what you foresee in -- with the five or so your time horizon or do you -- as you have both the growth that you've booked in some of these development programs, do you -- are you starting to sense that you might need to start planning on increasing the footprint again?.

Everything we have on the table now is covered. But I don't know if you remember this. So I think we discussed this, maybe I don't remember a couple of quarters ago when we first started talking about the expansion.

Remember that there was a comment, I think it's actually in our company presentation, which will be updated after Needham presentation that for an additional investment of $45 million in this expanded factory, we can provide another maybe $15 million of capacity. So there's actually space provided the new factory for another line.

So it would be pretty easy to increase our capacity for either hot-melt or solution depending on which direction you want to go in, by a significant amount. It wouldn't be the same thing as building a new factory, it’s just like ordering equipment we already know how to work the equipment, and have the equipment installed.

So, we do have that flexibility. We've built it in for just -- I think we are getting at. Not sure -- we know what we have now we can covered. We're not sure we'll have in the future. .

[Operator Instructions]. Speakers, I'm showing no further questions from the queue at this time. I'd like to turn the call back over to you for closing remarks. .

Okay. Thank you, operator, and thank you everybody for listening in. Been a pleasure. Give Matt and I a call anytime you want, if you have any other questions. And lastly of course is, have a great year. We wish you and your family all the best. Very good luck in 2020. Goodbye now. .

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect..