Park Aerospace Corp (PKE) Q4 2021 Earnings Call Transcript

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Park Aerospace Corp (PKE 0.14%)
Q4 2021 Earnings Call
May 13, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, my name is Justin and I'll be the conference operator today. At this time, I would like to welcome everyone to Park Aerospace Corp Fourth Quarter Fiscal Year '21 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. [Operator Instructions] Thank you. At this time, I will turn today's call over to Mr Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference call.

Brian Shore -- Chairman and Chief Executive Officer

Thank you very much, operator. Welcome everybody to Park's fourth quarter conference call. With me as usual of course, Matt Farabaugh, our CFO. We announced -- published our earnings release earlier this morning. So if you haven't checked it out, you want to do that. In the earnings release, there are instructions as to how I guess access the presentation. We're about to go through our presentation. You also can find it on our website, but you really want to get that presentation in front of you in order to make this call more meaningful. Without the presentation in front of you, it might be a little confusing. Also, there is a supplemental financial information that's attached as Appendix-1 to the presentation. Matt used to read that for us, but these presentations are going on for so long, that we don't do that anymore, but feel free to access it, ask any questions you like about it.

You know, we mention this every now and then, probably almost every call actually, that we're not able to cover everything. These presentations are feeling lengthy as is. We need to kind of select what we think would be of interest to you and helpful to you in understanding our company. We do the best we can with that and then, you know, next call maybe we'll cover something else. The call could go on for 45 minutes. So you see, we really can't -- it's not possible to cover everything.

We'll try to keep it to 45 minutes. When I say the call, I mean the presentation and allow as much time as you want for questions-and-answers. When we're done with the presentation, then I will turn it back over to you and you can ask any questions you want either about the presentation or anything about Park generally that's not in the presentation.

Okay, so why don't we just go ahead and get started and when we turn to Slide 2, this is our forward-looking disclaimer language. Any questions about this, just let us know. Slide 3, we'll take a little bit longer on Slide 3 and Slide 2. Slide 3 is a lot of stuff going on, very busy. So why don't we take a look.

Start by looking at the top line for the quarters of '21 fiscal year, one, two, three and four. You can obviously see what's going on based upon the significant downturn in commercial aerospace and also we talked about destocking at some point, come back a little bit in Q4, but I want to remind you right now, right at the start about something we discussed I think last quarter, maybe in the prior quarter and that relates to this essential component for rockets, for missile systems, this is our ablative product line.

So remember how it works, this is an essential component that's sourced overseas. We have the relationship with the supplier. So, the OEMs are concerned about this. These are critical missile programs. They asked us to buy that component and then sell it to them just to have a safe stockpile of that component. It's an essential component.

The product couldn't be made without it. So we do that. We buy this component, we sell it back to -- I shouldn't say back, we sell it to the OEM, to the customer, they never owned it to begin with and it's their product and they can do with it what they want I guess, but the expectation is that we will use that component to produce the ablative materials, the composite ablative materials for these rocket and missile programs.

This is significant for a couple of reasons. It affects our top line, also our bottom line. We sell it at a small markup. So the margins are quite small. The material content for these sales are quite high. So I just wanted you to know that number. Remind you of that for background. In Q2, sorry, in Q3, we had approximately $2 million of those sales of the component and in Q4, we had $3.5 million of sales and we predicted that. I think we did our Q3, so it shouldn't [Phonetic] be a surprise to you, but I just want to remind you of that because it does kind of affect the numbers.

So let's go through Q4, the current quarter, fiscal '21 Q4, $14.441 million of sales. You can see the numbers moving up, but in that number, $3.5 million of sales of that critical component were through low margins. Gross profit $4.326 million. Gross margin 30%, which is we'd like that. We don't like it -- well, let me put it a different -- we don't like it when it is below 30%.

We're actually surprised about this because with that critical component, that essential component, the margins are quite low, so we're surprised that the gross margins actually came in at exactly 30% actually. That's not a forced number, we don't do that. That's just the math. It came in 30% and the adjusted EBITDA by $3.257 million. So we're a little bit surprised about that.

Let me remind you about our forecast philosophy before we go into the more discussion about the numbers. So when we give you a forecast, we're telling you what we think is going to happen based upon working very hard and everyting we need to do to make it happen, but we're telling you what we think is going to happen.

We don't give you a low number to beat it. We think that's kind of silly. We know lots of other companies do that, largest are all alike. We think it's kind of -- I don't know, not wasting your time to do that. If we tell you something, we're telling you what we think is going to happen. We could be wrong, but we're telling you what we think is going to happen.

So, all right. So let's -- with that in mind, let's talk about what did happen in Q4. What did we say about Q4 during our Q3 conference call? We said the sales estimate was $14 million to $14.5 million. Well, we came in within that range, OK. Little up maybe to higher-end, but still within that range, no problem. We also said the adjusted EBITDA estimate was $2.3 million to $2.8 million. Well, we came in at $3.257 million. So quite a bit above the top of the range.

That's not what we thought was going to happen. What happened was that we did not properly capture in our estimate for Q4 the margins on ablative products. No, I'm not talking about the essetntial component. These are sales of ablative materials for rocket and missile programs. Very good margin and we just didn't fully capture those margins. That's on us. This was just not something we did to give you a low number. We could be zero [Phonetic]. We don't -- as I said, we just don't do that, not our way of doing things.

Let me see, anything else to cover on the numbers, no, I don't so, but there's another big item to kind of deal with on this page, this page if go down, special items, OK. You see at the bottom, it says before special items. Well, there was a big special item in Q4, $1.570 million and that related to something we call -- used to a pioneer plant, which is a plant in Singapore we opened in 2008. This is a composite material plant.

This is just around the time we were going into aerospace. This plant was going to be our Asian aerospace composite materials facility, but it was part of our Singapore company, our Singapore entity, our Singapore operation. In electronics, our Singapore facility was our largest facility, so it was part of that. It wasn't a separate entity and a key thing was, it was going to be operated and managed by our Singapore team, which is the Electronics Group at the time.

I wouldn't say it was very successful in terms of marketing. We never got very much -- we didn't get very much sales, but nevertheless, for whatever reason that was -- I would not say it was a great success, OK, but then as you know, we sold our electronics business in its entirety, AGC in December of 2018 and that included the Singapore operation of course, the Singapore entity. Now this pioneer plant as I said wasn't a separate entity, it was part of the Singapore entity, but we separated it and dropped it into another entity owned by Park. Why is that? Because AGC did not want to buy the Pioneer plant. They didn't want it. So we said, OK, fine, we'll keep it and we have kept it.

We had it mothballed almost right away, I think almost right away when we did the sale in 2018 because we didn't have -- without AGC, we didn't have you know our Singapore people, we didn't have the ability to operate this plant anymore, so we mothballed it. We didn't write it off right away because we had some hopes that we could be -- we might be able to use it at some point and why is that? Remember we've been talking about working on an Asian JV for a while.

I don't think we discussed it every quarter. We've been talking about it for a while and actually we're still in discussions with an large Asian aerospace company about doing a JV in Asia and our thought is that well maybe this plant would be used in that JV. These discussions are high level, executive level of this company. I would say they are serious, but also they are still preliminary and COVID has not been our friend because we really need to get together. We've had a lot of phone discussions, correspondence back and forth, questions and answers, but to me in order for this to get to the next level of this discussion, we need to get together and really, their team needs to come to Kansas, spend a couple of days with us and with COVID travel restrictions, that's just has not been possible and not been able to do it. So, you know, it really sidetracked this whole thing.

We're still in active discussions. I mean I don't want to -- I don't want to tell you that -- I'm not telling you it's dormant at all. We're still in active discussions I mean like probably on a weekly basis, emails or phone calls, that kind of thing but I feel like until we're able to get together, it's kind of not going to get to the next level. So why did we decide to write-off this time because this thing has gone on for a while and even if we do a JV, it's not clear that we'd use this facility in a JV.

So we decided to writedown the assets at this time and I think that's the right decision. I think it was the right prudent and thoughtful decision. Just in case you're interested, not much of an impact if you know why, the pre-tax benefit now that we've written off the facilities by $200,000 [Phonetic] per year positive and EBITDA benefit is only about $80,000 [Phonetic] because some of the costs are depreciation.

So just wanted you to be aware of that because I think in the news release, there's kind of a reference to this writedown, but I wanted you to know the background. It just kind of wasn't -- I mean, we didn't have the ability to continue to operate this plant after we sold Electronics to AGC, we just didn't have -- there was no way to operate it for us. So maybe the decision was kind of inevitable, but we made it and I think it was the right decision and the right timing.

Why don't we go on to Slide 4. Just a little more history here with our 2021 results. You can see the top line kind of nice growth '17, '18, '19, '20 and oops, '21. Of course, no news flash here, that's the effects of the commercial aircraft industry downturn and that destocking we talk about sometimes. Okay, why don't we move on to Slide 5, our Top 5 customers, this is something we do I think every presentation actually. It's kind of almost a fun thing sometimes and we have a little picture for each customer.

AAE Aerospace. That's the MK125 picture on the bottom left and we supply material to this program or actually structural components. This is not the rocket, the structural components of the warhead. Let's see, CPI Radant, it's neck one [Phonetic] that's over on the top right, the Navy Multiband Terminal and we supply radome materials into that program. Kratos, we talk about Kratos quite a bit, here in the bottom middle, the Valkyrie.

I think we've told you we believe we're the main material supplier, composite material supplier to Kratos for all their drone programs and this is a picture of the Kratos launching what they call a Baby Drone. Kind of interesting, that's a drone launching a drone. So how about that. I think Kratos actually said they expect the first production delivery of the Valkyrie in a couple of months. I think that was their terminology.

Middle River aircraft, that's the company that was owned by GE Aviation, now it's part ST Engineering Aerospace, you know all about them and we have a picture of -- there's a 747-8 and on top left. And Turkish Aerospace, not often in our Top 5, which will be nice to have them. They are a contractor for Sirkosky Aerospace. So you have a picture of a Sikorsky helicopter on the bottom right and we provide materials for the structures for the Sikorsky helicopters.

Okay, why don't we go on to Slide 6. These pie charts I find very interesting. Let's look at military in 2021 just do the math, $60 million in total revenue, 35% is about $21 million. Now, you have fiscal '21 where the total revenue was a lot less, only $46.3 million, about 59% military and obviously the military percentage has grown quite a bit, but actually the absolute number is about $27.25 million. So it grew from '20 to 21, which is nice.

Remember, we decided about a year ago to focus on military and I'm not saying we're happy with the results completely, we need to do better, but at least we've achieved some results and just remember also that $27.25 million includes quite a bit of that sale of the what we called that essential component for ablatives for rocket programs. So just keep that in mind. Looking at the commercial aerospace portion of the pie, was $28 million apparently. It looks like in fiscal '20 and $16 million in '21, just doing the math, that's all. So obviously quite a bit of downturn in commercial aerospace.

Why don't we go on to Slide 7. This is our fun slide and Don and Elaina kind of do this every quarter, they put together, we try to come up with things that are fun and interesting. This isn't necessarily our biggest programs, but we thought -- we want to make this a little bit entertaining for you. So we try to come up with some cool programs, military programs. Top left there is a B-1B, but it's not to B-1B program, it's the LRASM, the long-range anti-ship missile that's been launched by the B-1B. So we produce parts using Park materials for that program.

Avio Aster 30 air defense missile. Those are rocket nozzle material, ablative materials that go into that program. The F-15 Eagle, 104-0. Do you know what that means? The 104, this is in combat. 104 wins, zero losses. So it's not even fair we produce materials for radomes for the F-15 and we have the JSTARS parts where we cover some of parts and materials and we have the pie chart. Kind of interesting to see Rocket Nozzles are big, structures are big, drones are big. Radomes not as big, but still really important segment for us.

Okay, why don't we keep going. Got a lot to cover here. Slide 8 OK. So we talked about we love our military programs. So just in fairness, we need to also say, we love our commercial aircraft programs. We're got to give equal time to commercial. So we've covered this. This is kind of a review slide. So you know the story if you've been listening to our call. Single-aisle versus wide-body, a clear trend for single-aisle. It was actually before the pandemic, there was people wanted to fly direct rather than going to the hub-and-spoke system, but now it's even more so because the domestic aviation has recovered -- is recovering, has recovered to some extent. International travel probably a ways off. Domestic, take a single-aisle for domestic, for international think of wide-body.

So our view if you want to be a commercial aircraft, at least now, you want to be in single-aisle. There are three major single-aisle programs. We're in two of the three. We think those are the two you want to be on. No offense to the MAX. We wish it well. Hopefully it will do really well in the future, but we're happy, very happy to be on the A320neo program and also the Comac 919 program. So we think we checked two of the three boxes and we say, if you want to be in single-aisle, which we do, those are two boxes we want to check. That's our opinion and we think we're ideally positioned partly by luck in the commercial aircraft industry. I think we're kind of being nice to ourselves by saying partly by luck. I would say mostly by luck that we're just very well positioned.

So Slide 9, commercial aviation emerging from the abyss and certainly was an abyss. Higher jet fuel prices and environmental concerns provide extra motivation for airlines to more quickly replace the less fuel efficient legacy aircraft with more fuel efficient modern aircraft such as the A320 family. You know, a year ago fuel prices were down we're saying and that's kind of an impediment for the new aircraft, the new more fuel-efficient aircraft. Now fuel prices are not so good, they are very high. It's a little concerning. The environmental concerns are in place whether fuel prices are high or low, but the higher fuel prices provide extra economic incentive for the airlines to build a more efficient fuel-efficient aircraft of course.

China domestic aviation, domestic has recovered to pre-COVID levels, even greater depending on who you ask. That's very positive for single-aisle. US domestic aviation recovered a lot like 75% of pre-COVID levels. They are expecting a full recovery in 2022. Very positive for single-aisle. Just kind of an interesting little anecdote. I don't know if you saw this. Two new U.S. domestic airlines that recently announced they're launching and they don't plan to buy, from what they say, don't plan to buy airplanes but from programs, Park is on it, but still a very good sign of optimism by the U.S. domestic aviation market. Very good news for single-aisle. I think a year ago people said, that's just not possible. Nobody's going to start an airline in the U.S. maybe ever but that was the pessimism at the time.

Let's go into Slide 10. This is also a review slide. We provide the slide pretty much every quarter. I think the first item, we have the LTA's, started in 2019 through 2029, it's a requirements contract, Middle River Aerostructure Systems (MRAS), that's a subsidiary of ST Engineering Aerospace. So what's the GE connection? Why are we talking GE Aviation? Why are all these programs GE Aviation programs? Because Middle River, MRAS was a subsidiary of GE Aviation about I think two years ago and were sold to ST Engineering Aerospace. So they are GE Aviation legacy programs, so programs are GE Aviation programs used MRAS which was part GE Aviation for all the nacelle structures and thrust reverser structures. So that's the connection there.

Redundant Factory, we'll talk about that a little later. It's just about done, but when we signed up that LTA with MRAS, we said, OK, we'll go ahead and now we'll build that redundant factory. Why are we doing that? We'll next item, sole source for composite materials for engine nacelles and thrust reversers from multiple MRAS programs, the whole A320neo family of airplanes with those LEAP-1A engines, that's the first five items, the Boeing 747-8, the Comac 919, Comac ARJ-21 which is a regional jet for China and Bombardier Global 7500.

It takes a long, long, long, long, long time to qualify a composite material supplier. So you see the problem here is that if something happened to our one plant, it's actually a major crisis almost immediately for all these aircraft programs. So it was very proper and understandable that they asked us to build a redundant factory as part of us signing our LTA and we did that. It was actually I think a handshake but we are people of our word whether it's right or not.

Top right, just quickly, there is also a component we produce for those Passport 20 engines. That's not part of the MRAS LTA. That's actually through GE Aviation still and we supply one of their contractors. Picture of the legendary Boeing 747-8 nacelles. I love this picture because it gives you a perspective on these nacelles are huge. I mean look at the kind of background there and these nacelles are all Park materials, not only the nacelles, the thrust reverser structures and for Boeing some internal fixed structures as well for the 747 I should say.

Let's go on to Slide 11. We'll do a time pushing ahead here. Okay, so let's do an update on these specific GE Aviation programs. So the A320neo family. By the way, we added A319 deal. That's part of the family not talked about much but there are some sales. So that's part of the family and that uses the LEAP-1A engines meaning when they use those LEAP-1A engines, it's our program. Definitely in the ramp mode I would say here. Just some information, Airbus delivered 57 neo family of aircraft in March.

This is from Airbus. This is not industry gossip or analysts opinions that kind of stuff. Airbus plans to increase the A320 family of aircraft production rate from 40, which is currently is at per month to 43 per month in Q3, 45 per month in Q4 and just if you want to do some maths. I don't know if about you, I like doing this, remember that the A320neo family of aircraft, they have two engines. One is the LEAP-1A engine. That's the program we're on.

They also have a Pratt engine. Now, each airlplane is two engines. You got to remember that when you are doing your math. Just FYI, I'm not telling you what's going to happen in the future, which I don't know, but if you look at the May addition of aero engine news, it says that the LEAP-1A which is CFM. CFM is a joint venture between GE and Safran LEAP-1A engines has about 61% market share of all of the firm orders for engines for the A320neo family of aircraft, OK. So, if you like doing maths. That's the current situation. I'm not saying it will happen in the future at least we don't know that, about 61% market share. So two engines, but 61%. Think of it that way.

Let's keep going. Now this is pretty important, during Airbus Q1 investor call on April 29th, '21, the Airbus CEO, I'm not going to pronounce his -- you can try his first name, but I think it's Mr. Faury and I'm probably not pronouncing that name correctly. Sorry about that, lot of French friends, and stated there will be a steep ramp-up. This is quote, a steep ramp-up in 2022 and 2023 for the single-aisle aircraft. That means the A320neo family of aircraft.

Steep ramp-up. That's his quote for '22 and '23. He also commented during the call that Airbus has provided scenarios to their supply chain to determine the fastest possible ramp-up of single-aisle aircraft production the supply chain can reasonably support. You get what's going on here? So from my perspective, these guys are very optimistic. They're trying to push up the rate as much as possible of the A320neo and now they're trying to figure out what the supply chain can support. Really important thing to understand. Okay, so that's the A320neo story.

Slide 12, still on the A320neo family. A320XLR news, this is part of that family using the LEAP-1A engine. First test flight nearing aircraft -- first test aircraft nearing final assembly. First flight expected in 2022. Certification entering the service in 2023. I mean that's kind of around the corner and aircraft timeframes, electronics in the old days that would be forever, two years in the aircraft is like tomorrow and many this expect airplane to be a game-changer, very significant range, holds a lot of people and the theory is it will replace wide-bodies for many missions, at least missions and the key thing is Boeing does not have an answer for this aircraft.

Boeing is reportedly considering these 5X, which would be an answer to the XLR. In my opinion, they really need to do it because they don't have an answer for it, but the problem I guess for Boeing a little bit is that this XLR is going to be in production and being sold in two years and Boeing hasn't even announced this 5X yet. So I have no idea what timeframe they'll be talking about, but it's going to be into the future. With kind of a new airplane category, I mean I think the general rule is, it's always good to be first, maybe not always, but usually good to be first. Let's go on to -- anyway so just on -- see on 12, well, I think this could be a really important program for Park, the XLR, part of the A320 family, but really important program for Park.

Let's go to Slide 13, the Global 7500. I think they recently sold their 50th unit. This airplane is in production and doing well and in the ramp mode, ramping up, which is really good news for us. Comac ARJ-21. This is a Chinese airplane made by Comac. It's a regional jet. It's in production, most of it for the China market for now. They're ramping up. It's in production ramping up. Slide 14, Comac 919 with the LEAP-1C engines. So Comac has indicated they intend to certifiy and begin deliveries of this aircraft before the end of 2021. That's this year, so I guess we'll see what happens.

I don't know whether it's correct or not. I haven't heard any updates on that, but whether it's '21 or some other date after that, this is I think a very big potential program for Park. This is Airbus attempt to be a real player in commercial aerospace. This is their answer to the 737 MAX and A320. This is their single-aisle airplane and you see a picture right here. So I suspect it's going to be big. I suspect originally they are going to sell inside China. Remember, domestic aviation single-aisle, but eventually I believe they'd like to sell this outside China.

Boeing 747-8, Boeing announced it will terminate production of the Queen of the Skies in 2022, 12 orders left to fill. Long live the Queen as some of you know I have a real fondness for the 747-8. One of the things that makes it a real sentimental thing for us is the first program we got on with GE Aviation was the 747-8. Our first shipment for these programs was February 28 [Phonetic], 2014 about 11 o'clock at night, was kind of a pretty exciting day for Park actually. So we have a special fondness for the 747. I personally knew this. I took this picture actually at the Anchorage airport. This airplane you see the gears down about to land.

Slide 15. So commercial aerospace year in review, armageddon revisited. So you know about all these airplanes parked by the thousands. Donna did a real nice job with these pictures. Airline terminals were ghost towns. If you weren't there, you've heard about it, airplanes flying almost empty. We see lots of pictures only two people on a plane. Thousands of flights canceled. Thousands and thousands employees were laid off throughout the commercial aircraft and commercial aviation industries. That's armageddon.

Almost all news about commercial aircraft industry was negative, very negative just again as the analysts and you know the commentators and people like to get interviewed on TV that I guess a lot of people listen to and it was maybe not a good thing because that becomes a self-fulfilling prophecy. Aviation analysts and commentators predicted full recovery will not come for many years or may never come, maybe it's over, maybe the commercial aerospace industry is a thing of the past. There just won't be an industry almost, end of days, they're talking about.

Slide 16, but at Park, we did not completely buy all that doom and gloom stuff. We did not buy that at the end of days were at hand but it doesn't really matter either way, we made arrangements with MRAS to maintain minimum monthly baseline, critical mass production levels to preserve Park's ability to ramp-up production when needed. We covered this I think during the last couple of calls at least. So if you listen to our prior calls, you know about this, but it was very important for MRAS and Park that we did this. We didn't want to allow our production levels of the type of product we make for MRAS to go below the critical mass because we knew -- we didn't know. I guess we didn't know anything, nobody did, but we had a lot of -- we believe we're going to need to ramp back up one day. So it ended up being approximately $700,000 to $900,000 a month, the minimums were in terms of units because it was a production thing, not of sales thing, but it turns out there was approximately $700,000 to $900,000 per month starting about July.

Even though layoffs were widespread and pervasive through the commercial aircraft industry, we laid off nobody, none of our people through all the darkest and seemingly hopeless days of the commercial aerospace industry. Listening to all these guys on TV talking about the end of days, it's over, you know. Everybody we knew was laying people off, but we did not do that and it turns out that decision to not lay off people is critically important to Park because if we're ramping back up, we have to go try to rehire these people and call them back, which I know a lot of other companies are doing, we never let them go to begin with. A reason for not letting them go wasn't only that, it's because we don't like doing that kind of thing as we discussed many times in the past.

Slide 17, continuing the same theme. We spoke at length during our Q1, Q2 and Q3 investor calls last year about the significant divergence from and mismatch between the minimum monthly baseline critical mass production amounts agreed to with MRAS and the then current end market requirements for GE programs which Park is on. I'm not talking about now, I'm talking about then. Airbus always maintained they were going to stay at 40. They weren't going to go under 40. All the analysts, not all the -- that wouldn't be fair. A lot of the analysts and commentators, oh they're going to have to, you know, another shoe is going to drop, all right fine, it didn't drop, but we were producing with our minimum amount about half level of what was needed to support the then market, not the now market, the then market.

Inventory destocking. This is what happened, everybody was so intimidated, so frightened and so afraid and you know, like I said, the analysts and commentators didn't help very much. People weren't willing to buy anything, people weren't going to build anything, they were just kind of selling inventory down because basically the world is coming to an end. What did we say? We said to you, said inventory could not be destocked to below zero. You can't have a negative number, unless you involve very creative accounting I guess. The divergence was mathematically unsustainable. I mean how long can you sustain that kind of mismatch. We don't know how long, but it was not going to be sustainable, unless the aircraft end market took another dramatic step down. The day of reckoning was coming. We told you that. This was our opinion. Well, it came. Destocking has ended. All the GE Aviation programs which Park is on are in a ramp mode, except for the 747 whose rates are unchanged.

Let's go to Slide 18 and the ramp is looking steep. This is just an update from the slide we did last quarter. For perspective, GE Aviation program sales for the following periods were, now, these are calendar year periods, just want to mention that because normally you talk fiscal years but calendar year '19, $29.3 million. Calendar year '20, oops, $15.8 million, but the last six months of calendar year '20, $5 million, that's a $10 million run rate, but if you think about it, $700,000 to $900,000, that was a minimum, maybe $800,000 kind of -- middle of that range $800,000 times 12 is about $10 million. So that kind of makes sense. So we're running a $10 million rate during the last half of calendar '20.

Okay, calendar year '21. Calendar year is still calendar, forecast for GE Aviation program sales based upon new forecast we recently received from the customer, $25.5 million. What happened? Last time we talked to you, it was $24 million. Well, it moved up. Is it done moving up? I don't know. We'll have to see about. What does it mean? This is not a forecast to you. We're just telling you the forecast we received. Our forecast to you will be done fiscal year basis. Normally, we'll provide ranges when we give a forecast, but this is just to give you a perspective on how steep the ramp is. $10 million rate to the $25.5 million rate in a period of what like a month. So that's perspective.

Slide 19, continuing the ramp mode we're into a hit mode. In addition, we've written, this is really important. In addition, we recently received an updated long-term forecast for GE Aviation. This is not just a 2021 forecast. This is '21 through '29. The balance of the firm pricing LTA, remember that was '19 to '29. Well, obviously we won't in '21 [Phonetic] or '29 [Phonetic] now in terms of the updated forecast. The past is the past. So here is something really key. On an apples-to-apples basis, the total updated forecast, GE Aviation program sales for that '21 to '29 calendar year period are very similar to the total forecasted GE Aviation program sales from the pre-COVID forecast for that same period. We're basically back to where we were pre-COVID. That's the forecast we received. How is the updated forecast constructed?

Okay, I think we told you this before. We are giving units. We know what materials -- how much material is used, what type of material is used by unit. We know what the selling price is for the materials. So we just build it from there. We build a very detailed long-term forecast, big spreadsheets, lots and lots of detail, but that's how we build it. Our opinion? The updated long-term forecast that we're talking about now may not fully capture the steep ramp-up of the A320neo aircraft family production in 2023 predicted by the Airbus CEO just a couple of weeks ago.

We say that because we think that those comments came after we received the forecast and then also my I guess opinion is that the forecast may not capture the XLR sales opportunities and the reason I say that is because a lot of people think the XLR is going to be a big deal and the long-term forecast, we don't really see a bump which would be tied to the introduction of the XLR. I don't mean it's in there.

I'm just saying we'e just kind of wondering about it, but important question, so there is some upside we think maybe the forecast didn't fully capture these two things. But the other side equation is, how will the commercial aerospace manufacturing supply chain respond to the steep ramp. That's a big question. Remember the Airbus CEO said they went out to the supply chain to figure out what the supply chain can support. So there's two different things that are kind of pulling in different directions I guess.

Slide 20, how are we responding to the ramp-up, it's all about our people. Well, so Park's people count is currenlty 106. So what the heck happened here? Remember, last quarter it was 107 and we told you we plan to hire 15, 20 people. So where are those people? We haven't increased our people. So why? Well, maybe people are getting paid to stay home. So who is that helping? We are -- on the financial news, news about all these companies that can't really reopen, can't ramp up, they can't hire people.

It's really terrible. The government's paying them to stay home, but don't hear too much about the people. It's just helping those people. So you may want to think about that a little bit. These are people. Some of them now haven't worked for a year. They are home getting fat, you know. Their mind is turning to mush maybe, they are losing their edge. Some of these people are wasted people now. They don't may not have the ability to go back to work again, maybe ever. Look, if you're off for a few weeks, fine. A year? So maybe some of these souls are broken souls. What about them?

They are people too, you know. Their lives are being destroyed, at least some of them, but it's funny, that's not part of the discussion, it's always about the businesses, which can reopen and I appreciate that. I think that's a very good point, but why is nobody thinking about those people. Are they being helped by this? I have an opinion about who's being helped and it's not them, but don't you worry about us, we'll take care of it. As usual, Park's people stepping up, getting the job done. Corey has done a magnificent job of kind of organizing a workforce so that we're able to meet the ramp-up. We don't talk about disappointing customers. That's not in our vocabulary. One way or another, we'll get the job done.

Slide 21. So how are we responding. Thank goodness for our customer flexibility program. We've talked about this a lot, a little more detail. Total current participation 80%. We got of the 80%, two job categories 47%; three, 30%; four, 18%; five job categories, 5%. Without this customer flexibility program, it would just be very, very difficult to get the job done. This customer flexibility program is just a godsend. It helped up so much during the downturn to keep things going, not laying people off and it's helping us incredibly now with incredible flexibility to respond as we need to. Thank goodness we didn't lay anybody off in the darker days in the commercial aircraft industry, because we didn't have to hire anybody back. They're all there. Our team is there. That's not the reason, the only reason and the other reason is we just don't believe in letting people go. That's just not how we think about things. Those people are precious and thank goodness for Park's great people. Without them, we would not be able to get the job done. Park is very fortunate and blessed to have the great people it has.

Let's go on to Slide 22, GE Aviation program, how are we doing on time? Maybe more than 45 minutes. GE Aviation program sales history and forecast estimates. So the top part of it is the history, which you're familiar with. Q4 was $4.4 million. I think that's pretty much where we predicted during our Q3 call. Total $13.2 million and look that's less for '21. Sorry, fiscal '21. I would say it's less than half of fiscal year '20, which is not a big shock I don't think to anybody. Our forecast, Q1 $6.5 million to $7 million and that's pretty much booked. Q2 $6.5 million to $7 million. For the fiscal year $26 millionto $28 million, is that right? Well, I don't know, it could be, I guess it depends on what happens in part with the A320 and what Mr. Faury said, this Airbus CEO that we just talked about and then the other side of the equation is always can the supply chain meet the ramp up.

I'm not talking about us, but if any part of the supply chain is not able to support the ramp up, that means that ramp up itself maybe slowed down a little bit. So again a picture of the 747-8 departing Anchorage. So you see a lot of pictures of the 747-8. As the CEO, I get picture authority and I love the 747-8. So even though it's not our biggest program, I just love the airplane. I love putting pictures of the airplane in the presentation, but somebody asked about this, it's actually less than $2 million of revenue for us per year. So even though it has a very sentimental value for us, it's not one of the bigger programs for GE Aviation. So I just want you to be aware of it but you are seeing the programs being ended.

Slide 23, we have a little forecast here for you. First the top box is history. So just for perspective, the history, we covered the history on an earlier slide. Just to remind you, kind of broken record stuff here, that essential component for missile programs. This is last year '21 Q3 about $2 million in Q4, about $3.5 million just to keep that in mind. Now let's go to our forecast. We haven't given a forecast for a while. Well, we gave ish [Phonetic] forecast like 3-ish or 4-ish. We're back to trying to give you a forecast. We think there's still a lot of uncertainty, but we feel a little bit better.

So we're providing you with a forecast. Q1 sales $13.3 million to $13.8 million. That's less than Q4 as you can see, but again we don't -- we don't have those sales of that essential component and $3.6 million to $4.1 million of EBITDA. So we're getting back up there. Just you know in Q1, this is something we're not sure about. We have forecasts, forecasts forecasts, we do P&Ls every week and we test our forecast, but the gross margins in Q1 should be -- we're predicting quite a bit over 35%. I'm not saying that's sustainable. If you look at Q2, it's interesting, because we're seeing the revenues are going up but we're looking at the adjusted EBITDA down a little bit.

First of all, it's the hard it's just broken record stuff but there's $1 million of the essential component sales in Q2, remember very low margins, but quarter-to-quarter, the mix changes. Since we're doing a lot more military, we're going to have quarter-to-quarter mix changes and that's going to affect our bottom line. With the GE Aviation business there is really no mix change, it is what it is. Military, a lot of programs and you know one quarter it will be more of this and one quarter will be more of that and that's going to up and down our EBITDA from quarter to quarter. For the year, looking at $55 million to $62 million revenue, $13.5 million to $16.5 million EBITDA. I think fiscal '20 it's in the prior part of the presentation with $60 [Phonetic] million of revenue and $13 million EBITDA, so we're saying year, we're kind of back there may be a bit better than that.

So just a couple of things I want to mention, these are taken into account when we do our forecast and we could be wrong, but like I told you earlier and we've covered this many times. We'll give you a forecast, we're saying, this is what we think is going to happen based upon, of course working hard. This is not a walk in the park or anything like that but we're working very hard, doing our jobs, but we're still looking to hire people, we haven't given up. When you desire to hire maybe eight or nine people now and maybe some additional later on, so there's real cost involved with people, entry level people, they're not very expensive, over $50,000 [Indecipherable] per person.

New plant start-up, there's going to be some costs involved in new plant start-up. Raw material costs are going up. I mean inflation is quite a concern. So with the LTA with GE Aviation, those raw materials are locked in. We couldn't have done an LTA which GE Aviation if we didn't have an LTA from our suppliers, but most of the other customers not LTA's so we quote quite often what we do is we unfortunately raise our prices to take into account the raw material cost increases. That's what we do. It's not good and we know where that ends when prices keep going up and up, it's not a good thing.

Things like utilities are going up, supply is going up, shipping going up. We normally have that covered as either part of our selling price or our raw material purchase price and there is also, I would say, well, I'll speak for myself serious concerns about the economy, what's going on, how it's managed, inflation, interest rates and things like that and we don't really spend a lot of time thinking about it, but we can't deny it. We're still living in the world out here. We do what we need to do every day, but I don't think it would be proper for us to say we're immune from what goes on the outside world.

Okay, why don't we go to Slide 24, update on our expansion. Our budget is now $19 million. It was $18 million last time we spoke. So what happened? We started with $20.5 million I think. We pulled it down to $18 million on theory that business is very slow. So let's kind of the hold back a couple of things, see what happens so we can make the decisions later on, but with the ramp up and everything its increased to $19 million. Spending to date about $15 million. I guess do the math, about $4 million to go. Completion is basically next month. Little things will be worked on for a while but completion is basically next month.

We start the manufacturing trials for the major equipment which are pictured below the top, bottom left and right corners, July of 2021. Qualification runs for MRAS is September of '21 is what's planned. These two items of equipment. We're not really, they are huge and it's hard to give you a perspective on how big they are because some of the stuff we don't want our competitors to see and they are able to see our presentations as well. So we kind of took a funny perspective on this equipment [Indecipherable] Top right picture of our new offices and the office is open.

My office is at the top right of the picture and then you see the bottom middle, it's a nice picture because you could see on the left is a new facility and the right is existing facility except with the new offices and kind of toward the back between two rooms, that's the passage way. Off to the right of the existing facility, there is also the warehouse, but that's not captured in this picture. So that is the story of our expansion.

I'm going to try to wrap it up here. Slide 25, Park's reflections on its 2021 fiscal year was our finest hour. Well, let's talk about that. Park had its share of tragedy and heartbreak during the year, the kind of heartbreak that does not go away. But at Park, we don't quit, we don't give up. We don't back down. That's just not what we do, it's not our nature and we keep going.

We push forward with our major expansion when some others slashed their capital spending. We stayed true to our principles when maybe some others didn't. We do not sell out when maybe some others did. We did not layoff anybody when so many others did by the thousands and thousands. Park's people are precious. The Park family stuck together and saw through the darkest days together. At Park, we're a family, we have each other's backs.

Slide 26 Park is a strange and unusual company filled with wonderful and special people. We're very fortunate when it comes to our people. We're not like the others. At Park, we play for keeps. We're not fooling around, we're looking to make an impact here. So, Park's 2021 fiscal year may have been Park's best year ever. You know, I've been with the company since 1988. I can't speak to before that maybe in the '50s, in the early days in Woodside, Queens, maybe there were some great years then at the beginning, way before my time, but I can tell you without hesitation that in my opinion, the 2021 fiscal year was the best -- Park's best year since 1988 when I joined the company and I'd say that without hesitation, I can't think of another year that would compare.

I think our best year ever. That's my opinion anyway. Yes, our finest hour. So we will save the last for a picture of one of our crews which we love to do. The top row that's Guadalupe and Juan. The bottom row Jose who is a lead. Joshua and Seraphin. Now what's interesting is this is Park second shift solution treater and film line crew. Wait a minute, those are two different things. Well, what's going on here. This is the customer flexibility program.

Each one of these five guys has been approved to operate both lines and that's a big deal. You don't put somebody on these lines with you know, OK, here you go just hired them. No, it doesn't work that way. So you see how it works with customer flexibility. These guys are able to move back and forth between those two major lines and that was so important to us during the downturn and so important to us now when we're trying to ramp up. So that's how it works. So I think we're at the end of the presentation. Slide 27 is our thank you slide. Operator. So we're happy to take questions to the extent that there are any.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Brad Hathaway from Far View. Your line is now open.

Brad Hathaway -- Far View -- Analyst

Thank you very much and congrats. Brian getting through such a tough year, really very impressive.

Brian Shore -- Chairman and Chief Executive Officer

Thank you, Brad.

Brad Hathaway -- Far View -- Analyst

I appreciate your willingness to give us a 2022 forecast and all the commentary about kind of the ramp up that you're seeing. Given that things seem to be getting better and you kind of previously commented on kind of prior forecast just being shifted a little to the right. I was curious if you had any thoughts on kind of those prior forecasts and also kind of when you will feel comfortable perhaps giving us a long-term forecast again?

Brian Shore -- Chairman and Chief Executive Officer

So as we just commented, we're forecasting for the current fiscal year. It looks like 2020 fiscal year before the calamity happened for the world and the industry. Our forecast maybe a little bit better particularly EBITDA kind of right on that -- in that range for the top line. I don't know how to answer that question except maybe one way to look at it is that's kind of our restarting point. Obviously, before we go out with a new long-term forecast, we can't just kind of take off and going to roll it out or push it back by to the right by two years. That really wouldn't be right.

We have to take into account everything we know now and all the updates and all the new developments and there are significant new developments I think most of which are positive actually. When will be ready for that? I don't know, I don't really feel like it will be next quarter but let me just say I would hope that before the end of the year this year we'll be able to roll out the forecast for more than just one year. Even the one-year forecast as I said, there are uncertainties that we're still dealing with, it's not like kind of a stable world right now. We felt good enough that we're able to provide something to you. I don't know how to answer that second question.

I would just say I'm going to hope by the end of the year because you know what's happening is, we feel like we're getting a lot more useful information and what we're doing is we're really listening to what Airbus says, what Bombardier says, what Comac says, what Boeing says, for commercial I'm talking about and kind of tuning out all the analysts and everything and the commentators. These statements really have not been helpful and have been kind of wrong, but it's really great like the A320 to be on that program, because forget about what everybody else says, how about Airbus CEO, it's so helpful to be able to tie what we're doing to what Airbus says and we can do it. We can do it with a pretty good precision once we know what they are talking about. So, I don't know, sorry to not give you a better answer but that's all I can think of right now.

Brad Hathaway -- Far View -- Analyst

No, it's good. Anyway it's good to see everything after a tough year moving kind of -- all the programs seem to be moving pretty positive. So that's great. In terms of M&A, is there anything you can kind of update on what you've seen there?

Brian Shore -- Chairman and Chief Executive Officer

Yeah, so I think last quarter we talked a little bit and we thought that last year we'd be able to get some distressed sales that didn't materialize. Our advisors told us that's because the Fed made it possible for people to hang on. We're pretty active into areas we're actually putting a preliminary bid on one company I think later this week. We're still looking. We're trying to find niche ones.

We're trying to find things that everybody and their brother and all the financial buyers are not piling on because it just drives the price up so much, but the other thing is that we are -- we have identified a certain product area that's very closely related to composite structures and composite materials and we're doing some pretty good research I would say in that area and we've actually reached out to several companies that do have operations in that area.

I guess at this point, we won't specify, but it's something that will be used by company producing composite structures in addition to the composite materials. So we think it's really good tie-in and some of our customers have actually helped us in that regard as well. So we're optimistic, we're talking about -- not optimistic, that's probably no the way to say it these days. M&A is more difficult, but we feel better about that than just going to the auctions. Let me put that way. These are companies, some are private, some are divisions of large companies. They are probably not going to be for sale. So we're trying to initiate the discussions and we'll see how those go.

And then the other area, I just want to mention is, there are projects we worked on and we know about the joint venture discussion in Asia, but there are other projects that we work on with some of the large customers that wouldn't be really M&A, but would involve a significant investment of capital. So I guess I would talk about those maybe three things. We certainly haven't given up or let down all even though we have this concern about these companies being bid up right now with I guess M&A inflation.

I don't know, maybe it won't less, maybe that will reverse, we'll see. So obviously, we'll let you know as soon as we have something to report and we don't have anything to report right now, but I guess the message I would send is that we're still working on it. We haven't given up or just decided to take a year off or anything like that or wait till valuations come back down.

Brad Hathaway -- Far View -- Analyst

Understood. And in your mind. I mean, obviously if things continue to improve, one, with the M&A environment might become harder in the future unless you can one of these deals that kind of push to you or something, really niche, is there a point at which you decide that the cash on the balance sheet is not going to be usable for some kind of investment and you consider other alternatives?

Brian Shore -- Chairman and Chief Executive Officer

Sure. There is a point, I don't know what that point is but sure there's a point. So that's kind of an open question for us. I understand exactly what you're getting at, at least I think I do. I don't have -- can't give you a date, but it's something the back of our minds, absolutely.

Brad Hathaway -- Far View -- Analyst

I mean obviously my preference would be that you find an excellent bolt-on acquisitions. So if you can do that, that would be fantastic.

Brian Shore -- Chairman and Chief Executive Officer

[Speech Overlap]. Thank you. And just you know, we feel the same way about it, but thanks for the comment. Go ahead, sorry.

Brad Hathaway -- Far View -- Analyst

No, I was just going to say thank you very much, I appreciate all your efforts to generate the results you did in a year like -- a pandemic year like last year. It's pretty incredible. So thank you very much for the effort.

Brian Shore -- Chairman and Chief Executive Officer

Thanks for your comments.

Operator

Thank you. [Operator Instructions] And our next question comes from Leonard Cooper [Phonetic], a Private Investor. Your line is now open.

Leonard Cooper

Hi, Brian. Sounds like you're busy bees.

Brian Shore -- Chairman and Chief Executive Officer

Yeah, hey, Leonard. How are you doing? Haven't heard from you in a little while.

Leonard Cooper

We're doing OK. We're hanging on. I just noticed a story saying that we're going to go -- the U.S. is going to have a wind turbine farm. I think it will be the first authorized by the government. Are we involved in that or can we be involved in that?

Brian Shore -- Chairman and Chief Executive Officer

We're not and we don't want to be. Wind turbines are not the market area for us. It's actually if you look at companies that are involved, it's not really a very happy story. Those are low margin programs. We're aerospace and that's pretty much it. We decided to go in aerospace, we realized right from the start that we didn't know what the heck we're doing, you don't know, you don't know. Aerospace is such a huge complex field that we felt small company, we don't have a pin [Phonetic] to get involved in other areas boats or wind turbines or skateboards or whatever. Composites are used obviously in a lot of things. We're an aerospace company, that's it, no wind turbines for us.

Leonard Cooper

Okay. It's just there is a lot of aerodynamics in those blades.

Brian Shore -- Chairman and Chief Executive Officer

Yeah, you're right and I think they're getting more sophisticated. I'm not an expert in it, but I think they're getting more sophisticated from an aerodynamic perspective as well.

Leonard Cooper

Okay, thank you very much. It was a very interesting conversation. All the best.

Brian Shore -- Chairman and Chief Executive Officer

Okay, well thanks for checking in Len, nice to hear from you. So hopefully we'll see you soon.

Operator

Thank you. And I'm showing no further questions. I would now like to turn the call back to Brian Shore for closing remarks.

Brian Shore -- Chairman and Chief Executive Officer

Okay, thanks operator. Thanks everybody for listening. I'm sorry, I said 45 minutes. I think we went past 45 minutes. I try to rush through it, but there are always a lot of things you want to cover to help with perspective. So thanks again for listening in. Have a great day and feel free to call us. Matt and I are available anytime you want to talk. So we'll be talking to you fairly soon because our first quarter is actually just a couple of weeks. So I think probably early July we'll be doing our first quarter announcement. Okay. Take care. Have a great day. Good-bye now.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Brian Shore -- Chairman and Chief Executive Officer

Brad Hathaway -- Far View -- Analyst

Leonard Cooper

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