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Edited Transcript of AIRI earnings conference call or presentation 16-Nov-17 1:30pm GMT

Thomson Reuters StreetEvents

Q3 2017 Air Industries Group Earnings Call

BAY SHORE Nov 23, 2017 (Thomson StreetEvents) -- Edited Transcript of Air Industries Group earnings conference call or presentation Thursday, November 16, 2017 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Luciano M. Melluzzo

Air Industries Group - President

* Michael E. Recca

Air Industries Group - CFO & Principal Accounting Officer

* Michael N. Taglich

Air Industries Group - Chairman of the Board

* Peter D. Rettaliata

Air Industries Group - Acting CEO & Director

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Conference Call Participants

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* Bradley D. Noss

Roth Capital Partners, LLC, Research Division - Associate

* John Nobile

Taglich Brothers, Inc., Research Division - Senior Equity Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Air Industries conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Mike Recca, CFO. Please go ahead, sir.

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [2]

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Hello?

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Operator [3]

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Yes. Sir, you may still -- you may go ahead.

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [4]

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Good morning, this is Michael -- good morning, this is the Air Industries conference call. This is Michael Recca. I'm going to do start off by reading very exciting safe harbor statement. So except for historical information, the matters discussed here contain forward-looking statements. The accuracy of these statements is subject to significant risks and uncertainties, and actual results could differ materially from those contained in these forward-looking statements.

We refer you to our company filings with the SEC on forms 10-K, 10-Q and recently on S1 for important information about the company and related risks. We use EBITDA as a supplemental liquidity measure because we find it useful to understand and evaluate results, including the impact of noncash depreciation, amortization, stock-based compensation expense and nonrecurring expenses and outlays prior to the consideration of the impact of other potential sources and uses of cash such as working capital items. This calculation may differ in the method of calculation from similarly titled measures used by other companies.

And I'd like to turn the call over now to our Chairman, Michael Taglich.

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Michael N. Taglich, Air Industries Group - Chairman of the Board [5]

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Thank everyone, and good morning. I'd also -- I would like to start up this call thanking my very hard-working board, especially our interim -- historically, who is our Interim CEO and former CEO, Pete Rettaliata; Dave Buonanno; and Mike Brand who as a team helped manage this company through the difficult period and helped us directionally get this thing turned. I want to thank Sy Siegel, a longtime Board Director, who was retired, and I would like to, again, welcome Michael Porcelain, who has taken his place and is the new Head of our Audit Committee. And I'm very, very excited to congratulate Lou Melluzzo, who's our CEO.

So, with that, I would like to hand this off to Pete.

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [6]

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Thank you, Mike. Good morning. I would like to briefly comment on the quarter. We are encouraged with our results for the quarter and 9 months just ended. We continue to increase revenue quarter-over-quarter and in comparison with the prior year. Sales for 3 months increased by over 19% compared to 2016 and nearly 10% for the 9 months compared to 2016, while operating loss for both the 3 months and 9 months has narrowed.

I have recommended and I am very excited that Lou is being elevated to day-to-day operations, CEO of Air Industries. We have been so impressed with Lou's contribution to date and are confident that he is the leader, what this business needs right now. Lou has over 30 years of aerospace machining experience, our core competency. Lou, could you please spend a couple of minutes explaining you background and what attracted you to Air?

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Luciano M. Melluzzo, Air Industries Group - President [7]

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Good morning. Thank you for the kind words, Pete, and I'm excited to be here. Little history on myself. I am a 30-year veteran of the aerospace machining business. This includes extensive successful integrations of acquisitions into an existing corporate portfolio.

Things that attracted me to Air when looking for this opportunity was the funded backlog of about $100 million. I'm a designer, a machinist by experience. I know how to execute product out of the door. I have done this before at EDAC Technologies, and I believe that the business opportunity here is as good, if not better than what it was at EDAC.

At EDAC, there was no funded backlog when we started. There are some things that I've already identified that allow us to improve our operating leverage with the creation of user-friendly cells, continuous improvement and improved ERP system offerings, all things that will add to the business model.

Overall, I believe that there is a tremendous value in this business and fully engaged in executing and exploring the opportunities in the future.

With that, I turn the call over to Mike Recca to discuss our preferred -- financial performance for the first 9 months and the third quarter.

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [8]

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Okay. Thank you, Lou. I'm going to start with the third quarter, the 3 months ended September 1. The revenue for the quarter was $17.3 million, has an increase of $1.6 million, about 10% from the $15.7 million in the prior year. We have to keep in mind that we had a subsidiary called AMK that we sold in January of 2017. If we exclude the revenue of AMK from 2016 and from January of 2017, the increase was $2.8 million or a very close to 20%.

Our net loss from operations has improved. It has decreased by $1.4 million to just to about $890,000 to $2.3 million -- compared with $2.3 million for the prior year. Our net loss before tax was $2.9 million, a decrease of about $0.5 million from the $3.4 million in the prior year.

For the 9 months, revenue for 9 months was $50.5 million. This was slightly ahead of last year by about $250,000 from $50,200,000 in 2016, but, again -- once again, excluding AMK, revenue for the 9 months increased by $4.5 million or almost 10%.

Net loss from operations from 9 months decreased by $1.3 million to $2.6 million compared to $3.9 million for the prior year.

Our net loss before tax was $6.2 million, and this did increase marginally by $300,000 from our net loss in the prior year of $5.8 million.

And I think back to Pete. Do you have any other comments? Lou?

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [9]

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We're all set.

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Luciano M. Melluzzo, Air Industries Group - President [10]

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We're all set. I think we're ready for questions.

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [11]

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Excellent. Well, moderator, with that, I would like to open up line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Matt Koranda.

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Bradley D. Noss, Roth Capital Partners, LLC, Research Division - Associate [2]

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This is Brad Noss on for Matt here. Just wanted to start with the strong bookings that you saw this quarter. And just wondering what specific programs or what the primary drivers of the strong orders were? And how that margin profile, some of those new orders compare with the rest of the backlog?

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Michael N. Taglich, Air Industries Group - Chairman of the Board [3]

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Well, the largest part of our increased backlog has to do with the number of landing gear projects. And as it turns out, that is where our best gross margin work is. So we are participating and follow on E2D landing gear programs. We have F-15 landing gear components. We are making for UTAS for the first time. We continue to see orders against F-18 spare part components for the navy and landing gear. And I think the strongest growth period -- or business has been landing gear and landing gear components with UTAS and United States Government.

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Bradley D. Noss, Roth Capital Partners, LLC, Research Division - Associate [4]

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And then just specifically looking at the margin -- or the gross margin level in Complex Machining and aerostructures and electronics this quarter, I think we would have expected a little bit stronger gross margins on that level of revenue, but were there any write-downs or onetime cost there, or what else may have held back margins for the quarter?

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [5]

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Now the margins are held back because we're still operating at below optimal levels of production, and we're having trouble absorbing our factory overhead. I think if you look at last year, we had taken some significant reductions in gross margin in the fourth quarter. And we're kind of being preemptive here to be sure that we are valuing the inventory accurately. So now one thing we have to remind you is that the margins in this business are highly, highly related to level of revenue as tremendous earnings leverage, as things improve, just as there is a significant erosion of performance when revenues are low.

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [6]

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And if I can add I think that Lou's influence and his experience with production and ramping up production at EDAC and other places will be a great help to achieving the goals of better utilization of our facility and plant and much more productive output. It will bring down our hourly rates and increase profitability on this backlog that we have accumulated.

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Bradley D. Noss, Roth Capital Partners, LLC, Research Division - Associate [7]

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Okay. That make sense. And then just in regards to looking at Q4 as well as 2018, I mean, would we expect sort of a step change in margins as we go into Q4 from this level or will it be more of a gradual ramp as utilization and volume begins to come back?

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [8]

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It would be more gradual and, obviously, more gradual than we would like. I think you're looking at the improvement in the margin to be located in 2018. One other thing to keep in mind is, we are consolidating. One of our Complex Machining segment operates in 2 different facilities. One of those facilities leases up in October -- mid-October 2018. So we're going to be consolidating all the operations into 1 facility, which we think will: a, is going to save a good amount of money; and b, it should enhance the efficiency because right now, we're sending parts back and forth and they're only 6 miles apart, but that is obviously a delay. 6 miles is longer than 6 feet. So once they're all in one facility, we'd expect some improvement in the margin.

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Bradley D. Noss, Roth Capital Partners, LLC, Research Division - Associate [9]

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Okay. Got it. And then maybe just one more for me here. Looking at the elevated interest expense this quarter, I believe there may have been some amortization costs or other sort of onetime items impacting Q3, but could you split out any of those one-off expenses from what we would expect to be more normalized as well as if we'd expect a similar level in Q4 before the sort of onetime expenses to go away?

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [10]

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No. We -- a lot of the expenses in Q3 related to the bridge notes and some other financings that we made or did earlier in the year, they were carried on the books at a discount. And the interest was accreting over time subsequent to the public offering in July and further with the shareholder vote on October 3 after the close of the quarter. A lot of that debt was converted to common stock. And some of the interest expense you see, is the, call it, the write-off -- or rather charge-off of the discount at which the debt was carried. So it's no longer accreted on a quarterly basis, but rather immediately expensed. We also had, for accounting purposes, encouraging inducement to the exchange and that was the imputed value of the reduction in the conversion price of the various debts that were outstanding. So going forward, you should -- our cash interest expense has not really changed much. Our accounting interest expense is almost impenetrable to understand, but it is -- should be significantly reduced in the fourth quarter.

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Operator [11]

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(Operator Instructions) Our next question comes from John Nobile.

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [12]

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Congratulations, Lou. My first question actually is directed at Lou. I mean, you've been there for a little bit, so I just have a general question. And just, Lou, what do you see are the biggest problems that are hindering growth? And what are your plans to alleviate these problems?

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Luciano M. Melluzzo, Air Industries Group - President [13]

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Well, John, problems was a strong word. I mean, the opportunities here are plentiful. The consolidation that we're putting together right now is going to greatly increase our throughput. It's going to minimize on expenses for 2 quality departments, 2 engineering departments. All of that being said, and consolidated. The parts are all in one building. Those are all positives. As far as going forward, if we just execute on the backlog that we have, we're going to be in good shape. Just a matter of ramping up spindles, making sure that we've continued -- we've added actually to our second shift. We've added personnel on the floor to our first shift in anticipation of pushing this product to the floor. We have great equipment. We've got a talented workforce. It's all about executing, keeping focus on what's important getting product out of the door.

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [14]

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Okay. And your turbine engine component segment, it's still showing negative margins. I mean, not dramatically, but it's still a negative margin there. So I know that only Sterling is the only part of that component. So how much of your backlog relates to Sterling? And I was hoping you could provide an outlook for sales and gross margins for this segment, maybe over the next few quarters.

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [15]

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We have not provided that outlook publicly yet, but let me address this. The Sterling is a little bit different than Complex Machining in that, its cycle time is not as long. Cycle time, meaning that the period from when you received the raw materials to ship the finished goods, is much shorter than complexed machining. And as such, it does not have the backlog that the Complex Machining has. Companies order back -- order products based on the time it takes to make it. So it takes a year to produce a product. And a customer wants it in November of 2018, he is going to order it today; that generates the backlog. If it takes a month to produce the product and he needs it in November of 2818, they'll order it in October of 2018. So it's much less backlog. The gross margin at Sterling has improved and is much closer to 0, which is a terrible thing to say. Much closer to 0 than it was before, but there are still challenges there. Sterling also has much less owned material, much of what they work on are supplied. Much of the metal they are cutting is supplied by the customer. So their gross margin is more volatile with sales than the other companies. So at Complex Machining, 50% of the sale is material and 50% is labor. At Sterling, it's more like 75% or 80% labor. So just a couple of more dollars of revenue can dramatically improve the margin. But we've been pretty successful in reducing costs there and bringing that gross margin closer to breakeven.

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [16]

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And in terms of the future at Sterling, once again I have to turn to having Lou on board. Air Industries, Machining and Nassau Tool are more traditional businesses. It's the business building landing gear and critical structural components that this company knows well. The turbine business is a little business to us. And it's a business that Lou knows well. Sterling was a competitor, of sorts, with EDAC in the past. And this is a market he knows better than the rest of us at the company. And we believe that that influence will be very good on its future and that's something I'm very excited about.

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Luciano M. Melluzzo, Air Industries Group - President [17]

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John, having that said that, that business at Sterling is more of a cash-and-carry type business for us. It's a lot of shop assist work and only it's got the positive that you can turn parts relatively quick, and you can move on to the next project.

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [18]

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Being there, we're about halfway through the fourth quarter, I was wondering if we could get an idea of what you see now or at least what you have on the books for the following 6 weeks of the quarter. As it relates to Sterling and gross margins, are we looking at getting to 0 or even a positive gross margin in fourth quarter, but, I don't know, is it too early to tell you?

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [19]

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Right now, John, it's definitely too early to tell.

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [20]

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Okay. Operating expenses, I see that they dropped dramatically over the quarter. Currently, I think a little over $3 million, which is a pretty good drop. I'm just curious, is this the new norm of what we should expect going forward? Or are there still going to be cost cuts, or there were some things that maybe caused this to be a little lower? I'm trying to get an idea of what to expect in this line going forward?

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [21]

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At a minimum, you can expect it to be at the level -- at the current levels going forward; we expect it to be somewhat lower at the risk of raining on the parade a little bit included in the operating costs were some amortization expense at Nassau Tool Works related to the time when we acquired the company. Those intangibles were written -- were amortized over 5 years. The 5 years were up in June. That works out to about $0.75 million a year in amortization expense that has now gone away. So it looks nice, but it doesn't affect our EBITDA as positively as -- it doesn't affect dollar-to-dollar.

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [22]

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All right. $0.75 million at least on the income statement is going to show. So that -- you said it ended in June, right? So this quarter really reflects the ending of that amortization? There was none of it in this quarter.

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [23]

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That is -- when I say none, there's nothing material. Maybe there was a couple hundred -- couple thousand dollars, but nothing dramatic.

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [24]

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Okay. And I was hoping you could talk a little about how the consolidation of AIM and Nassau Tool is going? And when do you expect to complete this? I think on the prior call it was mentioned by October, I think, of by the time the lease is over October of 2018. I was hoping you can give us an update as to basically when -- if that's still a good date or you expect this to be done earlier. Just an update on how that's going?

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [25]

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John, the consolidation is, actually, moving along quite rapidly. We are -- we need to be out of that building by October of next year. It is in our interest to try to expedite that as much as possible. Obviously, the winter months will tell the tale. We can't move it fit and with a foot of snow on the ground. So there is some driving forces, but to date, we've moved about half a dozen machines. And they're all up and running at the new facility. And we will continue doing that at clip of 1 or 2 machines per week, a couple per month. As weather allows then, hopefully, try to consolidate this building by maybe midsummer, certainly before our time expires at the existing place.

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [26]

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Beautiful. Beautiful. I understand about weather. I know you don't what to expect this winter, but that's an earlier target than was mentioned, I think, on the prior call like -- by October. So that should be beneficial. I think it was roughly, spent $1 million, I think, to save on the expenses from this consolidation annually, is that correct?

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [27]

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No. The occupancy costs alone are about $400,000 to $450,000 per year, including rent and real estate taxes. So that -- start that -- use that as a baseline. In terms of the going forward, we'll probably have $0.25 million to $0.50 million in savings, but in the near-term, that's going to be offset by some costs of doing the relocation.

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [28]

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Okay. Right. Understood. But after the relocation, obviously, looking at, say, past the summer, we're looking at much improved margins just from the savings alone.

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [29]

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I'll tell you what, the intent -- the real benefit is going to be from the intangibles of having everybody working at one place. The original plan when we bought Nassau 5 years ago was to integrate the 2 companies into 1. That plan was put on hold with our now departed CEO and the 2 companies were made into competitors to each other, even though they're working on the same product for the same customers. So in combining them together in one place, we're going to have a much better efficiency in the plant.

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [30]

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Okay. And just one final question on the share count. I know in the Q it gives you what the average was over the period, but as we speak, what are the number of shares fully diluted? Actually, if you could break it down into current outstanding and fully diluted?

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [31]

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Our current outstanding is approximately $24,450,000. And fully diluted is basically the same because all of our auctions and warrants are out of money at this point. Now when the stock price doubles...

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John Nobile, Taglich Brothers, Inc., Research Division - Senior Equity Analyst [32]

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What happens when it's in the money?

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [33]

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When it gets in the money, I don't have that number off the top of my head, but I'll be happy to call you later with it.

You can figure it out from reading the footnotes, but I'll be happy to share it with you -- do it for you.

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Operator [34]

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Our next question will come from David Greenberg.

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Unidentified Analyst, [35]

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It's Evan Greenberg. David is my uncle. And this question is really directed towards Lou. Lou, you've been involved in turnaround situations before and EDAC is one of them. You did a wonderful job turning that around, by the way, Pete. Thank you for your service. It's been much appreciated by all the shareholders.

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [36]

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Thank you.

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Unidentified Analyst, [37]

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Lou, what are you -- what do you see here as a situation since we've -- since -- in terms of getting this company to profitability and to further growth? And some -- I guess, this turbine situation is an area that could be of significant growth since you understand it more than anyone else. Could you talk about what the similarities and differences were when you took over EDAC and what you could apply here?

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Luciano M. Melluzzo, Air Industries Group - President [38]

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Absolutely. Honestly, the situation here is much more positive. I mean, just the fact that we have the funded backlog and being able to execute on that, it just comes down to basic blocking and tackling. We're pushing forward. We're streamlining processing. We're streamlining programming. We're getting our spindles spending much more rapidly than it has. It's just a matter of keeping focus on the parts and driving the day-to-day operations. But just something that kind of fallen by the wayside over time here. At EDAC, it was a different situation. They had several businesses back -- while back there in 2003. None of them really complement at each other. We had one customer. It was a Pratt & Whitney driven business. We had just come off the Enron disaster. We got stuck with a ton of DTA parts in inventory. We don't really have those similar problems here. I see this as an opportunity that we can steer the ship a little quicker. And we can push things along. It's a matter -- we're trying to giant freight train. We're a small public company, but none the same at the giant freight train and it's just the matter of starting to roll this down the -- on the track. The turbine engine business, historically it's been a shop assist. Mostly 1 or 2 customers, there's opportunities for that business. They need crumbs to fall off buyers' desks at some key places that can break that business overnight. So there's definitely opportunities at Sterling. It's an older business that had old mentalities. We spent some -- Air Industries has spent some money in the last couple of years to get some new equipment up there. Equipment that can fully be utilized and can recognize a nice heyday for that business. Right now, that business needs work, and that's what we're pushing. We got our focus on filling the pipeline.

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Operator [39]

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(Operator Instructions) Our next question comes from Steven [Branstetter].

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Unidentified Analyst, [40]

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Can you explain the valuation of your inventory, really with respect, I guess, to raw materials, finished products, work in progress? And have you discuss with Roth Capital? They're the only ones on The Street with a report out on you guys, why they have no issues bringing up all the debt when they get your valuation, but they valued your inventory at 0 when they come to their price target of $1.75. So if you could just explain the inventory and explain maybe why Roth Capital doesn't see it being worth anything?

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [41]

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That's -- I really can't comment on what Roth Capital does. I mean, I obviously don't -- I don't quite understand that. In terms of our inventory, I don't exactly -- when you say value, what exactly you're referring to?

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Unidentified Analyst, [42]

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Well, I mean, part of it is raw materials. So that would value the cost. Then you have work in progress, I guess, you have to estimate a value of what that's worth? And then, I guess, whatever finished goods haven't gone out the door yet have a value, I guess, would be added profit margin? So, if we stripped everything away, what would be the value of the inventory. It's like someone was going to acquire you, they wouldn't give you $39 million in value, but what do you think they would give you?

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Michael N. Taglich, Air Industries Group - Chairman of the Board [43]

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One more thing, Mike -- this is Mike Taglich. We might want to -- we have relative to our current enterprise value or size of our shipments, we have excess inventory. So maybe a better way to put at it is what -- to what extent -- besides to answer your question, what extent is our inventory oversized and probably head back since it is going to turn into cash?

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Michael E. Recca, Air Industries Group - CFO & Principal Accounting Officer [44]

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First, how we -- how do we evaluate? Obviously, raw material is a cost. Our work in process is calculated on the 2 components of increasing those costs. One is labor. And that is done on a weighted average of hours. We have an hourly rate for various functions. So, if it's in the -- in machining, it is at hourly rate. If we add that to the value of the inventory, we have a lot of the outside processing that added back as cost. Finished goods is a kind of a misnomer here. We have -- we sell a lot of assemblies, which other could some up many finished goods. So if we're making a landing gear and we're making the axle, that will be -- we'll make a bunch of the axles, they will be finished, there in finished goods, but they're not sold. They are salable but that might not be the customer's order. So now leave finished goods, go back in the work in process and become part of a higher-level assembly. So the -- and then that would be what is sold. Mike Taglich alluded to our excess inventory. In 2015 and 2016, we went on an inventory buying spree, if my memory is correct. Our inventory went from about $28 million to $30 million to over $40 million. That was a result of some strategic opportunistic buys in anticipation of contracts. One of which is non-materialized and the other was -- has materialized at a much slower manner. I would say right now, our inventory is about $5 million to $7 million in excess of what we need going forward. And we're interested in burning that down, and we will over time.

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Unidentified Analyst, [45]

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Okay. Very good. There's several investor conferences like the LB Micro conference or Sidoti. And it appears going forward with Congress approving $700 billion defense spending budget that you guys have a growth story here and -- when do you think you'd be really talking to Wall Street to get the news out? Do you have any conference in the future?

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [46]

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In the near future, I have to look at the calendar. I don't think so. I've been to LB MICRO in the past. We've not been to Sidoti, though we do know Sidoti, the company, pretty well. We will probably -- we will most likely attend their next conference. I don't know when that is, but we will be ramping our "Talking to Wall Street Investor Relations." From here forward, we agree with you completely. We have a growth story. We were hurt badly by the sequestration of the Obama years. We don't miss it. And we're glad it's over. We think that there is a crisis of readiness in the military. A big part of our business is spare parts. And those are the key to reversing that crisis of readiness. And we look forward to supplying the military needs.

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Operator [47]

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At this time, I am showing no further questions. Gentlemen, any closing remarks before we end?

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [48]

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Mike Tag, you want to say something?

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Michael N. Taglich, Air Industries Group - Chairman of the Board [49]

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I want to thank everybody for their trust and confidence. We work very hard at the company. Again, we have had a hardworking board and some very hard-working employees. And I'm looking forward as a very large shareholder to peg turning this backlog into EBITDA.

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [50]

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Lou?

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Luciano M. Melluzzo, Air Industries Group - President [51]

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Thank you all for taking the time to join us on this morning call. And also I'd like to thank the board for your continued confidence and giving me this opportunity. I also wish Pete Rettaliata the best in the future. And I look forward to reporting back with you guys next quarter.

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Peter D. Rettaliata, Air Industries Group - Acting CEO & Director [52]

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And with that we'll...

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Unidentified Company Representative, [53]

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We'll wrap up.

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Operator [54]

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Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.