Earnings Call Transcript - PKE Q4 2024

Operator, Operator

Good afternoon. My name is Paul, and I'll be your conference operator today. I would like to welcome everyone to the Park Aerospace Corp. Fourth Quarter Fiscal Year 2024 Earnings Release Conference Call and Investor Presentation. All lines have been muted to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. Now, I would like to turn the call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Brian Shore, CEO

Thank you, operator. Welcome to our fiscal '24 Q4 investor conference call. I have with me Matt Farabaugh, our Senior Vice President and CFO. You may have seen in the news release that Matt's retirement was originally planned for the end of this month, but he has kindly agreed to stay with us until around mid-July, through our Q1 10-Q filing. Thank you for that, Matt. The earnings release was distributed around 4:15, and you should review it as it contains instructions on how to access the presentation we are about to conduct. After the presentation, Matt and I will be available to answer any questions you might have. At the bottom of the presentation's cover page, please note that we are celebrating our 70th anniversary since Park was founded on March 31, 1954. Interestingly, someone recently asked if I founded the company, which made me feel quite old. However, I want to clarify that I did not; I was two years old at that time. Moving on to Slide 2, if you have any questions about the forward-looking disclaimer, please feel free to ask. I also want to mention that I forgot to say earlier that I have the flu. The show must go on, and we will get through it. I recall a couple of years ago, I had COVID during one of these investor presentations. I don’t usually get sick, but it seems that whenever I do, it coincides with our investor presentations. I hope there are no psychologists in the audience who might draw any connections from that. Anyway, if you have questions regarding the forward-looking disclaimer, please let us know. So, the table of contents. We have our presentation and we have supplementary financial information. We're not going to go through it, but if you have any questions about it, just let us know. So, the original fact, well, it wasn't a factory; it's actually a garage. It was in Woodside, Queens. And I mean I'm not using poetic license; it was a garage, really a garage, and actually, it's still a garage. We did a Google map search, and the building is still there, it still exists. I mean like for fixing cars and that kind of thing, maybe 2,000 square feet. A couple of years later, I think, exactly when the Company moved to a real factory in Flushing, New York, which I think was maybe 8,000 or 10,000 square feet. This picture is in that factory. The dialing forward to the left, that's Jerry Shore, my father, the guy on the right that's Tony Chiesa, he’s my father's partner starting Park. As I said, sometimes he was like a second father to me. These are power presses. The original business was nameplates and decorative trim. So, these presses would stamp out the sheets of nameplates. My father and Tony, they used to work the line, they worked the machines, they would repair their machines. They maintained the machines. They did engineering enhancements on the machine. I think when you look at a dictionary, hands-on, you see pictures of these guys. Anyway, we've had a long history. As you know, we changed our name to Park Electrochemical in 1960, and a lot of people thought that related to being an electronics business. That's not true. We didn't think about electronics until '61; electrochemical refers to the anodizing process that is still used, I guess, to make a place integrity from selling that business, the original business in A4 to the general manager at the time, they go hand. This goes way back probably to the mid-50s, I guess; we call it our founders’ photo. I guess we did a nice little meeting with our employees when we went through a presentation and reviewed a lot of aspects of our history. We don't have time to go through that now, but I thought I'd touch on a couple of things for the sake of time, we'll keep moving. Let's move on to Slide 4 to discuss our Q4 results. Sales reached $16.333 million, which is reasonable. However, the gross margin was 27.3%, which seems low given our sales. The EBITDA margin is also concerning at around 30%, with EBITDA margins below 20%. During our Q3 conference call, we projected Q4 sales between $15 million and $16 million, and we slightly exceeded that estimate. However, our EBITDA forecast was $3.2 million to $4 million, and we only achieved the lower end of that range. You might wonder why the EBITDA results are not better despite higher sales. Let's explore that. One significant issue was missed shipments, which totaled $565,000. Now, international freight challenges, exacerbated by conflicts in the Middle East and Europe, affected us as well. These figures are disappointing, but they reflect the current international freight situation. We want to clarify that we're not making excuses; rather, we are providing explanations for what occurred. You may find these details of interest, even if others may not. This first point is important. We typically don't discuss production because our production levels usually align closely with sales. However, in the fourth quarter, we reported sales of $16.3 million, while our production, which we refer to as sales value production, was only $15.2 million, falling short of our sales. This discrepancy has a significant impact on our profit and loss statement. Not surprisingly, this sales figure included a $1 million reduction in inventory, which negatively affected our gross profit by $275,000 and our EBITDA by about $250,000. The reason for this is straightforward. If we had produced that product instead of drawing from inventory, we would have benefitted from the additional absorption of labor and overhead costs associated with creating the inventory. This situation was not part of our plan; we intended to align production with sales but did not achieve that target. There are several factors contributing to this shortfall, not merely excuses. We are dealing with less experienced team members who are still gaining the necessary experience. For example, an experienced lead knows the acceptable standards for our operations, such as on the treater line or film line, which are critical for our continuous production process. They are able to make informed decisions about whether to stop or continue production. In contrast, less experienced personnel might halt production to seek guidance, delaying operations unnecessarily. Certainly, we don't want to continue production if the product does not meet the quality standards, as that would lead to producing scrap, which is counterproductive. This is an illustration of the challenges we faced in achieving our desired production level in the fourth quarter. The positive aspect is that in the first quarter, our production levels were quite strong until a storm affected operations, which we will discuss later. We had $474,000 in sales from CTP fabric. This is a product we purchase and sell to our customers at a small markup, resulting in light margins. Additionally, we incurred an unplanned property tax of $212,000, which is added to our cost of goods sold and affects our gross profit or EBITDA. This expense was unexpected due to a disagreement with the state of Kansas, but we eventually settled on the amount and paid it. Q4 was a weak quarter, and we faced an additional week of fixed costs, along with a less favorable sales mix. Moving on to the year-over-year results, for fiscal year '24, we achieved $56 million in sales, with a gross margin of 29.5% and an EBITDA margin of 19.6%. This is a different narrative from Q4, which was impacted by specific incidents we've discussed. Our focus for '24 is on our strategic efforts to ramp up business in preparation for future growth. Let's go on to Slide 7. What is the story behind our year-over-year margins? As I said, probably a more meaningful question than the same question related to our quarter-over-quarter comparisons. Quarter-over-quarter is always going to be items in each quarter that affect the numbers which make the quarter comparisons less meaningful. Year-over-year, those things even out. So, the year-over-year comparisons become more meaningful. So ramping up in the juggernaut and Slide 32, we talk about the juggernaut; we talk about that almost every quarter. We strongly believe in the long term. At Park, we don’t run our business for the quarter. Although you may be shocked by how dedicated Park’s people are to delivering outstanding results for you every quarter. I just want you to be aware of that. But let's face it; we're in our business for the long haul; we never would have gone into aerospace to begin with. That was a decision made with very long-term thinking. Not one year, not five years, not even ten years. So, that's just an example of how Park goes for the long term. And if we ran our business for the quarter, we wouldn't have gone ahead with our $20 million factory expansion either. Let's discuss Slide 8 in more detail. It's important to note that our annual sales history indicates that we do not require expansion to maintain strong business performance. Referring back to Slide 6, you can see that sales in '24 reached $56 million, while in '20, they were $60 million, during which we did have an expansion. This shows that we did not need expansion to achieve $56 million in sales, as we reached $60 million in '20. We had all the necessary costs covered to support our business levels in 2016. The additional costs are in anticipation of future demands; we want to ensure we're prepared. Returning to Slide 8, the requirements for the new plant have been clear, and we are also in the process of staffing for our factory expansion to prepare for upcoming growth. Although we are currently operating less efficiently due to the ramp-up, the positive news is that the new factory lines are expected to be more productive, operating faster and more efficiently than the existing ones. This improvement makes sense because the original lines were designed in 2007. Our new lines have integrated lessons learned over the past 15 years to enhance efficiency and productivity significantly, which will positively impact our bottom line as we increase operations at the factory. We are incurring an additional $1.3 million per year in depreciation costs due to our expansion. While these costs do not affect EBITDA, they do impact our gross margins, which include depreciation. This accounts for approximately 2.3% of our gross margins based on fiscal year 2024 sales. To illustrate, if we refer back to Slide 6, where we had a gross margin of 29.5%, we could add 2.3% to that figure just from the depreciation associated with the new factory. Additionally, we are facing other overhead costs related to the expansion, such as utilities and insurance, which do affect both EBITDA and gross margins. Now, let’s move on to Slide 9. We’re ramping up our people cost for juggernaut as well. It's not just about equipment and factories; you've got people. Our current people count is 126. Our hourly people count cost rather already up by approximately $800,000 per year compared to last year. That's not going away. That's not a temporary thing. That includes the additional people and some wage inflation as well. We just approved another five people to staff the manufacturing lines and the new factory. And that’s just for now, it's not the end game. We need to hire a lot of people for the juggernaut. We increased our authorized people count for now from 133 to 138 as we ramp up our people costs and staff to prepare for the juggernaut. Our productivity, we measure that sales value production as production divided by hours, hourly hours worked. That means all airlines, so indirect and direct. That will temporarily slip. That's just the way it is, but ultimately will reverse very much positively as we ramp up production. The bottom line though is we want to be ready for the coming juggernaut, which we do. All these things are necessary. So, this is like I said, different than the analysis regarding Q4, where there are special items that affected when you look at the fiscal year numbers; it's more a part of our plan, what we plan to do what we intended to do. Let's go on to Slide 10, Park's balance sheet, cash and cash dividend history. We have zero long-term debt. We reported $77.2 million in cash and marketable securities at the end of fiscal year Q4 this year, '24 Q4. But don't forget, there's $9.3 million in remaining transition tax installment payments payable through June '25. And Matt just told me that $4.2 million of that is paid next month. So, when we get to our balance sheet, you'll see an impact on the cash. So, there are two more payments in June this year, and one, and the remaining payment is June of '25. So, I think you want to consider that. Our cash dividends: Park has paid 39 consecutive years, uninterrupted regular quarterly cash dividends. With that, over skipping a dividend or reducing the dividend amount. We're going for four years here. Park has paid $594 million or $28.975 per share in cash dividends since the beginning of the fiscal year 2005. The $594 million for a little company like Park, that's a whole lot of money. I don't know; it’s probably a lot of money from Microsoft. I don't know about Microsoft, but that's a lot of money for a small company like Park, I would say. We always share our top five customers in alphabetical order. Aerospace relates to Lockheed Martin and the Patriot and PAC-3 missile that we often discuss. Aerosphere is tied to Gulfstream G280, as they are a distributor for Israel Aircraft and manufacture some Gulfstream airplanes like the 280 under contract. We'll revisit Kratos shortly. For Middle River, we could have chosen many examples, but we selected the COMAC 919 and the Nordam group associated with the Boeing 737-700. Here, we highlight the WeatherMASTER Radome, which is produced using our materials. Moving to the next slide, I want to extend a big thank you to Kratos. They are among our top five customers, and they gifted us a remarkable aircraft, which has seen operations. They provided it for our display at the factory, and it's an impressive unmanned aircraft. I'm quite overwhelmed by this gesture, and we took a picture to thank Kratos, but I now want to do it publicly. So, let's proceed to the next slide featuring this aircraft used by the Air Force. As we look at our pie charts, 2024 shows an interesting contrast to 2021, which was impacted by the pandemic. You can see that commercial aircraft numbers were low then, but they have been consistent otherwise. I was pleasantly surprised that commercial aircraft remained stable in 2024. In the second and third quarters, we saw significant burn-downs for MRAS, which we previously discussed, but other commercial aircraft sales helped us maintain our position. Let's go on to Slide 14. This is Elena's project every quarter, focusing on some interesting niche military aerospace programs. Our estimated military revenues for 2024 by market segment include Radomes, rocket nozzles, and drones, which we view as niche markets. Even aircraft structure is a niche area for us, although it may not be considered niche by others. Here, we have Arduino's next-generation short-range interceptor, which replaces the Stinger missile, and the Boeing EA-18G Growler, where we supply Radome materials. We also support the Northrop Grumman LGM-35A Sentinel, previously called ICBM, which is the replacement for the Minuteman 3, providing materials for this nuclear deterrent program. Additionally, we supply Radome materials for the McDonnell Douglas F-15 Eagle and structural materials for the Boeing PA Poseidon aircraft, which is also a replacement program. Now, let's talk about Slide 15 and address supply chain challenges. There have been many claims that supply chain issues are resolved or about to be resolved, but we find that they are still ongoing. I can't tell you how many times I read reports from other public companies highlighting supply chain issues as the main reason why they're not making their numbers. What are supply chain issues fundamentally? Workforce issues! Our workforce issues have been resolved. I mean isn't that what it's about? If you have no workforce, you can have all the machines and the equipment; you're just not going to be able to produce to the requirements you need to produce for the people to do it. We hear unemployment is not that bad. So, what's going on here? Well, one of the things to consider is it's widely reported that $7.2 million able-bodied men just men between the ages of 25 and 54 have permanently left the workforce and are not even looking for work. I guess a lot of them left during the pandemic. Even though the help wanted signs are everywhere, what is happening? I don't know if you have an opinion about that. I heard you know this guy Charles Payne; he's a financial news guy. He said he knows a guy 60 years old, now not working. A lot of people apparently have never worked their whole life. So obviously, the government's enabling that. I wonder why that's happening. But these lives, I mean this is not funny. These lines are being destroyed. After a couple of years, people sitting on the couch eating potato chips, watching Oprah, whatever they do for two years. They try to come back to work; they can't. They've lost their edge. It's a real tragedy. And that's probably what you want to hear about in our investor presentation. But every now and then, I'll give you my thoughts about something like that. Let's go on to Slide 16. What does this mean for Park regarding supply chain issues? So, we found ways to manage supply chain challenges through better planning, strategically carrying more inventory, providing suppliers with longer lead times. But the issues continue to be a major challenge for us, and they're very consuming of our time and energy. So, yes, we're managing it, but it takes a lot of effort. But what do the ongoing supply chain challenges need for the aerospace industry generally? Maybe Park is able to manage it with a lot of effort. But the aerospace industry continues to struggle with supply chain issues. These challenges are impacting program ramp-ups and new program introductions. The demand is there, but the industry is just falling short in terms of meeting demand. Where is this going? Is there a solution in sight? I don't know. You know what it is? If so, what is it? I don't know! Maybe you use my deals. I'm serious. I don't know what the solution is. Going to Slide 17. We won't cover this in great detail. As a slide we show you every quarter. Firm pricing, GE Aviation Jet Engine Programs for pricing LTA requirements contract from '19 to '29 with Middle River Aerostructure Systems, MRAS, which is a sub of ST Engineer Aerospace. So, we always have to explain this; we don't get it because we have all these GE projects. Matter of fact, the title of the slide is GE Aviation engineering programs, all these programs listed below are GE Aviation programs. So, what's the connection? Well, the connection is that we on these programs, Middle River was a sub of GE Aviation, then GE sold MRAS to ST Engineering, which is a large Singapore aerospace company. I don't know about five years ago. But MRAS and Park continue to support those programs just as it was while it was owned by GE Aviation. I won't go into these programs; we talked about them at length before. So, I just point out a nice picture. The 747 program was canceled; we sold some spares. I really love this picture because you could see how big these missiles are compared to the sky standing back here, and those cells are all Park material. Let's go on to Slide 18. Yes, we now have to cover the first check item; we cover that every quarter. Second check item, fan case containment wrap for the GE9X, which we produce with our AFP composite materials. We talked about that as we're going to start the quarter now as well. But here’s some new, relatively new stuff; MRAS qualification of three Park proprietary film adhesive formulation product forms in progress. And then the next item, MRAS Park LTA, that’s the LTA we referred to in the prior slide. And '29 was recently amended to include three Park film adhesive product forms for composite bond and metal bond. That's a really great deal because we developed this film adhesive product line under a joint development agreement with GE and MRAS, but it’s wonderful because when we develop a product and then it immediately goes into qualification on really important programs. The dilemma is you develop a new product and R&D level; it's a great product. So, what I mean is it's like threefold on far; nobody should get in program, I think, 20 years. Like not 20 years, 20 seconds is between the time that our product is finished and when it goes to the qualification. That's a very special thing that we have with that customer like a program agreement required by MRAS and STE. Agreement is being actively worked on. When does it work for Park? I don't know what to hold onto. Let's go to Slide 19. Let's talk about some of the GE Aviation Jet Engine programs. So, start with the big kahuna A320neo. Airbus has a huge backlog of A320 aircraft, 7,170. I don't know if you know that. That's a huge number. And here's the problem for Airbus: let's say they're currently producing at a rate of maybe 50 a month. Now that's six or a year, right? Well, how many years of backlog is that like 12 years? So, if you want to order a new one, you got to wait 12 years. That doesn't help. They want to sell a lot more of these, so they really need to bring the lead times down. So, that's why they're pushing hard to get to 75 per month, which is, what, 900 per year. So, I do the math; divide 7,171 by 900, that's better. It's not like tomorrow, but it's a lot better. That's their motivation. In my view, there are varying opinions on this matter. Airbus is quite committed to achieving a production rate of 75 aircraft per month. During their annual shareholder meeting on April 25 and the first quarter investor call on April 10, they reiterated their goal to reach a delivery rate of 75 A320 family aircraft per month by 2026, possibly towards the end of that year. How are they progressing with this ramp-up? This is in spite of various jurisdictions and limitations impacting their supply chain. Moving on to Slide 20, they are actually performing quite well. Airbus delivered a notable number of A320neo fuel aircraft in each year, showcasing an upward trend in their production figures. In 2019, they reached a peak of 561 deliveries, but then faced a setback due to the pandemic. In 2023, they delivered 571 aircraft, surpassing pre-pandemic production levels for the first time since the pandemic began. Achieving this return to A320 production and delivery rates pre-pandemic is a significant milestone for Airbus, and they deserve congratulations for overcoming ongoing supply chain challenges. As of April 2024, Airbus delivered 167 airplanes year-to-date, and they also delivered 51 airplanes in both March and April 2024. It's important not to misinterpret the slower start to the year, as this is not characteristic of Airbus. Based on my estimation, I believe they may reach a rate of 55 by the end of this year. This is merely my speculation, not something stated by Airbus. They are indicating that by the end of 2025, they will achieve a rate of 75 deliveries per month. Let’s go to 21, on Slide 21. Yes, we already cleared covered this. Based upon this huge backlog, Airbus would already have been producing A320neo aircraft at the rate of 75 per month, if not for supply chain constraints and limitations. Again, what was the story about supply chain problems being behind us? I don't think so. What about Boeing? How are Boeing struggles and challenges with the MAX impact A320neo family aircraft prospects and also the single-aisle market share? I think in my opinion it depends on whether Airbus is willing to try to move that number up from 75 to higher. There's a lot of reporting about it; they're thinking about it, but they've not made any announcements. So what about the engines though for the A320 aircraft? That's an important question for Park. By way of review, A320neo offers two approved engine options, namely the CFM LEAP-1A engine, which is the program Park is on, and the Pratt engine, Pratt PW1100G engine, which Park is not on that program. So, we just covered the second bullet item. The third item, bullet item, according to the May '24 edition of your own engine news, that’s our buyable monthly edition. CFM LEAP-1A's market share for engine orders for the 20 neo family of aircraft is 63.1% as of March 24. Slide 22. The delivery rate of 75 A320neo per month is 63.1% LEAP, and market share translates into 1,136 LEAP engines per year. What's that worth to Park? We'll cover that when we get to Slide 32. There are currently 8,132 firm LEAP-1A engine orders. That's a lot of engines. Were those firm orders worth to Park? I don't know; you might refer to Slide 32, but probably about a quarter of a billion dollars I would think. No. That's not precise because this is Slide 32. We assume the pricing to be between 25 to 29. So, note that pricing doesn't go into effect for the ongoing months. Also assumes film leases run program, not on it yet; we're qualifying. But the other thing is that our pricing after 29 is clearly going to be higher, and that’s expected by MRAS and Park. So, we haven't taken into account that some of these engines will be delivered after 29. And we don’t have a contract after 2019. So, I guess you could say, well, maybe it's not 29. My opinion is that highly, highly, highly, likely that we'll be supplying this program for a long time after 29 and all the other MRAS programs. One of those firm orders with Park we just talked about that. There are widely reported serious durability issues with the Pratt PW1100G, and we talked about this before. So, all these issues, in fact, market share between the Pratt and Leap engine. An interesting question; we don’t know. And maybe the answer is similar to the Boeing question regarding Airbus A320 generally. Can is LEAP willing to produce or CFM rather want to try to produce more LEAP engines? And I know the answer to that question. So meanwhile, CFM is already delivering new LEAP-1A engines with its new reverse bleed air system design that further improves durability. So, you see that the dichotomy thing here; it's like Pratt's having pretty serious durability issues and CFM is moving forward, improving durability. Let's go on to Slide 23. We got the A320XLR variant of the A320 family. We covered this, we cover every quarter, inspected and serviced at the end of '24. Boeing's not planning a response. Airbus has 550 orders for the airplane, potentially important program for Park. Let's focus on the 919 a little bit more though. The COMAC 919, this is a slide, '23, with CFM LEAP-1C Engines. 919, that's the only engine for the 919. It's not like the A320 when there are two engines that are approved. COMAC plans to achieve a capture rate of 150, 919 aircraft within five years. If you look at our juggernaut slide, we're assuming less than that. COMAC has reported to have 15 under orders. It's really hard to nail that down, but it's one of the reports I saw. China Southern just ordered another 100 airplanes; going to Slide 24. COMAC just delivered its six units. COMAC is reportedly expanding its 919 production line. This is important stuff. Now look at this recently reported that China CAAC, that's like the China FA, is aiming for 2025 EASA to be European certification agency for the 919 aircraft. That's a really, really big deal because the thought was this was going to be a China-only airplane. It's clear that China and COMAC; that's not what they're thinking about at all. They want to take on Boeing and Airbus for single aisle. This could be a big program, an important program, an important program for Park. And like I said, they're expanding production lines, so these things to me mean something. The last item is the ARJ COMAC ARJ21 Regional Jet. Don't spend a lot of time on that; we accept it 35 aircraft reported newly delivered in '22 and '23. We'll get back to them later. And the rest of the program is going well; a good program for Park. Continuing on Slide 25, 777X aircraft, the GE9X engines. We've covered this for many quarters now. Expecting certification in '25. Some people are skeptical about that, but we'll see. I'm talking about the airplane. We expect about $1.7 million from this program in this calendar year '24. And we'll see. There might be a little bit of a gap after we're done with the crude production just as there may be some almost level of waiting for the program to start to really ramp up. This next check item, we've carved that many times and the next check item, Boeing S481 open orders for this airplane. Next check item and the 777X orders continue to come in nicely even though Boeing notwithstanding Boeing's ongoing challenges. This is also potentially a very significant program for Park. So, we're hoping for the best for this program. Slide 26. Okay, what are we talking about here? This is GE Aviation Jet Engine Program sales history and forecast estimates. When they go through the whole history, Q4 of '24 in the recent quarter, $7.6 million. I think we had estimated $7.5 million, so just about that number. The total for '24, even though we had a good Q4, it's only $21.1 million. That's because we had those burn down quarters in Q2 and Q3. I'm talking about it for fiscal '24. So, $21 million; that's a low number, not a good number compared to last year, the prior year $23 million to $22.3 million. So, we had forecasted $6.3 million for that's even a great number. You look at the $7.6 million in Q4, but I guess it's an okay number. But it's really important that we now read this footnote here carefully. That amount is fully booked for Q1. This is the forecast, but Q1 GE Aviation programs will be impacted by an unknown amount of storm damage to the company's facilities reported on May 22, and the Company moved. We'll get back to this when we talk about the forecast for Park generally. So, let's keep going for now. Slide 27, burn downs, aerospace industry management, inevitable day of reckoning. So, we've been through inventory burn downs. You're probably tired of hearing about them. We're certainly tired of talking about them. We have discussed at some point the very strange inventory management practices of the aerospace industry. I think I had a different term, not strange, but I decided to be a little nicer about it in one of my early drafts. I mean, you're probably tired of hearing about those things too, and we certainly are. And we have literal known. These burn down of strange inventory practices certainly can cause serious and even extreme distortions and disruptions in business planning and expectations. But ultimately, sources and disruptions are a matter of inevitable and transitory nature. Why is that? Because end program demand has to take over at some point. I mean, it's inevitable. It's just your math. Let's go on to Slide 28. Sooner or later, the inevitable day of reckoning Nicole will come. Sooner or later, the demands of the aircraft and programs have to take over and drive our business levels and activities. That has to happen; it's inevitable. And here's the thing: from what we're hearing now, I mean really recently, that day of reckoning is coming rather soon. Sooner or later. We heard just recently in '25. We're talking calendar years. Pretty big jump for the A220 program, pretty big jump. We've been kind of languishing with burn downs and inventory adjustments, and we hear now our inventory has been burned down; we don't hold inventory anymore. I mean, the customers, the inventory they hold of our product is just fairly low. They can't really burn it down anymore. But now we hear they have some finished structures inventory or they do what the customer does. So, it's a little bit exasperating. But our customers have been told to get ready for a pretty big jump in '25. And they've also been told that at '26, Airbus will be at that 75 airplanes per month rate. So, I have a feeling that this day of reckoning is not far off. We'll see. But the good thing is that although we did not know when the day of reckoning would come, we knew it was coming. It's inevitable as far as we are concerned. It cannot be stopped. It's like the locomotive that can't be stopped, the freight train. Good thing that at Park, we did not wait. Good thing that we are already ramping up for the day of reckoning, ramping up for the coming juggernaut. Let's go on to Slide 29. Here we go. Park Financial, history and our estimates. We won't go through the history; we sort of already covered it fiscal year '24 Q4 in total, so we already talked about those numbers. But let's talk about the forecast for Q1. This forecast was before the storm. It's really a shame because Q1 was looking at a really nice quarter. Why is that? Mostly because all those kind of things that affected Q4, none of them were affecting Q1. The production levels plan to be at least at the sales level. And actually, I was thinking that we'd be at the top end of the range for both sales and EBITDA in Q1. So, the timing of this storm was very unfortunate. This Q1 was looking like a nice quarter, but we better go ahead and read that big footnote. The '25 Q1 sales estimate is based upon fully booked sales for Q1. The '25 Q1 EBITDA estimate is based upon those fully booked sales. However, the Q1 sales and EBITDA will be impacted by unknown amounts by storm damage the company's facility reported on May 22, '24 in a company news release. Although as reported, unknown amounts of fiscal, Q1 sales will slip into Q2 as a result of storm damage. The Company is not expected to lose any sales or business as a result of that storm damage. Let's talk about this a little bit more. So, it was a pretty big event for us, but our people did an incredible job to get the factory up and running. All the hot melt lines in both the old and new factory are fully running, the tape lines, the film lines. We're about to restart the solution treaters. I’d say pretty incredible job on their part, pretty incredible job. But that number, I'll just guess at this point a little bit, but my guess is the top line is going to be in the 13s, not 16s. So, major, major impact on the quarter. We typically produce a lot at the end of the quarter, ship a lot at the end of the quarter. And we don't have the inventory, so we only could sell what we produce, and we're not able to produce. This one in the factory could produce. Last week, the P&L looked pretty ugly because we hardly produced anything, but we had full staff. Everybody had full pay last week. They had everybody come and help clean up and stuff like that. But the recovery is going really well, except it's going to be a mess for Q1. Too bad, these things happen. People did a great job, in my opinion. The key thing for me is nobody was hurt; that was the key thing for me. So, let's go on to Slide 31. Park Financial outlook for Park and GE programs and update. We don't have to go through this in detail; obviously, we've gone through this pretty much every quarter. Just one thing, what's the timing for the outlooks? We kind of already covered this. Not sure, but the juggernaut is coming. It can't be stopped. We'd better be ready; maybe pretty soon. Maybe not this year, calendar year, but I would think next year. So, I mean calendar '25. We'll see. So, let's go on to Slide 32. This is the juggernaut slide, and we won't go into detail because we cover this three or four times already. A couple of points I want to make. A320neo: we're assuming 1,080 units and that assumes 75 airplanes per month but also assumes a 60% market share for the LEAP engine. Remember, we said it’s about 63.2? I forgot what the number was exactly. So what we're doing is we're bringing that to 60, and the reason we're doing that is we don't have to change this every quarter because every quarter the market share is going to change. This way, we'll just use 60, which is a little bit lower number, 60%. But that way, we don't have to change the presentation every quarter. So, I don't know if that was a good decision or not, but that's what we've done. And you can see this highlighted in footnote four. One other change that was made is we upped ARJ21 to 72. Remember, I said that they delivered 35 airplanes last year. The prior year, that's equivalent obviously to two engines, two engines per airplane. All these programs are two-engine airplanes. And, well, we think we need a couple more spares; that's probably still pretty conservative in there. They're still trying to ramp up to some extent. The 919, remember, COMAC said they're going to be at a 150 units per year for four or five years. Well, that's going to 300 engines, not 200 engines. So generally speaking, we think this is relatively conservative; in my opinion. So, the juggernaut slide. Let's go on to Slide 33. We'll go through this pretty quickly. We just updated the slide, financial outlook, based upon the growth estimates of programs which were sole source qualified. You can read the footnotes to kind of explain the math, but we start with our base case of fiscal '24. And then we, the incremental program sales, I mean, we only had about $21 million in fiscal '24. So, a lot of incremental GE program sales of $15 million. We decided to remove the reference to specific programs because we felt uncomfortable. We felt we’re doing disclosure for customers, and maybe they don't want that. So, we're just lumping all into one number, $15 million incremental sales of $7 million last year, non- this is for non-GE programs. Last year, $35 million approximately. So, we're assuming that a 20% increase over course of whatever three or four years. We think that's a pretty conservative assumption, and the rest is math, except the $4 million point out that I think the last time we did this maybe $2.5 million, but this is based on $11 million EBITDA, which is such a depressed number based upon the ramp-up of our cost as we ramp up our factory and ramp up our costs to prepare for the juggernaut. So, it gives us an approximate EBITDA estimate outlook of $35 million. And Slide 34 is all the footnotes, and I won't go through this; it's just math. But really, if you have any questions, let us know. Slide 35 and 36, these slides were in our Q3 presentation. I think exactly like this new major new manufacturing initiative. The only new item is the last item of 36; our manufacturing project initiatives under active review and discussion with the customer. The point we're making is that this is a pretty active project, and the customer is highly motivated. We think it's a pretty and likely to actually happen. This is a major project for Park as we outline in these two slides. Let's go on to Slide 37. As I said, we had a nice little event to celebrate our 70th anniversary in the factory, top left, doing a little presentation, the history about Park for employees, discussions about how Park is a special company, and we've done some really incredible things over the years. And my point to them is that even if they've only been with us a week or a month, we’re part of the Park family and they share in all those accomplishments, all those incredible things just like anybody else does. Top right. So, after the presentation was, I was doing the presentation, a number of employees came up to me and said some very nice things. And one guy told me, I remember exactly how he said it, but Park's meant so much for him and his family. And thank me for that. And I tell you, running any business Park on unusual; there are a lot of things you got to deal with, but those kinds of things make it all worthwhile for me. The top right, this young man came up to me and introduced himself and said, "My name is Javaris, and I work as a treater operator. I've been here for one week." I said, so he said, the newest employee. So, I said, alright, Javaris. Then you and I will cut the cake. We had a nice cake for our R&D event, and we cut it together. And then the bottom picture is obvious. That's just a company photo of our employees, at least the ones that are based in Kansas. Unfortunately, Mark wasn't able to be there, but everybody else you normally see in Kansas was there. I'm actually in the back row because the tolls people were, or like, Corey organized the photo session. He said that the tolls people needed to be in the back row. So, if you can find me, let me know in the back left. And operator, that concludes our presentation. So, if there are any questions, we'd be happy to answer them.

Operator, Operator

We will now start the question-and-answer session. Our first question comes from Nick Ripostella with NR Management. Please go ahead with your question.

Nick Ripostella, Analyst

And Brian, I'm glad that, as you said, no one got hurt from the storm, and thank God it wasn't any worse. I just have kind of a big picture question. Given the programs you're on and the future and the potential new opportunities, I'm just wondering, do you think Park will continue to be a debt-free company? Or at some point, would you consider borrowing money? And the reason I ask this is, if the stock weren't reflecting the potential, possibly, you could be more aggressive in repurchasing shares. And I'm not saying today, but if the stock does not reflect the bright future, stays where it is or goes lower, would you consider being more aggressive and then maybe leveraging up?

Brian Shore, CEO

The stock price, I mean, I follow it when we follow it. I mean, it's hard to figure out why it might be going up or down. I agree with your implications that it's certainly. So, the stock price, I don't know why it goes up or down a little bit, but I certainly agree with the location that doesn't reflect the value of the company. And I guess my way of thinking about that is that ultimately, you'll have to. And I think ultimately, as the numbers pan out, the world, the market will recognize the value of the company. Until then, I guess, we'll just do the best we can to explain what we're doing, and some people will understand it. Maybe some people won't agree; I don't know. As far as going into debt, Nick, right now, we don't see a need to do that. We completed our expansion. As you know, we paid for it, and that itself will lead to a significant uptick in revenues as we call the juggernaut. This other project we're talking about could lead. I think we talked about maybe $6 million to $10 million of capital, but what we didn't talk about was working capital. We're talking about capital equipment and the plant and that kind of thing. But the working capital could be a lot, could be like $15 million or something like that. So, that gives you a little additional perspective. Would we go into debt? I'm sure we felt that it was a legitimate reason to do it, and if there's some opportunity that was important enough that requires us to go into debt. So, generally speaking, we've not been a company that's had debt. It's not been our philosophy to have cash. We've always had cash, and we feel good about that. And you certainly feel good about it when you go into, like, these what do you call it? Black swan things like the pandemic. But we're not philosophically opposed to that we wouldn't consider it if the circumstances we felt were compelling.

Operator, Operator

Our next question is from Chip Rewey with Rewey Investments. Please proceed with your question.

Chip Rewey, Analyst

Can you talk a little bit more about the potential storm recovery aspect? You say you have extra staffing. How much of that can really be recovered potentially in your second quarter and third quarter and both from a revenue and profit point? I imagine some of the profits are just burned, because you have to hang on to your staff, which is understandable. And then secondly on that extra opportunity that you talked about with center opportunities. Is there any timeframe for when you expect that to be a bid or potentially awarded?

Brian Shore, CEO

We don't expect to lose any business, and all the business that we're supposed to be, all the sales, let's put it that way, that we lost in Q1, will be in Q2; it won't go into Q3. The profit story is a little different. Let's say we just hypothetically, let's say we end up at $13.5 million in Q1 when we're thinking to be over $16 million. The bottom line will be a lot different than if we planned $13.5 million. It was kind of even across the quarter then we're running towards $16 million and then the last two weeks, everything goes down to zero. So, there's some amount of profit, which will not be recovered even though all sales won't. We won't lose any sales; all sales that were lost in Q1 will be in Q2. I don't know if that answers your question, but I don't, I can't quantify that. I try to quantify the, well, maybe I did not. If I did not, I intended to. So, let me do that now. We're thinking that sales-wise that we're probably going to be in the 13s when we were planning on 16. So, we're going to think of losing over $2 million in sales in Q1. All that will be translated into Q2. The profit stuff is much more difficult for us to estimate at this point. Even though we're at the end of the quarter, it's still a very dynamic situation. As far as the new project is concerned, it's not a matter of award. It's not like we're competing for it. I just want you to understand that. But the customer’s needs for that project to be up and running by ‘26. So that's kind of a timeframe that you might consider. Not it's from their end, not from our end. That's not a lot of time actually, because a lot has to be done to get there.

Chip Rewey, Analyst

And just following up on that, if you're not competing for it, is it business that you think you can get or that you hope to be awarded? And if they want deliveries in '26, like when would you need to start out with any capital, later this year or early next year? And on the storm insurance, was there on the storm, was there any insurance of any kind, either for capital or business interruption?

Brian Shore, CEO

Yes. We have insurance. The wind damage insurance, which comes under wind damage, our deductible is quite high. And we did that intentionally because when you think of insurance, we have cash, a good balance sheet. We think of the cash drop across. We don't want to bet against the banks. We set our deductible's pretty high in the theory that if we set them lower, obviously, the premium will be much higher, and ultimately, insurance companies get a win because they always do. So, there's a pretty high deductible, but we still expect to have some insurance recovery. And there is business interruption insurance that's included, but we don't have any amounts at this point because it's very difficult for us to quantify the loss, not only in terms of this interruption but also the repair of the facility. The roof itself is intact right now and it's secure, but still needs to be replaced eventually. So on that question about that project, it’s a customer that we're very close to, and I'm not at liberty to describe which one. They're talking to us exclusively at great length about how this would be done. Their timing is '26; that's what, from their perspective, that's what they need. I got to be careful; it's a very confidential project, so I don't want to say too much about it because I want to give it away. But yes, I mean, it's a good question. I would think that next year, we would need to start ramping up the capital in order to meet that requirement by maybe the beginning of next year. It still may not happen, but I think there's a high likelihood it'll happen because the customer is very motivated, and they're not talking anyone else about this.

Operator, Operator

There are no further questions at this time. I'd like to hand the floor back over to Mr. Brian Shore.

Brian Shore, CEO

Thank you. This is Brian Shore, of course. Thank you very much for listening in. Have a good afternoon. And if you have any follow-up questions, please feel free to call us. We'd be happy to try to help you with them. Have a good afternoon, and we'll talk to you soon. Thank you.

Operator, Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.