Park Aerospace Corp (PKE) 2021 Q1 法說會逐字稿

Good morning. My name is Shannon, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. First Quarter Fiscal Year 2021 Earnings Release Conference Call and Investor presentation. (Operator Instructions)

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 very much, operator. Welcome, everybody. This is Brian. Welcome, everybody, to our first quarter conference call. I have with me as usual, Matt Farabaugh, our CFO. So just want to mention that we announced our earnings, of course, this morning. And if you don't have the presentation up in front of you and you want to go get that, there's instructions in the earnings release itself as to how to access the presentation. Also, it's on our website, I think, under Shareholders and maybe Presentations or something like that. I'm sure you'll find it if you look. So you want to get that because that will make the call a lot more meaningful. Also, there is supplemental information which is attached as -- financial information, which is attached as Appendix 1 to the presentation itself.

So for those of you who attended or participated or listened to our fourth quarter conference call, which was on May 14, you know we went into pretty great detail about the virus and the economic crisis, any impact on the aerospace industry and Park. And we're not going to go over all that again, and I think that would be not that productive.

Unfortunately, to have the best context for this call you probably need to have some reference to the prior call, but for us to go back over everything again, and we'd have a 2-hour call. And I don't think anybody is up for that, me included, not being up for that. So I'm not going to rehash all of it. We'll do a little review with some of the -- and go over some updates. And then, of course, we'll answer questions. So why don't we just get right into it, and I'm going to be referring to the presentation and going through it for you and referring to slide numbers.

So why don't we move over to Slide 2. Those are -- that's our forward-looking disclaimer information. And you're familiar with it, I would think. But if you have any questions, give us a call, and we'll go through that with you.

Slide 3, our quarterly results, we're getting right into it. So we have the history of the quarters for the last 2 fiscal years, plus Q1 is in yellow at the right-hand column. You can see our revenues, you can see our EBITDA. You see our gross profit and our gross margin a little bit up about 30%. And let's reference a little bit down lower in the page, what we said about Q1 during our fourth quarter conference call on May 14.

We said our sales estimate was going to be $12 million to $12.5 million. So we're at $12 million to $13 million, we came in kind of the middle of that range. Our EBITDA estimate was $2 million-ish. We did that ish stuff because as we discussed in great length during our fourth quarter call, a lot of uncertainty in our business right now and in the aerospace industry. So we put that ish on the end of the $2 million, and we came in at $2.364 million. So I guess that's kind of in the $2 million-ish range.

Remember, our forecast philosophy is when we give forecasts, we don't play what we consider to be a game of giving you a low number, so we'll get to be a hero. We tell you what we think is going to happen, assuming we're going to work very hard and do whatever we can to make it happen. We're not trying to make it easy for ourselves.

Okay. Let's keep moving here. Why don't we go to Slide 4, our top 5 customers. This is for Q1. And if you remember, these actually are the same customers that were the top 5 customers for last fiscal year. This is alphabetic order, so we're not commenting on the order, except I think you all know that MRAS is going to be the top customer for Park.

AAE Aerospace. So that's for ablatives. PAC-3 missile, you see that -- the picture, nice picture of that at top right. And that's a latest generation of what we used to call the Patriot missile, which is designed to shoot down hostile incoming missiles. Remember, during our Q4 call, I mentioned that we received 25 -- 2-5, 25 letters from Department of Defense from military contractors, saying we're expected to stay open. Well, this might be an example as to why we're expected to stay open. I doubt that the military wants to run out of Patriot or PAC-3 missiles anytime soon.

AAR Corp. multiple programs, maybe interiors and things like that, floorboards for aircraft, Gulfstream program is one of them. Kratos, that's an important customer as well, and we are the main supplier. Maybe the sole source supplier, I'm not sure, but main supplier anyway, for all their drone programs. Those are tactical drones and the target drones, including the Valkyrie, which is depicted at the bottom right picture here.

Then there's Middle River Aerostructure System, MRAS, which was a subsidiary of GE Aviation. But it was sold last year to MRAS -- sorry, MRAS was sold last year to ST Engineering Aerospace, which is a large Singapore-based aerospace company. And we have a picture of the Comac 919, which is one of the -- on the bottom left, which is one of the MRAS programs.

Nordam Group, multiple programs, actually -- one of the items is GE Aviation for their engines, another is WeatherMASTER Radomes, which would be for, I think, for Boeing aircraft, maybe others as well.

Let's move on to Slide 5, if we could, please. So to do a little comparison here, kind of interesting, I think, to look at our pie chart. Remember, last quarter, we kind of took our pie chart, which had kind of more breakdowns and simplified into 3 key areas, which we thought it would be meaningful in terms of understanding our business.

So the top pie chart is just a pie chart you saw from our last -- our fourth quarter presentation. This is for last fiscal year, and if we put the revenues on the side. Just if -- we -- so want you to have a little perspective here. Then we go to our Q1 pie chart, very interesting. Remember, in Q4, we said we're going to focus on military. That was one of our objectives. So obviously, military percentage went way up, partly because commercial and business aircraft went down. So military obviously went up, but do the math here for a second.

Just look at the dollars, forget about the percentages. So last year, 35% of the $60 million, that's about $21 million. I think that's the number. In the first quarter, 53% of the $12.2 million, that's $6.5 million, that's annualized to $26 million. So in a very tough market. We actually grew the military segment dollar-wise, not just percentage-wise, but quite nicely.

Some of it's locked because some was just timing in terms of when the programs are produced because it's lumpy. It will be a quarter when we're producing one program this quarter, maybe not. But nevertheless, a nice job by our salespeople, all 3 or 4 of them. We have a pretty small sales group. We just added to our sales group, though, if you saw the announcement, I think, a couple of days ago, a new sales guy. So that's good. So let me see if there's anything else. No. Let's keep moving here.

Let's go to Slide 6. So Slide 6 and 7 are really pretty much slides that were in our Q4 presentation. And you see up top, it has revisited because we thought, well, let's take another look and see how we're doing. We were talking about different factors that could affect what will -- the recovery of the different industry segments, aerospace industry segments we supply into.

Military, we hear there are supply chain disruptions. They haven't affected us really very much. But we've heard about them, for instance, with respect to the F-35, a program we're not on. Park programs seem fairly strong and steady so far. And as we already said, it's actually even better than that. We grew our military business, not just percentage-wise, in terms of the pie chart, but actually dollar-wise in Q1 as compared to the quarterly rate from last year.

Commercial aircraft, so this is the Big Kahuna for Park. Jet fuel prices, remember, we spoke about that last time? Well, that's actually gotten better. I haven't checked this morning, but yesterday is lower $40 -- not the jet fuel. The crude is $40 per barrel. But obviously, that's going to drive the jet fuel prices. Meaning the lower prices are a disincentive for airlines buying new airplanes.

Reopening of economy, economic recovery. So we've come a little bit of -- what is it, 2 months, and it's almost 2 months maybe, 7, 8 weeks since our last call and things have developed. So the economy is being reopened. One concern I want to highlight, though, is that these quarantines that are being put forth by these different governors at different states. I'm quite concerned about it. I'm quite concerned that it actually could effectively shut down the economy again. Sure you could open up a beauty shop. But most business relies on interstate commerce, and it's become difficult actually, with all these orders, all these quarantines that are being ordered by different governors.

So I hope that the governors do the right thing for the country and the economy because if we destroy the economy, then we'll really know -- the world will really know what darkness is. We don't want to do that. So I hope everybody will think about what's best for the country and the world and not just the -- maybe myopic or small-minded about it. It is concerning, though, because the things were getting better in the commercial aviation area, actually a little bit more quickly than people expected. People were getting on planes. Let's see, May was better than April, June was better than May. And July was expected to be better than June, but with all these quarantine orders, we're concerned about what's the impact because you can't travel from one state to another without locking down -- locking yourself down in quarantine for 2 weeks. So it's going to pretty a big disincentive from doing that -- for doing that. So we'll have to see what happens with that. But I just want to flag. That's kind of a new thing, and it's concerning. So I don't know, but I just want to flag that.

Down to the bottom of the page, we're going to cover everything here. But we'd just like to say, this is really a slide from last quarter. We're just trying to -- want to update you on it. So generally, the news is actually pretty good. The commercial aviation industry was improving a little bit more quickly, I think, than most people expected. Not to where it was before the crisis, but people are getting back on planes. Let's see what happens with these quarantine orders.

Single-aisle at the bottom, versus wide-body, we covered this a lot. And I think it's pretty well -- pretty clear that single-aisle is going to recover more quickly and more strongly.

Let's go to Slide 7. This relates to business aircraft. Again, slide from last quarter. Just update here, jet fuel price is probably not much of an issue. Reopening the economy, economic recovery. Yes, it's interesting that the same kind of pattern. So in terms of business aviation, usage, May was better than April. June was better than May, and we're expecting July to be even better, but now there's serious concern about these quarantine orders. So let's see what happens.

I spoke to a couple of executives from 2 different -- from business aviation field yesterday, different companies. And they both confirmed the same thing, which I was surprised about a little interesting. And they said that actually, the smaller jets had been recovering in terms of sales more quickly than the larger jets. Larger jet, like the Global 7500, which is an important program for Park. This is probably the largest business jet you can buy.

So interesting. They said, well, you've got the individual owner operators, they can write a check for a smaller airplane. These are not cheap airplanes, they're like $5 million to maybe $12 million. But the corporations that buy the real big airplanes that are -- cost more than $50 million, they're kind of sitting tight. They're not ready to make a commitment yet. So we'll see what happens.

And that was before we had this issue I raised regarding the quarantines. And both the guys said that, yes, this quarantine -- they're already seeing an impact on their business from the quarantines already. And it's just -- this is a 2- or 3-week event. So this is a real concern. And like I said, hopefully, these governors will do the right thing and think about what's best for the country and the world. But we'll see.

Let's see. Okay. So will social distancing and fear factor concerns for commercial aircraft benefit business aircraft? Of course, it will. I mean, obviously, if somebody is in a position to buy and operate a business aircraft, that's going to be a preference that we might have, considering the issues of flying on airlines these days.

Will business aircraft recover before commercial aircraft? I do not know that. People have different opinions but it's an interesting topic to discuss.

Let's see, Slide 8. Let me go to Slide 8. Let's talk about GE Aviation. We always have to do that because it's such an important portion of our business. So why don't we go through the individual programs because I think it would be helpful to put GE Aviation perspective. Obviously, we'll start with the A320neo family, and you could read up top, the different variants of the A320neo family. All of them use the LEAP-1A engine and all these are Park programs.

So last quarter, we mentioned that Airbus had announced they're reducing production by 1/3. Now I think the production rate for the A320 was maybe 60 a month. I think that's right because they're reducing it by 1/3. Then it was something confusing happened. I think last week, they said, well, maybe 40%. But I read that the difference between 1/3 and 40% relates more to how they measure the output on a weighted basis rather than any kind of new cut. So I think that got some attention. I'm not sure what it means, a little bit vague.

Well, one thing I can tell you is, for us, we -- I've been in touch recently, just a couple of days ago, I think, with my counterpart at MRAS. And they received a forecast recently from Cerberus and Safran, which actually moves the numbers up. And I can't give the numbers, that's not -- wouldn't be appropriate. I'm not allowed to do that. Move the number up -- moves the numbers up in 2021, actually significantly. And in 2020 as well.

The caveat of 2020 is that, remember, the whole inventory thing we talked about last time? The burn down. So it kind of muddies the water, is not clear how it's going to impact us in 2020 yet. But those are facts I'm reporting to you. There's a lot of different information out there. Some of it's consistent, some is not completely consistent. But now you know pretty much most of what I know. The news on this aircraft is actually positive from what we hear.

Bombardier Global 7500, we just were talking about that with respect to business aircraft with the Passport 20 engines. This one is the biggest unknown for us. I'm not sure what's going to happen with this program. We know Bombardier is pushing the program hard because this is really the big new aircraft. The company has a lot invested in this aircraft. Their future is very dependent on the success of this aircraft. And also -- even though it's a smaller engine, Park has a lot of content per engine, dollar content per engine on the Passport 20 engines for the Global 7500. This is a question mark for us in terms of where things are going in the short term.

747-8, no change to program rates. Not sure how long the queen of the skies will be produced, but they're not going to reduce the rate in my opinion. So produce at the rate, which is 6 airplanes per year. We have 4 engines per airplane, that's 24 engines per year. They're going to produce that rate until such time as they cancel a program. Hopefully, they never will, but there's some talk and maybe it's even trade dots up a little bit that Boeing may be pulling the plug in 2 years. But Boeing has refused as far as I know to confirm that. So they've not confirmed that news.

My feeling is 2 years is a long time even if it is true, so hopefully, somebody else will come in and order some -- these airplanes for cargo. They're not really being sold for a passenger anymore. It's really a cargo sale. So I believe UPS has a number of them on order. And hopefully, somebody else will decide to order some more.

To me, I'm mostly involved with the 747, it's my favorite airplane. But also, just so you know, our first shipment in the GE Aviation program, so first program we got qualified on was a 747-8. Our first shipment was on, let me think, February 28, 2014, 11:00 p.m. I'm never going to forget that day or that time. So we hope it lasts forever. It's been around for a long, long time, a wonderful airplane.

Comac 919. This is one, I suggest you pay a lot of attention to. This has LEAP-1C engines, similar to the A320, a different variant. Comac is pushing this program forward. Our understanding is actually pushing it pretty hard. Maybe part will be some trade wars. That makes them even more -- the Chinese even more motivated.

This is a real prestige thing for China. So if you go to the next one, we'll talk about the Comac ARJ21 in a minute. That's a regional jet, mostly sold within China. This 919, this is not for China. This is for the world. This is to compete with the 737 MAX and A320. China wants to be a player in the global aircraft -- commercial aircraft market. This is their entry into the big time. And there's a lot of prestige involved in -- for China, not just Comac, for the country of China. So they're pushing this program very hard. I'm not going to give you an estimate as to when it actually gets certified in production. Right now, we're doing development work. But you can check their website and see what they say about it.

One little piece of good news is Park's Lightning Strike Protection materials now used in the program. So it's good because that means for every unit we have more content. So this is -- this, I think, is a really important potential program for Park. The picture here is the 747-8, sorry to digress. But you've seen them themselves. I've always loved this picture of these because you see the person standing kind of under the 2 engines. You get a feel for how huge these engines are and how huge these nacelles are. Love that little sculpted trailing edge of the nacelles.

Comac ARJ21, that's a regional jet. It has the -- also GE engines, CF34-10A engines. This program is strong and proceeding well. Actually, we're told that the Comac is trying to move up this program. Move up, okay? Not down, up. So obviously, the supply chain has to be able to support that. But Comac is different than the other aircraft manufacturers. They're not going down at all. None. They're going up, they're trying to go up. Okay? I just want you to understand that, not like Boeing, not like Airbus.

So -- and also, this is the next program we're told that used to qualify our Lightning Strike materials. I think you know this, but our lightning strike materials are used on the A320 program were self-sourced actually at this point on the A320 program, which is good.

Let's see. Why don't we go over to Slide 9. And Slide 9, the 777X, and this is not a good story for us, maybe for anybody. So remember, last time, we told you all the POs were canceled for the 777X program for the Park's POs. Production schedules pushed out further. Boeing then announced a rate reduction for the program. Then Park was recently advised by GE that they do not currently have the funding to continue to support Park's qualification activities. So -- and this is not an immersed program, this is a GE Aviation program.

Now we have become more pessimistic about the program of late and we had not included it in our planning. So this doesn't affect any of our internal forecasting because basically, we're not including anything for this program. We're not giving up yet. Hopefully, GE will get back in the game and come up with a funding to complete the qualification, but we don't know. That's kind of a question mark. But it doesn't play into any of our thinking short term, let's say, this year or next year.

Next item, Park was -- on Slide 9. Park's recent arrangement with MRAS to maintain baseline production levels to preserve Park's ability to ramp up production when needed. And this is kind of important. This relates to hot melt, almost all of our production for the GE programs are hot melt rather than [asphalt] solution. So we were kind of getting some vibes that, well, maybe we were just kind of -- they would shut down production for us, for the next quarter or 2 because there's so much inventory in the system.

So we spoke to MRAS, and we said that's not going to work. We need to have a baseline amount of production per month in order keep our hot melt operation going. We have highly trained crews, and if we shut everything down, we'll lose that 5-year investment in these crews and guess what? Were you to ramp up, that's not going to work. So they jumped on it immediately, I'm talking of MRAS. They responded. I mean they didn't push back at all. They realized it was a problem.

So we reached an agreement, let's say, an understanding. It's not an agreement, a handshake as to the minimal amount of production that we will do per month. And that's by unit, that's not by dollars. That's why we get down to our low forecast for Q2. It's kind of a -- there's a range there because we don't know what the dollars will be. It's based upon units because units are what drives the production needs of the hot melt departments.

Just so you know, we have -- we retained 3 crews. One of the crews has transferred to solution, and we'll talk about that a little later on when we go to our customer flexibility program, which helps a lot. So that's what we need. That's our baseline. So we can ramp up when we need to ramp up, and we'll get into that in a second because I don't think that day is too far off.

Now just for perspective, last year -- last fiscal year, our GE Aviation program of $28.9 million, let's say, round to $29 million, about 60% of the revenues were attributable to the A320 family. But $29 million, let's say, there is about $1 million for the 777X program. So let's take that off the list. $28 million, that's a nice number because if you divide it by 4, it's $7 million. You get the concept.

So last year, about $7 million of revenue per year on the GE Aviation programs. I mentioned that, so you can have some perspective on what we're saying is going on this year. So Q1, those are just -- that's an actual $4.1 million, obviously quite a bit down from $7 million. And then Q2, now we're estimating $2 million to $2.5 million. That's based upon that minimal -- that minimum rate that we said we need per month -- production rate we need per month in order to sustain and keep it intact all the capability that we built over 5 years with our people in the hot melt department. So that's a very low number. But that's what we said we need, as a minimum.

Now what's the message here? That number is well, well, well below the end market requirements. Not based upon any increase, based on what we know now. What do we know now? We know we talked about the A320, we talked about maybe a 1/3 reduction in A320. We also talked about the forecast. We just got -- it goes up, the Global 7500. That's a question mark, we don't know. 787, 747-8, that's not going anywhere, that's flat for the next 2 years. Comac919, probably not a factor this year because they're still doing the development. It hasn't been certified yet, but pushing forward aggressively. Comac ARJ21, pushing it up, not down. 777X, not a factor.

So if you take into account just the end market requirements now, not talking about any recovery at all based upon those specific programs that 2 million, $2.5 million, that isn't even close, and here's a problem we're facing in the rest of the supply chain, I guess, as well. My guess, and I'm going to give you a guess on this. Is that if you looked at just supplying, keeping up with the end market demand of today, that number is $4 million to $5 million, not $2 million. $4 million to $5 million. So that's a guess, a lot of variables, and like I said, the Passport 20, the 7500 is one of those variables.

But I want you to understand this because it's a really key point. So what's going on? Of course, it's the inventory, it's the burn down. It's inventory everywhere, we talked last time. Now the whole kind of thrust of the aerospace market was push up, push up, push up. More, more, more and more and then the rug got pulled out from under all of us. And everybody's left with a lot of inventory.

So at some point, though, that inventory is going to be normalized. And then what, then the end market is going to have to drive the production requirements. We're going to have to keep up with the end market. So my concern is this, I'll just tell you, I think the supply chain is demoralized. Kind of in a survival mode, maybe feeling sorry for itself, maybe not paying attention as much as they should. My feeling, and this is just a feeling, I could be wrong. Well, sometime, if the -- let's say, the market doesn't even get improved over the next 12 months. At some point, there's going to be that day of reckoning, where the inventories normalize and production has to match the end market requirement.

My belief is, I could be wrong, that's later on this year. My other belief is that a lot of companies in the supply chain are going to get -- who are going to really be caught off guard because they're going to be told, and well, we've got a problem, need to double, triple your production. And I think a lot of companies are not going to be prepared to do that. We are going to be prepared to do it. That's why we went to these guys and said, we cannot allow our hot melt capability that we've built over 5 years to be decimated. That's not going to work.

We're also working with our suppliers to make sure they're able to support this inevitable change, inevitable unless the market takes a big step down -- the end market takes a big step down, the end requirements. Assuming the end requirements don't get better, it's just what we have now. There's going to be a day of reckoning, a crossover point, and our production is going to have to go up significantly.

Remember what I said, probably $4 million to $5 million. That's an estimate, and we're at $2 million in Q2. That's that baseline production level that we agreed to with MRAS. So then Q3, Q4, that's really going to be a function of when this crossover point happens, and we don't know that. And this, again, is assuming there's no recovery. Nothing gets better. It also assumes nothing gets worse but assumes nothing gets better.

So I'll just give you a wild guess. My guess is in Q3 and Q4, that it's going to look more like Q1. Not like last year, $7 million and so end market is not that level of $7 million. But that $2 million is not sustainable unless the market takes a significant drop-down in the end market.

I want you to understand these dynamics because they're really important for Park. I think it's also important for supply chain. Like I said, my sense is that a lot of folks in supply chain are demoralized, maybe feeling kind of bad for themselves, and not really paying attention to what they need to think about for their future. Maybe they're in survival mode or future is if we can make payroll next week. I don't know.

So I'm not criticizing people. Everybody has their own issues to deal with, and I'm not criticizing anybody. It's a pretty difficult time. But I want to make sure you get that. This slide is probably the most important slide for this presentation.

Let's go on to Slide 10. Some perspective on commercial aircraft industry. This is just a review, single-aisle versus wide-body. We kind of beat this to death a little bit here. So that's already -- the trend is in place for single-aisle. I mean it's kind of like unanimous, everyone believes that single-aisle is going to recover before wide-body.

Wide-body is used for those long international flights, so there aren't no international flights at this point. Basically, all the flights are domestic using the single aisles, not the twin aisles. There are 3 major single-aisle programs: the A320, the Boeing 737 MAX, Comac 919. We're on 2 of the 3, check 2 of those 3 boxes. Those are the boxes we think we want to check. We hear the737 MAX, they're maybe getting certified again and they're back in business. We hope that they do. We wish them the best. We're not in that program though. So we wish Boeing only the best, and hopefully, they'll get the airplane certified and flying again.

We're not in that program, but we're on those other 2 programs, which we believe are the it programs, so we believe if you're interested in commercial aviation, which we are, you got to be in single-aisle. If you're interested in single-aisle, these are the 2 programs you want to be on. So it says Park checks 2 of the 3 single-aisle boxes, right? So we already covered that. Believe, we're quite well positioned. And as I said already, watch out for the 919 because this is a juggernaut, in my opinion, coming because it has the full force of not just Comac, the whole country of China behind it. A very big prestige aircraft for China.

Slide 11. Okay. So what is our strategy? And what does strategy mean to us? It's just a fancy way of saying what we plan to do. Okay. So double down, triple down in commercial aerospace. We're not back -- we're not backing down. We're doubling down in commercial aerospace. People want to fly again and sometimes out of a crisis comes opportunity.

So what do I mean by that? So some airlines are going to innovate and make it fun and interesting for people to fly on them, make passengers feel safe and actually look forward to getting on the planes and some won't. Some will just be in survival mode. So this is -- I think how capitalism is supposed to work. The ones that innovate, do a good job, they will not only survive, they will thrive. And the ones that don't innovate, they get it back into defense mode and survival mode. Maybe they won't make it, but it's all okay because that means that the better ones will survive, and this is good for the future of commercial aerospace, commercial aircraft, in my opinion.

We believe that commercial aircraft will be one of the great -- world's great industries for many years to come. Park will -- just going through the presentation. Park believes single-aisle aircraft is the place to be. So we covered that only 5 times already. Next item, we believe we're ideally positioned on the 2 most attractive single-aisle programs. We covered that, and we believe the glory days of aviation is still to come. We want to be part of it.

So the timing of the recovery in commercial aviation is uncertain. We don't know what's going to happen. I'm not sure anybody does. We watch, we pay attention, but we don't know. But to us, it's a little less important. What's important to us is we think commercial innovation is so important, so critical. Such an important industry for many years to come, and we want to be part of it. So if it takes 1 year to recover, that's fine. 2 years to recover, that's okay for us. We just want to be there.

So next item, we want to emphasize and focus on programs and opportunities in military aerospace markets, especially niche programs and opportunities. So we already talked about the fact that our sales in Q1 were relatively good in the military area. What do we mean by this?

So we're interested in niche programs, maybe a little more out-of-the-way programs. Our programs are a little bit hard to find and get but they're easier to protect. We're less likely to be interested in a big program like the F-35 because it's so big, it's so over budget. It's so late that it gets a lot of visibility. And if there's a government change or something like that, who knows what will happen to these big, high visibility programs. We don't want to be blown around the wind. We want to be on programs that have real staying power and are not that vulnerable. So that's what we try to do and it takes more work. It's harder, but it's worth it.

Use Park's balance sheet and cash to our advantage. We covered that in some detail in our last quarter call. Why don't we skip over that, any questions about it let us know.

And we haven't spoken about this in a while, it's not that it -- being a niche company, it's not that it's not part of us. It just that it hasn't come up in a presentation. Ben Shore told me about this, "culture eats strategy for lunch." Peter Drucker said that, I guess. I like that.

So in other words, kind of all kind of great strategies, but your culture -- our company culture, our niche company culture. What does niche company mean to us? It's not a generic thing, niche company means something specific to us. It means doing what others are unwilling or aren't able to do. It means saying yes when others say no, it means not accepting mediocrity. Going for greatness. We believe mediocrity is a choice. We believe greatness is a choice, too, although it's the more difficult choice to make. If you go for greatness, you need to be prepared to overcome many obstacles and setbacks. And the path to greatness can be a lonely path because you run across many doubters and nonbelievers along the way.

But that's our little culture thing, be a niche company, and it's something we're very committed to. It's something that's kind of palpable in our company. We -- something that's spoken about a lot. And it's something we keep reminding ourselves of that we need to drive ourselves, force ourselves to be the niche company.

Slide 12, financial forecast. So we withdrew our long-term forecast during our last call. And the reason is very simple, as we explained. We just don't know. So we don't want to just put something out there just to guess and that's kind of silly. It doesn't -- that doesn't help you. It doesn't help us, doesn't help anybody. So it's a waste of time. There's so much uncertainty in the global economy, in the aerospace industry that it'd be just really kind of silly for us to update our long-term forecast.

When we think about our long-term forecast, generally, though, where we're going to still try to grow military. We're still going after commercial programs. The impact -- sorry, the commercial recovery, the commercial aviation, aerospace recovery is going to impact our long-term forecast because we have so much of our company is invested in commercial aircraft.

So at some point, I made this comment last time, kind of interesting to think about it. We're not in a -- we're not posting our prior long-term forecast that was withdrawn. But we feel it's more like moving to the right. At some point, we'll resume that, a long-term forecast. We just don't know when. How much of it moved to the right? Now was it 1 year, 2 years? We don't know. And we're not going to speculate about that because it's not worth it. We just don't have a real good feel for that. But we feel all the principles and drivers for the longer forecast are still in place. Just moved to the right.

Our thoughts about our quarters. So this is kind of interesting. Q1, those are just the facts actual. Q2, so we're going to give you some ish numbers just to think about. For sales, we're thinking about $9 million-ish, EBITDA $1 million-ish. But, obviously, lots of uncertainty. So we got to emphasize that ish part of it, we're just giving you some perspective.

We have a little more of that $8 million shipped and booked for Q2. But the issue -- so in normal times that will be good. We wouldn't have too much trouble getting to $9 million, booking and shipping another, whatever, $800,000 or $900,000 for the quarter. But the risk is that the bookings where we have could be canceled or pushed to the right, could be pushed out. And there's been a lot of pushouts and cancellations of late. So that's why there's a risk, and that's why we go to the ish part of it. It's really driven mostly by the top line. Once we know what the top line is, we could figure out the bottom line more or less.

As far as Q3 and Q4 are concerned, big, big question marks, partly dependent upon what happens with commercial aerospace industry. Partly going to depend on when all that inventory is burned down, when that day of reckoning takes place, where the industry says, uh-oh, we kind of screwed up. We stretched this thing out too far, and now we're going to scramble to recover and everybody's got to double their production, that kind of thing. But if you just want something to think about and I've got to tell you to make sure that you understand. Lots and lots and lots, lots of caveats here. Because we're just speculating. I want you to understand that, I want to make sure that it's clear. But you may want to just think Q3 and Q4 may look like Q1 but that is very speculative. I'm just putting that out there just to help you think about things a little bit, okay?

So why don't we go to Slide 13, updates on Park. How are we doing? Well, our New York office is open. I guess we went through phase whatever in New York, and we were able to open our New York office. Our folks in New York, our small office in New York are doing great. Kansas continues to be fully operational and they were having a shut-down.

Customer flexibility program. Remember, I mentioned that. So we have 75% participation. This is really like a cross training program, [revert] our employee. We have a number of job categories. If you get trained in another category, you have to take a test and get approved. You actually get a financial incentive. So some of our employees have maybe 3 or 4 approvals. But this is really so important to us. Remember, I said that our -- we moved one of our hot melt crews to solution. They had -- they already had approval to work in solution. And when things are very unpredictable and very dynamic, it helps so much to be able to have people move from one department to another, one department to another. It makes us so much more flexible, so much more responsive and so much more productive.

And so it's helped a lot, and we've had no layoffs. We don't like layoffs, it's not part of us. We have reduced our head count, our people count through attrition. We have let go of some people that we didn't feel are right for Park, but no layoffs. We kind of -- it's something we just feel strongly about. We want people to believe and feel they can build a future with the company. So layoffs are something that are almost like against our religion.

Now, we're not God, so we can't ever guarantee there will never be layoffs. But it's something we're very, very reluctant to do. And so far, we've not done -- I mean we have no plans of doing layoffs. And like I said, not God, so I can't guarantee that will never happen. But it's very much -- we've very much opposed to the concept of layoffs. We don't like it. Don't like it. We want people, like I said, to believe they have the opportunity to build a future with our company. And laying people off is not really consistent with that concept very much, is it?

So anyway, let's keep going here. Park's people continue to do very well under difficult circumstances. Yes. It's pretty difficult with all the stress and anxiety in the world. I mean my advice to most people is, don't watch TV very much because it's all bad. And -- but people need to come to work, need to focus and really do their job. Do the best they can, find ways to do better every day. As we say, if you come to work, at the end of the day, you've made something better for the company. Even small, everybody we're talking about. That's a good day for you. If you haven't, that's not a good day. But tomorrow you come back and are even more dedicated to make something better. That's what we're all about at Park.

Major expansions, just a little update. Remember, $18 million in our budget. Spent $10 million so far, $8 million to go and expect completion early next calendar year. It's coming along nicely. We had some delays during the wintertime with weather, but it's coming along nicely. It really looks like an expansion right now.

Let's go to Slide 14. Potential significant opportunities for Park. So I just want to be clear, none of these things are in the bank. These are interesting and significant opportunities. So the B-52, this has been around even longer than the 747. The B-52, the -- re-engining of the B-52, and there are potential opportunities for Park in connection with that re-engine program.

Comac, that Chinese company is developing a twin-aisle aircraft, 929. Like I said, they want to be a player in a global -- the global aircraft business. So if you want to be a player, you need to have a single-aisle, but you also want to have a twin-aisle or wide-body. And then JV in Asia. We've spoken about that before. We haven't brought it up recently. We're not just going to bring it up every time, but it's still an active discussion. And maybe be something that would happen next year. We're still working on it. These 3 things are potentially big opportunities for the company, although none of them are in the bank. So it's possible nothing will happen. But I just want to put that out there.

Those are the big things, some big things rather, not all of them. But we still love the small opportunities. There's nothing too small for us. It's funny because sometimes the small things end up being big things. So if you're arrogant, though, you're not important enough for us, I don't know. I'm not going to pass judgment too much on others, maybe a little bit. But I would like to tell you, that is not us. That's on how we look at things. If you're being made to feel like you do not matter, you're not essential, let us know. Maybe we can help.

Can you imagine telling people they're not essential? How long do you tell people you're not essential? How has that worked? How does that work? It's a very strange world. It's not a world I would ever have expected. So your supplier making you feel like they're doing you a favor doing business with you, that's not very much fun. And we've been there, we know what it's like, so -- and maybe you want to talk to us.

All of our customers are essential to us. So like sometimes I say, we're Catholics when it comes to customers. We don't believe in divorce. We take on a customer, we take on a customer for life. Now they can divorce us, but we'll never divorce them. We'll never say to a customer, you know what, you're kind of small. We've got some big fish to fry, go find somebody else. And we know -- we heard a story just recently where somebody in our industry did just that. They got a big program and they told their customers, other customers, go find somebody else. We can't -- we don't want to deal with you anymore. That is so like icky to us, that kind of thing. We wouldn't even -- ever even consider doing that. Catholic, we don't believe in divorce when it comes to customers.

At Park, we're continuing to go for it, not letting up. We intend to make this our time. We're not waiting. We're not feeling sorry for ourselves. We're not demoralized. Others may falter, but Park is not going anywhere.

Okay. Thanks for listening to the long presentation. And now operator, I think we're ready for questions.

(Operator Instructions) And we have a question from [Nick Lupastela] with [NR Management.]

Just had a question on the dividend policy. Is your intention to keep paying the $0.10 quarterly dividend?

And I know this is hard to forecast. But at what level would you think you would actually have to be in a situation where you would burn cash rather than generate cash?

So at this point, we're not thinking of changing our regular dividend, and we discussed that last quarter. So it's something we continue to evaluate, but our position at this point is to continue the regular dividend. And that's based upon, we're looking out from year, our internal forecast. So this year, we probably won't cover the dividend. We'll probably have some limited positive cash flow, but it won't cover the dividend. But I think we're okay with that. It's important to us to continue the dividend. Now that's not a guarantee. I mean something could change. But that's our perspective at this point.

So does that answer your question, [Nick?] Or is there anything else that can help you with on that point or that question?

No, that's very clear. And one other thing, and again, I'm looking at -- I'm not saying this could happen. But at one point, an investor had requested or asked you to consider share repurchase. Now I do believe all that cash is a good asset to have, especially in these troubled times.

Are you seeing any more opportunities coming up for acquisitions? Is there anything out there that's looking more appealing in these troubled times and just address share repurchase. If the stock were at 6 or 5 or something like that, is that something you might consider?

Okay. So let's take those questions in reverse. So that's hypothetical, but yes, I mean, or how about one. Sure. As the stock goes lower, obviously the share repurchase becomes more interesting.

As far as the acquisition market is concerned, so what we're advised by the bankers we work with is that you probably need to wait now a couple of months, maybe the fall, maybe like September-October time frame for some of these opportunities that kind of come out of the wood work. But we just -- we covered this in our last call, that's why I didn't go into detail on this call. But it's something very important. I mentioned just kind of briefly using our cash and our balance sheet to our advantage. But we've been frustrated with acquisitions for a long time. Had cash for a while, but valuations have just not looked right to us, and I think with a bit of hindsight, we are right and the world was wrong. So the inmates may be running the asylum because we're told, well, if you want to get in the game, you got to pay these multiples and everything.

I think I mentioned last time, we looked at companies that were actually where the asking the price was maybe 5x revenue, and they were sold for 5x revenue. Not to us, of course, but in many cases, we saw the announcement and were quite stunned. We just don't -- and these are not a cure for cancer companies. I mean maybe they thought they were, but we didn't.

So what we're looking for is something more central to our business. Something that would be not a direct competitor, would be additive to our business, different capabilities, different product lines. But still central for our business, not very tangential. And we've been looking and looking and looking, but we've been frustrated because the valuations have not been right and maybe some of the things we're looking for weren't available as well.

We're hoping that maybe opportunities will develop in the next couple of months. We're told by the bankers and the investment bankers we work with, that they think it's probably the fall because the way they explain it to me is that the sellers have to go through some kind of a process of adjusting their realities and expectations to realize that whatever they thought they're worth before, that's kind of irrelevant. And also some of these companies may be in financial distress because the other factor is there's a lot of debt in corporate America. Everybody knows that. And maybe some big high-profile companies will get bailed out, but we're not buying those companies. We're buying smaller companies, I mean, Park-size, something like that.

So they're probably not going to have the opportunity to get a lot of help from the government, which is, it's fine. So we're hoping to be opportunistic. We're hoping just to be able to buy at least something important at good values, maybe even distressed values. So we're sitting tight. We have seen a couple of things in the last couple of months, but we felt it was early. We felt maybe the valuation is still high. And also, they're a little more peripheral, not so central in aerospace, obviously -- well, I shouldn't say obviously, we're all in aerospace. We wouldn't look outside of aerospace, but less central than what we do now. So we look, but I think we decided maybe not for us.

So Nick, does that help with your question?

Yes. I just want to say, I'm very appreciative of your conservative stewardship.

Thank you. That's great input. Appreciate it.

Our next question comes from Chris Hillary with Roubaix Capital.

I just wanted to ask, with all the disruption that's out there in the industry, do you see that creating opportunity for your -- to bid on new business? Or is it more a situation where everyone is more disrupted and just trying to deal and manage their own business commitments or whatever the pipelines are as they recover?

I think it's a little bit of a mix. But unfortunately, there's a lot of companies in the aerospace industry right now that are just, I think, feeling very, very defensive and survival mode. So that could be a little frustrating. We're doing everything we can. We reach out to customers all the time. We're not going away, looking for opportunities, looking for opportunities. But you know, it's not just black and white.

There definitely are opportunities. I think, especially in the military area, where it seems that the funding is still pretty good. So we have to keep at it. I mean it could be frustrating sometimes for the sales guys, they'll call and say, look -- call a customer. We're not doing anything now. We've got no money, we're not getting funding. We're just trying to survive through tomorrow. Okay, we'll call you back next week. We're not going to go away, and we'll make a pest of ourselves. But there are opportunities.

And I don't want to be overly generalized, Chris. But I think they're probably more in the military or defense area than in the commercial, civilian. All industries are affected by the economic crisis and the pandemic. But military seems to be doing better. The funding is there. New programs are being initiated, qualifying new suppliers. So I don't know. Well, I guess the answer to your question is not so black and white as far as I'm concerned. It's kind of a mixed thing.

But from our perspective, like I said, we're going for it. We're not going to relent. We're not going to let up. And yes, we'll be a pest. I mean we'll keep calling, what can we do? How can we help? Can we help? Sometimes -- I'll just say one other thing, sometimes the first answer is, well, there's nothing we could do. But you need a follow-up question, well, what do you mean by that? What are your issues? What are you struggling with? Don't accept no for an answer. So I mean, obviously, you've got to be polite and respectful, not belligerent but don't accept no for an answer. In other words, they may not even think there's an opportunity. You start a discussion. Well, wait a minute, what about that over there? Oh, yes, maybe you can help with that. We're looking for little things, looking for big things.

I mentioned last quarter, there was a couple of initiatives that we're taking on. In other words, to do more ourselves rather than farming these things out. And we don't want to be specific because it's kind of a sensitive thing. So we're looking at those kind of opportunities at all. Those are not huge ones, but they're nevertheless opportunities. As I just said, small, big, either way it's okay with us.

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back over to Brian Shore for any closing remarks.

Thank you, operator, and thank you, everybody, for listening during the summer when you probably have other things you might prefer to be doing. So even though the world continues to be kind of a challenging place, I still want to wish you a really good summer. Hopefully, you'll all get away a little bit, get some R&R. And we'll talk to you again, at least in terms of a quarterly call in a couple of few months. But in the meantime, you call us any time you have any questions.

So you take care, and have a great day. Goodbye.

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