Good morning. My name is Michelle, 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 2022 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..

major supply chain and transport challenges. Some say these are improving.

We don't see it, not yet anyway, daily battle, then abrupt adjustments to production planning and scheduling, very difficult to hire the people we need, still living with COVID and its many challenges, vaccine mandates, we talked about that, bringing a new plant on line, new equipment trials, major effort, major effort, and our people are facing these challenges shorthanded.

We can't hire people. Let's go on to the next slide, which is 37. But here's the key thing. Even in the face of these many challenges which are people confront and deal with every day, our people continue to press forward with major initiatives. That's a key point here. We've got a lot going on, a lot of challenges, a lot of difficulty, just how it is.

We're not complaining about it. It's just our world. We want you to know about it. But that doesn't mean we go into a bunker and high until things get better. We keep pressing forward. That's what we do. That's what our people do.

Our new business partner agreement, these are some examples we just spoke about with ArianeGroup, the two major initiatives in development projects we're pursuing our new plan. Major new opportunities we're pursuing through collaborations with our informal aerospace manufacturing company "partners," numerous other initiatives.

The point here is all these new things take a lot of effort, lot of dedication, lot of time. So we could say, yes, we're really tied up with all these difficulties and all the challenges we're facing, we'll do this some other time. But we don't believe in that. That's not who we are. To us, the other time never comes. So we do it now. We press forward.

We get developing opportunities. That's what we do. In the face of challenges and difficulties, others may seek shelter in the bunker and wait for things to get better. But at Park, we do not do bunkers, we do not wait. For us, the bunker is where you go to die. I guess the last slide, Slide 38.

At Park, even in a world full of challenges, we press forward, we attack, we don't stop. This is all we know. This is what we do. At Park, we're swinging for the fences. We're not like the others. At Park, we play for keeps. Now at the end of every presentation, we show a little picture of one of our departments or groups or teams. This is unusual.

This is a bunch of different departments. These are people taking responsibility for equipment trials and bringing a new plant online. This is a major, major effort and these people are from R&D, engineering facilities, production. There's about four others that didn't make the photo. I don't – they were not on the shift or something like that.

But I'm going to read the names to you. Back row, Christian, Dexter, David. Front row, Philip, there's Davakar, Kelly, Dave, there's Dave Way, Mell, Martin, Leo, like I said, several people didn't make the photo. But what's going on here? These are not new people. These people worked with us for a long time.

So four months ago, there was no new plant to bring on line. There were no trials. These people didn't have lot of free time than I could remember. So these people are the people that are doing this major project of the trials and bringing a new plant on line even though they have a day job. And it's not one department.

It's not like, okay, we have – we tried to hire people, we couldn't hire people. So our existing people are dealing with it and dealing with it very effectively, very aggressively. Doing the trial, as I said, the film line trials are complete. We're in the tape line trials now, the qualification, a lot of other aspects of bringing new plants on line.

So that's just kind of an example we're talking about. All right. That concludes our presentations. Again, I apologize, it took a whole hour. So operator, if anybody has any questions, Matt and I would be happy to answer them at this time..

[Operator Instructions] Our first question comes from Brad Hathaway with Far View. Your line is open..

Hey Brian, thank you for the detailed presentation. Especially appreciate the commentary on what the MRAS programs would look like in with the A320 in 2025. That was really incremental and helpful. So thank you for that. One quick question for you and then one longer one.

The quick one is, can you give us any kind of thought on the materiality of the Ariane space, I guess, sales relationship that was announced yesterday?.

So we can't quantify it. I guess I'll answer it this way. First of all, we already buy a lot of this product. So from our perspective, it's a big deal already. In terms of being a distributor and selling these products to others, we're just really getting started. We'll have to see. And we're really hard to predict.

These are very critical components, this fabric, the C2 fabric that's used in a lot of missile programs. So other companies want to get involved with the missile programs, they're going to need this material. And they'd have to get it through us at least in North America. But I can't really quantify it.

It just, I mean, we just, yesterday, I think in the news release I think we signed this agreement with them just about a month ago. So maybe not even a month ago, sometime mid-December. So I have to get back on that. We'll have to update you as we go.

I wouldn't expect though because the way the nature of how aerospace works in particularly defense, that next quarter we're going to tell you we've got $5 million of sales of this product. I think it's kind of more of a long-term effort to develop this business..

Got it. Understood. Any future detail you can give on the materiality over the long-term would be great, we appreciate it. So the second question is on capital, and we discussed it many times. But in this presentation, you talked about; I guess a project that could use $6 million to $9 million of capital.

But you still have, even with a conservative calculation; you have basically close to $100 million of capital on the balance sheet.

How do you think about, I guess, your alternatives to use that capital going forward? And what are you seeing in terms of things you're excited about or things you're most excited about compared to where we were six months ago?.

So we certainly don't need that amount of money to run our business on a day-to-day basis. I mean, normally, we generate cash. We like to be conservative. So we want to have some working capital available. So that's our opportunity of money, really and I know it's $6 million to $9 million. I mean, for some companies, that would be a lot.

For us, it's probably not that much. I mean, it's important money because we had to earn that money. Nobody gave it to us. That's kind of our mindset in our money and know that we don't spend it casually. But to your point, it doesn't make a huge dent in the cash position now.

And this is probably a little bit of maybe good frustrating discussion for you and some other shareholders because all we can do is say we're working on things, a number of things, but we really can't identify or quantify what those things are, including acquisitions.

And I know we've been talking about it for a long time, so I wouldn't blame some shareholders being a little skeptical of that, and we blame it all. Our standard is a little different. We're not looking to just buy something to buy something. We cover that probably a dozen times. But let me just go back to what I said.

To us, this is our opportunity money for the future. And whether we do something or other – we've done a lot of dividends in the past. We continue to pay a regular dividend. That's something that, obviously, we always consider. But my hope would be that we still are able to use a good portion of cash to develop opportunities for Park for the future..

No. And to be clear, my preference is always that if you can find a high return use of that capital, whether it's an acquisition or whether it's a joint venture or whether it's an investment in another factory, it could be returns from the new nature because they're going to be incredible. That would be my preference.

But just to push a little bit more, you got – as you say, the aerospace industry was dead a year ago and is now recovering.

So I guess, if you couldn't get – if you couldn't find a deal that worked for Park in the last 18 months, at what point do you say, you know what, it's going to be actually even harder trying to go your valuation criteria going forward and say that you're not going to be able to put cash to work?.

Good question. So you're right. We thought that when the market collapsed that there would be a lot of great opportunities, maybe companies that were good talent companies but had too much debt and that kind of thing, the valuation is to be really good. But that didn't happen.

I'm not the expert in that topic, Brad, but I understand that there's just so much free money, so much Fed money around that people were able to hang on rather than selling at these kind of distressed levels, bargain basin levels hang on and get through the difficult times which is I think what a lot of people did.

And you're quite correct that the valuation never went down to as much as we would have liked, but they certainly are very high right now. Everything is high, any asset cars, houses, boats, planes and businesses. And that's obviously not our friend. That's not good for us.

And maybe with interest rates going up, maybe nobody wants interest rates go up except us because we're the ones who have the cash, maybe that will help us a little bit. It seems like the tenure is up little bit again. So that might actually be good news for us.

But the more direct answer is that we have to keep adjusting our focus and looking at other ways and other things, which is what we've done and what we're doing because, you're right. I mean, what did Einstein say, keep doing the same thing and expecting result, that's a definition of being insane.

So just to keep adding and saying, oh, we're still doing the same thing, it does not bring logic to it when your point is correct. I mean, we have not had that success. So what we do is we keep adjusting our focus and refocusing and retuning, looking from other perspectives. And we're pretty actively doing that actually right now.

The frustration with M&A stuff is, obviously, there's only so much I can say. We can't really give any specifics. I'm sure you understand that. That's not something that's possible. So I don't want to say except I'm hoping that you'll see some interesting things in the future on the M&A side. But we're continuing to work at it.

But very good point, not just continuing to beat our head against the wall doing the same thing, adjusting our focus as we go so that we have a better chance of being successful..

Great, excellent. Thank you very much for your efforts and efforts for the Park..

Happy New Year Brad..

[Operator Instructions] I'm not showing any additional questions. I'd like to turn the call back over to Brian Shore for any closing remarks..

This is Brian again, of course. So Happy New Year to all. Thank you very much for listening to our very long presentation. Every time I want to make it shorter, it gets longer. But Matt and I wish you a Happy New Year and all the best. And feel free to call us if you have any follow-up questions. Always happy to talk to you. Thanks and goodbye..

This concludes the program. You may now disconnect. Everyone, have a great day..