Good morning. My name is Catherine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp.'s First Quarter Fiscal Year 2020 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, operator. This is Brian. Welcome, everybody, to our first quarter conference call. And with me as usual, Matt Farabaugh, our CFO. There's a presentation that I hope you all have access before we go through that presentation. After we're done with that, we'll be happy to entertain questions. And I want to point out that there's also a supplemental data, financial data, which is attached to the presentation as Appendix 1. The presentation is smaller and shorter than our last quarter's presentation because it's only been 2 months since -- less than 2 months actually since the last quarter presentation. So we don't want to just put redundant information in here. Although there's a lot to cover, so we're going to try to hustle through it even though it's only 10 pages. There's quite a few points for us to hit. So why don't we get started. On Slide 2, that's our forward-looking disclaimer, and if you have any questions about that, just let us know. Why don't we just move right into Slide 3. And Matt, can you help us with Slide 3, please?

Sure, Brian. The Slide 3 shows our reconciliation of EPS from GAAP to special items. And there is only one special item in the quarter, and it went through our tax operation line. It had a $0.01 impact, so you can see our earnings before special items, $0.14. It is $0.01 greater than our net earnings from continuing operations on a GAAP basis. The tax item here, the tax impact of canceled stock options, relates to options for employees of the Electronics Business that we sold to AGC back in December. The employees had a few months to exercise any stock options that they had outstanding, and at the end of that period, anything that was left unexercised canceled. And that did in fact happen. Some of the options went unexercised, and they did cancel. And as a result, Park lost a tax deduction related to those unexercised items that would've otherwise gotten had they've been exercised. We also show on this slide the top 5 customers for the quarter, and those top 5 customers are: AAE Aerospace; AAR CORP.; GKN Aerospace; Middle River Aerostructure Systems, including its subcontractors; and NORDAM Group. Those customers are in alphabetical order, and I do want to point out that Middle River Aerostructure Systems was recently sold by GE to ST Engineering Aerospace. So that used to be a GE-related company, now it's ST Engineering Aerospace.

Okay. Thank you, Matt. So why don't we just keep moving, we'll try to hustle on here. Slide 4, it is our results for Q1 with the prior quarter comparisons. I want to point out that we're trying to focus more on sales, gross margin, EBITDA then EPS in net because of the interest and taxes really tend to skew the numbers quite a bit. In Q1, tax rate was higher than Q4. Interest income was lower than Q4. But if you look at the EBITDA numbers and the gross margin numbers, they were more apples-to-apples. So let's talk about Q1 as compared to what we indicated, what forecast we gave you when we did our fourth quarter call on May 17. We estimated sales of $14.25 million to $15.25 million, and so sales end up being $14.95 million that came within the range. We also estimated EBITDA of $3.4 million to $3.8 million. So the EBITDA for Q1 was $3.372 million. You could say, well, it rounds to $3.4 million. But that doesn't really tell the whole story because when we do -- when we give you these estimates, we have an internal number, which is not a range, of course. And what we do, and we discussed this last time, we -- our internal number is going to be at the middle of that range. So we're not going to give you a lower range so we can beat it. We're telling you what we think is going to happen to the best of our ability. So really, we are looking for $3.6 million in a sense because you see $3.4 million to $3.8 million, obviously, the midpoint is $3.6 million. So we were about $225,000 short in our EBITDA in Q1 from what we thought we were…

[Operator Instructions] And we have a question from Christopher Hillary with Roubaix.

I just want to ask you guys, on the last call, you seemed to be optimistic that you were going to be able to find some additional business acquisitions to add on, tack on. I think you discussed some of your business partners pointing you in certain directions where they thought you could be of help to them. Is there any update on that?

Yes. We don't want to go through the whole thing again because we get redundant, but I just -- we mentioned the fact that we're continuing to do reach-outs now. That's exactly what is going on. As what you talked about, the customers and OEMs, a couple of them that we're close with have been pointing us in the direction they think we should be focused on, and they've been helping us by giving us names. So that's really the basis for the reach-out program. It's not just random. As we explained last time, we're not just chasing after bankers that have processes and that thing. We're focused on certain components, certain products that are provided to aerospace manufacturing companies, and this is based upon the input we received from, as we spoke about last time, customers' OEMs, and what are we asking them or they're telling us. They're saying these are areas we'd like your help in. We're not happy exactly with the supply chain in these areas as we explained last time. The last thing we want to hear is, oh yes, we have 5 great suppliers of that product, that product. Well, then the question for us is what do we bring to the table. So we're looking for areas -- that's the "Hit 'em Where They Ain't" kind of philosophy or strategy, looking for areas where our key customers and OEMs are saying they're not feeling good about the supply chain in those areas. Although those components are critical for aircraft manufacturing.

And then just -- great. And then just 1 other question maybe. Just -- you've been able to deliver a pretty impressive degree of profitability at your revenue run rate. Is there some more color or context you might share on how you've been able to accomplish that at this stage in the company's life cycle as an aerospace composite manufacturer?

Well, thank you for that question. We don't pat ourselves on the back pretty much about how profitable we are. We think we need to be more profitable. I don't know. Let me think -- let me share a couple of things with you that might give you some perspective, though. So we're really focused on being more of what we call a niche company. We're not interested in getting on some large program by being aggressive on pricing. We're always looking for something unique or something different, something special. We lose business all the time because we're asked to quote it, and our quote just is not where it needs to be. And we'll be told by the customer -- these are usually not our real quick customers. With MRAS, we've revered into relationship. Other customers, well, you're 20% too high, and our answer is, well, sorry, we do the math and this is what we think is required. So we end up taking business. Normally, it's because the customer has a need and they realize the value we bring to the table, and it requires real discipline. Now we can grow our top line a lot faster, but the question for us is how sustainable is that for our future because if all we have is low price. We're getting on a program based on price, first of all, the margins are not going to be very nice, you're not going to like them. And secondly, how do we protect that program? There is always somebody out there who can offer lower price. It doesn't matter how low you go. We learned this stuff from electronics actually, being an Electronics Business for all those years. That's a rough-and-tumble business. No matter how low you go, if you have…

Is there any -- just to the idea that by being a somewhat newer company, you've been able to create a more efficient footprint given you're obligated to costs in this market or this footprint?

Well, that's a good question, and I don't know the answer. I hear people that have told me those things, like we're not a big company like some of our competitors that have lots of corporate infrastructure. But of course, I'm not privy to their operating numbers and their inside story about their P&L and their costs. But it's -- I guess it's a good point. We are focused on being lean, and we're not looking to just add costs just because everybody else has that thing. So we are incurring costs. We are bringing our R&D operation to setting up R&D operation in Kansas, so that's some costs that we're incurring at this time. But we try to be real careful about how we spend our money, and we need to be focused on. This is something that really makes sense for Park. The fact that maybe everybody else does it is not a good enough answer. Some of them maybe true from that, I just don't know for sure because I think maybe that would be compared to others, and that's where I'm not sure how to make that comparison.

[Operator Instructions] We have a question from Brad Evans with Heartland.

Thanks again for a very informative presentation, lots of valuable information in it. Brian, I could be mistaken here, but I just noticed in the list of customers, the large customers you highlighted, you --- I don't recall seeing AAR CORP. in that list before, and I was hoping maybe you could maybe expand on how that relationship has evolved and exactly how -- what the nature of that relationship as it relates to what you're providing to them.

So AAR has been a large customer of Park for a long time. The thing is that some other customers, maybe 6 or 7 and they move up and down, I thought that they've been a top 5 before, but I can't say that for sure. But there's nothing special going on that I can point to with them. They have been a significant customer for many, many years. So I don't have any special news about AAR at this time.

Okay. But that will be supporting an aftermarket application. Correct?

There are a couple other programs that we work with AAR on, so I'm not sure it's only aftermarket. I'm not sure about that. I don't think so actually.

Okay. And then could you just talk -- I know we spoke only 2 months ago, but I'd appreciate perhaps if you could just give us a qualitative description of what -- how the pipeline of new business opportunities has evolved in the last 2 or 3 months.

I know it's always -- that seems to be a good question that is asked often. So this is a subjective answer, I think, that you're looking for. I think it feels pretty good. We mentioned a couple of new opportunities that we were -- we did mention our recent developments, the opportunity in private space. As I said before, it's a little frustrating because most of these things, we're not really at liberty to discuss with any detail at all. But I think it feels pretty good. Just my sense, it's qualitative. It's not based upon an objective analysis or hard data analysis, but it feels pretty good. Personally, I see pretty much everything that comes our way in terms of new opportunities, new quotes, and we -- just like yesterday, we got something we didn't see coming, and I was glad to see that. I don't know exactly how this works, the dynamic works, except I think there's part of it, Brad, is there's a little momentum that's built and you put a lot of work in and maybe you don't see the results, then 2 or 3 years later, things just start to come your way. But I sense that thing is happening and -- but again, that's subjective, as I mentioned. I think I've seen most everything that comes our way, so I get a subjective sense about what customers were dealing with, with programs, what's new, what's just legacy, what's a follow-on. And another thing I will just add, I probably -- I'm sure you don't really read too much on this is that we are in a way -- Park is emerging as an aerospace company. We're changing our name but -- we sold Electronics Business in December. I noticed there's a lot of these news items that I guess people do about public companies are -- some are little silly, and in many cases, we're still referred to as Electronics Business when they describe us. So maybe it will take a little while for people to figure out that we are an aerospace company. But I think the sale of Electronics was a big deal and made a big impact in terms of our perception as being an aerospace company. And I think that only will help and maybe add to the momentum that I feel we are seeing now.

And then my last question was -- thanks about new data point as it relates to the commercial space opportunity. Is there any update that you can provide as it relates to the VTOL market or the air taxi market that you referenced last quarter?

Yes. So it's in Ben's pie chart. It's something that we are working on. There's certainly a lot of news about it and the -- it seems to be the hot topic of the day, but we are working in that area. We're pursuing it. There is a program, it's an important program that I think we're on. I think I told you, maybe I did last quarter, that was pulled back where we design. But we feel optimistic that we'll continue to participate in that program. We think it will come out in its redesigned fashion. So it's something we hear a lot about certainly these days. It's in the news everywhere. So like when these new things come out, just my impression is that not every one of them is going to hit, right? It's like sexy and current and not every one of them will hit, but there's so much going on there perhaps being more than just fluff to it in my opinion.

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

Thank you. This is Brian. Thank you all for listening in the summertime. So I appreciate your time. Thank you for listening to our presentation, and have a really great summer. Please call us if you have any follow-up questions, and we'll talk to you later. Have a great day. Thank you. Thanks again. Bye.

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