Good morning. My name is Katherine, 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 '21 Earnings Release Conference Call and Investor Presentation. All lines have been on mute to prevent any background noise.

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

Thank you, Katherine and this is Brian. Welcome everybody. I have with the Matt Farabaugh, our CFO. Happy New Year to all. So first thing is that we announced our earnings this morning. You probably know that. You want to take a look at the earnings release because there are instructions as to how to access the presentation we're about to go through.

And I highly recommend you do that because it will make the discussion much more meaningful to be able to go through the presentation with us. There's also a supplemental financial data attached as Appendix 1 to the presentation, you might want to check that out. As you know, we cover this often.

We're not here with these presentations to promote or hype the Company. What we're trying to do is cover things of, we believe, which will be of interest to you and provide perspective that we think will be useful to you, our shareholders and understanding our company and our company dynamics.

We can't cover everything each quarter, unfortunately, just it's not possible. So we have to be a little selective. And notwithstanding that, we have a long presentation. It could take 45 to 50 minutes. So I just want you to be aware to embrace yourselves.

There are a number of items, which require a little more discussion because they're not so obvious on the surface. And then after we're done going through the presentation, then, of course, we'll be happy to answer any questions you might have. So why don't we get started and let me go to Slide 2. Slide 2 is our forward-looking disclaimer.

If you have any questions about it, just let us know. You can call us later, of course. We get right to Slide 3, okay, we go into the numbers, let stuff going on in the slide. Let's try to go through it. So in the third quarter, sales, as you can see, were $10,372,000, gross profit $2,553,000, gross margin of only 24.6%.

That's low, as you can see from history, and we'll discuss that just in a minute, and we have an EBITDA of $1,380,000. If you look at the top line for the first three quarters, it certainly shows the effects the commercial aircraft downturn and also the destocking we've been talking about for quite a while now.

So what do we say about this quarter Q3, during our last quarter conference call, we said our sales estimate was $10 million-ish and our EBITDA estimate was $1 million-ish. We're not trying to be cute or clever with the ish stuff. When we say, ish, we're saying to you, we really don't know.

There's a lot of uncertainty and we don't want to give you more confidence than we have in what we're telling you. We're happy to give you our thoughts. We want you to understand and how much confidence we have what we're telling you.

So it looks like we came in within the range for our top and bottom line, meeting our sales and EBITDA, maybe a little bit ahead, but let's call it within the range. Remember our forecast philosophy. We cover this often, but I think it's worth just going over again is our forecast.

We're not playing what we call again to give you a little low number, a number that's below our expectations so we can beat it. We give you forecast, we are telling you what we think will happen. We could be wrong, but we're telling you what we think will happen. We're not rounding up, not rounding down.

This is what we think is going to happen, the best of our ability. So let's go into the next -- let's go to the next item. Certain factors affecting Q3, and it will affect Q4 as well, sales and margins. Let's talk about that. So the GE sales, we'll cover this later on in the presentation, only $1.8 million.

Now this requires a little bit of a review of things we discussed in previous quarters, which will get to more detail later in the presentation.

Remember, we mentioned last quarter that we had reached an arrangement with MRAS, which is our main customer or largest customer, I should say, which is a subsidiary of ST Engineering in Singapore, used to be a subsidiary of GE Aviation. We used an arrangement with I'm wondering which we produce a certain minimum amount for them every month.

On the theory that if we went below that amount, it would severely impact our ability to ramp back up, and we need to ramp back up and we're quite confident that we would come -- that day would come and it has come, we'll get to that as well. But it's -- that minimum amount is in units, it's not in dollars.

So the dollar amount is going to change based our mix, but it's somewhere been $700,000 to $900,000 a month, a very small amount, but that's what we say we need in order to maintain that critical mass and the ability to ramp up.

Remember, I mentioned this last quarter that in September, though, we were not going to operate our hot-melt line because we're taking it down for major maintenance that was overdue. So in Q3, we only operated two of the three months. Rather than one month times three, maybe 700, 900 tons three, 700, 900 times two.

So we had only $1.8 million of GE programs revenue, as you'll see later on in the presentation in Q3. And you'll see as well that compares to Q2 of $2.9 million when we had three to four months of production at that minimal level. So that affected, obviously, our top line and then bottom line. So this is something else a little complicated.

We need to explain to you, so you have the perspective. During the third quarter, we sold about -- we had about $2 million of sales of an essential component that's used on missile programs that are very critical missile programs. These sales were to the OEMs, the defense contractors.

This component is actually produced overseas and it's produced by an ally. It's a friendly country, but nevertheless, the OEMs, these defense contractors, little nervous. They want to have a supply of this critical component. We have the relationship with the supplier. Note, this is complicated, but bear with me.

So we're asked to go buy this product, which we did. And then sell it back or not sell a package back sell to these OEMs, these defense contractors. So there is a safe source of supply of this critical component. And we did that. So we sold this component to these contractors. They own it now. They can do whatever they want with it.

But the expectation is, clearly, that will be used starting, let's say, next fiscal year, to produce the capacity materials for these missile programs. That's the pattern. But again, it's their product. They can do whatever they want with it.

But the expectation is that it will be used by us to produce these materials for these initial programs, but they're very low margins on that $2 million because we do mark it up, we buy it. We mark it up. And we sell it to these defense contractors at a fairly low margin.

Now it's actually good news because when we actually produce the preprint materials, the composite materials. The margins are quite good. But $2 million of revenue in Q3 that have very low margins associated with it. So we go back to that gross margin number 24.6%.

And that's probably the big picture in terms of explaining why those -- why that number is lower. You look at the prior quarter where the revenues were $9.2 million and the gross margin is 28.6%.

So, if we don't like anything block 30%, but nevertheless, you look at Q3 and the gross margin is even lower, higher revenues, so we wanted to explain that to you. Sorry to take little bit of your time, but I just want to make sure you understood that dynamic. Let's go on to Slide 4. Top five customers, we always cover our top five customers for you.

AAE Aerospace and Aerojet Rocketdyne, they're both related to this Patriot missile system. We have pictures that are associated with these top five customers we've spoken about this PAC-3. It's the missile system before. It's Patriot missile, the next generation, latest generation Patriot missile.

GKN, that's a contractor for Sikorsky and many other customers. But we have a picture at the bottom right of this, of course, Sea Hawk, which is a program we supply into next item down. Kratos, they've been at our top by quite a bit in the last year, I guess.

And we have a picture of the Valkyrie, remember that we've mentioned before, we believe we're the main supplier of the materials for all of their drones, including their tactical drones as well as their target drones. Valkyrie interesting looks like they received cratered award from the U.S. Air Force for the Skyborg program.

So that's a very nice for we got be on. And the last one is middleware air structure system we call it MRS, subcontractors. And again, that's a sub of SD engineer, aerospace, our largest customer. That's a picture with 747-8. And I think the tire rework is excellent, I must say because I took the picture myself. And this is an anchorage.

The airplane was landing see it gears down a landing position a little over a year ago, and I think I was -- that's right. All the except runway runs close here using one runway for takeoff landing. So I always winded up to take go off after this guy landed. I want to go on to Slide 5.

So and then sharing our -- these pie charts with you in the last few quarters, I think they're very interesting. And hopefully, they're informative. So let's start with last fiscal year, fiscal year 2020, $16 million revenue. You can see the breakdown here.

And then we fast forward to this year, year-to-date, the Q3 year-to-date, and these supply charts moved around quite a bit. Military is 58% where it was 35% last year. Commercial was down to 35%, were 47% last year. Let's do a little math here, just for the fun of it.

If we take $60 million last year, total revenue, and multiply that by 35%, the military portion, that's $21 million, isn't it approximately. Let's take this year, where the revenue is $31.8 million, we multiply that by 50%, and then we annualize that number. Let's just assume I'm at saying, it's true.

Let's just annualize is doing that Q4, at least similar to the first three quarters. That annualizes $24.6 million. So what's going on here? Even in the down year, you see that aerospace business has grown and grown considerably, probably not an action in product because we decided that we're going to focus on, I said, military.

I think that's an aerospace a mistake. Our military business has grown even in a down year, and we decided we're going to focus on military, as we discussed for the last couple of quarters. So okay, why don't we move on? We'll keep hustling long here, like I said at the beginning, we have a lot to cover Slide 6. Okay.

So we're talking about our niche military aerospace programs. As I just mentioned, we decided we're going to focus on a lot of retention on military. And I think so far, it's going pretty well. We still have a long way to go, but so far, it's going pretty well.

These are some -- the pictures are just some programs we're on are not necessarily larger or smaller. We just thought their programs of interest. I think every quarter we discussed a few programs that we're on military programs. One on the top left is very interesting.

That's something we're in qualification on, a standard missile three system, a very fast missile. I think both Mach 16 and 18. That's very, very fast. The SR-71, you know that airplane a fastest airplane. I think still that it was ever built. It goes Mach to about 3.3. So it's a very, very fast missile. And actually, we're also in qualification.

And we're in qualification on a rocket system that's used on the SM-3 and the SM-6 as well. Boeing KC-10 Extender, this is really a niche kind of thing. That this is kind of a special mission here because you see who the airplane is refueling. But normally, it would be used ray fuel, B-52s and F/A-18s military aircraft. This is in for six stores.

I'll try to go through it quickly, especially material, and we also make the parts for this program. And what -- how we got this program? We are a legacy supplier. This is not a new airplane that they didn't want to do anymore. It's too difficult to trouble. And okay, sign us up. We have to do that. We love to hear those kind of things.

And somebody thinks something else's them with trouble sign us up because those are the kind of programs we like. So let's keep moving the Grumman E2-D Hawkeye. As you can see, that's a carrier based aircraft early warning. You see the big antenna on top. We do structural parts using our material. For the aircraft, and we also have the Predator here.

I think last quarter, we showed you the Global Hawk. This is another drone obviously used for military purposes. And we -- our materials go into structural components as well as rate home materials. And you see the pie chart. This pie chart is taken a military segment for this year Q3 year-to-date and breaking it up into these subcomponents.

The common theme for us is we like the niche military programs are now looking to go into big ones like the F-35 structures, things like that. We'd rather do niche programs.

Where we feel we have something different, something special, something unique to offer, which -- and we also feel the ability to protect the business because of the fact we're doing something it different unique the KC-10 is a good example of that. Why don't we keep going, Slide 7.

So now we'll talk about commercial this quarter, as I said, we can't cover everything. We talked a little bit military, talk about commercial. We're not going to talk about business aircraft, at least in the presentation. This quarter, you have questions about it, please let us know. Let's talk about commercial.

This is a slide similar to the slide we showed you in the last quarter. So it's a little bit of review here we're talking about single-aisle versus wide-body aircraft. So trends already in place, favoring aircraft, that was before the pandemic. Why is that? Because people rely fly direct.

They don't want to do the hub-and-spoke thing if they can avoid it. So the single-aisle aircraft a smaller aircraft, they're able to operate out of more regional, smaller airports whereas the wide-bodies going to go to the big hub.

So if you want to go from point a to point B, you have to go stop at point C, I guess, where the hub is, and nobody wants to do that, if not necessarily. Now with the pandemic, that accelerated the movement towards single-aisle in our opinion. We'll have market for a single while recover before wide-body.

Yes, I think that's -- we state it as a question, but it's -- I think it's clearly the case and again, the pandemic and the economic downturn has certainly accelerated the movement towards single-aisle, favoring single-aisle versus wide-body.

So our opinion is you want to be a commercial aircraft, which we do, we never wavered on that, by the way, even though a lot of bad news about commercial aircraft over the last year. We felt that this is a good place for us to be. If you want to be a commercial aircraft for us, you want to be in single-aisle. That's our opinion.

There three major single-aisle programs, the Airbus A320 family aircraft and LEAP-1A engines. It's a program we're on. This is a very, very, very big program, a very important program. It's a great program to be on. The next one, the 737 MAX, as you know, the 737 MAX has been recertified. And it's flying again. So good look to Boeing, hope it works out.

We're not that program, we have almost -- I think no content, I shouldn't say almost no content I'm aware of on the 737 MAX program. And then third single-aisle is Comac 919. The airplane is still in development.

Comac says that they're going to have finished the development certification, at least in China this year, dark deliveries at the end of the year, we'll see if that happens. But we think that's very important potential program for the future as well. So in our opinion, we check two to three boxes. Those are the boxes we want to check A320.

That's by far, we think the big dog. And A320 had a lot of variance, too, that covers a lot of ground. We saw the large so they have a lot of unique things to offer, unfortunately, because the MAX problems are way ahead of Boeing at this point, at least in our opinion.

So you want to be in single-aisle aircraft, those are two boxes you want to check, and those are the boxes we do check. Let's go on to Slide 8 now. So why don't we do a program highlight, Airbus A321XLR. That's part of that A320 family. We're talking about, very interesting program here.

It's a single-aisle, range very good range, about 5,400 statute miles, seating capacity up to 244, has a lot of seating capacity and high-density configuration, expected end of service in 2023. I mean just two years from now. That's not very far from now. Will it be a game changer? Well, it's a lot of press, a lot of people writing about this.

A lot of people think, yes, it will be a game changer. Why is that? Because it will replace wide-bodies for many operations, for instance, North America to Europe, where you expect to take a wide-body this would be replacement for that wide-body, but much lower cost.

So there's a lot of excitement about this program, and we're happy to be part of it, that's for sure. So unfortunately, for Boeing, they don't really have an answer for this airplane.

It's kind of like the 757, the old 757, which is a single-aisle, but it's all technology and it was a stretched kind of version of maybe a 737, if you want to look at it like that, but they can't stretch the MAX any further. So they can't use a MAX as a platform to compete with this XLR.

And unfortunately, Boeing had an MMA airplane that was kind of targeting this market. But my understanding is anyway to discontinue development on that for a little while, where they're focused on the MAX. We believe Park is ideally positioned, maybe partly by luck -- maybe mostly by luck, in the commercial and aircraft industry.

But whatever reason, we think we're ideally positioned of this luck will take it. No problem for us. Slide 9, let's go to Slide 9. This is a slide that we -- that we go through almost every quarter.

It's just kind of review GE Aviation jet engine programs, why we're on those programs because MRAS, our large customer was until two years ago, a subsidiary of GE Aviation. Now there is a subsidiary of ST Engineering in Singapore, a large Singapore and aerospace company. So let's do this quickly.

We have a firm pricing LTA through 2029 with this MRAS Middle River Aerostructure Systems. We also have redone the factory, which some progress, we'll talk about that later in the presentation. What's going on here? If you look at the next item that says we'll sole source and all these programs.

So for a large aerospace OEM, they're not going to be comfortable with a sole source relationship, long-term sole source relationship for materials like these critical materials like this, where there's only one facility. It's too dangerous.

If something happened to our facility, it would be a real problem for these OEMs because the qualification time frames for these materials very, very long. So it would be a real problem. So it's kind of part of our arrangement with MRAS. We signed up this long-term agreement. We said, sure, we'll build a redundant facility for you.

Now the good news is we need it for capacity anyway. I think you remember or some of you do, and you might remember that about a little over a year ago, before the pandemic, we were talking about pushing our capacity already in our existing facilities. So that's the good news. We'll need it for capacity as well.

Sole Source for Composite Materials for Engines Nacelles and Thrust Reversers for Multiple MRAS Programs, we have the A320 family, the first four items at 747. We've always shown you a picture of that. That's not just for Nacelles and Thrust Reversers also Inner Fixed structure. Comac 919, we talked about that. Comac ARJ-21. That's a regional jet.

It's doing quite well. It's sold in China mostly. And then Global 7500 with the Passport 20 engines, top right, it says we're also making another component for that Passport 20 program, but that's through GE Aviation. Picture here is a 747-8 Engine Nacelles. I like this picture very much because it just shows you the size of the structures.

You can see the person on the background. These are very, very large structures made with our materials. So it's a very good program to -- for Park to be on because there's a lot of content for the Nacelles Structure on a Park content. Slide 10. So here's an update on GE Aviation Jet Engine Programs. We've done this the last couple of quarters.

Let's give you another update. First, in the A320neo family of aircraft at those LEAP-1A engines, what is Airbus said? Well, they were saying, until recently, they're going to do 40 airplanes a month. And it was interesting, a lot of analysts were questioning, well, do they going to be able to sustain that.

And it almost seems like everybody was kind of getting to the training where so many analysts were questioning whether Airbus could sustain the 40 per month, and a lot of gloom to news about commercial aircraft in general and then also the stage the A320 program. And well, Airbus said, yes, I guess, you're right.

We're not going to sustain 40 month we're going 47 I don't know if that's supposed to be in the face of the analyst position for Airbus. But I said at some point this year, they go to 47 and increase their rate of airplanes at 47 per month.

But I think more, maybe more importantly, we, Park, recently received a forecast from our customer, MRAS, indicating significant increases in units in calendar year 2021. Let's go into that Global 7500 with the Passport 20 engine. Same thing, we recently received the forecast from customer indicating a significant increase in units calendar year 2021.

This also is the next program to for our lighting strike materials are qualified on. Comac ARJ21, that's the regional debt that's being produced in China. Park recently received forecast from customer indicating a significant increase in units in calendar year 2021.

As you see a pattern here, here's the A321 picture day 321, a very big seller, very successful or planning for Airbus.

When we go on to Slide 11 continuing with the different programs, Comac 919 with LEAP-1C Engines, Comac has indicated the antenna certify and being delivering this airplane before the end of 2021 and our lighting strike or materials are already being used in the program. What that means is this is an NPI, new product introduction.

So they're already producing some units, trying to get ahead on production for any airplane is certified and also to go through the certification programs. 747-8. Yes, it's a special airplane is for me. But Boeing has announced they're going to terminate production of the Queen of the Skies next year, but no change to production rates until then.

So the rates aren't being reduced. Boeing saying nor can continue producing this airplane until the program is terminated. That to say rate until the program is terminated.

I'm a dreamer, but maybe it's unrealistic, but kind of hold out hope then maybe somebody will come in and order maybe a little big frank company, companies, UPS order some more units before the production hands, but that probably might be somebody been, that's what we're thinking. Slide 12.

So how do we get here where we are now with GE Aviation and GE Aviation Jet Engine Programs? Well, of course, there was a significant downturn in commercial aircraft industry and early calendar year 2020, we all know about that as a result of the pandemic and global economic crisis.

Almost all news about the commercial aircraft industry was negative, very negative. This is kind of, to me, the herd mentality that not a lot of conviction, maybe not a lot of courage. There are two or three analysts, industry analysts that start getting very, very negative that everybody chunk on board. Okay, fine.

To me, that's always a sign that -- look at the other side of the story. When there's that capitulation. Everybody is now capitulating, it so negative or maybe somebody is missing something. So next item, but we not -- so we didn't completely buy all that do in globe news.

But for Park, it doesn't really matter too much because of park, we make adjustments on the fly, we keep pressing forward. That's really all we know how to do. As Winston Churchill, I think, on saying when you're going through hell, you keep going. We're not analysts. We're not so we keep our head down a few moving forward.

We make the adjustments says that we need to make them. But we never gave out commercial airplanes, commercial aircraft. We just didn't buy that. We didn't buy a lot of the news that was coming out from industry analysts. Okay. Let's keep moving on. Park made arrangements. We talked about -- about this in the first slide.

We made arrangements with a MRAS Park to maintain a minimum monthly baseline critical mass production level to preserve Park's ability to ramp up production when needed this is critically important to Park and MRAS.

This arrangement went to affect probably June -- sorry, no July than we majoring in June, but probably July was the first month that we start to comply or buy it with a sort of arrangement.

It ends up being about $700,000, $900,000 a month based upon, like I said, it's really -- it's -- the arrangement is -- the minimum and the arrangement is based on units. So the units, the dollars are going to vary based upon the mix. But I think of $700,000, $900,000 per month is the arrangement we entered into.

And that arrangement lasted until last month, until December. Let's go on to 13, Slide 13.

How do we get here continued? So we spoke at some I'm sorry, but unfortunately, we have to kind of review for perspective, we'll be covered in the last quarter we spoke at some length during our Q1 and Q2 investor calls, but the significant divergence from and mismatch between our agreed to minimum monthly baseline production amounts that we just talked about and then current end market requirements for GE programs with Park is on, the specific programs which we were on.

So again, there's all news about the MAX and I don't know what it is and other programs. But we're focused on programs we're on. So -- and let's just go through some of my numbers. Again, it's a little tedious to have to go back and review the stuff. But perspective, I think it's probably important.

Fiscal '20 our GE programs, our revenues were $28.9 million, approximately $29 million, so just kind of doing some high-level math, that's about $7 million per quarter. We told you, I think, last quarter, well, we felt the programs we were on were probably down about 25% to 30% based upon what the end market usage was indicating.

The programs themselves, the airplane programs themselves. So we thought, well, all right, if we take the $7 million number, and we reduced it by 25% or 30%, that gives us about $5 million per quarter. But we're operating at less than half that. Look at our last couple of quarters, less than half that based upon that minimum amount again.

So what that is going on here, of course, it's at inventory destocking. And we knew that something was up, it wasn't adding up, it didn't make any sense.

We explained, again, going back that we believe many companies of the aerospace supply chain were demoralized and survival or not paying attention to need to ramp up production with destocking in, we're very concerned about that, still are.

We further explained during those calls that we believe the aerospace supply chain may be taking inventories to dangerously low levels. It's a serious concern of ours because the supply chain is very defensive in the survival mode, not thinking about the future, not thinking about, wait a minute, some is not making sense here.

We're going to have to ramp up some day, wasn't really being considered, in my opinion, by some of the members of the supply chain. So we said this last time, an abrupt and steep ramp-up by supply chain could be required when the inventory destocking ends.

Is this a ticking time bomb? Maybe, but one thing is for sure, I think if you do the math, the inventory can't go up below 0. There's a finite limit to how much inventory can be reduced. How much destocking can occur, right? Can go below zero. So let's keep going here -- sorry, 14.

All right, so how do we get here? And now to compound the potential need for a steep and abrupt ramp up because of that mismatch the forecasted units for calendar year '21 for all GE Aviation programs have gone up in some cases, significantly, with the exception of 747, which is flat. We just went through the program by program discussion.

We said everything is up significantly, except on 747. So we have the stocking mandate. We have inventory being low and then the programs move up. You see the dynamic. So now what? Now what is there's probably a problem that the industry has, at least our part of the industry.

This is the Global 7500 that we've been talking about with the Passport 20 engines. Slide 15. So the ramp is upon us. That's our belief. Destocking has ended in most of the supply chain-related to Parks, GE Aviation programs inventories taken too low in some cases. That's our opinion.

So we'll talk about this later, but the reason I say in most cases, is we deal with some subcontractors as well for these GE Aviation programs. It's about 20% of our revenues go to subcontractors. They have a little -- sorry, they have a little excess inventory, maybe at $1 million. But the main supply line to MRAS, no. We think it's actually low.

So as explained, just a little reviewer, rates are being pushed up, the ramp is looking pretty steep. Just for perspective, GE program sales for the following periods work. Now before we go into the numbers, I just want to point out, we're talking calendar years here. And I'm sorry to have to confuse things. It's normal when we talk fiscal years.

But for this purpose, we did talk calendar year because we have a forecast from GE Aviation -- sorry, from MRAS. For calendar year '21, we don't have a forecast for next fiscal year. So we got to do the calendar year comparisons.

This is just for perspective anyway, calendar year '19 $29.3 million GE Aviation sales, calendar year '20 last year, last calendar year, $15.8 million. But importantly, calendar year '20 last six months, $5 million. That's during that period. We're doing a minimum production from July to December, I guess.

Obviously, we can do that math for six months, $5 million, that's a $10 million run rate. Isn't it, $10 million, and that does add approximately $800,000 per month baseline minimum. $10 million, so we got $29 million, $10 million in last six months. Let's keep going. So now we get to the forecast.

The calendar year -- sorry, '21 forecast for GE Aviation program sales based upon the forecasted rates we recently received from the customer, MRAS, approximately $24 million, $10 million, $24 million. Get the numbers. I see what I'm talking about in terms of this steep ramp up.

This is basically not -- this is not six months from now, nine months from now, $24 million. What does this mean? Okay? So let me explain what we're talking about. What we received from our big customer is a forecast by unit and by unit number.

So this money of this program this month, that month, I don't give us -- not dollars, it's, okay, this month, we're going to build eight of these units. We're going to build nine of those units. We're going to build 20 of those units, month-to-month for 12 months. So it's pretty detailed forecast.

For us, it's very easy to convert that to dollars, which we know how much material goes in each unit very well. And we know what the peril saw for is it's very easy to convert that to dollars. It's actually, we say, approximately $24 million, and we have a more precise number, but it's about $24 million. That's how we take this number.

What does it not mean this is not a Park forecast. We're not ready for that yet. We're not quite ready for that yet. We're sharing information with you so you have a perspective on the ramp we're talking about, but we're not providing you a Park forecast at this time.

And next couple of pages, we'll explain that, there's still some things we're not sure about. We don't have enough confidence in to give you, a forecast for the next year. So we're not doing that at this time. So let's keep going. Let's talk about -- let's go to Slide 16.

So what are the risks and factors potentially affecting that $24 million forecast? Inventory subcontractors, we talked about that, it's probably about $1 million. And that probably would be absorbed and normalized by, let's say, April time frame, May time frame, certainly, by the end of our first fiscal quarter. This should be a rearview window.

This is a subcontractor. There's no excess inventory, we believe, in our direct to MRAS. Possible inventory build as a result of rent right now, there's very minimal inventory in our direct supply line to MRAS. We think it's probably too little, but it's the amount that was needed to support that $10 million business level, not $24 million.

So it's a very real possibility that the inventory can be built up. So that's going in the other direction for us. Obviously, more inventory, that's going to drive sales up, at least while the inventory is being built up. We don't know that will happen. I'm just kind of sharing with you as considerations.

Here some negative concerns, possible -- possibility to global economic recovery stalls. That obviously will affect commercial aerospace. The global economic recovery is there then people are going to be flying with.

And obviously, they're pandemic risks, vaccine risks, political complexities and risk, a very dynamic and complex environment right now, which we're not commenting on. We're not political analysts, except to reference that there's a lot of uncertainty, and that creates risks. So we just want to flag that. We don't have an opinion about it.

We're just saying those are risks. Geopolitical international trade risks, pretty dicey stuff, not just with China, with Europe, so you never know all, but I just want to flag that these always are concerns and issues for were the type of business we're doing, which is in every case, I said, well, maybe the 747 a little exception.

Every other case probably relies quite a bit on international trade. And export, U.S. export controls against China effected potentially affecting the Comac ARJ21 and 919. It really is potential. These are potentially affecting the forecast.

It's a recent event, I think, last month, December, there's some action, but it's certainly not decided and it's just something we're flagging for you. But if the U.S. imposed a very strict and stringent controls, export controls, it could -- it definitely could affect the ARJ21 and Comac 919 and use Western made engines. So let's go on to 17.

Sorry, we're taking so long, try to move as quickly as possible. So the ramp is upon us from just continuing here. Well, these are just more factors, are more risk factors, possible setbacks or issues with specific programs Park is on. Maybe the OEMs will push out their forecast. Another possibility is the OEMs or customers will increase the forecast.

I'm just not just throwing stuff out here completely. There's talk, we'll maybe increase this program, that program. Nothing we're prepared to talk about, but there's talk on both sides of the equation. Possibility supply chains according to GE Aviation programs, which Park, which Park is on struggle to ramp up.

That's a real concern, possibly the MRAS and supplier is not able to ramp up production as quickly as needed. So there's two kind of things we're talking about here. One is suppliers that supply directly to MRAS. And then you have suppliers all supply chain into aerospace.

So there is some reason, let's say, there's nothing related to MRAS or Park there are components that GE Aviation can source or even Airbus can source that could affect the whole program.

So it's just something to be concerned about when programs are being pushed up pretty fast, pretty aggressively, pretty steep ramp and maybe a supply chain that isn't necessarily focused on ramping up as much as they need to be herd mentality.

That just means that sometimes you get a herd effect where everyone is negative, sometimes everybody is positive. It seems like it's turning positive now. For us, that means we have to watch out and pay attention, not get caught up in herd mentality. Okay. This is the ARJ, the regional jet that's made in China. Let's go to Slide 18. Okay.

How will Park respond to the ramp-ups, these deep ramp-ups? All about our people, that's our race in a hole. Our current headcount is 107. We plan to add about 15, 20 people to accommodate the ramp-up. All new people need to be trained because we didn't lay anybody off. We got a call back. So it's a process. And we need to do it right.

We say we did not lay-up anybody against our religion. It is very much against or religion. Now when I say that, I always have to say, well, we're not god, so we can't guarantee we'll never do a layoff. But it's something we're very, very, very much against. We just don't believe in that.

And why is that? It's because we want our people to feel and believe that they can build a future with us. And you can -- whatever you can say wherever we want, and then you lay off a bunch of people. It's like, well, would happen to our future. Very important for Park, very important for our people, and it's also a very good business, in my opinion.

So we do not add people casually Park. We had somebody. We're thinking, okay, we're adding this person for life. So we got to be careful. We don't want to just go easily go hire 20 people banditry well does work out. We'll lay off 10 of them. We're not going to do that. So you have to be careful on how we bring people on.

We want to overdo it and have to lay people off. We hear -- we see companies they hire 1,000 and then they fire, lay off 1,000 people. That's not for us. It's not for us. It's not -- those are human beings. Those are people that really to make a difference for a company, a company that has real dedicated people, that's a company that has a lot of power.

The Company use people are just kind of punching a clock, I don't know. That's not for us anyway. Timing will be critical. In other words, we're not just to go hire, all 15, 20 people today. We're in the process. We're hiring some people. We have to do this very intelligently. We have to pay attention just as we go, very important.

If we hired 20 people now it would be chaos, we see we have to train all these people. That would just create chaos, like I said, we need to be very flexible and agile. At Park, we make adjustments on the fly as we go and keep pressing forward. We don't stop here group. So we're not going to stop. Okay, let's take a month or two to figure this out.

No, we quickly come up with a plan and we move ahead with the plan and we make adjustments on the fly because no matter what we plan, the circumstances are going to change at some extent. So, we have to be very agile, pay a lot of attention, make the adjustments on the fly. That's how we do things at Park.

Park's customer flexibility program, I mentioned this before, our Asia hole, our current participation is 83%. This is just a great thing for Park. It's so wonderful to have this program. It's a cross-training program. Most everybody is involved with it. It gives us so much flexibility, gives us so much better ability to respond as soon as to ramp up.

So you have a 300 crew, let's say, it's four guys and 300 crew, that's a very complex machine to run. We're into for people and just say, okay, given one week of training, good luck. No, doesn't work that way. Three months, and then the new people have to be integrated into a crew that has experience.

You can't just take four new people putting someone we want a treater and even in three months, doesn't work that way. So the great thing we have is the customer flexibility program, we did ramp up, let's say, one department, other department it's not so busy. Those people are cross trained. They can start today in that department. No training.

They're already certified. They get certified. Actually, people get a little bit of increase in pay. They get a little bit of a premium in pay when they're certified to do another job function. But they have to train. They have to take a test. So these people are ready to go. It's a great program at Park very flexible, very agile.

And ultimately, our great people are our races in a whole. That's -- we're very, very fortunate, very special, very privileged to have such great people, such dedicated people. It really makes the difference between what Park is and what maybe some other companies might be. Let's go on to Slide 19. This is our financial forecast slide.

Let's start with our GE Aviation. So to review, you can look for yourself at the first three quarters to speak for themselves. Q4, we're forecasting $3.9 to $4.4 million. $3.9 million, that's what's booked. So we start there and say, we're not sure, but be a little bit more. So we're talking $3.9 million to $4.4 million.

If you look at the last couple of quarters, Q2 and Q3, but that was really running out at $800,000, $900,000 a month rate. Remember, Q3, only two months of production. Now it's interesting because when we did our Q2 call, we predicted about $1.5 million for Q3, it came out $1.8 million.

That's just -- that's -- we're not getting credit for it, just how just how things worked out. In our Q2 call, we predicted about $2.3 million to $2.4 million of our Q4, now we're up considerably with the rest at now $3.9 million or $4.4 million.

It's still not that $24 million level, though, $24 million, let's do the math, that's about $6 million a quarter, right, divide it by $4 million. We're not anywhere close to the $6 million. So remember, we've got a forecast by month. It's not just for the year. So there's some ramp-up that's involved.

But according to the forecast we received, we'll be at that level, that $24 million level, which is, what, that's $2 million a month, right, by April. We'll see if that happens. We gave you all the risk factors. I'm not sure it's going to happen. And then there's also the subcontractors inventory. Don't forget about that.

But again, that should be pretty much normalized by the end of the first quarter -- first fiscal quarter. So let's keep going here. Let's talk about before -- our forecast for whole company. We give you the history here, which you've already gone over, our forecast for Q4, $14 million to $14.5 million, sales, $2.3 million, $2.8 million EBITDA.

So again, we got to stop and explain, so certain factors affecting Q4 sales and EBITDA. So first of all, as you can see, the GE program revenues are up quite a bit from prior quarters and we discussed that at some length.

But remember, we're talking about the essential component that we sold to the defense contractors for missile programs in Q3, and I think we said it's approximately three points -- sorry, it's approximately $2 million in Q3, $3.5 million, approximately $3.5 million in Q4. So that drives the top line up, remember, quite low-margin on those sales.

We buy the product from this overseas supplier, and we sell it to the contractor this component on a small market. When we actually end up producing the materials, that's where the good margins come in. So it's important to understand that.

Because you look at the numbers, you think, well, geez, you're talking about -- compared to Q1, for instance, you're talking about much more top line, but the bottom line isn't that much better. I got to say that that's why we need to explain the details there. Let's go on to Slide '20. Park's financial forecast estimates continued.

So we were true, as you know, rather, our long-term forecast, let's see, during our fourth quarter conference call, investor call last year, on May 14. When we'll be able to reissue that? I'm not sure.

We may be able to give -- provide you -- this is may be able to provide you with a forecast for the next fiscal year, fiscal '22, when we announce our Q4 earnings. I doubt we're going to be comfortable enough to give you like a three-or four-year forecast or maybe at least for the year. We will see.

I'm not promising on that, but we're hoping to be able to get there. As far as our forecast is concerned, long-term forecast, we believe the fundamentals are still in place. It's just that things are pushed to the right.

So you will go back and look at that forecast and say, well, when will you get back into those numbers and not sure how long it's pushed to the right, but the other thing I want to mention is that the one good piece of good news is rather than just getting back to the forecast.

Now we have the better emphasis on military so if you look at the, let's say, the pie chart, the bottom right, just for reference, the commercial aircraft segment, that's going to grow as the commercial aircraft programs ramp up, as we discussed, that will grow. That's not really something we're driving.

That's something that the end market is driving. We're just lucky we're on the right programs. Maybe some -- a little bit more than luck, but a lot of it's luck, we're on the right programs. But the military part of it, that's something we are driving. So we intend to keep pushing that up, keep pushing it up, pushing it up.

We're not looking for the big grand slam with military, looking for more niche programs. So it's a lot of programs, not one or two, lots of programs, they'll push that number up, but we feel very good about that. So, I think that covers it for a long-term forecast.

Let's go on to Slide 21, just a quick update on -- sorry that we're going so long on our expansion. Total budget $18 million, spending as at the end of Q3, $12 million, approximately $6 million to go. We expect completion during the first half of this calendar year. You see the pictures that are updated.

The first time we showed you a picture of the inside of the facility actually is the zero-degree freezer. It's I think technical term for it is huge. It's very big. Slide 22. Okay, different topic here. We uncovered this in a while. Our balance sheet, cash and acquisition perspective cash dividends.

So, we paid a cash dividend for 36 consecutive years, uninterrupted. They were skipped a dividend, they reduced the dividend. Since fiscal 2005, we paid $542 million of cash dividends, $542 million, $26.45 per share. And I guess, my opinion is that a lot of them money for a small company like Park. So let's go on to the next item.

Remember, we did this cash mating in the past. So we're saying, okay, we start with $117 million our cash and marketable securities into Q3. But we subtract $16 million, which -- sorry, that's the remaining transition tax installment payments. This relates to repatriation of foreign cash. This is paid over five years.

We are the last -- it's something we owe the IRS, we're saying, okay, that money spoken for $6 million remaining on the Kansas expansion. So we subtract those two numbers, you get to $95 million. Obviously, this is just kind of a conceptual analysis. This is how we think of it internally. So we're sharing with you.

Obviously, there's a lot of things that affect cash on a daily basis up and down. So we're not giving you a cash flow prediction or anything like that. We're saying, this is how we look at our cash situation. Park also has long-term debt.

So what about M&A? What about acquisitions? What's our perspective? So the major opportunities to buy businesses at distressed values have not really materialized in calendar 2020 we thought. We said we thought it might -- what happened. So what we're told, we think it's very much about the Fed.

So why is that? Companies that were distressed companies were able to hang on. They didn't -- they weren't forced to sell. They're able to hang on because they were able to access money so cheaply, hang on until business got better. So if they were going to sell, they could sell at a better price.

A very limited number of businesses offered through banker led or managed processes actually none that I could remember in the last year that we're involved with. What's the potential outlook? Sorry, what potential acquisitions do we look at in last calendar year? We looked at a few actually.

And some pre seriously, we did due diligence, not only came through banker processes or all niche kind of businesses, some relatively small that came to us either through industry contacts or maybe one case a customer called us and gave us a lead on a company that we might want to take a look at. But nothing was right for us. Nothing panned out.

So and like I said, we did some due diligence even significant due diligence in one case. But end of the day, we just decided it wasn't for us. It didn't pan out. So we moved on. What about the outlook for 2021, the bankers say that there'll be much more activity than 2020, but the valuations go up. So I have to see what happens.

Let's move on to our last Slide 24, Park's reflections on a troubled world. The world has been badly damaged and has a troubled place at this time. At Park, we have had our own share of heartbreaking tragedy. But at Park, we do not quit, we do not give up, we do not relent. We continue to grind and press forward. That's really all we know how to do.

Park is a strange and unusual company, filled with very wonderful and special people. And we're not like the others. We don't not fooling around here. We're not trying to just get by at Park, we play for keeps.

And the last thing I'll quickly cover is this is our shipping and receiving crew, I think, in the last quarter or so, we featured one of our better crews. Left to right, we've got Lucas, Jon Moon, Ramundo, Ms. Mile, Jon Moon is a supervisor, really great crew. And what I can say about them, we're lucky to have them.

If something needs to get shipped, it's going to get shipped. So, I think what we'll do since we're running so late is, we'll ship the rest of the comments and go to questions. So operator, thank you, everybody, for hanging in there. To the extent you have, operator we're ready to take questions at this time..

[Operator Instructions] We have a question from Brad Hathaway with Far View. Your line is open..

Quick question on the M&A. I'd love just to get a little more color, if you could about, why you passed on some of the things you passed on in the last year? Why they just weren't right for Park just understand more of some of your thought process, how you evaluate opportunities to decide they're not a good fit..

Well, I'll talk about two of them, and there are different reasons. So one was we thought would -- would look really interesting at the beginning because seen very nichy. But as we dug into it more, we realized we just covered that the market was very closed, very little opportunity to grow the business.

And it seemed to -- it definitely would require some investment, maybe I want to be not only on time, but it maybe was reflected a little bit, which we didn't mind. We were happy to put some money and invested in. But the thing that really got us hung up with the upside. We just didn't see it there. The market was pretty close.

Another case, small bids is, interesting business. And we're concerned that the customer concentration was very, very high. And also, the expectations of the owner where we felt quite high, and that's the owners right. They can decide whatever they want to aside regarding valuation.

But that ends up being a big disconnect, and that's why the discussions were ended. These were not auctions. They weren't part of processes. They're both one-on-ones. There are a couple of things we continue to look at but those are kind of examples. But in both cases, the reason we didn't continue. The reasons were different..

Understood. Great. And so you mentioned looking forward into calendar '21, there's suggestion there will be more businesses on the block, but also valuation expectations will be higher.

I mean, the combination of those two things make you more or less optimistic about binding potential deal in 2021?.

Yes. It's an excellent question because I think its yes and no. We're optimistic, obviously, because there's going to be more activity that's a good thing. The conservative valuations and we talked about the herd mentality.

Now if everybody is getting on that's kind of on a mindset that things are going to be going very well in the future, not just with aerospace, let's say, the economy generally. Then maybe there's some of that irrational exuberance that creeps into people thinking.

We certainly felt we saw that in the past or valuation that didn't really make sense for us. So we'll have to see. We intend to be active. We have the cash. We intend to be active. But for Park, we always want to keep our head on straight and not get caught up in the mob mentality or herd mentality where everybody else is doing it.

So, we don't see the value, but everybody else seems to. So, we need to get on board. We must be missing something. We're very reluctant to kind of buy into that thought process..

[Operator Instructions] We have a question from Brian Glenn with Olcott Square Investment..

Hi, Brian, thanks again for the very transparent walk-through as always and Happy New Year..

Happy New Year, Brian..

So you mentioned adjustments on the fly early in the presentation. Just want to see if you could take a minute or two or three to talk about company culture as a competitive advantage. So specifically, two things that kind of came to mind when I think about it, our some of the niche programs that you guys focus on.

I know they have volume fluctuations month-to-month or quarter-to-quarter? And then the second thing is what you guys are doing now and over the past few years, which is earning a spot or wedging onto some of these programs that are still in development? And I know the aerospace industry might be -- I don't know what the norm is six to eight weeks for turnarounds on prototype stuff.

I know that's overly generalized.

And maybe it goes back to your electronic heritage but my understanding is you guys just work on a different pace in terms of doing things like that and turning it around to a customer, whether it's a commercialized product or development?.

So that's a big question, our culture. Yes, well, so I guess we could say a lot of things about culture. We're a small company. We're not bureaucratic. There's a lot of passion among our people, a lot of dedication, commitment, and we move quickly. We're not at the politics.

We're not into who's right, who's wrong or we wouldn't have like clicks within the Company. The whole company is really no company, meaning, all the people company are focused toward the same objective, which is better things for Park. So, we do have the ability to move pretty quickly.

People get leaned up and focused and get to work in different directions pretty quickly. We'll make an adjustment, fine. We're moving in that direction. So, I think it's pretty good in terms of flexibility and agility based upon our culture. We also could be relentless.

I'm not sure about these six to eight weeks for our aerospace, aerospace qualification cycles hat could be quite a bit longer. But they vary, some are much longer, some can be shorter depending upon the situation. When I mentioned this allocation 10, which is a small program, but it doesn't matter, we love it.

When people, competitors are saying, they're not interested, it's too difficult, too small, too much trouble. Boy sign us up, we're there. And to me, it's amazing how some of our larger company competitors will walk away from a program. They'll be on a program for a while, they say, don't want to support it anymore.

What do you mean you don't want to support it anymore? We take on a program or a customer, it's like an employee, we're -- we don't believe the worse. We're married for life. We don't walk away from customers. We don't walk away from programs. We just don't do it. We've had issues where maybe one of our components.

We can't source anymore, so we have to qualify or get another component. But we don't just walk away from programs and say, well, we don't want to do it anymore. We've got bigger fish to fry or something like that. We don't have bigger fish to fry. For us, we want every customer to feel like they're the most important customer we have..

[Operator Instructions] And I'm showing no further questions on the call. I'd like to turn it back to Mr. Brian Shore for any closing remarks..

Thank you, operator, and thank you, everybody, for hanging in. I think we actually went over an hour. This probably breaks a record. So thanks for bearing with us. Happy New Year to all of you, and please give us a call anytime you like, always happy to talk to our investors. Thank you and have a good day. Goodbye..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day..