AIRI - Earnings call transcript Q4 2017

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Operator

Good day everyone, and welcome to the Air Industries Conference Call. Today's call is being recorded. Except for the historical information contained herein the matter discussed in this presentation contained forward-looking statements. The accuracy of these statements is subject to significant risk and uncertainties. Actual results could differ maturely from those contained in the forward-looking statements. filings the XX-K company SEC important XX-Q company's about information and the on and Form for See related risk. as working to the potential of results, expenses and used finds impact charges, stock-based non-cash of is a prior capital and measure amortization such liquidity cash, EBITDA nonrecurring expenses, because depreciation it and useful uses the to understand sources excluding evaluate outlays, items. and compensation and as impact of supplemental management consideration of calculation of other method similarly in titled by differ may calculation used from companies. measures This And the now, Melluzzo. at to this time I conference would like turn Lou over to Please ahead. go

Lou Melluzzo

Chairman of call reflect our Recca the have the strategic then initiatives. our reposition on CFO the know business. to helped Board evolution for Thank Rettaliata turn the plan share role year you, and Air joining our ongoing I’ll Industries financial is all overview, from the fourth third in for late with XXXX Mike of of outlook call. discussion I’ll thank agenda, you and this the us, back and of results you Taglich and President XXXX. discuss company will our of Mike us our wrap Peter company, quarter, with quarter. the April. for for up And stepping the Good plan role and that will I CEO afternoon CEO let XXXX the as over for summarize the transitional as recent into joining outcomes also to to a Mike today’s on we the in fiscal Therefore I and the that ultimately taken first was

XXXX done is way from manufacturing experience and a and my to on very might rooted of forward the In began company a business this returning again. very and team with of and reducing the our backlogs production to goal inventories. In EDAC profitable. the story by past units doing reduction by Simultaneously, EDAC began down I Put have the decreasing Technologies, and third the company my challenges. winding that this working had call, in I to quarter profitability, patterns increasing with recall for to at worked in similar of velocity healthy as and am you past we hours costs see which with Air the the all I focus both backlog. a sequestration, in of got Technologies program. company era Industries. looking rise companies a began As passion side in conjunction of it the revenue the side with

with floor a is due fourth five in However, business, we of aligned competitor as on three battery great Ultimately our needs. that the on recognize to of you serve optimally that and four in we last required beginning revenue, in shipped in of better persistence, customers’ was took realign to of we late evaluation and effort reason. for parts the an one F-XX customers, we next of an quarter. weeks, that the parts I schedule ability XXXX, enter we fourth customers. five XXXX those give With drive were took for of whatever profitability one this of this. concluded needed the to our the not late example examining schedules in return -- the We to quarter a largest the to to shop company’s my have by effort part our ship delivering on, the production I’ll of not ours

resulted hit quarter. schedules revenue realignment the and in to this fourth of addition a one-time In in production

on WMI Industries Machining sale management end March to the took the And May. the announced This of position I’d the Recca. the call quarter, of applications. the in and and further number, behind I’ll approximately transaction near-term in turbine financial $X provide fourth of million anticipate the strategic refocus turn Air aircraft this to cash. landing in products, culminated Mike? on like closing Complex Mike to addition the the to its details by call of XXXX We engine return close jet our XX, for gear we the In over Then resources discussion with outlook. for

Michael Recca

I am thank you, Lou. here,

this sales a our reduction million, X.X% So XXXX. number was for XXXX from was our revenue, $XX.X

early a from January, exclude and that However in increase sold you is company to we beginning subsidiary if revenue the the recover. year year, in in the in really XXXX which posted X.X% XXXX, and XXXX indicative from we our for AMK of

profit Our was prior XX% disappointing a this $X.XX of $XXX,XXX also it was the million, XXXX but sales, that was over gross year. for did represent $X.X increase

million Our an XXXX. that $X.X $X.X $XXX,XXX interest expense from and was was in in million XXXX increase or of

we that because accounting non-cash some I where incurred the sorry, expense together the and raised -- non-cash debt and expense associated for some where we sold However, and it a warrants value we am allocate of had interest to we between lot was debt of had we warrants. money, between with purposes transactions debt the the was the

period accreting called as So difference that we time. interest the overtime of are what’s over

significant includes prior increase charges selling our large at Engineering we're impaired in some non-cash off. the Sterling at the and it both which that which which that leaves me our goodwill kind determination part meteorology, charges, so non-cash it we from in operations. rolled represents welding and was debt $X.X and discontinued at million the our And year of of also were XXXX in paid that's million addition of $X.X is that In non-cash, an

million $XX.X discontinued our improve million, it million operating loss for adjusted this year. $XX.X ignore prior and long by way to if over loss $X.X for would for was from prior prior EBITDA is XXXX with for $X.X So net improvement million the basically was the X.X% the short compares XX% by close $X.X million in a it of the and year, EBITDA the the year. we XXXX goodwill versus year benefit and operations

have but that close year. at we have XX% EBITDA we by an the cut So for still loss, loss operating to

In a XXXX made terms has year-over-year versus from obligation the you. it million. we With $XX hand reconciliation just provided direction In our that we total liquidity, of adjusted release XXXX by direct money borrowed of and Lou, there. been our back to I'll press your reduced EBITDA, I

Lou Melluzzo

the and initiatives. with I you, summary quarter few will thoughts coming go-to-market Thank on out Mike. call our a of near-term close a

of revenue needs. customers' reflect in quarter As align previously our XXXX more mentioned appropriately we the our the to fourth need recognized

fourth revenue As such quarter. for was negatively the impacted

now position to existing $XX,XXX,XXX. additional on anticipated quarter company that as our are continuing However, well as of backlogs meet first commitments as revenue confident operations in we from are by take demonstrated XXXX

to on efficiencies, focus We per pulling implementing $X of approximately expense million quarter. continue operating

Our backlog from continuing million. $XXX is operations now over

my revenue reasons take One to this job backlog. is execute I proven drive ability chose to on and of the

concludes and It for fiscal quarter was Our achieve exceed January continues that in at The revenue take million slightly XXXX sold unit the quarterly to to excludes operations of to our AMK liquidity XXXX. is EBITDA. steps positive to improve end goal EBITDA as growth continuous for XXXX reflected goal of the first of revenues a in that its is the continuing operation is $XX.X now we XXXX. company the open call that, questions. our would reflect a formal up hard lines profits. the answers? you financial up afternoon. to and remarks this and goal participant’s open my We're working With keep improve gross And this this. that than harder to to will margins questions the will April, results answer have please ever working and we It for operating

Operator

caller. first our take We'll Please Instructions] [Operator go you. Thank ahead.

Unidentified Analyst

This [ph] Nos guys. here. Brad is for Matt on Hi, Grande

guess Just you the feel potentially those of wanted And residual ANE selling do base strategically around the How businesses? do Or guess that I at just feel or to look essentially to about revenues. you color taking maintaining from -- businesses can kill WMI. of provide enough those get [ph] some there profitability following divestiture revenue that? a lower you or I is

Lou Melluzzo

there I'm background were but some portion question? you a noise. Brad, Can of that sorry, repeat

Unidentified Analyst

following over scale regarding to or But lines those WMI. also line businesses divestiture feel the more your selling the well? the down like A&E that’s to so segment are and you seems sorry, feedback. that long do as there about Yes, profitability base of revenue of thinking is you left just ability the yes, How

Lou Melluzzo

No, the help no, actually have we with of the growth to infusion divesture we're the getting of a cash both that A&E. opportunities WMI, at

and will the With those the businesses of accordingly future. two now, in right the consolidation go the scale ahead plan, up businesses

those plan selling this no So businesses at time. there is

Unidentified Analyst

helpful. that's Okay,

Lou Melluzzo

are any transaction Sterling of our there plans units point. Nor or at other -- this other any any to sell

Unidentified Analyst

into come anticipate recent for got that airlines it. engine given regulatory incident, forward? scrutiny costs may or And concerns of some going then blade engine Southwest turbine the regarding you the Okay, increased any do just components play

Lou Melluzzo

and we the accident. don’t was We because and do regulatory blade not Engineering. of that it Sterling the reflect parts those a being product make That type unfortunate blade blade malfunction. might -- currently set really stuff will do a do that make work we compliances that an We kind there line really should that don't cases at be of forth, but be we was

Unidentified Analyst

clarity to EBITDA and quarter. QX in then the quarterly the $X regarding you’ve then of per $X.X guidance just referenced the million XXXX there. And million in Okay, obviously range thanks breakeven for EBITDA commentary,

for I for ramp of guess that end year? of year. full of distributed a midpoint QX at So And to double do expect the check of we would the adjusted would $X.XX through the I think the you that just that QX and towards evenly want relatively EBITDA be to EBITDA going or sort more million then indicate

Lou Melluzzo

forward. There incremental quarter each working end we is and very do improvements no going in hard goal, here, every diligently and here to straight-line in are the to

Michael Recca

EBITDA $X straight-line improve total. in of positive run we no in and world will projections. we'll million Can QX. million I And breakeven improvement; to million year, the earn there quarter-by-quarter believe But -- run end be $X exist rate. there, we'll only fantasy -- rate in we that for $X.X million in of by we're XXXX $X going hopeful comment the we're they the Not to is to in the positive

Unidentified Analyst

$X.X we think of That's divestiture XXXX expect just guess maybe outlook Or Okay, And regarding the for a spend XXXX, your just about capital the the in expenditures around got lowered how intensity beyond? capital should one should me with for then but here rate business? million run in more XXXX future I it. think helpful. of and in you I we here, WMI,

Lou Melluzzo

equipments The had I’ve idle of around. -- a and business lot sitting

there So back you sitting capital that have I really idle. to into sure nothing make is a fully get mode. expenditure

going anywhere for least at near a So, we while into not if to for come. XXXX capital the the ramp up past expenditures, to of beyond, and be it's numbers

Michael Recca

up requires ramping program for Let XXXX. that for Turbofan. we a significant capital expenditures Whitney me the particular we’re demand giant now. & secondly, to XXXX the program were in focus believe winning capital which Geared a love really And that largely that see We don't properly to any of we in new investment expenditure, equipped on manage related absent Pratt

Unidentified Analyst

Okay, got it.

it I guys. me you. for think that's Thank

Lou Melluzzo

Brain. you, Thank

Operator

please Next ahead. [Operator go caller, Instructions]

John Nobile

for Hello, Lou John and Mike. Brothers. Taglich Nobile, questions. Thanks This taking my is

a the a regard does one securing lack million And few in you the regard questions, had of into financing how a finances, the us that first in finances? believe in I of play backlog? your necessary your satisfy expect going give growth this Just $XXX what to to to forward past. sales sense inventory Could to hampered

Lou Melluzzo

at and material customer certainly raw expect industries conversation is with A [ph] consolidation A&E I lot a can consigned. the our now John. the of

we out have right helps in that up money to put when out in cash the don't flow So tremendously front.

the that there Works, we have materials lot to of Tool Nassau over And we is programs government business well. impart, the as have at divestiture a way jobs, Some of for type to and of that securing happen spend goes WMI that on. long money a making old that the the future

the it's combination the So John. of two

John Nobile

Okay.

saying the for customers you're jobs? So supply the these inventory do

Lou Melluzzo

across the few material, raw Not The board, but the a programs. forgings. on quite

Michael Recca

a can second. jump John, in I

John Nobile

Yes.

Michael Recca

inventory -- knew this as better than so anybody. our is Mike You noticed Recca, you

That million. Our inventory $XX $XX by $XX about to million buys has a million former speculative was management. increased from to

need want. vigorously some a do enough on find kind inventory, that to So we too Or some doing of we’re don't we’re to much material is because for cash what and we we have we excess us constrained the trying generate get back of what have for where now that years Lou we're quarter of now rid buyer to very now. inventory suppliers meliorated in for that members carrying some to But is other us, focused management to have of excess earned inventory effort been we've been and that. to each ourselves and accomplishments which have this we hopefully have now supply

John Nobile

and you're how sale, are quantify you inventory prospects Could much those to looking? how excess looking

Michael Recca

million -- want very sale. number, you give when have going million. about someone and but be to when round something, a to very to is going of you're it's $X $X it guess And will difficult prospects the Kind to a

find is call the So now to difference as halfhearted than a a effort. it do we less I'll effort buyer a appose concerted to concerted have

John Nobile

of able that your might Alright. to schedules was more to a I'm provide entails? I pretty about you, you your changes production hoping you what And ask needs detail. a a to made Lou but little little In fourth just to actually customers. was was And be meet big, you the of align quarter deep it what XXXX, exactly of I said you to bit the hoping alluded get to details

Lou Melluzzo

and not an transitional ready some our got brought for example, them. while. company around And honestly on you last with late they we another XXXX And the of XXXX at calling were they end gave I company they price, into sat worked that year. were orders wasn't five we a delivering. late we're do in John, from the And

year So be schedules, of three the shipping up up year shipped the have we first ended new We quarter last set this in one in part shipped close last to another scrambled timelines. the weeks. will and the prior parts parts year. three new and And really of

months. of convinced the worth we in basically So last year’s a work six

John Nobile

point so kind the quarter fourth not more going big of And we retool product we model get a hit years has are delivery be basically and and everything the at said at product a So backlog. many out? and what realigned feel at that so ago. of day, where I where Am And would you looked but you by customer you doing consistent this cannot looked business have that so not okay, what need the this wrong, correctly? you in you at where kind taken so the were where gone back of to that now looking you maybe if feel

Lou Melluzzo

want ship more of that I it's what kind Yes, correct honestly, is have And we we to our want, difference. not the mean, what customers' automated. XXX% ship. to that's

John Nobile

Okay. going just in And question this electronics just to impact one I'm to the margins how regard the sale aerostructure of believe the other is curious in segment? and WMI, you

Lou Melluzzo

and have allocation if remaining we’re to sector probably thing will. rethink in only the Well our aerostructures and you electronics going

and which very in difficult the low margins had because are have they large our are very But business, For depressed EUR-PAC, small margins performed -- is phase. has it the in which factories. we contract a a it's and are XXXX difficult and in depressed time rebuilding on volumes XXXX overall from

as all we increase So to increase absorb we’re overhead, dramatically. volumes our at better factory margins facilities expect able will

John Nobile

think a margin. Sterling, that Okay. down And gross and I to because acquired were when I if to could good trickled they you backup negative know margins I

is indication returning far there that get for hope to wanted does area? moment, and an like just is margins looking of as that the some gross while I So as sales positive it increasing in -- at look how to Sterling

Lou Melluzzo

and My customer more comment about Sterling than and is margins being because material. is is almost else true related revenue Sterling utilize that all anywhere sales of much

Sterling their If to and which So number XX% are if labor am they going labor, XX% not is Machining XX% totally you like sales AIR at out look material XX% accurate. and throw a material. I more are at

a and a and $XXX,XXX XX%. million, of $XXX,XXX Sterling in a sales memory XXXX, margins year, was if $XX a my operating per increase So million Sterling vice-versa. correct, positive When in increase margins back in was or -- month to dramatic $X small doing has is in increase

$X.X a margins Now it’s and doing million are $X year million, negative.

increase -- small the a just number, increase can tremendous So in have relatively a a margins percentage small big but sale as still increase. a

John Nobile

Sterling the as right. hurt outlook Sterling know overall how in is for category what margins I Right, that’s Because the speak? but was we that

Lou Melluzzo

customers never the the higher for but ramped there bringing business right is from they development, of they up all -- new coded a to that for taken we’ve we’ve going secure It’s table. to the have that Sterling. that activity that up business we’re places matter have with We John, time future before. volume There coding to be we size customers have steps the

John Nobile

much. have, Okay, you that’s all very I thank

Lou Melluzzo

to we John, you I change General want mentioned made Manager a -- up made Manager there. General a

Michael Recca

time such general of Lavieri Yes, late change yes very early I until made a we A&E and who and we part a made the want out have we got I change General he this here positive Management year is he the now made have two that actually and do John in the there showing the to changes is General us have at Managers are up Sterling back both we original and effects. made in owner anymore management that that to say help to of it doesn’t at and year,

John Nobile

Okay great. for taking questions. Thanks my

Lou Melluzzo

Thank you, John.

Operator

ahead. Next go please caller,

Unidentified Analyst

you conference of Good you of that are afternoon October year, one going? closing previous facilities is On gentlemen. mentioned before a call your how this

Lou Melluzzo

consolidating Bay of Works we Shore facility Machining. into Tool are our Nassau Yes, Air

We of left the or with consolidation about with that heavy exception are one XX% will. equipment done two of are pieces equipment that of

So of managed flakes we moved the -- then and XXX% just snow moved and a out had good, between that ahead it’s supporting peripheral But still schedule in stuff, I coming pretty for year, it’s a move equipment have we to trying guys are say. would although have pretty it’s to winter equipment waiting actually still stuff. this the

Unidentified Analyst

Yes.

Michael Recca

lease Works Tool roof, exit Nassau different business until plan under one integrate one year separate the on plan am The Nassau the Machining into a which When along business Nassau manager, competition company bought the and facility I and XXXX Works XXXX. in were to that Air our on We base was embarked general was Tool We is with Dan facility here. in essentially all Works Tool kind and year Works hired companies underway Nassau of lease. with as bought Machining half Goldman a one the on up under historian other. Air Nassau Tool we five each we with facility fall set in

closing cost back are reverting are one, we facility are plan of lease old we away want case doing significant from companies a recognize consolidate just be now we'll and we is But So giving benefits I that ring into to clear not walking with again our not a up some closing so. and of a a the facility of here. has exiting to the

Unidentified Analyst

thanks. more had will June or they last Hawk guys question, or Helicopters. the year July this announced orders back One see Okay, a year for from that, year? next maybe of you year I Sikorsky think contract big anything last you guess in Black Do

Lou Melluzzo

haven't is definitely materialized lot There because specifics can't We but a a in the yet, talk of stuff they lot stuffs in the works. there works. of really about is

Unidentified Analyst

military Okay. I to been military seeing anything trying the for more readiness readiness they're And spending. with budgets planes with increased passed, to ready regards you the is or use? as more of guess government Are improvement or have because be funding we will aircraft, know funding the the orders regards to get

Lou Melluzzo

activity for highlight seeing sure. a at We're coding

Unidentified Analyst

get take to deals? to or does it closing Okay. it is codes And what to just take actual close against the contracts just other your what or bidding competition it does from

Lou Melluzzo

even are the that, products through on government if incumbent Compliance still and the involved lead got time. above you to negotiations ground. much With you it’s sure all truth the to longer is go there Because and TINA is make more a

of doesn't It is to like buy on that timeframe that. happen. But would. a normally there definitely we're stuff a for spot So top all just materialize

Unidentified Analyst

that quarter? And your fourth the positive in was book-to-bill Okay. ratio

Michael Recca

was. it Yes

Unidentified Analyst

in or… above add Did million Or was. backlog it okay. Yes another we one, $X

Michael Recca

have would don't email us drop be respond. back to on with you to to I specifics be an we happy it my If happy on us get fingertips. call that, to either will I wanted or

Unidentified Analyst

thank you. Okay,

Operator

go please Next ahead. question,

Unidentified Analyst

[indiscernible]. Hi, is this

a previous gentlemen just have be more think bit but little I the here. question may I’ll specific asked

that in was have You you or $XX recent million a the SEC wondering of it from what your might in where release $XXX that I percent release filing, you the Sikorsky. press the had backlog? noted is million press contract

Michael Recca

The the Lou will $XX don't is it -- multi-years. Sikorsky I million new million, $XX if the call issues what handle contract mind, you

the contract. that multi-year worth So for we got orders years. $XX or five new next provides $XX million And of over million

fully in years. have five way bit a might funded what little and date. the a count the have we to we delivery Not do expect what backlog this. typically over happen we count backlog peculiar in what orders only Now happens, We are we're definite next and in that

$XXX XXst, those have But March the that is of It is you us that’s directly is in to million something time, happen a which years. to at of people in $XXX something This expect call of do know contact funded to Sikorsky -- a that more the than firm to million involves away. over most how don't be to the But a of point XX So months. you contract happy the deliver of is are $XXX product doesn't go the could at to Those I otherwise in But and agreement, only have tell to give it contract in to happen materialize. that basically five doesn't do Sikorsky that. $XXX is it stated has I backlog. worth for long-term what you demand happen to multiple are million -- actually million next number. backlog the that that kind not much I'll this if what we next over that sum answer. what's orders for that, not

Unidentified Analyst

Yes.

nice little something. million their and I like think is a I symbol think have or unfunded presentation million WMI, yes, nice is company the their $XXX presentation, you $X little backlog funded remember that have ticker I their like they a they CBU, sold is

Okay, thank you.

Michael Recca

people that deliver are we agreements next that May, a August to $XXX million and multiple funded, of to eighteen ordered, are expecting we're months, June, expecting that. the To beyond in is the the have us compare discussing July, that over it they months eighteen

our million. to compare their backlog you funded So, $XXX

Unidentified Analyst

Okay. have Well been conservative All that been kind you've Actually I thanks, you of stated. see very pretty that's I guys backlog the have right, doing. what thank you. with conservative.

Lou Melluzzo

you. Thank

Operator

And any there over call closing additional back the Lou, at this and time. no further are comments. to I'll it appears questions turn for

Lou Melluzzo

Thank you, April.

like to the all So, our to participate everyone call to think time thank over taking I'd on we today. for it with set. that, once Turn I back again are April

Operator

That does conference. today's Okay. for conclude all participation. you Thank your

may now You disconnect.

Air Industries (AIRI) 23 Apr 182017 Q4 Earnings call transcript