Good morning. My name is John, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. Fourth Quarter Full Year 2023 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. Thank you, Mr. Shore. You may begin.

Thank you, John, and welcome all to our – the Park’s of fiscal ‘23 Q4 Investor Conference Call. I have with me, of course, Matt Farabaugh, our CFO, as usual. We announced our fourth quarter earnings this morning, so you want to pick up on that if you haven’t so far. In the earnings release, there are instructions as to how you can access the presentation that we’re about to go through. You can get on a webcast. It’s also on our website. I don’t know if you know this, but for our standards anyway, the presentation is a little bit shorter than it has been recently. I think it’s about 40 slides or 39 compared to over 50, maybe 55, but there’s a lot to cover still, so it may still take the same amount of time. We’re trying to take a little bit of a different approach this time. We’re going to focus less on program and project updates and industry trends. If you want that information, I suggest you might want to go back and check our Q3 investor call presentation or the company presentation, which has a lot of detail on that information that we tend to cover quarter after quarter. But like I said, a little bit of different approach we’re going try at this time. We will cover the numbers, but then we’ll be more – this presentation will be more on our outlook, something new we haven’t given you before. Then we’ll talk about capital, dividends and we’ll talk about recent announcements. So Matt and I will then answer, after we’ve done with the presentation. Going through the presentation, Matt and I will be happy, of course, to answer any questions you might have. So why don’t we get started. Here we go.…

Thank you, sir. We will now be conducting a question-and-answer session. [Operator Instructions] And the first question comes from the line of [Nick Ripascella] with NR Management. Please proceed with your question.

Good morning, Brian and the team. Can you hear me, okay?

Yes, you’re just fine, Nick. Yes. Thank you.

Oh, great, great, great. Just a couple of questions. If you could just give a little update and your thoughts on what’s going on with China and the Comac program. Just really haven’t heard much about in the press about that lately. Secondly, you’ve again laid out how Park is really a U.S.-based growth manufacturing concern. That’s the way I look at. I look at you as a growth stock based on the outlook. And so if we were to have some stutter steps here, would you still have an appetite for share repurchase if Mr. Market became silly at some point and the equity were to become depressed? And then finally, this may be a stupid question, if there is. Do you have any thoughts on the removal from the S&P Index? I know that’s out of your control. Do you have any thoughts on that would be appreciated? Thank you so much.

Okay. Thanks, Nick. Comac, it’s funny that the Chinese are not as transparent. They’re a little opaque. And we follow news, you probably see the same things we see. And we haven’t seen much in terms of updates to the program. The programs are progressing now from our perspective in terms of material requirements. The ARJ21, that’s, at this point, really an aircraft that’s in full production. I don’t know if it will ramp up to higher rates. As I said, last year, I think they did 26 airplanes. So it’s small program, but still a meaningful program for us. And it’s also targeted for approval of our LSP product, which we’d be very happy about. The 919, that’s obviously the big one for the Chinese. It’s a real prestige program. They’re going up against the 737 and A320, as you know. We’ll have to see what happens. I haven’t heard any recent new though, Nick. Although I would just go back to what I’ve said numerous times, which is that this is a big, big, big prestige program for the Chinese. And my bet is that they’re going to do everything they can to make it successful. The – let’s see. You had a comment about our being a growth stock. And I don’t remember what the question was there, but you did a – you can remind me, but buyback, you asked about buybacks. Yes. So is the market going to make us another offer we can’t refuse? Yes, we’re very open to doing buybacks. And I guess maybe you’re tying the growth outlook to buybacks, I think that was the question. Yes. So actually something that we are thinking about, something on our radar screen, considering especially like I think what you’re suggesting the outlook is our…

Yes. No, that’s pretty good. Thank you so mucj. I appreciate it. And keep up the good work.

Thank you very much, Nick.

And the next question comes from the line of Matt Spiegel with GWK Investments. Please proceed with your question. Oh, excuse me. The next question comes from the line of Brian Glenn with Olcott Square Investment Partners. Please proceed with your question.

Hey, Brian, thanks for the always very thorough walkthrough.

How are you, Brian.

Good. I have a couple of questions. So the first is on the MRAS, which I know was 3.5 in 5 years. And so are you able to discuss, and you probably can’t go into detail, but to discuss the mechanisms for the reprice, which I think, correct me if I’m wrong, would be 2025?

That’s the cast in concrete. Yes, we have a price increase. All of our pricing goes up in beginning of calendar 2025. That was part of our 10-year LTA. So that’s kind of built in. Now when we did the 10-year LTA, we were using inflation assumption of maybe 3%. Raw materials, we have LTAs from our suppliers and raw materials, except for one where there’s kind of a risk-sharing arrangement for one of the raw material components, but it’s really a non-raw material area of our cost that we are at risk for. We assumed about 3% inflation year-over-year. And obviously, that has not been the case in the last like 12 months or so. So that’s where we have the risk. And the price increase that goes into effect January of 2025 use that 3% assumption. It’s not – I just want to be clear, it’s not an index. In other words, it doesn’t change based upon what inflation – what happens with inflation. I’m just saying when MRAS and Park negotiated the agreement, we agreed that we would assume a 3% inflation year-over-year in order to come up with the pricing.

Okay. Yes, thanks for that. I appreciate it and understood. And then my second question, it’s twofold. I guess there’s a lot of talk on the impressive dividend record, and it certainly is impressive and large and respectable and appreciated. Does the Board, to the extent you can share, does the Board have discussions around total shareholder return at all? Or is it mainly just around dividends? And then related to that, is there anything – I know a lot of people have asked over the last few quarters and years about dividends versus buybacks. Is there any other factors that would influence that decision related to you or the Board’s preference for amount of shares outstanding, trading liquidity or anything like that or ownership interest that may bias you guys one way or the other? Or is that just not a factor?

So Brian, it’s all a factor. And maybe I didn’t explain it that well. But when we went through the analysis where we decided to do the $1 dividend and also the increase in our dividend, we had discussions about all those things, total share of return, buybacks, M&A, investment – using our cash for internal investment. So I wouldn’t – there’s nothing that’s off the table. Everything is being considered and everything is being evaluated. In our discussions, all these things are considered. So if I implied that it’s only a one track thing, only about dividends, I didn’t mean to do that. Probably the reason we focus on dividends in the presentation is because we have the recent increase in the regular dividend and also the special dividend.

Understood.

Yes, Brian, let me just add. I just want to say again. So I think the Board is pretty sophisticated about this stuff. And if there’s some belief that’s not – I think that’s not correct at all. But in addition to that, we do get regular advice from outside experts, investment banking people that are the tops of their firms, like CEO levels, president levels at their firms. So I think we’re well advised and I think we’re well aware of all the different factors that you mentioned in terms of the total shareholder return.

Yes, yes, understood. I mean I think if, and this is just me, but if you look at your outlook and maybe that’s hit one day, maybe it’s not, I understand it’s not a forecast and there’s a lot of levers there. It seems to me that there is substantial return that could be realized over time by retiring a share and possibly higher than the return on assets or return on invested capital rate of the firm historically. And I know that’s changing with the footprint and the new plant coming online and some of the internal projects. But that’s just my own observation and just something that I believe to be true. But I do appreciate you doing this walkthrough. It’s always appreciated, and I find the level of detail you guys put into this presentation extremely helpful and appreciated.

Okay. Well, thank you very much for your input, Brian. Thanks, again.

Thank you.

At this time, there are no further questions. And I would like to turn the floor back over to Brian Shore for any closing comments.

Okay. This is Brian, again. Thank you very much for everybody, very much for listening again. These calls are – I try to make them quick and I try to rush through these things a little bit, but I end up going [400] hours, so I appreciate you hanging in there. And feel free – if you have any follow-up questions, feel free to give us a call and feel free to give Matt or me a call. Otherwise, we’ll be talking to you pretty soon because our first quarter report is at, I think, the beginning of July. Thanks, and have a great day. Bye.

Thank you, everyone. This does conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.