Good morning, my name is Sherrie and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. Third Quarter Fiscal Year 2020 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.

Thank you, operator. Good morning, everybody. This is Brian. I'm with Matt Farabaugh of course, our CFO, as usual, and welcome to our third quarter conference call. Also, Happy New Year to all. So I want to tell you, mention to you that we have a presentation that’s been posted on our website and it's also on a live webcast. It really will be good for you to get it up on your screen or your iPhone because we're going to be going through that, it will make the call a lot more be for you if you don't have it up already. And there are instructions in Paragraph 2 of the earnings release as to how to access the presentation if you haven't done that already. I also want to mention that there is some supplemental financial information, which is attached to the presentation as Appendix 1. So you may want to check that out at some point. And a couple of other just introductory comments before we get started with the presentation. So then I don't cover the same things each call, while we try to cover things that we think are meaningful, interesting and relevant, but let us know what you think, let us know if there are other things you like us to cover during these calls. So, these calls are for you. We're not here to promote or hype up our company. These calls are for you and not for us, so just let us know what you think. Is there anything else you'd like us to cover, any other focus you like us to consider? Let us know. This is your time, not our time. So we'll go ahead now and go through the presentation. Matt and I will do that for you. And then at the end of the presentation, probably take over half hour, just want to warn you, so brace yourself, then we'll be happy to take questions, alright? So why don't we just skip over to Page 2 of the presentation. That's our forward-looking disclaimer language, so just let us know if you have any questions about that later on. And Matt will take over for a few minutes to cover slides 3 and 4. So, go ahead, Matt. The ball is in your court.

Okay. Thanks, Brian. On January 8, the Board of Directors declared a special dividend of $1 per share payable to our shareholders, payable on February 20, 2020 for our shareholders of record on January 21. The total amount of the special dividend is approximately $20.5 million. Including this special dividend and the regular quarterly dividend of $0.10 per share payable on February 4 to shareholders of record on January 2, Park will have paid approximately $536 million or $26.15 per share of cash dividends since the beginning of our fiscal year '05. Park's regular cash dividend has been paid -- regular quarterly cash dividend is paid -- been paid every year since 1985. Never skipped or reduced that regular dividend. Moving on to Slide 4. I just want to walk through with you how we kind of think of our cash balance. Although our balance sheet shows $144.2 million at the end of our third quarter, some of that cash is really committed for future use. When we had the tax law change back in December of '17, there is a transition tax that's got to be paid over a period of eight years. We're a couple of years into that. So the remaining installment payments on that transition tax is $17.7 million that's got to be paid over the next seven, six years. The Newton expansion that we've talked about in the past has begun. So the remaining payments here for that expansion, although it's not legally committed there is unless barring any sort of major event this is how much that we will have to pay out. It's our best estimate of how much we'll have to pay out to complete that expansion. And of course there is this $20.5 million that we just talked about for the special dividend payment. So the way we look at the cash, although it's $144 million on the balance sheet. It's really roughly $91 million that we’ve seen it's remaining and available for any purposes that we see going forward. Alright. I think I've covered what I needed to cover on here.

Thank you, Matt. Very good. Alright. So I would just add that or comment, I guess that -- so what is it? What did Matt tell us? $536 million of cash dividends since 2005 fiscal year, $536 million. And we have no debt and $144 million of cash. That's a lot of money to be paid out in my opinion by a small company like Park that was started by two guys with I think about $50,000, $60,000 back in 1954. Just my opinion, but I thought you should know that. So why don't we move on to Slide 5. And Matt was referring to Newton, Kansas, expansion and it's certainly in progress now. The picture on the top right is actually about a month old. So unfortunately we couldn't get an aerial photo of more current area of photo of this. Actually a lot more have been done in the last month. So the original budget was $20.5 million and the spending as Matt indicated -- sorry Matt talked about how much left to be spent $15.1 million, so we spent about $5.4 million so far. The completion is now expected the end of this calendar year, calendar 2020 and that's a delay. That's about a four or five month delay, which we’re not very happy about caused by a couple of major things, governmental approvals, the process was more complex and time-consuming than anticipated. The governmental approval is really the FAA. You may be surprised to hear this, but if you build a factory in airport, you need to get FAA approval for it, and that was more complex than we anticipated. Also there is a lot more additional time required to finalize contracts and other arrangements related to construction. I don't know, maybe we didn't have enough…

Good morning, Brian and Matt, and thanks for taking my question here. Yes, so since a lot of important programs are ramping simultaneously, I'm curious has your team designed or implemented a more repeatable process for some of the pain points you've mentioned?

Okay. I think it's just kind of perpetual pain in a way, but I mean it'd be too much of a smart alec. I think the best way can answer that is that we're learning as we go and we're getting better and better at these things as we go. I don't want to tell you there's some kind of formal process, but I think we're getting better at these things as we go. Clearly, we've been in an uncharted territory, especially for the last couple of years when things start to really ramp aggressively. But the thing is I want to emphasize, it's not just us, it's the whole industry. And maybe I'll -- maybe I'm wrong about this, maybe it's an arrogant thing to say, but I suspect, we're probably doing better than most in terms of our ability to ramp and keep up with the ramp schedules and the reason I say that is because I know from the supply chain people, our customers that they are having a lot of difficulty with some of their other suppliers and they've been just keeping up.

And I think you guys did a pretty good job on disposing some of the estimated manufacturing capacity. I guess if I kind of step back and think about as the facility comes online, what are you kind of doing differently in that facility or planning to do differently in that facility, where it could kind of ease some of this strain or pain point?

You mean a new facility?

Yes.

Well, okay. The equipment -- good question. The existing facility. If we were going to do that all over again, we would design equipment differently. That equipment was designed a way back one I guess in 2008 and the AFP program is where you can really be considered at the time, it wasn't something that was very much on our radar screen. The equipment that were -- that we ordered has been designed for today's needs. So it's much more capable for the production needs of today. And you noticed that we're looking at even a higher capacity output. There are things we've done, which are a little bit confidential in terms of the design machine, which will allow the machines run faster, the machines to run faster as well. These machines -- more continuous process machines are the key to productivity, obviously is up. But the other key is the run speeds. So, I think this factory is going to be much more optimized. Actually we struggle a little bit with the existing equipment just because it was not designed for what we're doing today so much. So obviously we don't use that as an excuse we make it work, one way or another, but the new equipment was designed for today's needs, not the needs of 2008. So I think it will be a lot better. And also there will be much more capacity. So we'll have the ability not be running at full capacity, which makes your operation much more efficient use and you can plan and you could do longer runs, you just have much more predictability and your operation is going to be much more efficient as a result.

And then one more from me and I'll jump back in the queue. I know you discussed recent development, major private space company, NREs in progress. Have you ever maybe talked about what that NRE touches upon or what you're involved in there?

No, I think we're probably pushing the limit by saying what we've said and we do that because we think our shareholders are entitled to know something about this, but I'd be reluctant to provide any more information at this time. Maybe, like I said, pushing limit too much, as to what the OEM would find acceptable.

[Operator Instructions]. We do have a question from Christopher Hillary with Roubaix Capital. Please go ahead.

I wanted to ask with some of the slowdown in the broader aerospace supply chain. Do you think that will help you with some of the supply issues that you’ve faced during 2019?

I'm not sure I follow the logic of that. How this slowdown...

With the 737 MAX pause, would that help you get more of the input materials that you've seen some shortages here again?

Okay. So we talk about carbon fiber quite a bit, and I'm pretty sure that the carbon fiber we use is not also used on a 737 MAX. But of course there is a lot of different components of supply chain. I'm not sure that's going to help us in the shorter term. Long-term, that's a different story. If the 737 MAX never really recovers to its original intended levels, then the supply chain may adjust right, where the business is. But short-term, qualification periods take a long time to qualify a supplier that was previously supplying or currently supplying into the MAX on an old program is very time consuming and it kind of doesn't make sense practically because we're six months from now, whatever, the 737 ramps back up and what are they going to do. Long term is something different though, like I said. There could be a fundamental adjustment to the whole supply chain if the share, let's say, the market share between the MAX and the 320 and the Comac adjust, but I don't think short term it really will help us too much.

Okay. And then obviously you have a very distinguished track record on your capital return that you highlighted earlier. I thought it might be an opportunity to ask are you seeing many opportunities to do some bolt on type acquisitions to kind of grow your portfolio or give yourself some more assets that would help you as you go through this growth phase?

We're looking at a few things. We're also looking at some projects. We didn't mention it for last couple of quarters. Remember we're talking about a potential JV in Asia, that's still something we're looking at. So there's a lot of different irons we have in the fire right now. We're also hoping that maybe the valuations will start to come down a little bit too. So we want to keep some powder dry. We still feel that valuations are maybe a little unrealistic and I'm not -- this is not my field in terms of M&A and business valuations but some people have said to me, people who are in that field that maybe in a not-too-distant future some of the valuations will come more in line with what might be more realistic or appropriate. So we don't have anything imminent. That's why we want to retain -- Matt doing the math, like the $90 million of cash, but we still want to keep some powder dry because we think there are opportunities and they will continue to develop over next couple of years, but we'll see. We're not going to -- I think you know this about us. We're not going to do an acquisition just doing an acquisition. We don't do that it has to be right for Park and right for Park is complicated. I see right for Park in many different levels, it has to be the right kind of company, it has to be the right kind of location, it has to be the right kind of product, right kind of technology, the right kind of culture, and it will of course has to be available for sale at the right price. So we're not just out there calling bankers and say, look, we want to get and this broker or that broker, this process or that process. We've been in a couple of processes, but we don't like them very much. I know this maybe too much information in response to the question. The reason we don't like them is because the bankers try to rush you along and obviously they're trying to get the price up. But for us to do an acquisition, it's a serious thing. We want to take our time. We want to spend time with management. We really want to understand it's just the right thing for Park. We do an acquisition, we're thinking we're going to own this thing for 20 years. So maybe everybody else is getting rushed to the conclusion, but when we get these processes, sometimes we just back out and say, we're not able to do distribution, we're not able -- you're not providing us with the access that we need.

And then I guess one last one. With a longer-term horizon, what are some of your thoughts on how your manufacturing capacity is developing? Do you feel like the current plans encompass what you foresee in -- with the five or so your time horizon or do you -- as you have both the growth that you've booked in some of these development programs, do you -- are you starting to sense that you might need to start planning on increasing the footprint again?

Everything we have on the table now is covered. But I don't know if you remember this. So I think we discussed this, maybe I don't remember a couple of quarters ago when we first started talking about the expansion. Remember that there was a comment, I think it's actually in our company presentation, which will be updated after Needham presentation that for an additional investment of $45 million in this expanded factory, we can provide another maybe $15 million of capacity. So there's actually space provided the new factory for another line. So it would be pretty easy to increase our capacity for either hot-melt or solution depending on which direction you want to go in, by a significant amount. It wouldn't be the same thing as building a new factory, it’s just like ordering equipment we already know how to work the equipment, and have the equipment installed. So, we do have that flexibility. We've built it in for just -- I think we are getting at. Not sure -- we know what we have now we can covered. We're not sure we'll have in the future.

[Operator Instructions]. Speakers, I'm showing no further questions from the queue at this time. I'd like to turn the call back over to you for closing remarks.

Okay. Thank you, operator, and thank you everybody for listening in. Been a pleasure. Give Matt and I a call anytime you want, if you have any other questions. And lastly of course is, have a great year. We wish you and your family all the best. Very good luck in 2020. Goodbye now.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.