Good day, and welcome to the Air Industries Conference Call. Today’s conference is being recorded. Air Industries Group’s Safe Harbor statement. Except for the historical information contained herein, the matters discussed in this presentation contain forward-looking statements. The accuracy of these statements is 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, excluding the impact of non-cash depreciation and amortization charges, stock-based compensation expenses, and non-recurring 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. At this time, I would like to turn the conference over to CEO, Lou Melluzzo. Please go ahead.

Thank you, Anita. Good morning, and thank you for joining us as we summarize Air Industries’ results for 2019. Our results for the year are much improved over 2018. Sales are up, gross profit is up, and expenses remain well controlled. Air Industries has reported an operating profit for the first time in several years. A few high points for 2019 compared to 2018 are: sales increased to $54.6 million, $10 million, or 23% more than in 2018. Gross profit increased by $3.7 million, or 68%. Operating expenses were essentially flat. Adjusted EBITDA was $5.2 million, three times what it was in 2018. Our non – our on-time delivery metrics improved across all metrics. Bookings were up 49.5%. The relationship with our supply chain improved dramatically. We have refinanced our credit line, replacing PNC Bank with Sterling National Bank. Our new credit facility, a combination of a revolving credit line and the term loan has very favorable terms. The interest rate is less than half of what we were paying with PNC. The amortization of our term loan is much more favorable. The combination will reduce our cash needs by about $2.5 million a year. This is new found money we can reinvest in our operations. At this time, I would like to turn the call over to Michael Recca, our CFO, for a recap on the financials. Then I’ll return to close the call. Mike?

Thank you. Good morning, everyone. A couple of topics I want to discuss: our gross profit, operating income, net income and the – a little more information on our Sterling Bank refinancing. As Lou said, gross profit is highly variable with sales. Sales for last year 2019 were up 23% over the prior year, but our gross profit grew by 68%. So it’s really the indication of the earnings leverage of the companies that our gross profit increases at a faster rate than the increase in sales, and that’s because of the manufacturing company we have. As sales go up, our manufacturing overhead is absorbed and spread over more dollars of sales increasing gross profit. Operating income is very, very satisfying for the year. In 2019, we had positive operating income and a greatly reduced net loss. Operating income for 2019 was $328,000, and this compares to a loss of $4.9 million, close to $5 million loss for 2018. Now to be fair, the loss in 2018 included a – an expense write-off of capitalized engineering of about $2 million. So perhaps a better comparison is income of $328,000 versus a loss of about $3 million, still a dramatic turnaround. Our net loss from continuing operations in 2019 was about $2.6 million and that compared with $8.5 million loss in 2018. We reduced our loss by two-thirds. This continues a trend from 2017, 2018 and now into 2019. And hopefully, that will continue in 2020. As Lou mentioned, we – on December 31, we replaced PNC Bank with Sterling National and dramatically reduced our interest rates. At PNC, we were paying about 9.5% for most of 2019 five over prime, plus substantial quarterly renewal fees to keep them in place. At Sterling National, we’re paying 2 points – 2 percentage points over 30-day LIBOR, and we’re currently paying about 4% as the floor of 3.5% on the Sterling loan. With the Sterling loan, we paid off all of our capital leases and our term loans. We had one single term loan and, as Lou mentioned, it is going free up about $2.5 million in cash that we no longer need to use to amortize that debt. Lou, pass it back to you.

Thank you, Mike. Let me close with a few thoughts on the remainder of the year. Our results for 2019 confirm that we have increased sales and margins. We have achieved both operating profitability and greatly reduced our loss compared to 2018. We are dedicated to continuing these trends. During 2019, we issued guidance that revenue would be $50 million to $55 million, with EBITDA in the $5 million to $5.5 million. We have achieved both goals. While we expect 2020 to exceed 2019 due to the uncertainty in the world today, we are not issuing guidance at this time. We will do so as soon as things stabilize. With that, this concludes our formal remarks this morning. And I would like to open the call – I would like to open the line up for questions from participants. Anita, can you take the call, please?

Thank you. Yes, sir. Thank you. [Operator Instructions] We have a question. Caller, your line is open. Please go ahead.

Hi, good morning. This is John Nobile from Taglich Brothers. Thanks for the call and thanks for taking my questions. I just have a few here. My first one, I was hoping that you could actually break out your sales from defense-related sales versus commercial sales in 2019. If you have a rough estimate of that, that would be great?

First, good morning, John. How are you?

Good. How are you?

John, we’re about 80%, 85% military and 15% to 20% basically. You’d call it 80-20, something in that neighborhood of military versus commercial. So we are not predominantly heavily on the military side.

Okay. I just wanted to make sure. So about 80% military, 20% commercial. Now, I expect – expected defense sales to grow in 2020. I believe commercial sales, given the current situation will probably be under pressure, at least, in the short-term. But is there anything encouraging that you’re able to say about the long-term commercial sales from what you see at this point?

So our involvement in the commercial side is really – was a couple of platforms. I mean, we are heavily into the geared turbofan. That’s the contract that we published, I believe, back at the beginning of the year for $60 million by five-year LPA going forward. We don’t expect that – at least from where we’re sitting right now, we don’t expect that to slowdown dramatically. I think the need for that engine will be hot, heavy in the future. So that’s a pretty stable platform to be on. We have a very little content on the A380 now. We know that the A380 is coming to an end at some point, and we’re going to be ramping that up. Actually, we’ve ramped up our first contract, but we just got an extension for another year, year-and-a-half at much favorable pricing that we’ve been doing this program, and I don’t see that being sidelined. So that that’s not going to affect us that much. We have absolutely zero content on the 737. So that has had no impact on Air Industries or Sterling Engineering operations in any way, shape or form. So our content on the commercial side is – we’re not in a great exposure is what we’re saying.

Okay. Well, that’s great to hear. I just wanted to make sure I get some clarification on that end. But obviously, being more heavily into defense, like there’s a little defensive, if I could say it that way. And what is the current backlog? I know it’s been floating around $100 million. What is the current backlog? And how much of that is actually defense-related?

Our current backlog, 18-month funded backlog resides at $114.7 million, just under $115 million. And of that…

[indiscernible] we could put pie for the defense more like 90%...

Yes.

…for lead time items.

It’s….

Oh, okay, great.

[Multiple Speakers] on the defense side.

Okay. And one thing, being that you have – do have that much of a defense backlog. On the last call, you mentioned that you purchased four horizontal lathes, and that was in an effort to remove some of the bottlenecks in shipping product. Could you comment on the status of those lathes? And any further progress that might have been made in alleviating the bottleneck?

So we purchased two horizontal lathes. We purchased…

Two, okay, I’m sorry, I thought that was four.

Yes, [Multiple Speakers] horizontals and 4,500s, and those machines are both fully operational, fully staffed and they’re running two shifts and they work wonders with eliminating the bottlenecks to that area. And last year’s CapEx also included a large boring mill in Karaki, [ph] also included a large boring mill in Karaki, horizontal boring mill, which we’ve just retrofitted and that is also running a commercial product on it right now, a community product that’s kind of what we bought this thing for. All three pieces of the equation are 100% operational and staffed.

Okay. So with these here, alleviating the bottleneck, one can at least anticipate, especially with the heavy defense spending that there should be a ramp-up – a sequential ramp-up in sales from – at least in the fourth quarter?

We are forecasting a ramp-up this year. Obviously, there’s a hiccup right now in the system with this virus. And we don’t know it’s going to affect the supply base, how it’s going to affect the OEMs. I mean, as of right now, there’s – Boeing has shutdown a factory on the West Coast, doesn’t have really that much effect. We’re seeing Airbus, I think, has closed in France for four or five days for deep cleaning. MTU is working some limited hours came over in Sweden and Norway are also working on a limited schedule. We don’t know. I mean, the only difference here is that, this thing blows over in a couple of weeks, which I don’t know if that’s the case or not. And obviously, our government can’t give us more information. But I can’t see this thing being around for six months or I pray to God, it’s not around six months.

No, I have fully understand.

We have hired some personnel in Q1. We’ve added four people to the day shift. We’ve added four to the night shift since December. So we are planning on a ramp-up.

[Multiple Speaker] keep in mind. Remember, we’re different than a retail store or in a restaurant. The demand – even if we have a delay in shipments, because a lot of our customer is close, when they reopen, we can make up that difference. So…

Okay. So…

We are considered in essential business, John. So which means, we’re going to open from – open through this. And it would be our intent to keep the machining operations going…

Okay.

…pretty much at all costs. And like Mike has just been saying, it’s an opportunity to get ahead. Even though, you might not be able to ship the parts this week or next week, we’ll have those parts go in time.

No, that’s great to hear. And that was my next question I wanted to find out if you were considered an essential business, where you still are operational. So that, that was good to hear that. If I could switch gears here to interest rates here, the interest costs, let’s see, in 2019, it was about $3.6 million and that was at an average rate of about 9.5%. Now in light of the current rate being around or less than 4%, Mike, if I could ask you, what do you believe the interest expense will be in 2020 from what you see right now?

It’ll be down by about $1,100,000. Again…

$1 million. Okay. So we were $3.6 million. But you’re looking roughly, as you see now, maybe about $2.5 million in that line?

That’s correct.

Okay. And just one final question. If there’s anybody else, I’ll leave it open for them. The ROTH agreement to date, how much was raised from that agreement?

Oh, John, I’m glad, you asked. That – the ROTH agreement opened up, we sold our shares for four days. We raised about a $1 million. We literally sold 419,577 shares. So that was it.

Okay. Those 419,000 shares…

That is – that’s correct.

Is that correct? No. And that was approximately $1 million raised. All right, great. Well, it’s good to hear some words of encouragement these days here from what’s happening in your business. That’s all I have. Thanks for taking my call. I’ll leave it open to others. Thank you.

Always a pleasure, John. Thank you for calling.

Thank you. We have no further questions at this time. [Operator Instructions] It appears we have no further questions at this time, sir.

Okay. So with that, once again, thank you, everyone, for taking the time to be on this call today and for your attentions and questions. The management and employees of Air Industries look forward to continued growth in 2020. Anita, please close.

Thank you, sir. This concludes today’s call. Thank you for your participation. You may now disconnect.

Thank you.