Park Aerospace Corp. (PKE) Q2 2027 Earnings Report, Transcript and Summary

Good afternoon. My name is Cleo, and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp.'s Second Quarter Fiscal Year 2027 Earnings Release Conference Call and Investor Presentation. [Operator Instructions] At this time, I will turn the 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 all to Park Aerospace's Fiscal '27 Second Quarter Investor Call. I have with me, as usual, Mark Esquivel, our President and COO. We just, I guess, right after the close, published our second quarter earnings release. And in the earnings release, you'll find instructions as to how to access the presentation we're about to go through, either through a link and there's also -- it's also on the website. So and if you want to pull it up in order to make this -- the presentation discussion more meaningful. It's kind of a common theme for the last couple of quarters. We have a lot of new investors. I think last call, we had about 170 people who participate in the call. And we have a lot of new investors. We have a lot of the veteran investors. So we have to find a balance between the old and the new, and we'll do the best we can to maybe find a mid ground or compromise. Obviously, the legacy investors probably don't want to hear the same material being covered every time, but some of the new investors may find it more interesting and useful. So we'll do the best we can with that. And after we're done with the presentation, we'll be happy to answer your questions. So why don't we get started? Let's proceed. On to Slide 2, forward-looking disclaimer information. Let us know if you have any questions about the forward-looking disclaimer information. Slide 3, our table of contents. First of all, Slide 1 -- sorry, the first item in the table of contents is the investor presentation, which we're about to get to. And there are also a supplementary financial information attached as Appendix 1 to the presentation. We're not going to go through that information, but let us know if you have any questions about it. As usual, we feature the James Webb Space Telescope and our table of contents. James Webb Space Telescope recently identified a mysterious new class of cosmic objects called Black Hole Stars. They look like gigantic stars, which shine up to 100 billion times brighter. So that sounds like a lot to me. Thank you for James Webb Space Telescope and Park. James Webb was produced with 18 Park proprietary Sigma Struts, as you probably all know. Let's go on to Slide 4. So we go from the sublime to the mundane here. Here are the second quarter results. So let's just go through the right-hand column, second quarter, our current -- the quarter we're just announcing. Sales of $20.791 million, gross profit, $7.135 million, gross margin, 34.3%. We like that. We like our gross margins to be into the 30s. Adjusted EBITDA, $5.285 million; adjusted EBITDA margin, 25.4%. What did we say about our Q2 during our Q1 investor call? We said our sales estimate was $19.5 million to $21 million, so we came in within the range, maybe kind of toward the upper end, but within the range. Adjusted EBITDA estimate, we said $4.3 million to $5.1 million. So we came in a little bit above the range with our EBITDA number. Significance of our forecast estimates, we remind you of this fairly often. When we give these estimates, we're telling you what we think will happen. Sometimes we're wrong, sometimes we're not, but we're telling you what we think. Mark and I usually spend a lot of time going through this and come up with the ranges for you. We don't pad the numbers. I know a lot of other people do that. We don't give you a number and subtract 10% from it. So when we announce the number, we can beat it. That's just not what we do. We understand that pretty much everybody else does that, but we're not like everybody else, as you probably know. That's actually a kink song, if you want to check that out. Pretty good one. Slide 5. Quarterly results. We're continuing here. So we're mixing things up a little bit. I maybe should have explained at the beginning. We're changing the sequence of things, and we're changing the content a little bit just to try to make a little more interesting for you. I don't know if we'll be successful, but that's the objective here. So what we're doing with this slide here, Slide 5 at the top is we're talking about some key product groups that we'll circle back to in many cases. C2B fabric, we covered that a lot, $1.5 million of sales. Ablative materials produced with C2B fabric, $1.8 million. Often, we describe -- we discuss those 2 numbers because if they're really out of sync, out of alignment, they could distort the quarterly P&L. But those numbers are fairly close. So we're not going to get into that. But just for information, we always like to know. Missile Systems programs, so $5.7 million. Obviously, we emphasize Missile Systems a lot, so we thought you'd be interested in that number. Advanced composite materials for GE Aerospace jet engine programs, $8.3 million. We'll circle back on that. We cover that every quarter. And here's something a little interesting we thought we'd provide for you. Our second quarter sales value of production, we call it SVP, was $21.1 million. That's not inventory value, that's actually sales value. And that's a modern-day record, we think, post sale of our electronics business. And that's a really good thing. And we're going to give a lot of credit to our factory people, our floor people for producing and getting out the door that much product. That's actually a pretty nice accomplishment under maybe not ideal circumstances, but when are there ideal circumstances. So we wanted to acknowledge our production people in terms of how much product was produced during the quarter. One other thing we never cover in these investor calls is EPS. We don't get into that. But we just wanted to mention something to you, it will be discussed in more detail with our 10-Q, which I think will be filed on Tuesday, Monday is a holiday. So you can look forward to it there. But you might have noticed already, and I just want to get ahead of this a little bit, that our tax rate for Q2 was quite low. It was 18.6%. That's not a normal tax rate. There are significant benefits from stock option exercises, which took place in Q2. There, a lot of stock option exercises in Q2, significant benefit. Our normal tax rate without that benefit, the stock option exercise benefit, if you will, for the tax rate would be probably around 26.5%, something like that. And just so you know, if we had that more let's say, "normal tax provision" or tax rate rather of 26.5%, probably looking at $0.19 rather than $0.21. Like I said, we're reluctant to get into EPS stuff. We don't normally cover that, but I thought it's such a significant difference in the tax rate that you'd probably be interested to know that information. If you want more information about that, you really should call and talk to Gus and Chris. But like I said, when we do -- when we publish our 10-Q, there'll be a little bit more information about that particular item. Okay. Let's not get too hung up on that. So let's go on to Slide 6, our top 5 customers for Q2 in alphabetical order. Let's see. Let's tie the customers to the pictures. The easy one is Kratos, the BQM-177A, that's a target unmanned aircraft that obviously ties to Kratos, Defense and Security. Airbus A320neo with LEAP-1A Engine that ties to the Middle River Aerostructure Systems, we call it MRAS. And let's see, the Patriot, we talk about that a lot, PAC-3 MSE Defensive Missile System. That's two for the price of one, that ties to AAE Aerospace and L3Harris Missile Systems. That's nice and efficient. The bottom right, Bombardier Global 8000 Business Aircraft, and that ties to The Nordam Group, okay? Let's go on to Slide 7, lot of pie charts. Nothing too remarkable here, pretty consistent. So let's not get -- let's not spend too much time on Slide 7, just we keep moving. Let's go on to -- of course, if you have questions, let us know later, but we're going to move to Slide 8. This is a little more interesting. Park Loves "Niche" Military Aerospace Programs. This is a slide we give you every quarter. This is a Alaina's project. She always does a real nice job. So the pie chart is interesting because look at the Missile System percentage, it is growing. This is just one quarter. So we'll see what happens quarter-to-quarter. These things change, of course. But we've been talking a lot about Missile Systems and Missile Systems as a portion of the pie chart is growing. We won't go through a description of the photos, individual programs, except we always say that we don't provide photos of programs that we're not somehow involved with. But we used to give you more information. Right now, we just -- at this point, we don't feel we can do that. It's just -- it's just too sensitive. We just don't know where the line is as to where we can say we can't. So we don't want to push the envelope too much. Let's go on to Slide 9. Okay. GE Aerospace Jet Engine Programs. Like I said, we're changing things up in terms of sequence a little bit, try to make a little more interesting. And this slide is a little different than it was in the past. Park's advanced composite materials are sole source qualified on multiple engine nacelle and thrust reverser components on the following GE Aerospace and CFM Engine Programs. So quickly, there's Boeing 747-8 with GEnx-2B Engines, those are for spares. That program is canceled. LEAP-1A Engines for the A320neo Aircraft Family, that's the big kahuna. LEAP-1C, that's for the Comac 919, that's Chinese single-aisle. CF34-10A, that's for the Comac 909, that's the Chinese regional jet. And the Passport 20, we already talked about that Bombardier Global 8000 Aircraft with the Passport 20 engine. So what's going on here? Park has an LTA requirements contract through the end of '29 for the above programs with MRAS, a sub of ST Engineering of Singapore. Now what's going on here? These look like they're all GE programs. You got to read the little footnote. Footnote, MRAS is formerly a sub of GE Aerospace. So that's the connection. When we got on all these programs, MRAS was part of the GE Aerospace. And then I think in maybe 2018 or '19, GE Aerospace sold MRAS to ST Engineering, which is a large Singapore aerospace company. Park is also exclusive supplier of AFP composite materials for the fan case for the GE9X engines for the Boeing 777 aircraft. Let's go on to Slide 10. Update on GE Aerospace Jet Engine Programs. We're starting out with the big kahuna, the A320neo Aircraft Family. We're not going to read the variants for you, but you can see them for yourself. So as of August, Airbus had delivered 4,741 of these airplanes, and they have a backlog of firm orders. 7,571. That's just a huge, huge, huge, huge program, probably the biggest ever for commercial aircraft. So we're fortunate to be on that program. And here's the history of the ramp-up. You can see what's going on. They were ramping up the program until they hit the skids with 2020. That's the pandemic year and then clawing their way back 2025, 607 airplanes were delivered. And 2026 year-to-date, you don't want to annualize this number, that's not a good idea. You can do it if you want. It's not how it works because these aircraft companies say make the years, if you will, in the last couple of months. But what's significant is that, that number is quite a bit larger than the same period from '25, which was 333 deliveries and year-to-date August '25. So that's good. It means that GE is and ramp up -- GE Aerospace, sorry -- GE Aerospace and Airbus are ramping up this program, which is a good news. Slide 11. Okay. What are we doing here? Airbus is targeting A320 Aircraft Family delivery rate of 70 to 75 per month by the end of '27. Remember the prior page, I think when we say '25, it was like 51 per month. So we still have a way to go here and stabilizing to a rate of '27 thereafter. Approved engines, this is important, these are 2 approved engines for the A320 Aircraft -- A320neo Aircraft Family. 1 is the CFM LEAP-1A engine. That's the program we're on. We're on the A320neo aircraft family with the LEAP-1A engine, CFM, and we're not on the A320 Aircraft Family Program with the Pratt engine. So we covered that in the first and second bullet item. Here's some interesting info, third bullet item. The CFM LEAP-1A market share of firm engine orders for the A320neo family of aircraft was 66.9% as of June 30. So the CFM LEAP-1A market share continues to grow very nicely. And in the prior quarters we explained why that is, what's going on. We're not going to go into it here, but if you have any questions about that, let us know. The key thing is that the LEAP-1A market share, that's the program we're on, continues to grow. I think when we started these presentations, it was maybe less than 60%. I don't remember, but it's grown quite a bit and it continues to grow. And there's a huge, huge backlog, so there's a lot of ballast, if you will, in that market share. You know, it's not easy to change the market share so much month-to-month or quarter-to-quarter. But nevertheless, that's what's happening. At that delivery rate of 75 A320neo Family Aircraft per month and at 66.9% market share, that translates into 1,204 LEAP engines per year, which is a lot of damn engines, pardon my French. Let's go on to slide 12. So still with the same program as of June 30, there were 8,546 firm LEAP-1A engine orders. And that's a heck of a lot of engine orders. I think if you go to slide, what is it? Slide 16, you could kind of figure out what that's worth. You can do your own math. Because in Slide 16, it tells you what a revenue per unit is. It's -- let me just say it's a big number. And that's not it, that's just the firm engine orders. That doesn't mean that's it. Obviously it's going to take more orders as time goes on. So let's go, let's continue on Slide 12. A new, a different program, the COMAC 919, that's the Chinese aircraft with the LEAP engine. It's a LEAP-1C engine. They reportedly have over 1,200 orders. And you can see the deliveries, they're trying to ramp up. They haven't been doing, you know, I'm sure they're not achieving the rates that they want. Their deliveries are expected to ramp to 59 in '28, and 93 by '30. Those are airplanes, not engines, by the way. This is the single-aisle, the Chinese single-aisle airplane that's designed to compete against the 737, the A320. Let's go on to Slide 13. The 777X with the GE9X engines. This is a very delayed program, but still a very important program for Park. The test program has amassed over 1,700 flights. That's a lot. Over 4,800 flight hours, that's a lot. Reportedly, they have over 670 open orders for the aircraft. And Boeing anticipates a certification entry to service and first delivery next year. This has been pushed back a lot, a lot of delays, but just my opinion is I have some optimism that this will happen next year, which will be really important for Park -- an important program for Park. So let's get a nice picture of the 777X undergoing cold weather testing at Fairbanks. A friend of mine took that picture. Let's go on to Slide 14. Here we go. So, GE Engine Program Sales History and Forecast Estimates. We don't go through all the history, we don't need to do that. But what you might look at is look at fiscal year '20. That was like the year before the pandemic, just about $29 million. It took up to fiscal year '26. Look at the right-hand side of the slide kind of halfway down, '26 to get back to $29 million numbers. So, you know, we really had a setback with the pandemic. And it took us a while to even get back to the pre-pandemic numbers for these jet engine program sales. In fiscal, in our second quarter, $8.3 million of sales. And our forecast for Q3, this is GE Engine Program sales forecast, $8 million to $8.5 million. For fiscal '27, the whole year, we brought that number down, from $32 million to $35 million, it was a little higher. That number was based upon the input we have from our customers called a bill plan. And we haven't gotten a revised bill plan, but, you know, we're a little skeptical as to whether we'll achieve that bill plan because we have our first 2 quarters in the books. We've got a forecast of Q3. And we're trying to be a little more conservative in terms of where we're going to go with the fiscal year. We'll see what happens. All right, let's go on to Slide 15. So the GE programs outlook that we call our Juggernaut, Park 's Commercial Aircraft Juggernaut. This is our first Juggernaut. Remember GE Aerospace Jet Engine programs. What's the timing for the Commercial Aircraft Juggernaut? For a long time, for years we were saying, when's it going to happen, when's it going to happen? We don't know, we'll see. But we're no longer saying that. We're saying that Commercial Aircraft Juggernaut's here because the programs are clearly ramping up. Commercial Aircraft Juggernaut drivers, what are they? They're the A320neo Aircraft Family production as it ramps up to the 75 airplane for a month. The expected certification entry into service of the 777X and Comac's planned ramp up of C919 aircraft. The other 2, GE Aerospace programs, the Global 8000 and the C909, those programs are pretty much at rate, so that's good, but they're probably not going to be key drivers in terms of the ramp up of current rates, the current revenues rather to that Aircraft Juggernaut kind of revenue level. So let's continue. Here's Slide -- what is it, Slide 16 we're on, yep, continuing with the Juggernaut. So here is kind of how we lay out the juggernaut and get to that $62.34 million. There are a couple changes here though in the assumptions and slide 17 has footnotes in terms of how we computed, how we arrived at assumptions and how we did the math. But we actually increased A320neo to 1,200 units because we decided we really should look at the current market share. We're holding off using like 60% market share, but we thought that doesn't make any sense anymore. And we brought down the number for the C919 just because they seem to be struggling to get that level. Now remember, these are engines. So you got to multiply the airplanes by 2. So 200 engines means 100 airplanes. So -- and we do the math and then we get to $62.3 million or $62.4 million -- like $62.3 million. And that compares to about, what, $30 million last year, something like that. So it's still a long way to go in terms of the ramp-up. 17 -- Slide 17, rather, these are the footnotes I referred to. We're not going to go through these. Any questions, let us know. Slide 18. Okay, we're changing gears and we probably have to pick up the pace a little bit, Missile Systems. Now the good news about Missile Systems is there really -- even though there's so much going on for us in missile systems, it's like a frenetic pace for us to keep up with. But there's not a lot of new developments that are being reported in the presentation as compared to Q1. So a lot of this is just review. It's our new juggernaut. Next big thing, missile systems, Park Missile Systems niche, we call it. We specialize in design and manufacture advanced composite ablative materials used to produce solid rocket motor structures for critical missile systems, including the PAC-3 MSE Patriot Missile System, which we talk about a lot. We also design and manufacture advanced composite materials used to produce other missile systems components. Depletion of the depleted, we covered this last time. It's well understood, widely known that the missile system stockpiles have been badly depleted by all these horrible wars that we've been involved with the last couple of years, running empty, replenishing the depleted stockpiles. So there clearly is a highly urgent need to replenish depleted stockpiles. But is that it? Does it end there? Maybe not. Let's go on to Slide 19. Okay. Here we go, quadrupling the production of the exquisite class of weapon systems. Quadrupling, that's quite a concept for the aerospace industry, usually it doesn't move that quickly in our experience. On March 6, beginning of the year, 2006 (sic) [ 2026 ] President Trump met with in the White House with 7 top defense contractors. At the meeting, these contractors reportedly agreed to quadruple production at the exquisite class of weapon systems as rapidly as possible. That's really quite something, kind of shocking. And the PAC-3 missile system, of course, is head of the class of the exquisite class of weapon systems, plus other things that other programs Park is on. Let's talk about PAC-3, the PAC-3 MSE Patriot Missile System. Park is also sole source-qualified advanced composite ablative materials for the solid rocket motors for the PAC-3 MSE Missile Systems program. The PAC-3 Missile System interceptors have been extensively and very effectively used by U.S. allies in the Middle East, including all these countries. And why are they using them? Because the bad people are shooting missiles at them. So they've been using the PAC-3 Missile Systems to intercept and destroy the incoming missiles, ballistic missiles that are being shot at their countries, launched toward other countries and in particular, civilian population centers. Let's go on to Slide 20, the PAC-3 MSE Missile System. It's an extremely effective missile defense system, very high rates of successful intercepts and destruction of incoming ballistic missiles and other threats. But the stockpiles of those PAC-3 MSE Missile Systems have reportedly been badly depleted by all these horrible wars. I don't think we're talking out of school. We're not talking about anything confidential, no inside information here, just it's been widely reported that these -- the system stockpiles have been badly depleted by these horrible wars. And the thing is that the Patriot Missiles, they don't do any good if they're not available, as wonderful as they are. According to reports, there were dozens of people killed recently in Ukraine by Russian ballistic missiles incoming, which Ukraine was not able to intercept and shoot down because of a serious shortage, that's their terminology of Patriot missile interceptors. It's just heartbreaking. I mean these are people that died. It's not funny. It's heartbreaking. On January 6, 2026, this is now kind of following on what are we doing about it? What's our government trying to do about it? Lockheed announced it reached a 7-year agreement with the Department of War to increase the PAC-3 MSE interceptor production capacity from 600 per year to 2,000. Well, that's quite an assignment, 600 to 2,000. Let's go on to Slide 21, more activity by the government January 13, like a week later, the Department of War announced its investing $1 billion in L3Harris Solid Rocket Motor business to boost solid rocket motor production for the PAC-3 MSE and other missile systems. This is all public stuff. We're not talking out of school here. ArianeGroup of France, let's talk about them for a while. ArianeGroup is a joint venture between Airbus and Safran. Ariane is an iconic and legendary missile launch system development and manufacturing company with very deep legacy technology. Ariane's rocket and missile system programs include Ariane 6 Heavy Lift Launcher used for the European -- by the European Space Agency and the MS1's submarine launched ballistic nuclear deterrent missiles. This is a very special company. Our relationship with them and its predecessors go back to the early 2000s. We're very proud and fortunate to be their partner. Like I said, they're a very special company, very special people, wonderful people actually. And we just want to go on record to make sure everybody knows how we feel about this wonderful company, how privileged we feel we are to be connected with them and how privileged our country should feel to be connected with Ariane. So let's go on to Slide 22. They produce -- Ariane produces a proprietary fabric called RAYCARB C2B, which is used to produce ablative composite materials for advanced solid rocket missile programs. And we're sole-source qualified on the solid rocket motor for the PAC-3 MSE missile program for specialty ablative materials produced from ArianeGroup's proprietary C2B fabric. So we're qualified with our prepreg material, but it's also qualified with Ariane's C2B fabric. Park entered into a Business Partner Agreement. That's what they call it or Ariane calls it with Ariane in 2022, under which Ariane appointed Park as its exclusive North American distributor of their C2B fabric. I think formally, we were doing that for a long time, but they wanted to formalize it. That was -- that came from them, not us. On March 27, '25, we entered into what they call the New Agreement with Ariane under which Park agreed to advance Ariane EUR 4,587,000 against payments for future purchases by Park of C2B fabric. We paid the first installment in our fiscal year '26 Q1. We'll get a second installment in our fiscal '27 Q1. Let's go on to Slide 23. Our third installment is basically being paid now. And we actually accelerated that. It was supposed to be April next year. It's now, I think, next month. And that was in exchange for Ariane increasing the allocation and pulling in the allocation, accelerating the allocation and then also in exchange for at least our asking if they can even do more. We have a wonderful relationship with these people, and it's worked very, very well. What's the purpose of this EUR 4,587,000 advanced payment? To fund 50-50 with Ariane in the construction of additional C2B fabric manufacturing capacity in France. This additional French manufacturing capacity expected to come online in '28. Approximately half of it is for us and half of it is for them because they need it for their own programs at Ariane. So we went 50-50 on this additional capacity, we're 50-50 on the output. But unfortunately, this additional French capacity -- manufacturing capacity will not be adequate to support the ramp-up of the PAC-3 MSE program, not completely anyway to that 2,000 interceptor per year rate. So now what do we do? Let's go on to Slide 24. I'll try to pick up the pace a little bit here. Sorry, taking too long. On July 18, this is all covered at our last -- our Q1 investor call. This all just happened, right, at that point. July 18, Park and Ariane entered into a term sheet agreement relating to the construction and establishment. This is big by Ariane of a U.S.-based C2B fabric manufacturing plant with expected capacity more than adequate to fully support the needs of the PAC-3 MSE missile program at that 2,000 interceptor per year rate. The term sheet agreement provides a definitive agreement also will need to be entered into before the end of the year. But what's the significance of the signing of the term sheet, I mean, before the definitive agreement is signed, based on the term sheet signed by Ariane and Park last July, Ariane is proceeding with the construction and establishment of a U.S.-based C2B fabric manufacturing plant. That's really important. Let's go on to Slide 25. And that's provided in the term sheet, 100% of the output of that U.S. plant, the U.S. plant will be allocated to Park, which we will use to support the PAC-3 and other missile programs. That's really important because the capacity in France, we share that with Ariane. This capacity is all for us in our programs. Also under the terms of the term sheet, Park has committed to invest $25 million in ArianeGroup's U.S.-based manufacturing plant. Now it's not equity or debt kind of investment. The $25 million investment will be made by Park in the form of advance payments to be fully applied against future purchases by Park of C2B fabric. The $25 million advanced payments are expected to be made by Park in '26 and '27 and expected to be applied by Park against future C2B fabric purchases beginning in 2030. So why do we do that? It's kind of a strange thing to do, you would think. Why did Park enter into the term sheet agreement with Ariane and why do we make the commitment to $25 million advance payment commitment? Because it was necessary to provide Ariane with the green light to proceed with the construction of the U.S.-based C2B fabric manufacturing plant, and we at Park believe it is urgent at Park -- that ArianeGroup rather builds its U.S. plant as soon as possible. So let's go on to slide -- what is it, 26 -- yes, Slide 26, top. Although we're not at liberty to disclose the specific C2B fabric manufacturing capacity expected from Ariane's U.S. plant, when the plant is complete and online, its manufacturing capacity, together with the C2B fabric allocation from Ariane's European operations will be more than adequate to support the needs of the PAC-3 MSE program at the 2,000 interceptors per year rate and numerous other critical missile programs. So what's the timing of the Ariane U.S. -- C2B rather fabric manufacturing plant in the U.S. According to Ariane, their U.S. plant was originally expected to take 4 years. That's a long time to be completely online. But Ariane recently agreed with Park to accelerate the time line for the completion and bringing online of a U.S. plant by 6 months in exchange for Park's agreement to accelerate the $25 million advance payment schedule. It's very good news because we want to get that plant up and running as soon as possible. As a result of this recent agreement, Park is now expected to make advanced payments of $20 million this year and $5 million next year. That's all to be applied against future purchases by Park of C2B fabric. Now this is all obviously dependent on us entering into that definitive agreement, which is expected to happen before the end of the calendar year. So let's go on to Slide 27. Okay. So just for the record, I want to cover this, even though we are in business to make money for our shareholders, thank you very much, it should be obvious. It's not all dollars and cents for us. There's more to it for us. As we've already alluded to, every time a PAC-3 missile is launched and successfully intercepts, destroys an incoming ballistic missile, it's likely that there are people who are alive and walking around on the Earth who otherwise would not be. Lives are being saved. This is reality. This is not theory, this is not some interesting paper or some kind of video game. That matters a lot to us. Okay. That matters a lot to us. So that motivates us a lot. We don't like seeing people getting killed when they shouldn't be getting killed. But let's talk dollars and cents for a minute anyway. Under the terms of the term sheet, Park is expected to purchase a significant amount of C2B fabric from Ariane during the period of 2030 to '36. So why is that a good thing? Well, it's also -- it's a good thing because Park will also be expected to sell all that fabric to its pre-arranged customers under prearranged arrangements with the customers with our distributor's markup. But in addition to that, Park will be expected to manufacture and sell ablative materials produced from that C2B fabric for those customers. So what kind of ROI do those sales of fabric and materials represent for Park? Well, we're not going to disclose that specifically. But let's just leave it at this. It's a very, very good business deal for Park, and you should be happy about it from a business perspective, very good. Let's go on to Slide 28. Okay. Changing gears here, talking about our new plant. And again, this has all been covered pretty much, not too much news here. July 17, we entered into this lease agreement for land at the 18 acres at Tulsa International Airport. That's where our new site will be. There's also going to be land for space for additional plant if needed in the future. Plant size, 150,000 square feet approximately, the budget outflow -- sorry, the capital budget, $65 million cash outflow, $10 million in '27, $45 million in '28, $10 million in '29. You probably noticed that this got pushed out a little bit. I think last quarter, we said $25 million in fiscal '27. It takes a little -- take a little longer to work through all the incentive agreements with Tulsa and Oklahoma. And we're not -- they're wonderful people. That's not -- they're not a problem. It's just longer than we expected. But the good news is you look at the last arrow item is that facility is still expected to be complete in '28 and production shipment is supposed to commence in '29. So that's not pushed back. Fiscal '29, I should say. Page -- sorry, Slide 29, continuing here, plant is designed to produce our full product line. Second arrow item expected to -- this is important, approximately double Park's current hot-melt prepreg and film adhesive manufacturing capacity. That's used to support GE Aerospace programs and other commercial aircraft programs. But here's the key thing. By staffing up our existing hot-melt manufacturing lines in Newton, Kansas, in our Newton facility, we'll be able to support the ramp-up of the GE Aerospace programs and the other commercial aircraft programs and hot-melt programs we support. So we'll be able to do that. And people are asking about that, how are we going to bridge the gap until our new plant is online? We can do that with our plant in Newton by staffing up our lines. But the additional hot-melt manufacturing capacity provided by our new Tulsa plant will be necessary to provide to more properly and sustainably support those GE Aerospace programs and other commercial aircraft programs. So we'll be able to get through the transition with our current plant, but it's really good our new plant is coming online soon. And it's the same really, almost the same exact story with the solution treating on Slide 30, manufacturing capacity. We're tripling our solution treating manufacturing capacity with the new plant. That's used to support, among other things, missile system programs, the solution treating manufacturing capacity. And the same story by staffing up the existing solution treating lines in our Newton, Kansas facility, we'll be able to support the PAC-3 program at the 2,000 interceptors per year production rate because that according to what our customers are indicating, we're not going to give you the specifics, we're supposed to meet that rate well before our new plant is online, but we can handle it. But the key part is the additional solution treating manufacturing capacity provided by our new Tulsa plant still be necessary to more properly and sustainably support the PAC-3 program and other critical missile programs in the future. Why are we building the plant, pretty obvious, just because of our commercial aircraft juggernaut and missile systems juggernaut, they require it and also to enable, facilitate and promote Park's growth and development of this company for the future. Okay. So Slide 31. Here's where we kind of mix things up again. These slides are somewhere embedded in the middle of the prior presentation. Park's financial performance history and forecast estimates. We won't go through history. We just -- we already did that, but Q2, so we already talked about Q2, $20.8 million rather sales, $5.3 million in EBITDA, adjusted EBITDA. Our forecast estimates for Q3, $21 million to $22.5 million of sales, $5 million to $5.8 million of EBITDA. Let's go to 32. We show you this slide every quarter, except the new things. We're including the first 6 months year-to-date in the right-hand column. We'll continue that like next quarter will be the first 9 months, just for information. So why don't we continue? Let's go on to Slide 33. Recent public offering. You know about this. There's no news about this. It was already complete when we did our first quarter investor call. It was a $50 million at-the-market public offering, ATM, I guess, they call it. And we sold 1,812,000 shares at an average -- for proceeds of $49,996,000, average price of $27.58 per share, and that at the market offering is complete -- was actually complete, I think, in June. Let's go on to Slide 34. Our last slide, thankfully, I guess, Park's balance sheet, cash and cash dividend history, saving the best for last. Park has 0 long-term debt. That's really important to us. I'm not saying we'll never have debt, but that's kind of against our religion. I hear these -- sometimes watch the financial news, all the small companies with all the debt, they are struggling. It's the big 7 or whatever they call it, are doing so great. Well, I don't know about that, but we're not big believers in debt either. Park reported $114.75 million in cash and marketable securities as of the end of second quarter. That's a lot of money, I agree. But remember, as we previously discussed, we plan to invest $65 million on our major new Tulsa manufacturing plant and $25 million in ArianeGroup's U.S. plant in the form of advanced payments. Now $25 million eventually comes back to us, but that could take 4 or 5 years. So you add $25 million and $65 million, you get some real numbers there. I just want to mention something we haven't mentioned before, which maybe is obvious to you, but the $65 million -- so those were the capital assets, that's the equipment and the factory and everything else. That's not the working capital, and that's not the start-up costs, which are going to be significant. That's over time. That's not just day 1, but just keeping that in mind. So when you look at it that way, $114.75 million is a lot of cash, but maybe it's not all that much actually. Park has paid 41 consecutive years of uninterrupted quarterly cash dividends. That's a nice thing for us. And saving maybe the very best for last, Park has paid $616.4 million or $3.10 per share in cash dividends since the beginning of fiscal year 2005. I always like to juxtapose that last comment to the picture of the Park founders back in the 1950s in a plant in 19 -- plant in Flushing, New York actually, not a first plant or a second plant. These 2 guys, the founders started the company with basically nothing, I think a little money left over from the war duty. So I guess you could say Park has come a long way from those early days. But I'm going to spend a lot of time on this, but I still think it's important for all of us at Park to remember where we come from and because those beginning days were so important for us and really set an example for what kind of -- what we want to be -- the way we want to deal with things, deal with problems, deal with obstacles, deal with hurdles, roadblocks that come up every day today. So okay, I think that ends our presentation. Yes, it does. Operator, I'd be happy to answer questions to the extent there are any.

[Operator Instructions] Our first question comes from Jim Ricchiuti with Needham & Co.

First off, just if my numbers are right, it looks like you had very strong growth in missile systems, both sequential and year-over-year. So are these levels sustainable? Or are we going to -- should we anticipate continued variability until we really see this missile ramp underway in earnest?

Jim, you're breaking up a little bit, but -- if you look at Slide -- that's fine. Slide 32, a good question. I think it is sustainable. And the reason that you want to look at Slide 32, looking at the sales, from '17, '18, '19, '20, we're growing pretty aggressively, $10 million a year, more or less. Then we hit '21 -- fiscal '21, the pandemic, and that really kind of slowed us down for several years. It took us through to '25 to really get back to the levels of '20. But I think we're back on that trajectory. And I think it's pretty aggressive, probably more aggressive than it was before. It's going to be our challenge to keep up with the growth, both in the missile programs as well as the GE programs. I think we talked about the juggernaut of $62 million for the GE programs. Last year was maybe, what, $30 million, $31 million, something like that. So there's a long way to go there and certainly a long way to go with the missile programs as well.

Brian, hopefully, you could hear me clearly, but I wanted to also go back to the commentary on -- regarding your full year sales with the GE programs. I mean you had a strong Q2, I think, versus expectations, and yet you're trimming the full year. It sounds like you're being conservative. But again, this is based on build plans that you get. So I'm just trying to understand that a little better and reconcile that.

Yes. Unfortunately, Jim, you're breaking up quite a bit. But I think you're asking about the -- what the GE programs forecast. Let me see if I can actually pull it up for you. It was on -- so the history, if I can't find it quickly, I won't -- okay. Slide 14. So you're asking if the growth is sustainable, whether it being conservative. I don't know. The forecast for fiscal '27, $32 million to $35 million. I don't think that's what we're trying to be conservative there. I do know there's a lot -- what we can tell you, Mark and I can tell you is there's a lot of energy toward ramping up these programs, especially the A320neo program. And then if the 777X gets certified next year, that program will have a lot of growth as well pretty quickly, I think. Like I said, we have fiscal '26 was that the last full fiscal year, $29 million and the juggernaut of $62 million. So a long way to go with the GE programs. Was there something else, Jim? We're having trouble hearing you.

Yes. No, I'm sorry about the connection. I'll jump back in the queue.

Your next question comes from Trevor Walsh with Citizens.

Maybe just to revisit that last question, just to clarify. So we saw you took the full year GE number down. And I understand a lot of moving pieces, but are you seeing -- your Q3 number looked kind of right on with what we were expecting. So it seems like it's maybe a little bit more uncertainty with Q4. Is there any -- is that a fair statement? And then beyond that, are there any specific programs that are kind of creating that uncertainty? Or is it more just kind of broad-based of just kind of what you're seeing within the group as a whole for GE?

Okay. I think we're misunderstanding this. No, just do the math, look at Q1, Q2 and Q3, and then it will be a big jump in Q4 to get to that number. The forecast that we provided was based on what's called the build plan, and they're probably just ramping it up a little more slowly than they originally planned. But I think it would be a mistake to read anything other than a pretty aggressive ramp-up from this information. We're just trying to be more realistic with Q4. There's nothing holding back Q4, but we're thinking, well, maybe Q4 will be similar to Q3 and Q2 in that range anyway. And we could be wrong, but we're just trying to be realistic, not trying to be conservative, realistic. But again, I want to emphasize, I think it would be a mistake to interpret this information in some kind of negative way that things are not going well, the programs aren't ramping up as quickly as possible. The key thing, I think, the key challenge, it's not us, would be our customers, is their ability to keep up with the program ramps. It's a challenge. It's a challenge. These are manufacturing companies. So it's a challenge for a manufacturing company to ramp up so quickly. But I would also say, just I don't want to beat this horse to death too much that we're clearly out of that pandemic mode where everything was just kind of going sideways for so long, and we just weren't seeing any growth at all. The growth is aggressive.

Yes. Okay. Fair enough. It makes sense, Brian. I appreciate the color. Maybe switching gears to missile systems a little bit. I appreciate the color around how the Newton facility can just generally support in this interim period before Tulsa gets up and running, both kind of the full extent of the GE ramp and then as well as the PAC-3 2000 rate as well. But obviously, there was just a big announcement with the Navy and Raytheon around SM-6, which I know you guys have some content on. PAC-3 is not the only game in town. So is it fair to say that as these other missile programs ramp up as well that you can -- that the Newton facility can also support those as well? Or do you kind of get to a point where you have to have to make some decisions about kind of what lines you are doing and just maybe talk more broadly. I know there's sensitivities around it, but just how comfortable you feel like given the pace of the ramp that how Newton can kind of get us through to when Tulsa is up and running?

Yes. We probably overemphasized the PAC-3 program. It's just we do that because there's so much visibility about it, so much known about it. We have companies publicly talking about the rates, which is a little different than some of the other missile programs. So -- and since we're sole source on the materials for the solid rocket motors, it's easy to kind of key into the discussion about the PAC-3. But as I was going through it just now, I was thinking, yes, we're really emphasizing PAC-3 to -- maybe to the detriment of a lot of other programs that we're working on. PAC-3 is clearly the largest program that we have now, but there are many, many other missile programs that we're working on. Mark and I were just talking about that. And it's a lot to keep up with. At this point, the answer is we plan to be able to handle everything with the Newton plant, but that will be by stretching and by staffing up the solution treating lines quite aggressively. And -- but we plan to be able to get there with the PAC-3 as well as the other missile programs. I think we'll all be very relieved when the new capacity and Tulsa comes online because we'll be stressed to get to that point.

Got it. Great. Super helpful. Maybe one more for me, and then I'll hop back in the queue. Good to hear that Ariane is able to kind of pull forward their timetable around the build-out for their facility. What -- I mean, it seemed like it was -- it just took some -- an additional infusing of funding and commitment from you to do that. If things got really kind of dire from just everything requiring C2B, could there -- is there a scenario where that can be pulled forward even more with additional funding, whether it's from you or some other kind of third party to help move that along? Or is that kind of -- is what it is at this point?

That's a funny question because people keep asking that. I think the answer is no about money. That's all it is. And what we did is we pulled forward the -- our advanced payments. We didn't increase our advanced payments. We pulled them forward. We accelerated them in order to help them get their plant up and running more quickly. So is there an opportunity for us for Ariane to squeeze that time frame, let's say, 4 years, 3.5 years to less than 3.5 years? I don't know. I think it would be a challenge. I think it would be difficult. I'm not saying it's not possible. And maybe a couple of months here or there. But significantly, -- my guess is probably not. It's not a matter of money either, and that's not the issue. So the reason I'm kind of laughing is because people have offered that, what would it take, and it's not money.

[Operator Instructions] Your next question comes from Fabio Wolfinger with Switzerland.

I'm calling from Zurich. As you told, you lowered your full year sales forecast for some of the programs. For any shipments that have been delayed, have customers confirmed new delivery dates? Or are you still assuming those sales will return? And looking into fiscal year 2028, do your latest customer schedule support faster sales growth than this year? Or should investors lower their growth expectations for that year as well? I'm asking especially about the difference between confirmed orders and expected demand. Could you give a rough breakdown of the reduction and tell us when you expect any delayed sales to be recovered?

I'm not sure I know what you're referring to in terms of reduction and delays. We haven't provided a forecast for this fiscal year or next fiscal year, but I'm not sure I understand what you're getting at in terms of these delays or reductions you're referring to, I'm sorry. Maybe you can clarify or yes...

No, I was listening about and I thought about some programs accounting for reduction approximately for these engine programs, right?

The engine programs. So I don't know what to say about it, the engine programs. If you're talking about the fact that we brought down the full year forecast, maybe that's what you're referring to, yes, I think now I understand for the GE programs. I thought you're referring to the forecast for Park. Yes, we brought that down.

Yes, Aerospace, yes.

There's a couple of million. Yes. Like I said, I think the original forecast we provided was based upon the build plan we received from our customer. And we weren't aggressive with it. We didn't round up or anything like that. And we're just saying now based upon the fact we have 2 quarters in the books, and we have a forecast for Q3 that we want to bring the number down a little bit to be realistic. But the ramp in our opinion, is going to happen, whether it moves a couple of quarters here or there, I think, is not relevant. And when we start talking about the GE Aerospace juggernaut, I think our main point was we don't know exactly what the time frame is. But the key thing is it will get there, and we better be ready for it. So I think the second question about this, I think we're really overreading or overly focused on the fact that we brought that number down a little bit. I don't think it really means anything in terms of the long-term big picture. Those programs are still there, and they're still ramping. I think it's not a function like the -- we talked about the COMAC program, the 919. So maybe that's what you're referring to. That program is a little delayed. But I don't think we had really big expectations for that this year at all. So it's not a function of the programs themselves. It's a function of how quickly our customers can ramp up their production. We can meet their requirements. It's not -- the Park is not the problem. But I don't think it's the end market either. I don't think it's the programs or how many airplanes the OEMs are able to sell. I think it's just a function of how quickly the industry could ramp up. And that's really been the story for several years now as we're trying to emerge from the pandemic because you probably know this, but Airbus had this target of 75 airplanes a month for years ago. And they really were struggling to get even up to 50, maybe past 50. It wasn't that the market wasn't there. Look at the backlog, they got so many airplanes sold. So it's a function of the industry ramping up production, not Park only, but the whole industry ramping up production to get to those rates. But I think I would say that maybe we're overthinking this annual forecast because clearly, the -- I don't know the vibe, if we look at it that way, we're getting is that there's an aggressive ramp-up going on. I know we talk to our customer, they're talking about very aggressively ramping up. And I guess I would say, maybe we're wrong, maybe we're being too conservative. Maybe the original build plan will end up coming true. We haven't -- we don't get revised build plans every year from them. So you haven't gone back to them and say, what do you think about the build plan? We're just trying to be a little bit more realistic based upon Q1, Q2 and Q3. But I think if we're -- we don't want to overthink that or read too much into it, let me put it that way. That's my opinion anyway. The GE Aerospace juggernaut, as we call it, I think, is very much intact and very exciting for Park. I'm sorry, I didn't understand your question at the beginning. It was just I was thinking...

No worries. What about the GE Aerospace outlook since July? That's what I'm asking.

Yes, got it. Thank you.

This now concludes our question-and-answer session. I would like to turn the floor back over to Brian Shore for closing comments.

Okay. This is Brian again. Thank you all for listening in, and thank you for the questions. It's been very nice talking to you. Please give us a call if you have any follow-up questions, happy to help you with that. Take care. Have a good day. Bye.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.