Good morning. My name is Michelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. 2nd Quarter Fiscal Year 'twenty two Earnings Release Conference Call and Investor Presentation. All lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will be a question and answer session. Thank you. At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr.
Shore, you may begin your conference.
Thank you, operator. This is Brian. Welcome everybody to our second conference call. I have with me Matt Tharpe, our CFO. As usual, of course, as most of you know, we announced our earnings this Morning.
In that earnings release, there are instructions as to how to access the presentation, which we're going to go through now via webcast, the presentation is also posted on website. And I think you really want to have a copy of the presentation in front of you as you go through it to make this call more meaningful. As usual, we tried to provide inside interesting perspective. We can't cover everything. We don't spend a lot of time ticking through dry data numbers, that's really not when we tried doing these presentations.
And I want to warn you, this could be a long one. I think the last 3 or 4 have been, it could be like 45, Few minutes. So hang in there if you can. And Matt and I, we have to answer questions and when we're done with going through the presentation. So let's get started.
Slide 2, This is our forward looking disclaimer. Let us know if you have any questions about our disclaimer language. Slide 3 is our table of contents. We have 3 appendices, which are attached to the presentation. We're not going to go through those at this time.
But Again, let us know if you have any questions either at the end of our at the end of the presentation or you can call us later. Slide 4, Okay. Now we get into the part of the stuff, we go right with the numbers. So we just announced our fiscal year 2022 Q2. As you know, Sales were $13,618,000 I look at the right hand column here, gross profit $4,411,000 Gross margin 32.4%, down from Q1, as you can see, probably more or less at the level of The last couple of years.
And I think that we indicated the gross margins would come down in Q2 when we did our Q1 call. Adjusted EBITDA $3,232,000 and adjusted EBITDA margin 27 correction, 23.7%. So what did we say about Q2 during our Q1 investor call on July 8, we said our sales estimate was $13,250,000 to $14,250,000 So it seems like we came in within the range there and our adjusted EBITDA estimate was $3,000,000 $3,700,000 Again, we came within the range. Our forecast philosophy, we cover this every quarter. I just want to say, I'm not sure how much of Stuff we should go over because a lot of you are pretty familiar with us, but we still go over some of the basics just in case you forgot or in case we have some new people dialing in, which We hope to.
Our forecast philosophy is a little different. We don't provide numbers that we can beat. We feel that's a little bit of a silly game. We know almost everybody plays But we don't we give you a forecast, we give you a range. We're saying to you, this is what we think is going to happen.
We could be wrong, but we're saying to you, this is what we think is going to happen. Not easy happened, but happened assuming we do we normally do, which is work very hard with a lot of dedication and commitment. So we're not trying to give a number that we can beat and then be here later on. We think that's kind of silly and almost just not worth your time. So just want to remind you of that.
Let's go on to Slide 5. Lots of factors which affected Q2, Which one to go through and throughout this presentation, these will be kind of themes these are repeating themes. Sales of substantial component for missile programs. We discussed this over the last several quarters. In Q2, we had sales of the component of about $1,000,000 Remember, That's low margin.
This is we have the relationship with the supplier. It's an overseas supplier. Some of our customers and OEMs that are on these missile programs in the U. S. Ask us to buy this product for them.
We have the relationship with a supplier overseas. These are critical programs and then we sell the product to the customers. So There is a markup involved, but it's quite low margin. Now the flip side, as we discussed many times, is when we actually use that product and produced the, we call it a blade of pre pregs and the margins are quite high. Now once we sell the product to these customers, they can do whatever they want with it, but the expectation is that it will be used by us to produce the composite materials for these ablator programs for them at some point in the future.
So it flips when we produce the materials, good margin when we sell the essential component, Basically a markup low margin. So 2nd quarter, a low margin, dollars 100, sorry, dollars 1,000,000 of sales of that component. Difficulty sourcing key raw materials. Yes, This is a big theme, over $200,000 actually of missed sales because we couldn't inability to source materials we needed. And then international shipment difficulties, another $200,000 in the sales in Q2.
In other words, this is stuff going out, not coming in. We have overseas customers. We couldn't get international shippers to ship all this stuff. I mean, our people are really good at that too, really good at it. We still couldn't ship $200,000 of product that was testing overseas.
For us, it's very simple. We ship the product, we invoice it and then we record it as a sale in that quarter. We can't ship it, it's not going to be sale in the quarter. So $400,000 approximately missed there. And that doesn't sound good, but here's the thing.
We had over $1,000,000 additional dollars at risk in the last couple of weeks of the quarter. So our people did a really fantastic job if you ask me in getting this stuff done. A lot of brute force, a lot of moving things around, a lot of juggling, a lot of logistics. But It was a little bit of a nail brighter for us because there's a lot more at risk, all based on the same factors at the end of the quarter. So lots of brute force, daily battles, plus we're dealing with COVID quarantines, fortunately everybody's okay, nobody's really got really Sick this time around, but that reached havoc with our production scheduling and planning Because what happens is somebody's wife gets tested positive, then they have to go home, then their whole crew has to go home and we have to work around all that stuff.
And this is not complaints. This is just our life that we want you to be aware of. And I think our people did a pretty terrific job and dealing with these kind of things. Domestic freight issues, yes, international shipment difficulties, domestic freight issues. Okay.
The customer sorry, the supplier hasn't terribly can't get somebody to deliver to us. We're talking about driving up to Kansas City Train Yard, you go pick up some of the materials or sell that we couldn't do that, obviously, will let us what we're talking about it. Additional costs for expedited freight shipments. So Yes, it's kind of like a little weird. Our suppliers aren't really getting the product to us and they say, oh, well, last minute we can get you something, but then we're expected to pay the expedited freight, which Okay.
You could say that's kind of interesting perspective, but there are actual costs there, cost escalations. If you're paying attention to anything going in the world, Wall Street Journal, financial news, while listening to other companies, these are not going to be surprises. This is kind of day to day life of of company that's in manufacturing in the U. S, not just in aerospace, I don't think either. Raw material cost increases, yes, there are a lot of them.
And most of they're covered When we enter into an LTA with a customer, normally that's based on the LTA we have with the suppliers. No LTA, well then We get new quotes for customers and we're not normally going to make an adjustment based upon raw material cost increases, but not always covered. General freight cost increases, Mostly covered, not always covered in terms of our P and L. Sorry, manufacturing supplies, yes, not always covered. So there's risk in terms of manufacturing supplies, costs for the supplies and go up and up and up.
And miscellaneous other costs, yes, all of the lot. You can tell me what they are, utilities, wages, benefits, insurance, you name it. It's a very strange environment we're in, in my opinion. I'm talking about just generally as a country. We finally have been able to increase our people count.
Remember, we talked about that every quarter. We'll give you specifics later on. That's good news, but there's a 2 edged sword here because obviously the people count goes up, the cost goes up as well. These are not any kind of excuses at all. We don't not into that kind of a shoes thing, we don't like that.
But these are factors that we thought you would want to know about. So let's go on to Slide 6. I'm just talking about Slide 6. This is our Annual P and L history going back to 2017. You can take a look on We'll look at Slide 34 at our forecast for the current fiscal year fiscal 2022, if you want to compare it to the prior years.
But let's just move on. Let's keep going here at Slide 7. So we were not including this information for a couple of quarters and one of our important shareholders said, we really like to see this information every quarter. We said, sure. So here we go.
Park has a 0 long term debt. This is our balance sheet cash, cash dividend history and capital allocation strategy. Sorry, I forgot to read the caption. Park has 0 long term debt. Park had $113,000,000 of cash and mark pivotal securities at the end of our Q2.
We've got spending to go Complete our major expansion about $2,250,000 spending to date about $17,250,000 We spent about $800,000 in Q2. So and the tax transition payments, we've talked about those in the past. Matt's better explained that than I am, but they have to do with Trump tax law and earnings sorry, overseas cash. So let's see, we have $14,300,000 that we owe, dollars 7,600,000 that has been paid to date and $1,700,000 in fiscal was paid in the second quarter. That those payments are to be paid the $14,300,000 through calendar year 2025.
Of course, you always have every quarter like a little over $2,000,000 plus regular dividends. So you can think about that as well in terms of cash outflows. Park's cash dividend, Park, we maintained a regular $0.10 per share quarterly cash dividend throughout the pandemic connected on the crisis. I don't think everybody did that. Park has paid 36 consecutive years of uninterrupted regular quarterly cash dividends without ever skipping dividend or reducing dividend amount.
I'm rushing because it's a long presentation, sorry. Park has paid $548,000,000 or $26.75 per share and cash dividends since the beginning of fiscal year 2,005. Let's go to Slide 6, another $0.10 per share regular quarterly cash dividend was declared on September 13, payable November 4 to show record on October 1, 2021. So here we go. When this cash dividend is paid on November 4, 2021, Park will have paid $550,000,000 in cash dividends since the beginning of fiscal 2,005 with 3 exclamation points.
I don't know what you think, but for a small company like Park, that's a heck of a lot of money. But we get it. Don't tell me what you did from yesterday. Tell me what you're going to do for me today and tomorrow. So now we go to Park's capital allocation strategy or a fancy way of saying what are we going to do with all that money for those of us that aren't really living in the Wall Street financial world.
I think that's what it means. So acquisitions and potential collaborations, Park continues to watch and track certain potential acquisition opportunities, but also strategic targeting of a certain aerospace industry segments and product lines. We talked about this Last time, so we identified areas we want to go into that we think are strategic rather than just reacting to stuff that comes over the transom from bankers, let's say. Park has reached out to several companies and continues to reach out to companies in the targeted segments. So we're still at it.
We're still trying. Next let's go on to the next slide, Slide 9. Potential strategic investments in major aerospace and aircraft programs. Park has reached out to A certain large OEMs regarding strategic investments in major new aerospace programs. So this is really interesting.
These are household names, OEMs in the aerospace industry. We're aware of new programs that they're considering, maybe they haven't been announced yet. So we've reached out to them and asked if we can work with them on these programs, partly by making investment. Obviously, we would also want the business as part of the discussion. So let's keep going.
Park earned every dollar of its cash through much syndication and sacrifice on a part of many Park people over many years. Park's money is not easy or cheap money. There's not easy com, easy go with us. So we'll not invest our cash casually Or do a deal just for the sake of doing a deal. That money, when it comes hard, my feeling is you're going to tend to be much more thoughtful, much more Careful much more serious about how you spend it.
It's not going to be a let's just kind of throw money around for this thing or that thing, a cool idea that somebody had. If and when we do a deal or invest our cash in an acquisition or some other form of strategic investment, we will feel is the right thing to do for Park and its owners, meaning you. Well, I guess some of you are not shareholders, but many of you are. Slide 10, Okay. This is our one of our standard slides in our presentations, our top five customers, kind of a fun thing.
Let's start with Aerojet Rocketdyne, It was quite a bit recently. That goes with North Grumman Grande based strategic deterrent, that's GBST. Have you heard about that? That's a really big deal. We're very Happy to be on this program and we hope to get more penetration into GBSD.
This is The next generation ICBM is very important for our company's defense. There are matrix composites. We don't have a picture for our matrix here, but there are multiple programs. Kratos, they seem to be in the top 5 quite a bit and we have a picture of their UTAP 22 drone. We're told by Kratos that we are the main supplier of composite materials for their drone programs.
So anyway, here we usually try to find a different picture every quarter, because they seem to be top 5 quite a bit. Okay. Middle River Aerostructures system, air structure systems, we know that is, there's plenty of stuff about them in the rest of presentation, so we won't Well, I'm here, but we found a nice picture of 747-eight engine nacelles in the bottom right. Those nacelles you see there all made with Park Materials. And Newergan Group.
We featured Newergan Group with different program last quarter, I think. This time it's a top right, the Passport 20 engine. Now What's interesting is that we produced the materials for the nacelles for thrust reversers for this engine through MRAS, But this is not MRAS. This is a component of the engine itself. It's a primary structure, primary structure of the engine And this is produced by the Norden for the Passport 20 engine, which goes on the Global 7,500 long range business jet.
Let's go on to Slide 11. Okay. So here's our another standard slide that we have in our presentations. Our pie charts, we have 20, we have 21 and we have 22 for the 1st 2 quarters. And just for comparison, look at how the pieces of the pie have moved around, the commercial is back dominating.
I shouldn't say dominant, that's not right, but much more significant than it was, let's say in 2021. That's not No, I don't think it should be a big surprise to anybody. Military, maybe a little slower. We hear generally not for us due to budget issues, Although, I guess the Senate Armed Service Committee just released its full markup and just wrote this down, so I can tell you about it. Good for many of our programs going to Valkyrie.
For us military, it's really going to be the programs we're on and which ones are active, which Military for us is very different than commercial. Commercial, especially the AMR programs, they're going to be running, running, running every month, every week Really, but military, we could be on a really good program. It will be active 1 quarter and then it will be active next quarter and it will be active in the following quarter. Obviously, we have no control over that. So that's why the military revenue could be a little choppy, but it's not to me anyway, a A function of the military market getting stronger, weaker.
We think it's just fine from our perspective. Also in niche programs, Orion, we like those. We think they're less Sensitive to the big budget fluctuations that these programs sometimes get caught up in. Business aircraft for us, that's mostly the Global W500, that's a big dog for us in business aircraft. Although we do supply into other like Gulfstream and Falcon and Citation type programs.
And business aircraft has been quite good for the last, I don't know, 6, 8 months, maybe 9 months for maybe obvious reasons. People Able to have them fly on business jet prefer to do that rather than airlines. Commercial, we'll go into much more detail about commercial throughout So let's keep moving here. Don't want to get bogged down. Slide 12, this is one of our little fun slides that we do every quarter.
This This is Elena and Donna, their project, we had a lot of fun with this. These are not necessarily the biggest military programs, but there are programs we think you'd find to be of interest, The top left. So we're in the PAC-three program. This is really kind of a fun thing or interesting thing for us. F-thirty five of providing tracking data of an incoming missile to a ground based interceptor PAC-three, we've been in that PAC-three program for a long time.
I think we mentioned it many times. Then next one to the right, U. S. Navy MK41 vertical launch system. And we actually produced materials and parts for this program, but we're not really at Liberty to talk about it very much except this is a really nice picture of you should see them the actual missiles being launched from the deck of the Navy ship.
Next one, C-twenty 7 J Spartan medium range surveillance aircraft. So this is a rental material for the Coast Guard And then, Avio Aster hypersonic missile, blade of materials, probably not surprising there. And then SpaceX Falcon Heavy, Really nice to be on this program. We hope to get more penetration to the SpaceX programs, but we're not really in a position to talk about what we do with that program. The niche program as we consider radones, rocket nozzles and drones to be the niche military programs, that's where we like to focus.
Let's go on to Slide 13. Okay, changing gears here, update on our major expansion in Newton, Kansas. Total budget moved it up to $19,500,000 I think last Donna, Tom, we should have $19,000,000 so it's creeping up a little bit. Spending today, about $17,250,000 spending to go added up, I think that's a total $19,500,000 that's $2,250,000 to go. So we know the expansion is complete.
The way it works is that there's holdbacks with some of the suppliers When things get signed off and certified and the final payments are released, that's why there's still some money to be paid out. Manufacturing trials in progress, which is good. Qualification runs expected to begin probably around Thanksgiving, so we're saying December. We push forward with a major expansion Many others were slashing their capital spending maybe to 0, good thing we did. If we had, we'd be in a world of hurt right now.
Originally, this expansion was redundancy as you remember, but based upon everything going on, we really need this expansion for capacity as well. And we figured that out now, We've been in big trouble because you don't do an expansion and get the building built or the equipment, design equipment, get the equipment certified And released get the factory qualified in 6 months. It's not it's like a 3 year process. So we didn't start and keep going. We'd be in a real we have a real problem right now.
So good thing we made the right decision. One thing that's a little new here in the pictures, the bottom picture, You see the existing facility in the middle with the new offices, the facility in the left is new facility And this little building to right, that's actually something that's been rolled along. We never really talked about it, but I wanted you to see it. It's about 10,000 square feet, Ten City Aircraft Works. That's our R and D facility.
And the name we came up with the name is kind of a little bit of a secret thing, but Anybody can guess how we came up with name. Well, maybe we'll send you at least $1 or something like that. All right. And then the middle picture, that's the new building with the new office sorry, the existing building with the office expansion sheets, Two stories now, the building top is the new building. Let's keep going on Slide 14.
So commercial aviation updates and developments, Changing gears again on to commercial aviation. The first item we had in a prior presentation, higher jet fuel prices and environmental concern provide motivation for airlines to more quickly replace less fuel efficient legacy single aisle aircraft with more fuel efficient modern single aisle aircraft such as the Airbus A320neo. Next item, domestic so this is new stuff and we're going to try to give you a little perspective here as to what's going on with the commercial, aerospace commercial aviation market. Domestic commercial aviation activity was recovering nicely in all major markets, What the delta variant negatively impacted recovery in August September, the passenger traffic was down in August and probably September as well. September hasn't fully reported, but that's the expectation.
So in the China domestic aviation market is probably impacting the most of major markets based upon the Delta variant outbreak in China, but the U. S. Domestic aviation market as well as other major markets have also been negatively Good bye to Delta Gurion. The full U. S.
Domestic aviation recovery, meaning back to pre COVID, I guess that's what we mean by that, Which have been predicted to occur in the Q1 of next year or even earlier, maybe the Q4 of this year, Maybe push to the right to some extent by the delta variant. My feeling is very minor amount. That's my feeling. Let's go on to Slide 15, maybe we can talk about this more. Why will it be a minor amount, if at all?
Will this temporary The setback negatively impact airline orders from the airplanes produced by the large commercial aircraft manufacturers. Well, I don't know if you're running an airline, How much you have to do airline business, I mean long term planning. You don't just order an airplane and buy it in 2 weeks. So if there's a 2 or 3 weeks sorry, 2 or 3 months setback and pass new traffic data and you're running an airline, you really change order patterns. You're going to push out orders, you're going to cancel orders.
We're not talking about the beginning of the pandemic when there is massive uncertainty, but everything. This is a very different situation. My feeling is that if you're running an airline, you make that decision to push out or cancel orders under these circumstances, you're probably in the wrong business, Rob shouldn't be running the airline. Well, the large commercial aircraft manufacturing Boeing Airbus change or adjust the production schedule based upon this 10% setback, I'd be shocked. I guess if they did that, I would be very quite surprised.
In any event, we have not seen any evidence of this in our own business. Well, the delta variant be trending down by the end of November as has been predicted by certain experts. I mean, people are saying it's trending down already. A lot of people A lot of data, I guess, to support that. Also, there are other countries that got that started with the delta variant before us like India and I think UK, And we look at their patterns.
So I think there's a lot of expectation that the Delta variant is kind of winding down. And by the end of November, even maybe the end of October, We'll see it winding down even more. So my feeling is that, yes, it did affect passenger traffic. They say that in, let's say, August, September, My feeling also is this have no impact upon our commercial aerospace business. International commercial aviation has started to recover to some extent based upon Some loosening of travel restrictions and increased fractionation rates, but big butt is still significantly still significantly lags domestic aviation recoveries.
International commercial aviation is still expected to take a number of years if we recover. We recover means a free cover level. I don't know, maybe 3 or 4 years of what people think. Let's go on to Slide 16. Since single aisle commercial aircraft are designed to service the domestic aviation markets as well as shorter range international aviation markets, Park believes single aisle is the place to be in commercial aviation, at least for now.
Yes, we feel we're in the right place because single aisle, That's the A320 family. That's like the probably, I don't know aircraft for the decade, maybe for multiple decades, COMAC 919, those are all single aisles. Three interesting questions. How will GE Aviation's rise engine development affect commercial aircraft industry in the future. Have you heard about this GE Aviation Rise engine?
It's actually Not even GE Aviation, that's not correct. It's CFM, which is the partnership between GE Aviation and Safran. So that's actually not correct. But Will Boeing develop a new single aisle aircraft to compete against the A321 XLR, which Airbus plans to introduce in 2023? Last one, will COMAC 919 be certified in China before the end of this year?
We're not going to go into these items because we just don't have time. These would take could take 15, 20 minutes to have a proper discussion of these items. I just want to put them out there because they could be important in terms of What happens in the future in the commercial aviation industry and markets. Let's go on to 17. This is a slide you've seen almost, I think every quarter with some minor modifications.
We're not going to cover it just to save time, except just the first couple of items. So just the basics here, We have a firm pricing LTA, it's a requirements contract from 2019 through 20 29 with Middle River Aerostructure Systems, MRAS, a subsidiary of ST Engineering Aerospace. So, what is this about? When we entered this contract, MRAS was a subsidiary of GE Aviation and then it was sold to ST Engineering Aerospace, I think about 3 years ago. But that's why all the programs we're on to MRAS Our GE Aviation or CFM type programs is to GE Aviation tie in that existed before the sale by GE Aviation of MRAS ST Engineering.
We're done in fact, and we talked about it already. Construction is complete. So our deal with GE Aviation and MRAS was as soon as they sign this LTA, we're going to go ahead and build a factory and of course we did that even though it was So handshake, but of course, we live up to our commitments. So let's not go into the rest of the items here. If you have any questions about them, please ask.
Legendary Boeing 747-eight engine installs. I love this picture because especially this guy in the background, it shows you how huge These are the cells are these are all Park materials that go into these cells, lots of content. Slide 18, update on GE Aviation Jet Engine Program. So let's do an update now. It's going to take a little while, so we'll try to go through as quickly as possible.
So the A320neo family of aircraft, this is a big, big dog. These are the LEAP-1A engines. It's ramping steeply. We had this in the last investor presentation, but let's just quickly go through it. On May 27 news release, Airbus stated A320 family Airbus confirms an average A320 family production rate of 45 per month in Q4.
That's basically now, right, Q4 of this year. I just want to mention that it's been at 40 throughout the pandemic. That's where they held at 40. And they call on suppliers being on glass to prepare for the future by securing a firm rate of 64 by Q2 of 2023, 64 that's moving on quite a bit. Anticipation of continuing recovering market, Airbus is also asking suppliers to enable scenario of 70 by Q1 of 2024.
Longer term, Airbus is investigating opportunities for rates as high as 75 by 2025. There's a little picture of the A320 deal. So those are very big numbers. Let's keep going on Slide 19. As of the end of August 2021, CFM, meaning LEAP-1A engine had a 16.25% share of firm orders for the A320neo family of aircraft.
I'd add the source of that is the aeroengineers, which is kind of like the bible for commercial aircraft engines. So the A320 family of aircraft has 2 engines that are certified for the program. 1 is the CFM LEAP-1A and the other one is Pratt. So this is the share, we're talking about share that the CFM LEAP-1A engine has. That's our program, the CFM, ALLEAP-1A, we're not in the crack program.
So that's the CFM is good for us. Pratt, we don't applying to the crack program. So let's keep going here, assuming a 60.25 CFM share, Assuming that and that goes in effect now, we don't we're not predicting that for the future. We don't know what will happen in the future, but this is the current share And it's a big backlog. It's not like just a few planes, it's thousands of planes, thousands of engines that have been ordered.
75 H320neo aircraft family per month rate. That's the rate we're talking about the prior slide represents a significant increase over number of units forecast in the long term forecast. So let's talk about that. How should we continue? In a long term forecast that we have from MRAS, A320 units sorry, A320, if we do the math, we're going to back It's equivalent to 57 airplanes per month, 57 A320 airplanes per month, assuming What share that assuming the 60.25 percent share for instance and doing other computations, 57 compared to 75.
So that represents it's a lot higher. Like I said, I think it's over 30% increase over the our forecast. Our forecast tops out at that assuming the 8,57 number in 2024. We're not that number yet. We're not that number in the forecast yet.
So our forecast tops out in 2024 assuming a 57 rate, but Airbus is saying they want to get to 75. So big, big, big number. The difference is 1,000,000 and 1,000,000 of dollars per year for Park, difference between 57 and 75. Well, it happened, I don't know, but I want you to be aware of it because it's a big, big deal as far as I'm concerned. Now there's some tension with Airbus suppliers, Particularly engine suppliers, some tension has developed over the aggressive A320neo aircraft family forecasted ramp up.
There's historically been tension between aircraft and engine manufacturers about production rates based upon diverging economic drivers for the aircraft and engine makers. What does that mean? The aircraft makers make their money by selling airplanes. The engine makers make their money by servicing the engines, not by selling the engines. So there's a tension that's existed for a long time.
This is not a new thing. So Here's the point, the engine makers aren't so anxious for the aircraft maker to come out with the next generation airplane because they want to keep servicing the legacy engines On the legacy airplanes, CFM also supplies into the legacy 737 and CA320 with the CF56 engine. They want to keep getting some life out of those engines. So if everybody says, wait a minute, we're going to Really up our production plans for the NIO. That means those airplanes are going to retire and then she loses the revenue and margins from the service of those engines because the airplanes are going to be retired.
You get the dynamic, it's pretty important to understand that if you're into commercial aerospace. Slide 20, then on July 29, 2021, the Airbus CEO stated he is disappointed that some partners, many suppliers are challenging to ramp up. He further stated, we have a backlog of more than 6000 A320neo family aircraft at a rate of 40, which was the rate they're at until I guess this quarter. That means 15 years of production, a rate of 60, it means 10 years. That's a long, long time.
Customers do not want to wait that long. We have to go now this is a SIC, I think this is a missed call, but that doesn't make any sense. I think he said above 60. It's pretty obvious you said above 60, otherwise it wouldn't make any sense. You further stated, we expect the supply chain to ramp up at a much faster pace.
So here we go. We have a little bit tension here as I said. The aggressive ramp up is partly based upon the success of the A321neo. The CEO also commented On July 29, that Airbus wants to be capable of production share of A320neos, significantly above 50% to a share of 60%. So you want my opinion is what will happen, it's just my opinion, I can be wrong.
My opinion is that if Airbus can sell these airplanes, GE or CFM We'll supply the engines. And why do we think that? Okay. Because they share this program with Pratt. So if CFM digs their heels in and says, well, we're not going to supply that many engines to support the airplanes that you want to produce Airbus.
Airbus would say, okay, it's fine. I'll go to Pratt, maybe Pratt can help us out. In that case, what happens to CFM, they don't get any revenue for servicing new engines. We are still not selling the new engines on these programs. And the old airplanes, the legacy airplanes are going to be replaced Anyway, but with neos that are produced with manufactured with Pratt engines, say lose either way.
This is my opinion, I could be wrong, But my opinion is that there's going to be a lot of haggling back and forth at the end of the day. If our Airbus could sell these airplanes, GE or Safran, Gene Saffron, the new CFM will support it. Airbus also recently announced resuming work on new semi line in Toulouse for the A321deo aircraft. So maybe they're putting their money where their mouth is, not just talking about trying to move the rates up They're investing. So let's go on to Slide 21.
The XLR, H3 21 XLR, we've spoken about this for several quarters now. So this is supposed to be in service in 2023 And as part of the Park probably a big driver of the aggressive forecast of the A320neo family of aircraft, this is considered to be in the A321neo, They have over 450 orders already. Is it a game changing aircraft? Yes, it could be, I think probably, Because with this range of 5,000 miles and the seating capacity over 2 25 seats, Well, it really replaces some of the wide bodies on some of the shorter international flights at much lower cost. So you're going from, let's say North America to Europe, you want to get on the wide body or you get on an XLR, Much lower cost for an airline with XLR and they still have quite a bit of seating capacity.
So, let's see what happens. Our key question is this single aisle 5,000 plus statute mile ratings 225 seating capacity market being ceded to the Airbus A321XLR, that refers to what a Boeing is going to develop and they're planning to compete against it. So, and last item is Just back to the A320neo family, generally 95 orders in August, which is not bad. Let's go on to Slide 22. These are still GE Aviation or GE Aviation programs.
In this case, again, it's a CFM program. So COMAC 9/19, we talked about that quite a bit. Interesting dynamic here. Recent reports, U. S.
Export controls are slowing progress of 9/19, But Comeco almost immediately responded by saying, no, it didn't really those export controls didn't make that much of a difference and they were doubling down on our certification timeline before the end of this year. So they're saying they're going to have their airplane certified this year and that would be in China for China deliveries, but nevertheless, they're sticking to it. So let's see what happens. Maybe by the next conference call, we'll know what would have happened. So, but this is an important potential program for Park.
So let's see what happens with it, but that's the dynamic there. Slide 23, let's So as quickly as we can, the Global 7,500 with the Passport 20 engines is ramping up. This also is We're planning to have our lighting strike material certified for this airplane next year, which is a good thing. Also those are high margin products for us. And the COMAC Air J21, that's a regional jet that's ramping up as well.
Last one is the 7.47, we talk about this every quarter. And we have a lot of pictures of the 747. It's kind of a sentimental thing for us for reasons we've discussed probably in the past. But following it out, they're going to terminate the 747 program next year. So that will be a real sad thing for us.
I'm able to have a visual for them. But I also want to remind you, this is less than $2,000,000 of revenue for us. So we emphasize a lot, But it's less than $2,000,000 that program is less than $2,000,000 of revenue for us per year. Slide 25. Okay.
Let's just quickly review this commercial aerospace industry in the meltdown mode sorry, industry meltdown in review. Why don't we just kind of skip to the end. You can read all the different items here. We know about it. It was really Armageddon in the commercial Aviation Industry, Commercial Aircraft Industry, both, almost all the news about the industry back at the beginning of the pandemic was very negative.
Aviation analysts and commentators predicted that the recovery will not come for many years or may never come rather. The end of day scenario, pretty dire stuff that was being talked about and believed also. Slide 26 result at the end of day's attitudes companies in the commercial aircraft supply chain led off thousands of people and went into bunker survival mode, production slashed or even halted. Our thoughts about industry recovery, how to handle it, we're just not in the minds of many, probably most companies in supply chain. It was all about survival for them since the leaf was at a recovery, if any, So far in the future, it was not worth thinking about.
But surprise, surprise, people got tired of being locked down. Vaccines were developed as promised. People started to want to fly it again, fly again for domestic flights and lots of people remember these flights were empty. So all of a sudden people want to get in these planes again. So it was kind of a big change.
And as a result, airline companies wanted to buy airplanes again. At the beginning of the pandemic, airline companies just didn't want airplanes, One airplane piece is so much uncertainty about what the future was, but not in one of our airplanes, we own lots of airplanes and somebody needs to produce the 1,000 and 1,000 of components go into these airplanes, the airplanes that the airline companies want to buy now. Let's go on to Slide 27. But the commercial aircraft Supply chain was going very flat footed and the bunker survival mode is not in the mine shed to quickly ramp back up to meet the renewed demand. Plus since Supply chain companies had laid off such a massive number of employees who did not have the workforce to meet the industry ramp up anyway.
This company has tried to hire back the employees they laid off, What has been widely recorded that has not been so easy, plus the government was paying people not go back to work, so that didn't help either. What's the result of all this? The whipsaw effect in which commercial aircraft industry supply chain was caught flat footed and struggling in some cases badly to meet the unexpected increased demands of the commercial aircraft industry as it recovers. So kind of a whipsaw because they were kind of clamping down in the survival mode, then all of a sudden, we need to ramp back up again. And the response has been, I would say, lukewarm.
This is today's commercial aircraft industry supply chain dynamic. It's a difficult one. 526, but at We did not buy all the doom and gloom news. We did not buy the end of days were in hand. Here's what we said.
This is interesting. This is what we said on May 14, 2020. This is the beginning of the pandemic, the beginning of the crisis when confusion, uncertainty and fear reign supreme. Just read this. I'm not going to read it for you, but go through it.
Quite interesting. We were not going into the bunker mode. We were in the go forward mode. And you know what, we were pretty much alone. I don't remember too many people that were joining I don't know what you call it, the mission that we're on.
But the last item when we got one for you, we believe the gory days of aviation were We tend to be part of it. Let's go on to Slide 29. At Park, although we do not know when we believe the commercial aircraft recovery would come and we wanted to be ready for it and be a part of it. We're not giving up on the commercial aircraft industry is quite the opposite for us actually. So we made arrangements, we talked about this before with MRAS to maintain minimum monthly baseline critical mass production levels to preserve Park's ability to ramp of production we need.
This is critically important. If we went below these levels, we have a real problem in our hands because we would not have a critical mass to ramp back up And it would be a problem for us, big one, proper MRs, big one and problem for some of those aircraft manufacturers, big one. And even though layoffs are widespread and pervasive, We didn't really know anybody was laying off people in the commercial aerospace industry. We laid off nobody, none of our people through all the darkest and seemingly hopeless days in the commercial aerospace industry. Turns out the decision not to lay off any of our people, it's really important for Park, because when we laid off people, We would have we'd be in such bad condition in terms of trying to ramp back up.
It would be very, very difficult for us. Slide 30. So GE Aviation jet engine programs, the Park, the ones where Park is on, they're ramping up fast. So GE Aviation jet engine programs that Park is on, sorry, the Park is on ramping up and ramp up is looking steep. Just for perspective, we shared this with you last quarter.
Look at Q3 of 2021, dollars 1,800,000 Then move forward 2 quarters to Q1, 2022, dollars 7,000,000 that's a 4 times increase in 2 quarters, Four times in the quarter, that's very, very significant for a manufacturing company. We're not just selling stuff, we have to make it. We have to Get the raw material. We have to produce it, we have to test it, we have to ship it, a very big challenge, very big challenge. Just FYI, so fiscal year 2022 Q1 and Q2 are already at pre COVID levels already.
If you look at Q1 and Q2 and a ramp up is still a long has still a long way to go. Important question, how is the Commercial aerospace manufacturing supply chain responding to the steep ramp. I would maybe give it a C- not so great. It's an issue and challenge 1st every day. Slide 31, how is Park responding to the GE Aviation program steep ramp up, all about our people.
I'm going to I'll try to rush in faster here, because I know we're going really long. Our current headcount is 114. We're at 105 last quarter. So we're ramping up our I had kind of a little bit, but still a challenge. We still a number of people are looking to hire, 2 step forward and 1 step back in terms of the hiring process.
So Parks people stepped up once again. That's what Parks people do in order to get everything done in Q2. We already talked about the challenges that we had to be overcome, so I won't go back over those again. Once again, thank goodness for Park's customer flexibility program. Won't go into the details, but this program as we talk about almost every quarter has been really critical to Park, especially as we're trying to ramp back up.
Slide 32, How is Park responding to the GE Aviation Programs team ramp up continued? All about our people, we can't say enough about our people. Thank goodness for Park's great people. Without them, could get the job done. Park is fortunate and blessed to have such great people and every Park person received $150 bonus for his or her dedication and outstanding work during the Q2, well earned and deserved.
A lot of brute force, less supply chain issues, freight issues, COVID quarantine issues, logistics planning, big challenge, but through dedication, loyalty and commitment, We were able to meet our objective for Q2. So Slide 33, rushing this quickly. You see the numbers, not much discussion about it. The only thing I would say is that this is GE Forecasting, of course, it's difficult quarter to quarter because of the inventory practices, things can move from 1 quarter to other, it can move forward and move back. That makes it more difficult.
To me, one of the big questions though is, when will the numbers ramp up to meet the especially the forecasted numbers that Airbus is coming out with that we spoke about earlier in the presentation. We have a mismatch here. We're not operating anywhere near those levels. So at some point, either Airbus is going to bring those numbers down or our numbers are going to have to go up, But can't be both ways. So that's something's going to have to give.
Is it going to be in the 4th quarter? It's going to start in the 4th quarter? I don't know. Hard to say, Totally hard to say. If I had a feeling about it, I would let you know.
But at this point, I'm just saying it's out there. It's kind of hanging out there that we know something's got to give, something's got to happen. Unless Airbus says, wait a minute, we changed our mind, we're bringing our numbers back down to 55 or 57 per month, Maybe that's a different story, but unless Airbus backs off and backs off a lot, something's got to give because we're close to operating a level to support that program and the other programs we talked about as well that are ramping up. Slide 34, again, the numbers are pretty So I won't go into them in any great detail. I'll just mention in Q3, we expect about $400,000 of latest sales, that's good.
In Q4 though, we expect about $2,500,000 of the critical essential component sales, which not great margins, but also about $1,000,000 of the sales of the embedded materials, which are relatively good margins. Same question. If you want to go back and look at little factors that we talked about regarding Q2 On Slide 5, they'll do that because they apply for Q3 and Q4. Those factors haven't gone away once we keep talking about. Same question though about the GE programs, particularly Airbus.
At what point is our production going to match their requirements? This point, it's not matching. At some point, something's going to have to happen like I said. They're going to bring their numbers down or we're going to have to move our numbers up. When it will happen, I don't know.
But it's out there, it's kind of looming out there and we're ready. We're ready to go. Obviously, we'll have our challenges with our supply chain that will continue, but Park is ready to go. As I said, it's really good we didn't stop that expansion, that will slow it down, very important for Park. Let's go on to Slide 35, 36.
So these are the last slides. So let me go through them fairly quickly, but they're important to us, changing gears a lot here. What matters the most at Park, We're deeply saddened by what we see and hear in our world today. We're told that people who work for living do not matter. We're told they're expendable.
We're told they're going to be sacrificed for some loosely defined or undefined rate or good. So to us, it's really tragic. But We understand we're a small company and what we say or what we believe, it doesn't matter all that much about these larger issues. But what matters a lot Is what we say and think about our own people. So at Park, our people are not expendable.
At Park, our people matter the most. At Park, our people are everything. At Park, our people are family. We do not turn our back on family. Our people will not be forsaken.
Our people will not be sacrificed. At Park, our people are precious. At Park, we're the most fortunate when it comes to our people. I know I say it's a lot, No, but it's because I mean it a lot. Let's go on to Slide our last Slide, which is 36.
At Park, our people work for a living. That's what they do. At Park, our people make money for our owners. That is what they do. It's something that our people are committed to.
I'm talking about all of them. Now, we made money every quarter throughout this pandemic and economic crisis. Did everybody do that? I don't think so. I think most companies in the aerospace supply chain probably did not do that.
But that was something that our people did and it wasn't easy Throughout this pandemic, throughout the economic crisis, our people did that, made money for owners every quarter. That's what they do. Not an accident, not luck. It's based upon serious commitment and dedication, serious commitment and dedication. So just wanted you to know that.
Park is a strange and unusual company filled with wonderful and special people. At Park, we're not like the others at Park, we play for keeps. So we always feature, always at least in the last few quarters, a picture of 1 of our crews. In this case, we're featuring 2 crews, customer service and purchase Planning teams, let me go from left to right, Jordan, Theresa, Jonathan, Chris, Dakota, Sarah and Elena. So These people, all the things we've been talking about throughout this presentation, these people were on the front lines with all the supply chain issues, freight issues, international freight issues, Juggling customer orders, quarantine issues, production planning and then the possible environment because normally you want some visibility and production planning.
You don't want things that change every week, every day, but these things that kept coming up, let's say, COVID quarantine, you can't predict that. So lots of juggling, a lot of moving schedules around, big job, brute force was probably the way of the quarter for these people. But this group saw to it that we met our objectives for Q2. They always on ways to overcome the obstacles. So thank you very much.
Sorry to take so long. I was really rushing. You probably made Difficult for some of you to follow me, so it's gone so quickly, maybe skipping over things. But operator, we're now done with our presentation. So if there are any questions, we'd be happy to take them.
We have a question from Brian Glynn with Allcott Square. Your line is open.
Hi, Brian.
Hi, Brian. How are you doing?
Good. How are you?
Good. Thank you.
My question is there's 2 questions. So the first Thank you for the walk through, of course, as always. The first is around the supply chain. You alluded to it a little bit. Is there a chance that You guys who are more than adequately prepared for a ramp that you're held back by the rest of the industry.
I know Airbus has several 1,000 or more suppliers for that program. I know not all are sole source, so there's some ability to toggle. But is that a real risk going forward that you see as potentially material? And then the second question is around, I know you haven't put in place guidance yet or brought it back, but if we go back to pre COVID, I know during COVID, you guys worked on some military programs and there were some added efforts there. You talked about the lightning Strike material through NORDAM that's on the Passport 20 that looks like a new program that may happen, or that is happening.
And So commercial aside, if you think about the long term without getting into numbers, is there kind of a net add in terms of The programs you might be on or that you are on versus if we go back to 2019 when you had that forecast in place.
Okay, thanks. So let's see, the first question is supply chain and is that going to be an issue for us ramping up? As you, I guess, at least implied, we are sole source on these all the GE Aviation programs, including the Airbus A-twenty family programs. So I think the risk of our being replaced is non existent, On these existing programs, that's where you're getting at. But there certainly is a major challenge for us spending our supply chain as we're We're ramping up, plus we're also doing trials and everything else.
So as you know more work there, so it's a major challenge. And When will this kind of thing even out? I don't know. I mean, there's a lot of reporting about it. When will the suppliers kind of catch up and kind of get their ribbon back?
I don't know, maybe toward the end of the year, that's what I hear some reporting about that. But of course, it's a case by case thing. We have 3 or 4 major suppliers that we use for these GE Aviation programs. And we really need to look at Individually, some are doing well, some are struggling and I don't know how else they answer except It's just a major effort and sometimes crew force effort. So but the other side of the equation, I guess, is our people are very Chairman, very committed to finding ways to make things work and we've been able to do that for the most part.
So I don't know, Brian, I'm not sure I answered your question adequately. Is that kind of information you're interested in or is something else that you're going for there?
That was helpful. Yes, I know you guys are sole source with respect to the GE program. Yes, it was just around people, even Suppliers even outside of your vertical, right? They're supplying into the 320. And you answer, this is stuff totally outside of your control, Got it.
Right. And it's a bottlenecks everybody.
Right. So I understand that question. So it's a really good one, Because let's say we got everything organized, our surprise is okay. But if Airbus is not able to source Other key components are salon can be able to get airplanes and it affects us. I get what you're going for.
Well, that's a really good question. I don't have a crystal ball on that one. My feeling is it just my feeling is it's going to be ugly and messy for a while. My feeling is at some point the supply chain, some of these are very large companies that don't really aren't that agile, don't move that quickly. At some point, everybody will catch up and kind of get used to the new rhythm, the new rates and everything else.
When that will be is a good question. I don't know. But I think probably I'll just give you my it's almost speculation. My feeling is toward the end of the year, we'll start to feel that things are getting a little bit better, Not solved, not that all for the issues. And I'm not just talking about our supply chain.
I'm talking about what you're asking about the supply chain for these airplanes, which like I said, 1,000 and 1,000 of different components are required to make these airplanes. You're probably not surprised to hear this, but Airbus, for instance, they have a massive function that deals with supply chain management and they spend a lot of time with suppliers. They try to identify where the risks are and try to focus on them. I'm sure it doesn't surprise you that that's What any good OEM would do. So I don't know if that helps, but I don't know much about what else I can do.
Yes. Now the next question, we haven't reissued our long term forecast yet, Brian, but maybe in the Q3 we'll try that. We're a little bit Uncomfortable now because there's a lot of uncertainty, the things we talked about throughout the presentation. But Absolutely, yes. The programs we've been working on and developing over the last year and a half since the pandemic started, those aren't just temporary things, just sulfur factory.
Those are things which we hope and expect will have long term impacts to us. Now in aerospace, I just want to add, you've got to do this because some of the programs you run, they're going to go away. So even I just kind of breakeven or keep the same levels, you need to keep getting new programs. But our objective of course is not just to kind of maintain our levels, it's to increase our levels, our sales levels. The Leidyshrike, good example, that's commercial of course.
And we hope that we also get lighting strike on the ARJ21, That's the COMAC regional jet. Once we get a line strike on that program, if we can, then we'll have a clean sweep of all lines strike on these programs. Hi, Shriek. That's actually from fairly significant revenue, but also quite good margins. That's a product we really love selling.
But then there's lots and lots of military programs. We talk about them every quarter. We have little pictures. Some of them are little, some of them may not be little. And you got to get your foot in the door, you get a star, you do with some small content and you try to grow with the larger content.
We had a picture of GBSD. GBSD is a really big deal and also SpaceX. We haven't featured those programs before. So that's good. We're getting on those programs and we're not just going to stop once we penetrate, we want to do more and more and more.
For us, it's always good to get to do something with a customer, because then we kind of show our stuff, we can show how we service, how we respond, how we support a program. It's much more difficult to say, look, put us on your program because we're good at doing all these things. It's like, well, everybody says that. But once we get a chance to actually start to work with a customer, We could demonstrate how we feel we're different than other suppliers or meaning our competitors.
Understood. Thanks. That's very helpful. And Adam, thanks to you and your team for the efforts on behalf of shareholders.
Thank you. Thanks for those comments.
Our next question comes from Brad Hathaway with Fairview. Your line is open.
Thanks for the time and thanks for all the detail on the call. One question was earlier in the call you mentioned that Initially, the new facility was mainly going to be kind of backup capacity, but now you are really going to need it. Is there any way inside of big picture numbers to think about, I guess, the total kind of revenue capacity you have when that new facility is on launch?
So we've talked about that before. I think we said it's about $60,000,000 in capacity, new capacity. But Remember, you may probably remember, if we haven't covered this for a few quarters, I don't think. But in the factory, there's a big area And we're talking back, which is not like a little room, a huge area that's set aside for another line. It could be a hot melt line or a solution line.
So if we decide we need more capacity, it'd be very easy to drop that in. We don't have to go build a new factory. The factory is already built. The equipment has already been designed because we just bought the equipment. So it'd be easy to drop in a new line there.
So it could be ramped up to much more than that at that point. So the thing I was saying, I just want to make clear is that the factory was originally agreed to with GE Aviation and MRAS as a redundant factory. Why is that? We just talked about being full source. It could take 3 years to qualify a composite material supplier on these major commercial aircraft programs 3 years.
So it's kind of a scary thought what happens if something happens to 1 of our factory rather. I mean, it's like a really scary thought. I had this discussion with people before And it's kind of the room gets really quiet. So they asked us very understandably, we'll build another factory, which we did. If you look at the little photograph of the new factory, it's actually separate building that is joined with a passageway for moving people and material that has a fire going on both sides.
So it's kind of the best of both worlds. We manage it as one factory, but it's actually 2 factories totally redundant. So if something happens in one factory or even one line, the other line of the factory is available. But that was the original concept, But because business has ramped up so much and it's getting stronger and stronger, it's no longer a matter of redundancy, which is really critical in Space when you're sole source on something, it's also a matter of capacity. So what I'm saying is that, it's really good we did, we did because We are starting now, we realize, wait a minute, we have a problem with capacity now.
We'd be in a world of hurt because it would take us 3 years ago, approximately 3 years ago, build a factory, get Let's say we started from the beginning, and then we have to get the machines go through trials, you get the machines signed off on by The supplier and then qualification, which also doesn't even though it's only a plant qualification, not a material qualification, still takes a long time. So I'm thinking maybe 3 years timeframe, but then we'd have real problem on our hands. It'd be too late and we would not have enough capacity, I don't think.
Got it. Great. That's helpful. And is there any more color you can give us kind of on the M and A side and kind of anything you're seeing out there? Love to hear more about your thoughts there.
Yes, the M and A side. So we continue to work in this area, the strategic area that we identified. And I don't think we want to mention it, but these products or products are used to make composite structures by our customers. It's not composite materials, but other things are used, other products that are used to make composite structures. So that's one area we'd be focused on.
We probably contact I mean, Matt, I don't know if you have another number, but a dozen or more of these companies and we continue to reach out to other companies and We keep trying. So that's something we feel real good about because we feel it makes so much sense for us to be in that area. The challenge is to find the right opportunity because obviously, a lot of times you contact somebody and thank you very much when after sale, That kind of thing. These are not auctions where something's for sale, we saw bankers putting it up for sale. So it's a little more difficult from that perspective.
There are a couple of companies that were kind of watching, tracking to see how they're doing. There Maybe public and watching how they're doing and kind of maybe the timing isn't quite right yet or thinking about them. And then There's this other area we talked about, which is a more of a kind of joint investment with very big OEMs and new aircraft programs, Which we've had discussions, we've had beginning discussions with one of these big OEMs. We've reached out to 2 of them. And the first discussion is just in the beginning of discussion, but I was with very high level people and I felt there was a serious interest in airport.
They know us very well also, it sounds like who are you. So we're hopeful. We're hopeful that will be a good avenue for our investment And really great opportunity for Park's future.
Fantastic. Thank you. Thanks for all the efforts.
Sure.
There are no further questions. I'd like to turn the call back over to Brian Shore for closing remarks.
Thank you, operator. Thank you everybody for listening in. Sorry, it went so long. Every time we try to at least I try to make a little bit more compressed, but I don't I'm not very Had not been very successful. Have a great day.
Matt and I are available call at any time. We'd be happy to talk to you. Okay. Good day. Thank you.
This concludes the program. You may now disconnect. Everyone have a great day.