Park Aerospace Corp. · NYSE:PKE

Park Aerospace — Investor Presentation (May 2022)

51 slides from Park Aerospace's investor presentation, May 12, 2022

1. Slide 1: Company Presentation

   Company Presentation May 12, 2022

2. Slide 2: Forward Looking Disclaimer

   Forward Looking Disclaimer This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events or our future financial or operatin

3. Slide 3: Our Business

   Our Business  Park Aerospace Corp. develops and manufactures Solution and Hot-Melt Advanced Composite Materials used to produce composite structures for global aerospace markets:  Wide array of prepreg materials specifically designed for hand lay-up or automated fiber placement (AFP) manufacturing

4. Slide 4: Our Business (Continued)

   Our Business (Continued)  Park Aerospace also offers:  Specialty Ablative materials for Rocket Motors and Nozzles  Specially designed materials for Radome Applications (including RadarWave® materials)  As a complement to our Advanced Composite Materials offering, Park Aerospace designs and fabri

5. Slide 5: Our History

   Our History  Park founded on March 31, 1954 by Jerry Shore and Tony Chiesa with ~ $60 Thousand Investment  Company started in a small “factory” (garage?) in Woodside, Queens with 5 employees  1954 Results: Park’s Founders  Sales: $124,206.59  Pretax Profit: $887.38  Taxes Paid: $226.21  First

6. Slide 6: Our History (Continued)

   Our History (Continued) November 17, 1960 Park goes Public 1961 Park acquires New England Laminates Company (“Nelco”) in Stamford, CT for ~ $200 Thousand 1984 Park lists on NYSE 1985 Park commences regular Quarterly Cash Dividend Mid-1980’s Park had become global Electronics Business with other anci

7. Slide 7: Our History (Continued)

   Our History (Continued) Jan 2007 Park commits to Aerospace as second major area of business focus Jan 17, 2008 Ground-breaking of Park’s New Aerospace Facility in an empty field in Newton, KS May 2009 Park’s Newton, KS Aerospace Facility opens February 28, 2014 (11:00 PM) Park makes first production

8. Slide 8: Our History (Continued)

   Our History (Continued) December 2018 Park announces Major Expansion of Newton, KS Facility December 2018 Park sells its Electronics Business to AGC Inc. of Tokyo, Japan December 2018 Park’s transformation from an Electronics Company into an Aerospace Company is complete July 17, 2019 Park changes n

9. Slide 9: Major Expansion of Newton, KS Facilities

   Major Expansion of Newton, KS Facilities  December 2018…Park announced Major Expansion of Newton, KS Aerospace Manufacturing and Development Facilities  Redundant Plant for MRAS and its Aircraft OEM Customers  Park expects Redundant Plant will also be needed for Manufacturing Capacity  Approxima

10. Slide 10: Major Expansion (Continued)

    Major Expansion (Continued)  Expansion includes:  New 60” Hot-Melt Film and Tape Manufacturing Lines  New Mixing and Delivery Systems  New R&D Lab  Expanded Production Lab  Additional Slitting Capacity  Additional Freezer and Storage Space  Space to accommodate additional Hot-Melt Tape Line

11. Slide 11: Quarterly Results for FY2020, FY2021 and FY2022

    Quarterly Results for FY2020, FY2021 and FY2022 (In Thousands)* FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY22 Q1 FY22 Q2 FY22 Q3 FY22 Q4 Sales $14,950 $13,723 $15,847 $15,494 $12,213 $9,250 $10,372 $14,441 $13,594 $13,618 $13,864 $12,502 Gross Profit $4,804 $3,813 $5,022 $5,03

12. Slide 12: Quarterly Results (Continued)

    Quarterly Results for FY2020, FY2021 and FY2022 (In Thousands)* (Continued)  Living the Park life in FY2022 Q4 (and FY2023 Q1...and beyond!)  Supply Chain…Supply Chain…Supply Chain!!! • But things were supposed to get better towards the end of last year...Ha!  Freight…Freight…Freight!!! • A Daily

13. Slide 13: Quarterly Results (Continued)

    Quarterly Results for FY2020, FY2021 and FY2022 (In Thousands)* (Continued)  Inflation…Inflation…Inflation!!! • Raw material costs • Freight costs  Crude Oil Prices! • Utilities  Crude Oil Prices! • Supplies • Pretty much EVERYTHING  But Inflation was supposed to be only transitory! Ha, ha!  No

14. Slide 14: Quarterly Results (Continued)

    Quarterly Results for FY2020, FY2021 and FY2022 (In Thousands)* (Continued)  The Supply Chain has become a free-for-all...order in the Supply Chain has broken down...chaos and panic pervade  In some cases, even confirmed POs are not being honored  But, at Park, we do not panic and we live with ch

15. Slide 15: Historical Fiscal Year Results

    Historical Fiscal Year Results (In Thousands)* FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 Sales $31,837 $40,230 $51,116 $60,014 $46,276 $53,578 Gross Profit $8,299 $11,288 $16,184 $18,673 $13,191 $17,917 Gross Margin 26.7% 28.1% 31.7% 31.1% 28.5% 33.4% Adjusted EBITDA $1,055 $4,704** $10,248** $13,01

16. Slide 16: Park's Balance Sheet, Cash and Cash Dividend History

    Park’s Balance Sheet, Cash and Cash Dividend History  Park has zero long-term debt  Park had $110.0 Million of Cash and Marketable Securities as of end of FY2022 Q4  Spending to go to complete Major Expansion: ~$1 Million • Spending to date: ~$18.75 Million • Spending in FY2022 Q4: ~$600 Thousand

17. Slide 17: Park's Balance Sheet, Cash and Cash Dividend History (Continued)

    Park’s Balance Sheet, Cash and Cash Dividend History (Continued)  Park’s Cash Dividend  While others cut or cancelled their dividends, Park maintained its regular $0.10 per share quarterly cash dividend throughout the pandemic and economic crisis  Park has paid 37 consecutive years of uninterrupt

18. Slide 18: FY2022 Q4 Top Five Customers

    FY2022 Q4 Top Five Customers (in Alphabetical Order) AAE Aerospace GKN Aerospace Kratos Defense and Security Solutions Middle River Aerostructure Systems (MRAS)* and its subcontractors Nordam Group Patriot Advanced Capability (PAC-3) Missile System Boeing P-8A Poseidon Sub Chaser Boeing 787 Gremlin

19. Slide 19: Aerospace Market Segment

    Park’s Estimated Revenues by Aerospace Market Segment FY2020 FY2021 FY2020 Revenues: FY2021 Revenues: $60.0 Million $46.3 Million FY2022 FY2022 Revenues: $53.6 Million 011218 slide 19 051222 Slide 19

20. Slide 20: Park Loves Niche Military Aerospace Programs

    Park Loves “Niche” Military Aerospace Programs MK125 Warhead for Boeing RC-135 Standard Missile-6 Boeing Harrier AV-8 Park’s Estimated FY2022 Military Revenues by Market Segment Estimated FY2022 Military Revenues: $20.0 Million Collins Class Submarines 011218 slide 20 051222 Slide 20

21. Slide 21: Military Markets – Trends and Considerations

    Military Markets – Trends and Considerations The New World Order  The New World Order…a Sea Change in attitudes about the Defense Industry and Defense Spending based upon the War in Europe  Almost overnight  What a difference a war makes  U.S. 2022 Defense Appropriations Bill signed into law  A

22. Slide 22: Military Markets – Trends (Continued)

    Military Markets – Trends and Considerations The New World Order (Continued)  But Europe may be the real big Defense Spending story…  Certain countries, like Germany, have already significantly increased their Defense budgets, and many others are considering, or in the process of, increasing their

23. Slide 23: Military Markets – Trends (Continued)

    Military Markets – Trends and Considerations The New World Order (Continued)  On April 19, 2022, Lockheed commented that Russia’s attack on Ukraine has boosted demand for their missile defense systems. Lockheed’s CEO stated, “We’ve got demand signals for THAAD and PAC-3 from around the world.” He c

24. Slide 24: Commercial Aerospace Markets-Trends and Considerations

    Commercial Aerospace Markets-Trends and Considerations  Commercial Aviation continues to recover, largely driven by continuing improvement in U.S. domestic and trans-Atlantic demand  Single-aisle aircraft continue to lead the recovery over wide-body aircraft…single-aisle aircraft are designed to s

25. Slide 25: Commercial Aerospace Markets (Continued)

    Commercial Aerospace Markets-Trends and Considerations (Continued)  So, all of the signals seem to be quite positive for Commercial Aviation  And, generally, higher jet fuel prices provide airlines with extra motivation to more quickly replace less fuel-efficient legacy aircraft with more fuel-eff

26. Slide 26: Commercial Aerospace Markets (Continued)

    Commercial Aerospace Markets-Trends and Considerations (Continued)  It is true that there is pent up demand for air travel as the world recovers from the pandemic and also true that there is lots of loose money in the pockets of individual and business travelers alike  But, are individual and busi

27. Slide 27: Commercial Aerospace Markets (Continued)

    Commercial Aerospace Markets-Trends and Considerations (Continued)  Something to think about while we are celebrating with exuberance (is it “irrational exuberance”?)  If people start flying less, will airlines be less willing to order new airplanes or will they seek to push out or cancel existing

28. Slide 28: GE Aviation Jet Engine Programs

    GE Aviation Jet Engine Programs  Firm Pricing LTA (Requirements Contract) from 2019  Park Composite Materials are Sole through 2029 with Middle River Aerostructure Systems Source on primary structure component (MRAS), a subsidiary of ST Engineering Aerospace for Passport 20 Engines for Bombardier

29. Slide 29: GE Aviation Jet Engine Programs New Developments

    GE Aviation Jet Engine Programs New Developments  Park’s New Film Adhesive Product  Park’s new Film Adhesive Product was developed under a joint development MOU between MRAS and Park  The development of Park’s Film Adhesive Product has been a long process, but it is now complete  Park’s new Film

30. Slide 30: GE Aviation Jet Engine Programs New Developments (Continued)

    GE Aviation Jet Engine Programs New Developments (Continued)  Park’s LSP Material is now in the process of being approved for use on the Bombardier Global 7500 Program (with GE Passport 20 engines) • Also very good news for Park  Fan Case Containment Wrap for GE9X Engines for Boeing 777X Aircraft

31. Slide 31: Update on GE Aviation Jet Engine Programs

    Update on GE Aviation Jet Engine Programs  Airbus A319neo/A320neo/A321neo/A321LR/A321XLR (A320neo Family of Aircraft) with LEAP-1A Engines…  In a May 27, 2021 news release, Airbus stated: “A320 Family: Airbus confirms an average A320 Family production rate of 45 aircraft per month in Q4 2021 and c

32. Slide 32: Update on GE Aviation Jet Engine Programs (Continued)

    Update on GE Aviation Jet Engine Programs (Continued)  Airbus delivered an average of 40 A320neo Family Aircraft in 2021  Airbus is currently delivering A320neo Family Aircraft at a rate of 49 per month  Airbus recently stated that they plan to reach a rate of 65 A320neo Family Aircraft deliverie

33. Slide 33: Update on GE Aviation Jet Engine Programs (Continued)

    Update on GE Aviation Jet Engine Programs (Continued)  GE Aviation recently stated, “We are experiencing an unprecedented ramp in LEAP production”, and further stated, “We are aligned with the airframers on what we need to produce through 2023 and we are solidifying what we need to do for 2024.” •

34. Slide 34: Update on GE Aviation Jet Engine Programs (Continued)

    Update on GE Aviation Jet Engine Programs (Continued)  As of the end of March 2022, CFM (meaning the LEAP-1A engine) had a 57.4% share of firm orders for the A320neo Family of Aircraft (Source: May 2022 edition of Aero Engine News) • Assuming a 57.4% CFM (LEAP-1A) market share, the 75 A320neo Aircr

35. Slide 35: Update on GE Aviation Jet Engine Programs (Continued)

    Update on GE Aviation Jet Engine Programs (Continued)  Comac C919 with LEAP-1C Engines…After a number of delays, certification (in China) and entry into service expected by the end of 2022 Comac C919 with CFM LEAP-1C Engines  Bombardier Global 7500 with GE Aviation Passport 20 Engines...  39 Glob

36. Slide 36: Update on GE Aviation Jet Engine Programs (Continued)

    Update on GE Aviation Jet Engine Programs (Continued)  Boeing 747-8…Boeing has announced it will terminate production of the Queen of the Skies in 2022…  Last Boeing 747 expected to be delivered in October 2022  Sad Day for one of the best (maybe the best) Commercial Aircraft ever built  Only 4

37. Slide 37: GE Aviation Programs Sales History and Forecast Estimates

    GE Aviation Programs Sales History and Forecast Estimates  GE Aviation Programs sales history:  FY2020 Total: $28.9 Million  FY2021 Q1: $4.1 Million  FY2021 Q2: $2.9 Million  FY2021 Q3: $1.8 Million  FY2021 Q4: $4.4 Million  FY2021 Total: $13.2 Million  FY2022 Q1: $7.0 Million  FY2022 Q2: $

38. Slide 38: Park's Financial Performance History and Forecast Estimates

    Park’s Financial Performance History and Forecast Estimates  FY2022 Sales and Adjusted EBITDA history: Sales Adjusted EBITDA FY2022 Q1 $13.6 Million $4.1 Million FY2022 Q2 $13.6 Million $3.2 Million FY2022 Q3 $13.9 Million $2.7 Million FY2022 Q4 $12.5 Million $3.1 Million FY2022 Total $53.6 Million

39. Slide 39: Comments and Thoughts about Our Forecast and Outlook

    Comments and Thoughts about Our Forecast and Outlook  Forecasting is highly problematical and probably not very meaningful in the current environment of supply chain chaos and disorder  Predicting the future in such an environment is somewhat of a guessing game  Forecasting for Park and GE Aviati

40. Slide 40: Forecast and Outlook (Continued)

    Comments and Thoughts about Our Forecast and Outlook (Continued) • How would a recession impact the outlook for Park’s military business?  We believe not much at all because there is too much at stake for the countries seeking to increase their defense budgets and spending  Commercial Aircraft bus

41. Slide 41: Forecast and Outlook (Continued)

    Comments and Thoughts about Our Forecast and Outlook (Continued) • Comac C919 and ARJ21 Programs - although the relatively small ARJ21 program may have only limited future upside potential, we believe the C919 program has significant upside potential for Park once the aircraft is certified and deliv

42. Slide 42: Forecast and Outlook (Continued)

    Comments and Thoughts about Our Forecast and Outlook (Continued) • Bombardier Global 7500 Program (technically a business jet program) - this is clearly a very key program for the restructured Bombardier company…in our opinion, it is a mandatory success program for Bombardier…Bombardier is clearly p

43. Slide 43: Update on James Webb Space Telescope

    Update on James Webb Space Telescope  Park’s proprietary SigmaStruts™ are incorporated into the structure of the JWST  The JWST, along with Park’s Sigma Struts™ produced by Park’s People at our “little” plant in Newton, Kansas, are established at the Lagrange 2 (L2) Orbit Point located approximate

44. Slide 44: Park's People

    Park’s People  Park’s current People Count is 105 (recently bottomed out at 98)!!!  Ideal People Count would be 125 to 128!  Minimum People Count needed to properly operate and function is 115!  Many other companies are throwing money at people in order to recruit them  They bid up people when

45. Slide 45: Park's People (Continued)

    Park’s People (Continued)  At Park, our People earn everything they get  We believe our Park People are compensated properly, but they earn what they get…every cent of it…  No giveaways… “No free lunches” (Milton Freedman)  We respect and admire our People too much to marginalize, demoralize and

46. Slide 46: Park's People (Continued)

    Park’s People (Continued)  Remember the panic and uncertainty about whether the world would even survive?  Well, we did not let go of any of our People then…would we let go of any of our People if there is a recession?  What do you think?  “Culture eats strategy for breakfast” (Peter Drucker) 

47. Slide 47: Park's People (Continued)

    Park’s People (Continued)  People talk lots about “strategies” (sometimes developed by fancy Ivy League consulting firms), but, with a dedicated, motivated and inspired workforce, a company can move Mountains…without such a workforce, a company can move Nothing, no matter how elegant their strategy

48. Slide 48: Closing Thoughts: Principles are not Cheap

    Closing Thoughts Principles are not Cheap  Will there be a recession?  The excesses in the economy and our Society seem so extreme to us • Are they sustainable? • Will people be willing to continue to pay highly elevated prices for almost everything when the money supply is tightening and the days

49. Slide 49: Closing Thoughts: Principles are not Cheap (Continued)

    Closing Thoughts Principles are not Cheap (Continued)  Principles are not cheap…Principles only count when it is “inconvenient” to hold true to them  It is “inconvenient” and costly for Park to honor our POs and PO confirmations in a world where many others are not doing so • At Park, we do what w

50. Slide 50: Closing Thoughts: Principles are not Cheap (Continued)

    Closing Thoughts Principles are not Cheap (Continued)  What is next for Park?  We will continue to press forward  We will continue to attack  We will continue to make money for our Owners  And we will keep swinging for the fences  At Park, we are not like the others…at Park, we play for keeps…

51. Slide 51: 011218 slide 51 051222 Slide 51

    011218 slide 51 051222 Slide 51

Park Aerospace — Investor Presentation (May 2022) on 6ix