Q4 2020 Air Industries Group Earnings Call

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Good day, everyone welcome to the Air Industries Conference call. Today's conference is being recorded Air Industries Group.

<unk> Safe Harbor statement is as follows except for the historical information contained herein. The matters discussed in this presentation contain forward looking statements.

The accuracy of these statements are subject to significant risks and uncertainties actual results could differ materially from those contained in the forward looking statements see the company's SEC filings on forms 10-K, and 10-Q for important information about the company and related risks.

EBITDA is used as a supplemental liquidity measure because management finds it useful to understand and evaluate results.

Clothing, the impact of noncash depreciation and amortization charges stock based compensation expenses and nonrecurring expenses and outlays prior to consideration of the impact of other potential sources and uses of cash such as working capital items.

This calculation may differ in method of calculation from similarly titled measures used by other companies.

And at this time I would like to turn the conference over to low Maluso CEO. Please go ahead Sir.

Thank you Nicole good morning, and thank you for joining us as we summarize air industries results for the fourth quarter and all of 2020.

Air Industries had an excellent fourth quarter net sales in the fourth quarter with more than $14 $5 million, an increase of eight 5% compared to 2019.

This was easily the best quarter of the year.

Gross profit increased by more than 20% and increase significantly higher than the increase in sales.

In our last call discussing the third quarter, we said, we expected our gross margins to increase and it has.

Due to the challenges of COVID-19 sales for the overall year, we're down about 8%.

From old mandate, a new Covid protocols will impose on operations early in the second quarter.

Our supply base and vendors experienced same obstacles and conducting day to day business during that period.

In the second half of the year operation starting to normalize and the trend carry through the balance of 2020.

Negative effects of Covid, 19, pandemic, which compared operations earlier in here appear to have largely past.

And as economies around the world are starting to reopen we believe that air industries is firmly positioned to achieve growth in 2021.

I would also like to give an update on our capital investment program.

During 2020, we invested over $4 million of new equipment in total five new major large machines were added to the production floor.

To make room for this new equipment, we have relocated the production cell consisting of four machines to our Sterling engineering facility in Connecticut.

All of the equipment on long island is installed and running.

Our investment in this equipment has been very well received by our customer which is very encouraging.

Despite the turmoil in the aerospace industry caused by the pandemic our backlog remains strong at approximately $88 million.

It is ironic that despite the significant decline in commercial aerospace our commercial backlog increased.

Finally, I would like to again reiterate that our backlog represents firm orders from customers.

<unk> unfunded hoped for were anticipated orders under long term contracts.

At this time I would like to turn the call over to see us through our CFO, Mike Rekha sort of financial recap then I'll return with my closing thoughts and open the call up for questions.

Hello.

Discussed we ended 2020.

Our results from fourth quarter was significantly better than a year.

Certainly much better than Q2.

And Covid DFAST results.

Sales.

Highlights.

The important points.

Gross profit.

In absolute terms and our percentage of sales increase in the fourth quarter due to higher sales of absorbing more of our fixed manufacturing overhead.

As we've said before gross profit is highly correlated with volume of sales.

We continue to increase we can expect.

Yeah.

Our operating costs remain very well controlled declined about $500000 six per cent for the year.

This is despite increased COVID-19 related costs that we incurred.

Expenses remained significantly lower than our historical levels.

While we had an operating loss per year in the fourth quarter on increased sales.

A return to an operating profit.

Interest expense has been cut by more than half significantly moving past.

The bulk of this is from lower rates and Sterling National Bank, where we are now paying three and a half per se.

So net of.

In excess of 9% with a former bank.

And during the year, we converted about $3 million of subordinated debt.

Common stock.

You mentioned that.

$4 million investment in new equipment.

Almost all of this expense was financed with a combination of proceeds of our stock sale in early 2020.

And the expansion of our term loans with Sterling in November again at low interest rates.

And with that I'll turn the call back to Lou and look forward to your questions.

Thanks, Mike.

Let me close the call with a few thoughts I'm sure you all agree with US that we are glad 2020 is over I look forward to being able to travel to a client have lunch with a colleague or be able to talk with us the infrastructure of a mask. We took many things for granted in 2020.

2020 is now behind us. So we are very confident of improving business conditions in 2021 going forward.

With those closing thoughts I'd like to open up the call to questions from participants Nicole would you. Please take questions.

Absolutely, ladies and gentlemen, if you'd like to ask a question at this time. Please press star and then one on your phone.

You will hear a voice prompt letting you know when your line has been opened if you could introduce yourself before posing your question. If you are using a speakerphone today it might be necessary for you to pick up the handset or depressed the mute function. So the signal can reach our equipment.

Again that is star and then one if you would like to ask a question at this time and we'll pause for just a moment to give everyone a chance to signal.

Yeah.

And we'll take our first question.

Please go ahead.

Yes. This is Rick down in Tampa I'm, just wondering about the remaining debt. We may have hit what interest rates with debt glitch and is there any possibility looking at the Crystal ball out 18 months to two years that we get a.

I'll return at the dividend. Thank you.

Yeah.

We have.

Our senior debt with Sterling National Bank.

Have several nodes with tablets tablets.

Tablets brothers principles.

That range from seven two.

Yes, 7% to 12%.

In terms of the dividend I think a little bit premature to discuss when that might be.

That might be able to be resumed.

Okay. What is the possibility of restructuring debt remaining debt that would make an average like you said about 8%.

We did restructure it in during 2020 and I would expect as things continue to improve we could make further reduction.

The last time I did a calculation, which is not very recently our overall.

Expense works out to about 758% now.

Okay, Alright, well, London little little savings somewhere in the future on debt. Thank you.

Right.

Thank you Rick.

Yes. Thank you.

And once again, ladies and gentlemen that is star and then one or if you would like to ask a question at this time.

Okay.

Okay.

Okay.

And that does not appear that we have any other questions.

Coming into the queue at this time.

Okay. Thank you Nicole.

Ah.

So with that once again.

Thank you everyone.

Everyone for taking the time to be on the call today and for your attention and questions.

Nicole I think we're all set.

And once again, ladies and gentlemen that concludes today's conference. We appreciate your participation today.

Thank you.

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Uh huh.

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