Greystone Logistics Inc

Good day, everyone, and welcome to today's Greystone Logistics Q3 results conference call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. You may register to ask a question at any time by pressing star 1. Please note this call is being recorded, and I'll be standing by for assistance.

Now, I'll turn the call over to your host, Brendan Hopkins. Please go ahead. Thank you, and thank you, everyone, for joining us today. We have a brief safe harbor, and then we'll get going. So except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known or unknown risks and uncertainties that may cause or actual result in future periods to differ materially from forecasted results. With that said, I would like to turn the call over to Warren Kruger, CEO of Graystone Logistics.

Thank you, Brendan. I appreciate it. And thanks, everyone, for joining the call today. I wanted to just kind of get down to the nuts and bolts and the reality of it, again, to reiterate from a 30,000-foot level what's transpired in the last six months today. And our biggest customer for the last 11 years in November called and just said, today's our last day. And they had tried to sell three times. We went over this last call, but I'm just kind of reiterating where we were. And they apparently have decided to not go into growth mode but just kind of stay stable mode. And that world of leasing pallets is a world I like, and we are actively – it's given us actually a starting point to really take advantage of that, because we couldn't be in that world since we were supplying them. And now that we are not in that world, we're in a better place to provide those services. So let me talk about a few things. The income for the last three months and balance sheet, it affected us greatly. Generally, our December, January months are very slow months regardless. And then February being a slow month, it was a slow month. But good news is for this quarter, we've got a rhythm down. We've got a lot of new customers and existing customers that are continuing to work. We've also, in years past, some of those longtime shareholders will remember, we used to buy resin and grind it and beady it and sell it, and we got out of that world because we were doing so much for our customers. Well, the good news is we're doing about $150,000 a month in revenue there, grinding, granulating, and pelletizing on a contract basis. And it's a beautiful thing because we have the equipment, so we don't have to go out and acquire any equipment. It's just something we do and have done for years. So it's just a great way to generate additional income for us. Greystone while we wait on some of the big opportunities. Walmart has been over the last five or six years, we've done $50 million or so in revenue with them. Over the last 90 days, I think we've got 80 truckloads of orders from Walmart. We are working with them, as I've mentioned in the past, on a tracking and tracing pilot program. where we put cellular devices inside the units, and we can tell them where those units are every single day. We can tell them the temperature. We can tell them if they've been dropped, if there's been a jar to the unit. So, there's a lot of data we can provide that. We've been doing that at a Walmart distribution center in the Midwest, and it is something that we're excited about. we anticipate that we will be doing some more of that in the future. In anticipation of that, last year, before IGPS left us, I did acquire quite a few, probably around 28,000 cellular devices. So the cellular devices are for track and trace. They have a seven-year life, and once they start to be utilized, And so we're prepared for someone who has an opportunity for us to be in the pooling business for up to 38,000 units at this particular moment. And for us to get those new cellular devices, it doesn't take much time, and it's a beautiful thing. There's also some Bluetooth technology that's allowing tracking and tracing, leveraging Apple phones. If there is an Apple phone within the a vicinity of a TAG unit, they can track and trace that unit just off existing iPhones that are in the facility. So, a lot of new exciting technology going on, and we are excited about that. During the last quarter, we've been working diligently on our sales side. Ron Skellhaus has worked with me for many, many years. Ron's out there and has done a fabulous job with Walmart and has a lot of great opportunities working. Gary Morris, who has been in the industry for over 25 years. Gary has some wonderful things. We have a big opportunity with a company for 90,000 pallets to be managed. So we, even this week, they talked about if there are broken pallets, if they lease them, They understood, but if they bought the units, how much credit would they get if we bought them back? So we've got some exciting things happening on the sales front. In terms of just the operational, where we are, money-wise, we have contracted to sell a piece of property we bought for $1.675 million, which will allow us to have some cash on hand for any shortfall we might have. I don't anticipate, I think that cash flow-wise, we're closing in on where we need to be just to get to a constant breakeven basis. Our bank has worked with us. IDC has been fabulous. They are, we've gone to an interest only. Going into this quarter, they were renewing, we're renewing our line of credit, and we also had a, we were out of covenant on a few things, so they're working on that. So, we will get those all resolved in the next 30 days. We have a great relationship with them. They know what our business plan is. They see it. They understand we've been doing this for 23 years, and exogenous events do occur in business, and this is one that we are dealing with, and I'm proud of our staff for doing so. We, as I mentioned in the last call, last quarterly call, we laid off 140 people. That really hurts me as a person because that's hard, but we had to do the right thing. We've hired some of those people back, and so that's nice to be able to do that, and so we've stabilized, and we feel very comfortable with that. On one of our pieces of equipment down in Palmyra, Missouri, which is a brand-new machine, We've been outsourcing one of those machines for the manufacturing under contract for some garbage cans for someone else. Again, just generating revenue to help our cash flows. So I feel very excited about where we're going. It's almost like we're back in time, but going back in time, I didn't have 1,300 ton machines ready to go. And that's where we are right now. We have the equipment. Our standard business has got a steady Eddie. Our nestable business is steady Eddie. We have tested our Yingling keg pallet at Yingling Brewery. They liked it. It worked very, very well. We're just waiting on our first order from them. That same stand-up keg pallet is something Budweiser uses. We're working with a group to get in the Budweiser system to show them our recycled plastic stand-up keg pallet to replace wood. We've also continued to We have one other product. It's a mold. We're not making it capital expenditures. We're limiting our capital expenditures. But we did find a great opportunity on a one-piece sanitized 4840 pallet that one of our customers needed. So we'll be able to acquire that mold probably around a third of the cost that it would if we built it. So I'm excited about that and that we also have a customer that will immediately take uh, palace from that. So, uh, I know that there's a lot of questions out there. I've kind of gone at 30,000 feet, tried to just give you the basics of where we are, but, uh, we have, we have the infrastructure, we have the machinery, we have the tooling, and, uh, we have great opportunities in the marketplace. Now we just have to bring those to, uh, bring those home. And, uh, That's my job is to bring them home, and I've done this before, so we're going to do it again. So at this time, I'd be happy to entertain calls or questions from anyone. If you'd like to ask a question, please press star 1 on your phone now, and you'll be placed into the queue at the order receipt. Again, star 1 for a question, and we'll pause briefly to form our queue.

Our first question today comes from Eric Nickerson.

Good afternoon. Just one quick one. What did you have to give up to the bank to get them to loosen their terms to interest only?

Nothing. It's a beautiful thing. We have a great relationship with them. We had a great relationship. We've paid them a lot of money over the years and never missed a beat. And immediately when IGPS canceled, the first thing I did was pick up the phone and call – our officer and just say, hey, here's where we are. I want to go to interest only. They understood and really didn't have to do anything. They just said, fine, we'll take it before the committee, and they took it before the committee, and we went to interest only for a year. So really didn't have to give up anything. They know that we're going to make it happen.

Okay. That's good. That's all I have. Thank you. Yes, sir.

Once again, everyone, press star 1 for a question.

And we have no further questions at this time. Warren, back over to you for any additional or closing comments.

Well, I do want to say it's funny how business is. And during the last multiple years, when we had $10 million to $11 million, $12 million every year, we were buying equipment, paying down debt, buying equipment, paying down debt. Last year, we felt really good about where we were. We were We anticipated moving up to the NASDAQ. We paid off $5 million in preferred stock. We bought $1 million worth of shares back, common shares back. We bought the building that I mentioned earlier for $1,675,000. We did a lot of – we bought two new pieces of equipment because of And that took a couple years by the time we got the machinery and got them installed in Missouri. That, you know, all those things add up, and you never anticipate really horrific events. You can talk about the what ifs. But, you know, we've done those things, and what it did for us is it gave us new equipment and it gave us new opportunity. The $5 million saved us about $350,000 a year in interest that we were paying for that $5 million. So, there's some really good things that came from that, but that's also, we've got a little over $9.5 million in debt, and it's not substantial. I feel comfortable about our cash position. I feel comfortable about where we are. Boy, there's people in our company who really care, and that's what you want. And I have seen what's happened with our shares and You know, I hold probably, I don't know, 9 million shares myself. So, believe me, I want nothing more for us than to do good things for the shareholders, which, you know, it raises all, a rising tide raises all boats. And so, that's our goal, and that's where we're headed. I don't have any time unless we ask some further questions.

And we do have a question queued up from Adam Posner.

Hey, thank you so much. Hey, Warren. Hi, Adam. Quick question around the resins pelletizing sort of as a source of revenue. Do you see this as something that could expand beyond current levels as needed, or what's sort of the overall revenue opportunity here?

Well, there most certainly is more opportunity on that side. It is not a focus, it was not a focus of ours at all until about 90 days ago. We said let's start utilizing. We have, we're currently working on a project that's 13 million pounds of ABS trays that need to be ground and another 6 to 7 million of high molecular weight that we're grinding under contract, and then we actually, after we grind it, we get paid for taking apart these bins, and we get paid for grinding and granulating them, but then we get paid for beading them, putting them in pelletized form. We do have four pelletizing units. I mean, our operation is pretty strong on the recycling side. so we have capacity to do more beading uh the grinding and granulating we continue to do that so we have customers like emulsion coolers when they break a pallet we buy those things back and we we will grind and granulate those take the the fiberglass rods out and reuse the fiberglass rods and reuse the material and we uh so to answer your question specifically we will, if we can continue to add to that and do some contract work for BBing and or grinding, we will do so.

Makes sense. Thank you so much, Warren.

And I do want to mention that Adaptive Pallet Solutions, we have done some wonderful things with them. This whole leasing world is really in their hands. Besides the Walmart opportunity. They are out there and have some really great opportunities, and we look forward to the future of leasing out there in the world of our company.

John Brandenburg has our next question.

Warren, you know, it seems there's such a disparity between book value and where the stock is. Is there any – I guess a couple questions. Number one, is there any – are you restricted by your bank in terms of buying any shares back, number one? Number two, I can't remember. I know you have a million – you bought a million dollars. Can you maybe be more specific about when that million was bought back? And then additionally, the new – you know, you're all – you know, you're ready, you've got the equipment, you've got, you know, the business cycle. I think once we get through some of this geopolitical stuff that is obviously hampering the business cycle in this country, there's no doubt that you're well positioned. But is that business that you're looking at without giving up any proprietary information, I assume, is that business going to be more on the leasing side? So those are some questions that I have.

I think some of our new growth is going to, you know, like I mentioned earlier, IGPS leaving gave us an opportunity to be in that world. And that world is what we want to be in specifically. You know, we've been dealing with Walmart for many, many years. And we believe that a palace is a service. We believe that that is. that on an ongoing basis. It's great to sell pallets, but if we can provide a service for them and not only provide the pallets, but provide them information as to where they are and if they're damaged, they don't have to worry about them. We take them back and we recycle them and put them back in the system so they never have to worry about it. Because I will tell you that, you know, it's something I've been doing for 25 years and it's reality. Wood pallets in a warehouse, in a Walmart system, I just heard from through Ron Skellhaus. I just heard from a Walmart distribution center about how much money they spend on tires and forked time equipment from damage due to wood and so forth out there. It's just incredible. We've been doing this for 25 years and it continues to evolve, but I think that with Walmart going to automation and all its distribution centers, the equipment demands that you have a better product in there. And we think that that bodes well for our future. And so back to your original question about the million dollars, that was all over a dollar that we purchased that back. And, you know, if we had a crystal ball back then, it wouldn't have been a – I thought it was a great bargain back there buying at a dollar, getting the shares back in. So, we are not, we are restricted from the bank. We can't use any of our cash to buy corporately. That doesn't mean that you might see some other purchases in the market in the future from others within our organization.

Did I kind of cover, John, your questions?

I think I did. Any other questions? Yes, we have one more from Sean Marconi. Hey, Warren. Hi, Sean. Hey, sorry, I logged in about nine minutes after the call started. When I logged in, you had mentioned that you guys had laid off 140 people. That's correct. What exactly did that occur and just Did you just get us up to speed? What exactly happened where the revenues declined as much as they did year over year?

We lost a customer we had for 11 years that provided us about $30 million a year in revenue. And it was IGPS, which is a pallet leasing company. They buy our pallets, and then they rent them to people like Procter & Gamble or whomever. And in the world, in the pallet world, you've got three big leasing companies. You've got CHEP. which is a blue, you'll see blue wooden pallets out in the marketplace. You've got Pico, which is a red pallet that you'll see in the marketplace, or if you go to Costco, you'll see blue and red pallets in there. And then you have IGPS, which is a plastic pallet pool, a plastic pallet leasing pool. And they bought over the years, we had as many as a million two one year, but generally they bought about 750,000 pallets from us a year. They're owned by a private equity firm. A private equity firm has gone to try to sell it three times over the last 11 years. And I don't know if there's a continuation fund that owns it now. I'm just a little unclear on that. But I think in not selling, I think they decided that they were just going to go in a non-growth mode and just replace the pallets or broken with their own manufacturing operation. which precluded us from bringing new pallets into their system. So their growth is curtailed. And what I mentioned, Sean, is that we didn't go out in the marketplace and attempt to be in that leasing world, and now we are out there knocking on doors doing the same thing for ourselves, particularly in closed-loop pools. We don't want to compete against CHEP or PAYCO or IGPS out in the open-pallet world where you – you have pallets going in in California and ending up in New York. That's not our world. Ours are from a manufacturing operation to a retail store and back to the manufacturing operation, that type of thing. So that's what happened, and it happened overnight, and it was it. Most certainly you can see it affected our revenue. It affected our earnings, and, you know, and my job as CEO is to replace revenue. I can tell you the facts on what happened. But now I've got to bring new revenue to the table. And we've got a wonderful infrastructure, as I mentioned. But now is the time to add incremental revenue and add it on top. And we've got plenty of room to do so.

Got it. Thank you, Warren. You bet, Sean.

And we have a question from Luke Wheatley.

Hi, Warren. How are you? Good, Luke.

Quick question for you. I appreciate all the detail that you've given today. Looking back, it just seems like maybe the plant addition and then some of the buyback kind of happened at a bad time. You've got a lot of debt to do in the next year and you kind of outlined this layoff plan. What are the internal cash flow projections that you and your team are discussing? Have you spoken to the bank about a possible refinance, or how are you thinking about that? Just so you know, yeah, everything shows as current, but that's not so. It's an interest only. Our bank has been very good about our financing, and the financing will be over time. It's not going to be all due within a year. It's just that before this quarter, we didn't get some of the things done we needed to have the bank do. So, we have a great relationship with them. We won't have our thing due within one year. So, we're in good shape. So, that means you're in the process of refinancing or you've already refinanced? No, we are already. I mean, we've got our working capital line. That's up for renewal. And so... We've had those discussions already. That's being done. And then our debt, because we were out of covenant on a few things, it shows, it made our auditors present all our debt as current. And, again, I've had multiple discussions with the bank. This is long-term debt. and most certainly a certain portion of it will be current, but it will not be what's on our balance sheet now. We won't have $9.5 million plus our working capital line due within one year. That won't occur. Okay.

So could you tell everyone on the call maybe what percentage will be due in the next year and then what percentage will be due and then when you think that will be due?

Yeah, I can tell you already that by year end, it's interest only. So nothing will be due until after calendar year end. So nothing due until December 31. And then we'll probably be on whatever the original AM was. I can't tell you what that was, whether it was five or seven years, but that probably will continue to be the case. So whatever will be AM in that first year, it will be due in that first year.

Did that answer your question, Luke? Yeah. So, essentially, you'll get a five-year extension. Is that how you're kind of thinking about it at the end of the year?

It sounds like there's a difference with the auditors. I'm not trying to read too much into it.

Well, I will say that the auditors are, I mean, I'm not, you know, the auditors are, we had this discussion. They said, Hey, because you've breached the covenant. We have to put it all due. That's the auditors. I can tell you personally, and I'll tell the world, that I've had discussions with our bank. It's an interest only. We're an interest only. They feel comfortable with that. They've seen our plan, what we're working on. We probably, I don't know where we were last month, but our revenues were considerably up in the month of March. and April through the halfway point of the month are where I'm pretty pleased with where they are. And so, what with our financial institution, they will, they'll go back to our original AM, and again, I wish I knew the note terms off the top of my head. I'm sorry that I don't remember if it was a, what the amortization period was. I just don't remember. but it will go back to whatever the terms were at the time that we went to interest only. So if it was a five-year AM or seven-year AM, that's where it will go back to.

Okay. Thank you. Yes, sir. We have no further questions. Warren, back over to you.

Okay. Well, I just want to tell everyone, thank you very much for being a shareholder. I've said many times in the past, I've been doing this a long time. It's a... It is a work-in-process, and we are working every day hard for our shareholders, and we have motivated employees and motivated staff, and we have the best recycled plastic palette in the world. And the world, we'll continue to sell in this marketplace, and we'll continue to get back for everyone. Our shareholder base will be happy. Thank you very much.

That concludes our meeting today. You may now disconnect.