Air Industries Group Reports Amendment to Loan Agreement with Webster Bank
Air Industries Group (NYSE American: AIRI) has announced an amendment to its loan agreement with Webster Bank, its primary lender. The revised Credit Facility includes a waiver for not meeting the fixed charge coverage ratio for Q1 2024, and reduced financial covenant metrics for the rest of 2024 and Q1 2025. Additionally, there's a $1 million advance under the term loan for capital expenditures and a reduction in annual principal amortization by $135,000. However, these changes are partly balanced by a modification in the revolving credit line availability formula. CEO Lou Melluzzo expressed confidence that the new terms will provide the necessary flexibility and liquidity to support the company's strategic growth plans. The amendment will be filed with the SEC.
- Waiver of fixed charge coverage ratio for Q1 2024 reduces immediate financial pressure.
- Reduction in financial covenant metrics for 2024 and Q1 2025 offers greater operational flexibility.
- $1 million advance for capital expenditures supports infrastructure and growth.
- Annual principal amortization reduced by $135,000, improving cash flow.
- CEO indicates confidence in growth for fiscal 2024.
- Modification in revolving credit line availability formula could limit future borrowing capacity.
- Dependence on amended loan terms indicates existing financial strains.
- Short-term relief implies potential long-term financial challenges.
Insights
The amendment to Air Industries Group's credit facility with Webster Bank includes several key changes. Firstly, the waiver of the fixed charge coverage ratio failure for the period ended March 31, 2024, offers immediate relief. This measure avoids potential penalties or defaults that could have strained the company's financial stability.
Another significant adjustment is the reduction in certain financial covenant metrics for the remaining period of 2024 and the first quarter of 2025. Financial covenants are conditions set by lenders to limit the risk of default. Reducing these covenants provides Air Industries with more flexibility, likely enabling them to operate without the constant risk of breaching loan conditions.
The company also secured a $1 million advance under the term loan designated for capital expenditures. This influx of capital can facilitate investments in production capabilities, aiding growth. Combined with a reduction in annual amortization of $135,000, the cash flow situation should improve, giving the company better liquidity to manage its short-term obligations.
However, modifying the availability formula under the revolving credit line could slightly restrict the company's borrowing capacity. Investors should watch how this balance affects overall liquidity.
Overall, these amendments allow for greater financial flexibility and immediate capital improvements, which is positive for both short-term liquidity and long-term growth prospects.
Air Industries Group’s maneuver to amend its credit facility indicates a proactive approach in financial management. The aerospace and defense sector is capital-intensive and companies often need to ensure they have sufficient liquidity to meet production demands and invest in new technologies.
By securing a $1 million advance for capital expenditures, Air Industries can potentially enhance its production capabilities. Given the ongoing global demand for aerospace and defense products, such investments could allow the company to capture a larger market share or improve operational efficiencies.
Moreover, reducing the financial covenant metrics alleviates the pressure on the company, allowing management to focus more on strategic initiatives rather than strictly maintaining financial ratios. This is especially pertinent in an industry where long-term contracts and project timelines can sometimes strain quarterly financial metrics.
It’s important to note that any restriction in the revolving credit line formula could limit short-term borrowing, which might necessitate careful cash management. Nonetheless, the overall amendments seem to position the company better for executing its strategic plan without the immediate pressure of financial covenant compliance.
These changes could positively influence investor sentiment, showing a commitment to growth and financial stability.
The modified Credit Facility provides for the following:
- A waiver of the failure to achieve the fixed charge coverage ratio for the period ended March 31, 2024,
- A reduction in certain financial covenant metrics for the balance of calendar 2024 and the first calendar quarter of 2025,
-
An advance under the term loan of
$1 million $135,000
“I am pleased that we reached this agreement with our lender,” said Lou Melluzzo, CEO of Air Industries Group. “I am confident that fiscal 2024 is on track to be a year of growth. I believe our modified agreement provides us sufficient flexibility and liquidity to support our strategic plan. The amendment to our Current Credit Facility will be filed with the Securities Exchange Commission.”
ABOUT AIR INDUSTRIES GROUP
Air Industries Group is a leading manufacturer of precision components and assemblies for large aerospace and defense prime contractors. Its products include landing gears, flight controls, engine mounts and components for aircraft jet engines, ground turbines and other complex machines. Whether it is a small individual component or complete assembly, its high quality and extremely reliable products are used in mission critical operations that are essential for the safety of military personnel and civilians.
Additional information about Air Industries can be found in its filings with the SEC and on its website at www.airindustriesgroup.com.
FORWARD LOOKING STATEMENTS
Certain matters discussed in this press release are 'forward-looking statements' intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. In particular, the Company's statements regarding trends in the marketplace, future revenues, earnings and Adjusted EBITDA, the ability to realize firm backlog and projected backlog, cost cutting measures, potential future results and acquisitions, are examples of such forward-looking statements. The forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the timing of projects due to variability in size, scope and duration, the inherent discrepancy in actual results from estimates, projections and forecasts made by management, regulatory delays, changes in government funding and budgets, and other factors, including general economic conditions, not within the Company's control. The factors discussed herein and expressed from time to time in the Company's filings with the Securities and Exchange Commission could cause actual results and developments to be materially different from those expressed in or implied by such statements. The forward-looking statements are made only as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
NON-GAAP FINANCIAL MEASURES
The Company uses Adjusted EBITDA, a Non-GAAP financial measure as defined by the SEC, as a supplemental profitability 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 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 may be different than the EBITDA calculation used by our lenders for purposes of determining compliance with our financial covenants. This Non-GAAP measure may have limitations when understanding performance as it excludes the financial impact of transactions such as interest expense necessary to conduct the Company’s business and therefore are not intended to be an alternative to financial measure prepared in accordance with GAAP. The Company has not quantitatively reconciled its forward looking Adjusted EBITDA target to the most directly comparable GAAP measure because items such as amortization of stock-based compensation and interest expense, which are specific items that impact these measures, have not yet occurred, are out of the Company’s control, or cannot be predicted. For example, quantification of stock-based compensation is not possible as it requires inputs such as future grants and stock prices which are not currently ascertainable.
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Air Industries Group
Chief Financial Officer
Scott Glassman
631.328.7039
ir@airindustriesgroup.com
Source: Air Industries Group
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