Park Electrochemical Corp. (NYSE:PKE) Q2 2020 Earnings Conference Call - Final Transcript

Oct 10, 2019 • 11:00 am ET

Previous

Park Electrochemical Corp. (NYSE:PKE) Q2 2020 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Presentation
Executive
Brian E. Shore

the quarter, second quarter, I'm talking about $13.723 million gross profit -- gross margin 27.8%, obviously way down, and EBITDA $2.406 million also down.

So let's talk about what we told you would happen or what we said -- we believe would happen during our first quarter conference call that was on July 11. We gave you a sales estimate of $14.5 million to $15.5 million and EBITDA estimate at $3.1 million to $3.7 million. So the shortfalls both top and bottom line, the sales shortfall is to the lower end of the forecast range, okay, not the middle of lower end is $777,000 and the EBITDA shortfall of $694,000.

So obviously, if we go to Slide 4, the question is what happened? Why did this happen? What the heck happened in Q2? So, as I've already mentioned at the beginning of this explanation -- the explanation is as complex. It's also a multifaceted. And we're going to go into some details because I think it would be helpful for you to understand and get the perspective. These are things we probably haven't discussed with some in the past. So just try to bear with me, please.

Why don't we start with some background perspective and I'm trying to pin in a picture for you here by giving you a little background perspective, okay. We've discussed this before, but I just want to remind you that in fiscal '19 Q4 that was December of last year in January and February of this year, the sales to the -- for the GE/MRAS programs for 3 times the sales of the first quarter that same year, it's just nine months later. That's a very, very steep ramp for a very difficult and demanding and challenging customer and challenging programs to support.

So -- but we did get the job done. We do not disappoint them in Q4 with the fairly huge ramp that they asked us to handle. But we did it mostly with brute force, and that's really what we had at that point. We didn't really have systems in place to operate that level, especially for such a demanding and difficult customer. We -- I want to be clear, I'm not saying it as -- in a bad way, we love the MRAS. I love the MRAS, also if anybody ever ask, but they are a much more difficult customer than the other customers. So, in fact, they are the ones that ramped 3 times during the nine-month period, put a lot of pressure and stress on our system, but we did not dissapoint.

And I got to tell you that I think we're the exception at a rule because there is a lot of suppliers in the supply chain right now. They have real trouble keeping up and are causing real challenges for supply chain managers in the aerospace industry, just because some of the programs that are ramping very steeply at this time. Q1 of this year, fiscal