Park Aerospace Corp (PKE) 2022 Q4 法說會逐字稿

Good morning. My name is Howard, and I will be your conference operator today. At this time, I would like to welcome everyone to Park Aerospace Corp. Fourth Quarter Fiscal Year '22 Earnings Release Conference Call and Investor Presentation. (Operator Instructions) Thank you.

At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, operator. Hello. This is Brian. Good morning to everybody. Welcome to our Q4 investor conference call. Nice to have you aboard. So this morning, as you know, we announced our earnings, there was an earnings release, and you probably want to pick that up in the earnings release, our instructions as to how to access the presentation we're about to go through, through the webcast, also on our website.

So we always give you this little caveat. We can't cover everything. We cover a lot, but we try to focus on -- we don't go through real dry number analysis -- we can do that for you later, if you like, but we try to highlight some areas that we think might be interesting to you and might give you some interesting perspective.

We'll skim over certain portions of the presentation is very long. Some of it is just included for context. We're not going to cover every item in the presentation. We don't have time for that. And it could still take 45 minutes to go through this, and I just want to warn you about that. Matt and I will, of course, answer any questions you have at the -- when we're done going through the presentation. Okay?

So let's do it as they say. Why don't we go to Slide 2, forward-looking disclaimer. If you have any questions about our forward-looking disclaimer, just give us a call. Slide 3 is table of contents. Slide 1 is the presentation about to go through. Appendix 1, we have our normal supplemental financial information as Appendix 1. I want to go on to Slide 4, probably take a little more time on Slide 4 than the first 3 slides.

So in Slide 4, we have our Q4 results, which you probably are already aware of because they also came in news release. So I won't spend a lot of time in the numbers. The numbers are there you see the top line is off from the prior quarters. And -- but one thing we're happy about is that the gross margin is back over 30%. We don't like it, like last quarter for Q3 when it was under 30%. That doesn't make us too happy and the adjusted EBITDA margin is also in the area we'd like to see -- we'd like to see better than that, but at least it's not like below 20%, which was a Q3 percentage as well.

EBITDA -- adjusted EBITDA were $3 million. We're pleased about that. Okay. What did we say about Q4 during our Q3 conference call? We said sales estimates were $12.75 million to $13.25 million. So we didn't make that number or under that number by $12.5 million. Adjusted EBITDA, $3 million to $3.5 million. So we came in within that range.

I would always remind you, I forgot to do that, that when we give you forecast, we don't call it guidance or estimates. We're telling you what we think is going to happen. We're not playing what we consider to be a low game that probably 90% of other corporations do, where they give you a low number so they can beat it to be heroes. We think that's kind of silly and insulting. So we tell you what's going to -- what you think is going to happen. We're sometimes wrong, but we say we're telling you what we really believe is going to happen.

Anyway, even though we came in under the top line. The bottom line was where we want it to be. And I would say that was an outstanding job by Park's people to make the EBITDA number considering that the top line we did not make and considering all the other things we're about to talk about in terms of the day-to-day life of Park.

Let's go on to Slide 5. Here we go, living the life of the Park Life in Q4, Q1 and beyond. These things are not going to surprise you if you listen to other conference calls or watch the business news these days, supply chain, supply chain, supply chain, wow -- this is really something. And I just want to note that we were told by people that they want to know that this is going to end -- this problem going to end last year. It's a hard year for that. Of course, it didn't end. And as far as we're concerned, it's -- we never thought it's bad.

Freight, freight, freight, yes, daily battle, severe staffing shortages. We'll get back to that later. Total missed shipments in Q4 close to $1 million, mostly due to supply chain issues close to $1 million of stuff we would have shipped -- could have shipped if we had the raw materials that we needed.

Let's go to Slide 6. Okay. We're continuing on the -- what Park is living with stuff, inflation, inflation, inflation, raw material costs. You bet freight costs, utilities, supplies, pretty much everything. So again, no need for us to tell you this. Everybody knows about this, the grocery store, gas station, you're hearing it, you're seeing it, you're feeling it.

But inflation was transitory. We've got a double how on that, remember, transitory. The people still saying that. I wonder, this is not a list of excuses, excuses, that's a dirty word of Park. We don't get into excuses. But as investors, we think you would like to know what we're living with every day at Park. So that's why we're telling you these things.

Slide 7. More on the supply chain, yes, we never saw like this before. It's become a free for all. Order in the supply chain just broken down. It's chaos, pervades and in some cases, even confirmed POs are not being honored. So this is what I mean by things breaking down. In normal business, there's just kind of trust, good faith that is required for business to operate. We get a pricing quote from a supplier. We have a PO, confirmed PO, we turn around and we give pricing to our customer. It is based upon our cost, of course, based upon the raw material costs, based upon the call we have from our supplier.

Then it goes up and down to supply chain like that. This is always done. It's just done on good faith. We don't get a law firm out every time. We don't contact the law firm every time there's a PO or PO confirmation. This is how business operates. But right now, none of this really works anymore. Not only our suppliers not able to meet their delivery commitments, that we understand because maybe they're not getting their raw materials in time so that we understand or maybe they have staffing shortages. But the other thing that's happening, which is disappointing to us, but not shocking is that in some cases, people, companies aren't even honoring the pricing that's in appeal.

A confirmed PO, they say no, we're not going to honor that pricing. So what position it puts us in is that, okay, we've assumed our price. Can we give pricing to our customer? So kind of an interesting dynamic, but that's why I say the supply chain is kind of chaos. Everything you want to count on for normal business, it's -- these are assumptions that we just could not take -- used to take or granted, we can't take it for granted anymore. So -- but at Park, we don't panic, even though the panic creates we're saying and we live with the chaos. If chaos comes our way. So we'll deal with whatever comes our way. It's very unfortunate that this is the world we're living in it because there's a lot of time and effort to deal with this stuff would be better to be dealing with other things, but we'll deal with whatever we have to deal with. That's how we do at Park.

At Park, honor and integrity are what matter most. At Park, principle do not come cheap, more on this later, but you probably get we're going with this. We honor our commitments. We honor our commitments in terms of any kind of pricing we have on a confirmed PO. We don't go back and say, sorry, our costs went up. Let's say we have a confirmed PO, delivery is supposed to be in 3 months. We don't go back to the customer and say, "Sorry, our costs went up so we're not going to honor the pricing." We don't do that. That's not in the Park way anyway. Okay. Let's keep going. We'll get back to that later.

Slide 8. Slide 8 is interesting, I mean, that's the annual look at the -- annual fiscal year look at the Park history. And we highlighted, as you can see, fiscal year '20 and fiscal year '22. We thought maybe we could focus on those 2 years for a second because we think the comparison is kind of interesting. Note, of course, that in fiscal year '22, the top line was off from fiscal year '20, partly because of some of the reasons we're talking about. But nevertheless, it was off. But it is a very nice but here, look at the gross margins. The gross margins were better in '22 than in '20, even though in '20, the top line was much higher.

'20 was a good year. Let's think about that. Our fiscal year ends at end of February. So '20 was a pre-COVID year, right before COVID started. Obviously, '22 was not a pre-COVID year. Not at all, not a pre-COVID, pre-economic crisis year. So even in the second COVID year, our fiscal '22, the second economic crisis year, our gross margins were actually better. And look at the adjusted EBITDA, not just the percentage, the actual number is better, $13 million in fiscal '20 to approximately $13.1 million, a little bit better, but we'll take it in '22.

In '22, we had COVID disruptions, supply chain chaos, inflation, staffing shortages. These are the things we live with in '22, but nevertheless, look at what our people were able to achieve. The adjusted EBITDA margin also very nice. So I would say excellent, excellent outstanding job by Park's people under extremely difficult circumstances to deliver that kind of performance. So if you ever want to send a thank you note, send a thank you note to the Park's people, not me, I didn't do any of it. It's our people to do all of it.

Let's go on to Slide 9. We'll just skim through this. This is something we do every quarter now, one of our really good investors, good ideas and we should cover this every quarter. So sure, we'll do it. The only thing that I'll cover is the bottom on Slide 9, the bottom arrow point. With interest rates rising fast and era of cheap and easy money coming to an end, we hope, maybe Park's hard-earned money will finally be worth something. It's so frustrating having money and everybody else gets free money and we're trying to compete, let's say, on M&A and the prices go way through the roof because somebody else -- they're using other people's money. We use our money. And the other people's money is cheap. So hopefully, there'll be a little bit of change there.

Slide 10. The only thing we'll cover is the last item, just an update. We paid $554 million or $27.05 per share cash dividend since fiscal year 2005. By comment, I think you know what it is. That's a lot of the money for a small company like Park.

Slide 11, okay. A little more of our kind of fun stuff here, top 5 customers in Q4. There's a picture of Boeing 740 -- sorry, 787, that relates to GKN, that relates to Genx-1B engine, which provide materials. Boeing Poseidon Sub Chaser, that's Nordam, that relates to Nordam Group. And actually that -- because this Sub Chaser uses a WeatherMASTER Radome. We've produced the materials for that Radome produces. And Patriot, Advanced Capability PAC-3 Missile System. This is the big one. We'll talk about this a few times during the presentation that it relates to a company called AAE. We supply the materials for the -- third-party materials for the -- rocket nozzle for the PAC-3. And Gremlin, you probably guessed it away. That's Kratos design and built a Gremlin drone. We don't have a picture for Middle River, but we'll cover them later on.

Okay, let's keep going. Slide 12. Interesting comparison, fiscal '20 to '22. You see that the pie is kind of coming back more or less to fiscal '22 coming back to more or less would look like in '20, except military is a little down as compared to '21. I'm going to '21. And our feeling with that is our military is really something we really feel good about, especially for the future, and we'll get to that in a minute. But in fiscal '22, we think military was kind of held back because there were really big delays in approving the budget. The budget is now approved. So we'll see what happens with that.

Let's go on to Slide 13. Park loves niche military aerospace programs. So we always do this for fun. This is a project that [Dana and Elena] work on every quarter coming up with some kind of fun stuff that Parks involved with.

Sometimes it's with all niche stuff, sometimes it's not big volume, sometimes it is. So Boeing RC-135 materials for structures, the MK125 Warhead for this SM-6 missile that's materials for structures. That's on ablative actually, in that case, that structures. Collins Class Submarine, that's for the Royal Australian Navy materials and materials for the Harrier.

Let's keep going. We'll keep track of the time here. I'll have to cover Slide 14. Okay. So we're going to do something a little different here. We're going to cover -- talk about trends in the military markets and talk about trends in the commercial markets. We haven't done that in prior quarters. So we're trying to provide a little bit of a different perspective for you, which we think is timely. Military markets, trends and considerations, the new world order. What's a new world order? A sea change in attitudes about the defense industry and defense spending based upon the war in Europe. Almost overnight, happen almost overnight and what a difference a war makes. The war is a horrible thing, of course, but it certainly has an impact -- has had an impact upon the global defense industry. It seems that way anyway.

I just talked about to you, U.S. 2022 defense appropriations bill was signed into law. So defense industry is no longer in limbo and the 2023 defense budget includes additional spending increases, including for missile defense systems, that's something we'll talk about a lot here. Missile defense systems, such as the PAC-3, we talked about that and a hypersonic missile system such as SM3 missile, we're in that program as well.

Let's go on to Slide 15, continuing with military market trends. But Europe may be the real big defense spending store. We talked about DOS and everything. What about Europe? Because these products may be made in the U.S., but where they're being used and purchased? Certain countries like Germany have already significantly increased their defense budgets and many others are considering or in the process of considering, increasing their budgets. And not surprisingly, what you -- not surprisingly at all, under the circumstances, what's the emphasis? Missile defense systems, well, I guess we know why that is because nobody likes missiles getting shut at them. So that's a big thing.

And I think that's kind of maybe a part that what do we call a sea change. We don't use that term paradigm shift at Park. So we use -- we don't like that. And don't forget about Asia. That's not a happy place these days either with everything going on with China and Taiwan. So Taiwan recently contracted for upgrades to its PAC-3 missile system. Japan utilizes that PAC-3 missile system, defense system as an essential part of its missile defense strategy. South Korea, not surprisingly, utilizes the PAC-3 missile defense system to counter North Korea's ballistic missile capabilities.

Let's go on to Slide 16. Still military markets, some trends about the new world order. So Lockheed recently commented -- sorry, I'm resting a little bit, commented that Russia's attack on Ukraine has boosted demand for their missile defense systems. Lockheed CEO stated, "we've got demand signals for THAAD and PAC-3 from around the world." He continued, "When you see missiles hitting hospitals and train stations in Ukraine, governments are now thinking that it might be worthwhile to have an effective missile defense system. Yes, you think so.

Next item, Aerojet, which is also a big contractor for the PAC-3, announced significant increases in PAC-3 missile system activity just recently. So -- and Park, as we've already commented, supports the PAC-3 missile defense system with specialty ablative composite materials.

So here we go. What's the conclusion here? The strong trend towards increased defense spending in North America, Europe and Asia undeniable as far as I'm concerned, anyway. But -- and there's a but, supply chain issues can least temporarily limit the speed of the ramp-up of defense spending. And that's a significant item because the supply chain may not be able to respond as quickly as some of these countries want to upgrade their defense systems and they take a little while for the supply chain to catch up. That seem to be always the case.

So why don't we go into Slide 17? We covered defense trends. Now commercial aerospace markets, trends and considerations. A little more complicated, so it will take a little bit more to go through it. So let's start with Commercial Aviation continues to recover, largely driven by continuing improvement in U.S. domestic and transatlantic.

Single-aisle. We talked about that a lot, continues to lead the recovery over wide-body. Single-aisle aircraft are designed to service those domestic routes as well as the short-range international routes like transatlantic. U.S. domestic commercial air travel is now running about 90% of pre-COVID levels. We've heard, that's been reported in any way.

Even business travel, which lagged the personal air travel recovery, appears to be beginning to recover nicely. I'm not talking about -- we're not talking about business jets. We're talking about business people traveling on commercial airlines.

Analysts believe 2019 global air traffic levels will be matched in 2023 and surpassed in '24. Let's see about that. And then several U.S. air carriers recently reported strong passenger demand and increased their revenue guidance. Carriers have recently commented that they plan to pass along jet fuel costs, let's talk about that a little bit later, to the customers and they expect their customers to pay the increased ticket prices. I just saw a report this morning on one of the financial news programs that just last month, ticket prices went up 18%. Don't hold me to that news. It's like a new program. Sometimes they get this stuff on, but not surprising.

So Slide 18, continuing with commercial aircraft -- sorry, aerospace trends. So all the signals seem to be quite positive. Happy days are here again. We're going to celebrate. And generally, higher jet fuel prices provide airlines with extra motivation to more quickly replace less fuel-efficient legacy aircraft with more fuel-efficient modern aircraft such as the A320neo. As a general rule, higher the jet fuel prices, the greater motivation.

So generally speaking, airlines don't want to replace the legacy airplanes early because the economics don't -- are against that. But once the jet fuel prices get so high, then there's economic shift and then there's motivation to replace the legacy airplanes with more moderate airplanes more quickly. The Neo is much more efficient -- fuel efficient, I should say, than the legacy A320 as comparison.

Then you come to the but, okay, big but here, though. Is there a limit to how much additional cost the market will be willing to absorb? Nobody seems to be talking about this too much. But it's our job to think and not just listen to what people say. Jet fuel is considered to be the largest piece of the operating cost pie for an airline. And that was the case even before the sharp increases in jet fuel prices. Jet fuel costs approximately twice what it cost a year ago, resulting in very significant, very significant increases in airline operating costs. That may even more than twice now because it seems like every week it goes up more and more. In order to maintain their margins, airlines have significantly increased ticket prices, and will likely need to increase them even more to keep up with those escalating jet fuel prices.

Let's go to Slide 19. So it is true that people point this out, a lot of pent-up demand for air travel as the world recovers from the pandemic. And also, a lot of people lose money in their pockets, so people want to get out and stopping lockdown, want to travel. So there's no doubt about that. But -- and then we go back to the but again, are the individual and business travelers going to continue to be willing to pay the greatly escalated ticket prices for ever and ever with no end in sight? Does that make sense really? Does that defy logic? I don't know. Does that defy history? Oh yes, it defies history. That's not how it's worked in the past. Does it defy gravity? Well, I don't know, maybe it does.

What about that dirty R word? What if there is a recession? Will people keep flying and paying the greatly escalated -- escalating ticket prices if the economy stalls out and goes into reverse? Something to think about.

Let's go on to Slide 20, still on commercial aerospace trends. So it's something to think about while we're celebrating with exuberance, how great things are in commercial aviation. And of course, we have to ask if that's irrational exuberance. If people start flying less, will airlines be less willing to order new airplanes? Well, maybe something to consider anyway. If that happens, will commercial aircraft manufacturers scale back their production rates? And here's an interesting thing. Some may and may not, something to consider. Now this is what may be where we get to this diverging duopoly thing. Boeing is, from what we're told from their reports, they're focused on cash flow. Airbus from their reports, now, they're focused on dominating the single-aisle world. So the reaction may be different or Boeing may say, yes, they got to pull things in. Understandably, am I criticizing Boeing? Airbus may go the opposite direction. So we'll get back to that later, but it's a real interesting thing to watch, especially if the economy slows down and goes into reverse.

Let's go into Slide 21. Slide 21. This is a slide that's in every presentation. So this is just kind of a review. We have that Firm LTA Requirements Contract through 2029 with Middle River Aerostructure System, MRAS, which is a sub of ST Engineering. I always have to remind you that MRAS used to be a sub of GE Aviation. That explains how we're on all these GE Aviation programs. So we've done these programs when MRAS is still a sub of GE Aviation. We built a redundant factory for them. Sole source for composite materials for engines -- sorry, nacelles and thrust reversers for the first 5. I checked items, we'll call the A320neo family of aircraft with LEAP-1A engines, 747, the 2 Comac airplanes and the Global 7500 aircraft.

Let's keep moving. I always like to point out this picture. That's -- those are Boeing 747 nacelles and -- look at the size of them compared to the guide at background. Load that picture.

Okay. Slide 22. So some new developments, GE Aviation. This is kind of a nice Park's new film adhesive product, developed under a joint development MOU agreement, we call an MOU between MRAS and Park. Development of this film adhesive product has taken a long, long time, but is complete. And now our new film adhesive product is undergoing qualification with MRAS. It's very good news, very happy about that. It's a long process.

Park's Lightning Strike Protection, LSP material. Park's LSP material was also developed jointly with MRAS. It's currently in use by MRAS on the A320neo aircraft family and the Comac 919 program. We're still sourcing those 2 programs. That's good. That's not news though. But here's the news.

Slide 23 at top -- on top. Park's LSP material is now in the process of being approved for use on the Global 7500 program that has GE Passport 20 engines. That's very good news for Park also. I showed the timing on these things. If I had some confidence about them, I would tell you, but I don't know. That's one.

Fan Case Containment Wrap for the GE9x engines for the 777X aircraft. Well, this is really good news until about a week ago. After being dormant for almost 2 years, the Fan Case Containment Wrap program has become active again. There is still design risk. Remember, we told you about this that there could be a redesign of the fan case so that the containment wrap is not -- no longer necessary. But even if that happens, there's still a number of containment wraps that need to be produced.

So we're very pleased to be back on that program at least for the time being. We actually were expecting POs like any day for this program, yes, we're starting it any day, then Boeing pulled the rug out from under rest. They'd surprise I think a lot of people by announcing they're pushing out the 777X entry into service until 2025. That's a 2-year delay.

So that's obviously disappointing. At this point, it's very unclear how that will impact the Containment Wrap Program, but it obviously can lead to program delays. So that's a little bit of not a good news, but maybe some putting -- throwing some cold water on as well.

Let's go on to Slide 24. All right. So we spent a lot of time talking about the A320neo family with the LEAP-1A engines because it's so important to Park. This slide, we've had in, I think, 2 or 3 presentations already. This is where Airbus were kind of putting down the marker saying, this is what we're going to do. This was a year ago, May of last year. This is what we're going to do, okay? As soon as they did that, the supply chain gets kind of freaked out and a lot of push back, a lot of quo, it's too much, how can the supply chain support that. And so you got to be tension right away between Airbus and supply chain.

Let's go on to Slide 25. Just some background here in Airbus delivered 40 -- average 40 Neo family aircraft per month in 2021. They said they wouldn't go below 40, they didn't even, to be the pandemic said we can hold to 40, so many doubters, so many doubters, but they faltered the word.

Next item, currently delivering A320neo family aircraft at a rate of 49 per month, which I think is pretty much what they're planning. So they're ramping up already. Then Airbus recently stated they plan, and this is a big one, reached a rate of 65 A320neo family aircraft deliveries per month by the middle of next year, which is just 14 months from now. So obviously, if Airbus to get to that rate, the supply chain needs to ramp up really before that date and maybe even now.

And in a recent speech, the Aviation Week Raw Material Supply -- Manufacturer Supply Conference, this is a conference where the Airbus people are talking to their suppliers. What do they say? He says, it's kind of interesting. You need -- "We need you, being the suppliers and the audience, to follow Airbus' rate increase indications and have faith in the rate increases, indicated by Airbus." He also told the audience, "We count on you not to second guess." So you see, Airbus is getting a little bit impatient, a little bit annoyed with the supply chain. That's my take on this anyway. Like stop questioning what we're doing, just get on board. So there's attention there.

Slide 26, GE Aviation. This is I think important, recently stated publicly. "we're experiencing an unprecedented ramp in LEAP production. And further stated, "We're aligned with the airframers, that means Airbus, on what we need to produce through 2023." So this is potentially significant because GE was -- GE Aviation, one of those companies of supply chain, that was probably questioning the aggressiveness of Airbus' indicated rate increases.

Okay, let's go to the next one. And it's been reported. This is a theme we keep going back to the current very high oil and jet fuel prices. We're motivating many legacy A320 operators to consider upgraded A320neo aircraft more quickly. Again, Neo much more fuel efficient than the legacy A320s.

And then the last one, this is important kind of news, this is very recent news, just on May 4. This was, 1 year after the original indication, remember, May of last year, this I think was part of the Airbus' Q1 earnings announcement. "Looking beyond 2022, we see continuing strong growth in commercial aircraft demand driven by the A320 family. As a result, we are now working with our industry partners to increase A320 family production rates to 75 aircraft a month in 2025." You see, they're not typing down, they're actually doubling down. In the news release, they further stated "Commercial aircraft production for A320 family is progressing toward a monthly rate of 65 aircraft by summer 2030."

That's the other thing they've been saying, 65 by middle next year, 75 by 2025. Following an analysis, this is important, global customer demand as well as assessment of the industrial ecosystem readiness, that needs really the supply chain, the company is now working with its suppliers and partners to enable monthly production rates of 75 in 2025. During the conference call, Airbus also said they assessed a large number of suppliers, and they're coming back and saying, "Okay, we've heard all the questions about it. We worked with our suppliers, we're doing this." That's at least my take on it.

So Slide 27, let's keep going. At the end of March 2022, the LEAP-1A, CFM had a 57.4% share of A320 family aircraft orders. So this is -- by Aero Engine News. The A320neo has 2 approved engines. One is a LEAP-1A. That's the one we're on through CFM and the other one is a Pratt engine, which we're not on. So that percentage is really important because we're only on the LEAP portion, 57.4%. So we're assuming that 57.4%, which obviously goes up and down every month. But just let's use that number, that's the current number. The 75 A320neo aircraft family per month represents approximately $28.75 million per year of revenue Park starting in 2025.

Last item, the XLR. We talk about this every quarter kind of a big thing. We don't have time, not so good. First slide expected this year, certification entry into service early 2024, very unique airplane for single aisle in terms of its seating capacity and range. 515 firm orders as of February 2022. And this is a big one, still no response from Boeing. Boeing does not have a response for this airplane, and we're not hearing anything. So I don't know what to make of that, but it seems like Airbus is planning to own this space, plus Boeing moves pretty quickly.

Let's go on to Slide 28. Continuing on the GE Aviation jet engine program update, COMAC919. So that's supposed to be -- that's an important program for Park, supposed to be entering into service at the end of this year, we'll see. And then the Global 7500, produced 39 last year and they also delivered their 100th aircraft recently.

Let's go on to Slide 29. 747, we cover this every quarter. Boeing has terminated in production of the 747. I guess the last one was supposed to be delivered in October. This is a real sad thing for us because we just love this airplane, a real important airplane. Also, this is the first airplane with the first GE Aviation engine program that we got on back in 2014. So it's sentimental for us as well.

Slide 30. So we won't go through the history, you can read out for yourself. At the bottom of the page, our forecast. This is GE Aviation program, sale history -- sales history, the forecast for Q1, $6 million to $6.5 million. Now Q1 is over in 2.5 weeks, but there's still a lot of risk in Q1. And you see that's down. Q4 was $6.7 million. That's -- the reason it's down is 100% because of supply chain limitations, we believe.

So let's go on to the next item, which is the forecast for Park's financial performance history and forecast estimates. Again, the top part is history. What's our forecast for sales for Q1, $12.75 million to $13.25 million. And the EBITDA, $2.75 million to $3.25 million. So we're talking about not great numbers. But we're -- number at the beginning of the presentation, we're talking about Q4. We said we missed about $1 million of sales because of supply chain issues mostly. Well, these numbers take into account we're probably going to miss another $1 million of sales in Q1. In other words, if we had everything was great, the supply chain was there, we had everything we needed, the sales would be a lot higher.

So let's keep going. Let's talk about some comments to our forecast and our outlook. First of all, forecasting is highly problematic and probably not even very meaningful in the current environment of supply chain chaos in this order. Predicting in the future in such an environment is somewhat of a guessing game, probably more than someone. Forecasting for Park and GE Aviation programs is problematical even for Q1.

Q1 ends in 2.5 weeks. But the thing is it's back-end loaded a lot for production for us because we're having difficulty getting raw materials. So the thing is there's a lot of risk even in the forecast we gave you. The forecast we gave you takes into account a lot of stuff that we're not going to be able to ship in Q1 because of the supply chain issues.

But there's further risk because in order to get to the numbers we forecasted, things have to go well. There's a hiccup, and we have more disappointments with supply chain, even those numbers are at risk. So I know that same strange, I have 2.5 weeks to go, how could there be so much risk? Well, we're living in very unusual times. Again, supply chain chaos disorder. So it's very hard to predict things in that environment. It's really hard to predict 1 week out. So we talk about long-term forecast. Well, that's kind of silly. And we gave you a forecast would have long-term forecast and just have very little value. We know what your time is something that is a little value. However, and there's a big however. We believe we can provide meaningful, I'm just checking the time, it cites into our company outlook.

So let's break it down between military and commercial. Military first. Based upon the new world order caused by the war, we believe the outlook is quite promising for Park, particularly in the missile defense system area for reasons we discussed. We believe this new world order dynamic is also not a temporary thing. We believe it is an emerging longer term and sustainable phenomena. It's like the world kind of got a wake-up call here, and it's not going to go back to sleep. I mean war is -- you can talk about wars, when you have a war. You see it on TV every day, what happens, it gets people's attention.

Obviously, if you're in Europe, it even gets more of your attention because it's in your backyard. People remember, well, I don't know, they're probably not the only people so live, but that were (inaudible) 2, but they probably heard about it. About what could happen in Europe in other words, in the case of a war.

Slide 33. How would a recession impact the outlook for our military business? We believe not much because there's too much at stake for the countries seeking to increase their defense budgets. There is, again, that little drag, which is the supply chain. But if you're concerned about missiles coming your way, you probably prioritize your missile defense system over other stuff, maybe fixed your roads or whatever other -- what a country spend their money on.

Commercial aircraft business outlook. This is a little more complicated, but let's go into it. When we break it down by program is I think when you look at the key programs, that helps us understand. A320neo, obviously, we're starting with that one. Airbus is aggressively attempt -- attempting to aggressively push up the rates for this critical program. How would a recession impact this program? We believe Airbus is attempting to aggressively exploit what they believe is Boeing's perceived weakness in order to take as much single-aisle share as possible and to establish an irreversibly dominant position in single aisle. As a result, we believe Airbus would -- at least could attempt to press their advantage even more aggressively if a recession did occur.

This is kind of an important moment in time for commercial aircraft. I mean if you're American, you may not like it that much. But I think they believe there's a window of opportunity for Airbus for them to break the duopoly permanently and take dominant share single aisle. Single aisle is where it's at. So there are very confound mindset between Boeing and Airbus from what I could tell.

Airbus seem to be really aggressive. There's a recession. My guess is they'll go even more aggressively. That's my guess. I don't know if I'm right, I'm just kind of thinking a lot with you folks. I'm not -- nobody -- I don't know, nobody bear with us to tell many stuff. I'm just reading what you can read on your own on a public information.

Slide 34. Let's talk about our Comac program. The ARJ is small, probably now we're spending a lot of time. And C919 has significant upside potential for Park once the aircraft is certified. How would a recession impact those programs? Difficult to say, but a key consideration is the aircraft are intended to be sold to the China market, a market controlled by a centralized China government. Since the C919 is an important prestige program for the Chinese government, they may press the program forward even in a recession. Something to think about.

Slide 35. Let's talk about that Global 7500 program. Technically a business jet, we're including in commercial just, I guess, for simplicity in the presentation. Clearly, a very key program for Bombardier. It's actually -- we believe it's a mandatory success program for Bombardier, but good news is they have been successful so far, clearly placing a great emphasis on the program.

How do recession impact that program? Interesting to think about, not completely clear, but it's possible that the success drivers for the program will stay in place even during a recession. In a recession, a typical buyer of a $40,000 Chevy may hesitate, but would a recession slow down the typical buyer of a $73 million airplane? I don't know, but if they're going to buy with a different kind of mindset, clearly, then the guy wants to buy that nice Chevy a lot. Although actually, there are no Chevies on a lot right now because of the -- I guess, the chip shortages and other supply chain issues. But in theory, if there was a Chevy on a lot, the guy could buy one for $40,000, he might hesitate.

Based upon the above consideration, this is the punchline either, although there were serious concerns about the economy, inflation, workforce shortages and supply chain chaos, we believe the outlook for Park is actually quite positive based on what we just talked about. Okay, we're going to try to hustle a little bit here.

Changing gears quickly. So major expansion. We're not going to go through the numbers, except the second last item, film and tape line qualifications are in progress, but they haven't delayed because of supply chain issues, staffing limitations. And just you know, those lines are being run, operated for the qualification by R&D and engineering people. We do what we got to do, not what we prefer to do, but we do what we need to do. Everybody does what they need to do at Park.

So just quickly, I don't want to spend a lot of time on this. But if you look at the top picture, that's the one of our new building. Well, it's actually front of our existing building where we expanded the offices. The second floor in the middle, that's the most beautiful part of our expansion. That's a conference room. And what we decided to do is dedicate it to Linda Burge. Linda died about 1.5 years ago. She was a very special employee of ours, a lot of hearts were broken when she died. So we decided to call this room, Linda Burge Observation Deck. It oversees the airport property and runway, a very beautiful room. And we had a little dedication. Her family came over, very [museful] event. So I just wanted you to know about that.

Let's go on to Slide 37. Not a little bit departure here at James Webb Space Telescope, now about 1 million miles from earth. And it's really, when you think about it, this baseball scope has a lot of our Sigma Struts incorporated into structure of the -- which is called a bus, I think. And so those little -- those -- not little, those Struts were made a little factory and putting a "little" compared to 1 million miles in Kansas and another 1 million floating in space, orbiting 1 million miles from the earth. Moon is only 0.25 million miles from the earth for perspective. And this MIRI instrument, I guess, that's the extremely cold order for it to operate properly. So they have it in a real cold temperature that just does kind of a fundal factor.

Let's keep going due to short of time, of course. Let's -- okay? And we are short in time. Park's people, I always talk about Park's people. So yes, this is our staffing crisis here or challenge. Maybe I shouldn't say crisis, but severe challenge. We currently have 105 people, but we just added 7 people last week. So we were bumping along at 98, 99, 100 for a while there. Ideal people count for us would be 125, 128. Minimum needed to properly operate and function is 115.

So many other companies are throwing money at people. You hear about everywhere, offering money to people to hire them. Lots of money. Of course, it's a problem for us. It makes them more difficult to recruit people. They bid up people when they are needed and short them. For you investor people out there, you know what that means, throw them on the garbage heap when they are not, like commodities to be traded, like pork bellies. At Park, it's kind of heartbreaking to see that. We believe throwing money at people and paying them what they have not earned can be cruel and hurtful to them. They can destroy their sense of dignity, self-respect, humanity and self-worth.

It's clearly more difficult and challenging for Park to recruit people in a world where others are throwing money at people to recruit them, where Park's not willing to do that. At Park, we stick to our principles, no matter how difficult or inconvenient throwing money at people as if they were commodities. That's not for us. Our people, they're not commodities. Our people are precious, our people are family.

Slide 39, at Park, our people earn everything they get. We don't give giveaways. We think our people are compensated properly, but they earn what they get. So they have some dignity. No giveaways, no free lunches. We respect and admire our people too much to marginalize them, demoralize them, dehumanize them by giving them stuff they haven't earned. That's a domain to a person to do that. Kind of sending the meaning.

What will happen if there's an economic downturn or a recession? Well, those companies throwing money at people, they're going to hold on to them all the people they hire? What do you think? But at Park, when we hire someone at Park, our attitude is we hire them for life. It doesn't always lag, it doesn't always work out. They make -- maybe if they're not right for us, they won't stay. But that's our attitude anyway.

Throughout the depths of the pandemic and economic crisis, we kept all of our precious people, every last one of them. Remember that pandemic and economic crisis when our sales weren't kind of -- relatively bad, roughly, I don't know, just one off a cliff, I guess, you say.

Slide 20 (sic) [40]. Remember the pandemic, uncertainty about whether the world would even survive? Remember that 2 years ago, and we really didn't know what's going to happen. There's so much uncertainty, so much fear. What did we do? We did not let go of any of our people then. Wouldn't let go of any of our people if there's a recession. What do you think?

Then let's keep going. Here's an interesting little one. Culture eats strategy for breakfast. That's from Peter Drucker, maybe some of you know who Peter Drucker is. I can think of some of you folks out there listening, I'm sure know who he is. So how were we able to make our Q4 EBITDA number with such a severely reduced workforce? Was it magic? I don't think so. Our people have been working very long hours, in some cases, 70-hour weeks, week in and week out. A dozen of our salaried people, including our VP and GM, worked in line during Q4, including the 3-day President's Day weekend. That was pretty right before the end of Q4, and we had a lot of production really get out to make our numbers.

Nobody really asked our people to do it. They just did it. Understand how very fortunate and lucky we are to have the wonderful people we have? Understand why we love our people? That's a question.

Item -- sorry, Slide 41, on hustle here. People talk lots about strategies, sometimes developed by fancy Ivy League consulting firms. We've got nothing against fancy Ivy League consulting firms, but that's often where the strategies come from. But this is the key thing that so many people miss, so many Ivy Leaguers miss. With a dedicated, motivated and inspired workforce, a company can move mountains. Without such a workforce, a company can move nothing, no matter how elegant their strategy might be. But don't get us wrong. We have a strategy, too, but it's our wonderful people who make us powerful and whole.

Update on our Customer Flex Program. We talk about this every quarter, so I won't read the numbers for you, except to say, critical program for Park. It'd be very difficult for us to really get done. We have to get done without that program. We love that program.

Let's go on to Slide 42. Closing thoughts. We'll get there. Will there be a recession? The excess in the economy and our society seems so extreme to us. Are they sustainable? Will people be willing to continue to pay highly elevated prices for almost everything when money supply is being tightened and the days of cheap and easy money are coming to an end? Can things continue that way forever? Does that make sense? Something to think about. We're not economists, of cores, but we believe recession is likely under these circumstances. How do we feel about it? Well, we know it sounds harsh, but in a way, we hope there will be a recession because to us, that may be the only way some sense of balance, proprietary -- propriety, logic, order and sanity can be restored to the economy and our society. What would we do differently in a recession? Probably not much.

Slide 43. Closing thoughts continued. Principles are not cheap. So we're circling back principles not cheap. The only count when it's inconvenient to hold true to them. You know when somebody has principles when it -- when they're holding true them when it's not convenient. When it's convenient, it doesn't matter. It is inconvenient costly for Park to honor our POs and PO confirmations in a world where many others are not doing so. But at Park, we do what we say we're going to do. At Park, our word is our bond. Doesn't matter how inconvenient it is, how costly it is. Our word is our bond. We don't go against our word.

It is -- and I'm talking about pricing and appeal. I'm not talking about suppliers that are delayed. That's not their fault, I believe their supply chain is not supporting them, other than pricing in a confirmed PO. And it's inconvenient for Park not to throw money at people in order to recruit them in a world where many others are doing just that. At Park, our people are precious. Our people are not commodities to be bid up or sold short depending on which way the wind is blowing. Others need to make their own choices about what matters to them and what does not. And we have to live with those choices. That's their business. But at Park, honor and integrity are what matter most. At Park principles are not cheap.

Slide 44. What's next for Park? Really nothing new. Continue to press forward, continue to attack. We're not shy. We go after things aggressively. We continue to make money for our owners. That's something that we -- all our people understand is important. We make money for owners. We always do. And that's our objective, anyway. And we keep doing it for the fences. We don't place small ballpark. We're always swinging from the fences. At Park, we're not like the others. We're not fooling around here. We're looking to make an impact. We look to go for greatness. At Park, we play for keeps.

Last thing we always talk about is our picture. This is a little different because the people picture. This is not everybody. We tried to get everybody, but it was a storm and people couldn't make it. They have storms in Kansas. You've heard about that, wizard of us. And it's only about half our workforce. But we still do a company picture because really, we want to recognize everybody in Q4, everybody did such a great job. And interestingly, that little thing above, that's a little above the folks. That's actual Transdel structure at A320neo. It was given to us a gift from MRAS. That copper stuff -- looking stuff, that's the actual Lightning Strike material. So you can kind of get a perspective on the size of the Transdel, its engine nacelles. So I think that covers it. How we're doing with time, not so good, 50 minutes.

So operator, if there are any questions, Matt and I will be happy to answer them.

(Operator Instructions) We have a question to comment from the line Brian Glenn from Olcott Square Investment.

Thanks for all the efforts and the walk through. I know there was -- this goes back to the quarter ended May 2020. There was a small buyback. It was like 137,000 shares and the stock price was about the same. The outlook from me as an outsider, looks tremendously better and more certain even if there is a ton of uncertainty. Back in May of 2020, we had no vaccine, no timing. Air travel was shut down globally. And now it looks like you're getting larger exposure on some existing programs like the film adhesive for the 7500, the A320s ramping up. Those statements are out. You had your comments around China's Comac and then the military spend. And the stock price is about the same. So if it was cheap enough to buy back then, what's changed in terms of any sort of repurchase, whether small or large now?

Okay. Thanks, Brian. Yes. So that's a very good point. Right now, we're pretty much in a blackout. But it's something we need to consider. We haven't been real aggressive with buybacks, as I think you know our history is to use the return of capital with cash more and actually use a special -- rather use special dividends, more than buybacks. But thanks for the input, something to consider. I just want to comment. Yes, I agree with you. The short-term forecast we can't even give you one as it's such difficulty in the market right now.

I agree with you that the outlook, and it's hard to time the outlook because of all those short-term factors, let's call temporary factors, but I believe you're right. The outlook is positive. So thanks for the input, something for us to think about. I'm not going to be answer, of course, but we'll discuss it -- we will discuss in next board meeting. So that's what I can tell you at this point.

Okay. Can you remind me of the A321, the SLR that you mentioned? Is that within that long-term agreement for MRAS? Or that's outside of it? I think you did mention it prior, I just don't recall.

It's within the LTA. So yes, that's a LEAP-1A engine. So that's all within the LTA.

Understood. And then I guess, last one if I can sneak it in. Any comments around the timing of actual workflow being done in the new facility and it might have even happened?

The timing of workflow, starting of the operating facility. Yes. Yes. So we're still going through -- yes, go ahead, sorry.

Yes, yes...

We're still going through the qualification. As I said, that's been delayed. We've had to actually choose between the qualification and production, and we chose production. We don't want to disappoint our customers. So the qualification was delayed just because raw material shortages and staffing.

I mean, as I said, the people that are actually running the equipment are people from R&D and engineering, which is not what we want. We want operators to be over there. So at this point, we're not being press so hard at qualification complete, which is good. So it could take a little while longer. But once we get the qualification complete, then we'll start producing in that PAC-3 for MRAS and other customers as well. But I don't have a hard timing for you on that. And it's kind of one of those things that's in flux based upon all the other supply chain issues that we're dealing with.

Okay. I appreciate that. Thanks for the efforts. And good luck with the 747 coming to an end. I know that's going to take you personally...

Yes. Thank you very much.

(Operator Instructions) I'm sure no additional questions in the queue at this time, sir.

Thank you very much, operator. Thanks, everybody, for listening, hanging in there. I apologize these calls keep getting longer and longer. We do our best to rush through them. So anyway, so have a good day. And you always can reach Matt and me if you want to have any follow-up questions, we're happy to always take your questions. Have a great day. Thanks. Goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.