More email questions for the CFO.
I talked to the Rahhal again after the 10Q the other day. Here's what he said:
1. Today's PR mentions the two pallets that were also mentioned in a PR last quarter: slim keg and 48x40 nestable. This quarter's PR also mentions a new 37x37 beverage pallet. How does the new 37x37 beverage pallet differ from the existing MC beverage pallet? I know the MC pallet is an open rack 40x32 design. The 48X40 is not a nestable but a lighter weight standard pallet designed to meet OSHA requirements for pallets not to exceed 50 pounds. The 37X37 was designed for a market that uses this pallet size. The 48X40 was designed to meet the requirements of a new customer, but the company feels that its weight and versatility (configuration to meet racking or other requirements0 make it very marketable.
2. Are these three new pallets ready for production delivery or still in the test & development phases? When do you anticipate shipping product from these new pallets? Do you have orders in place for any of these? All three molds are in place ready for production. There are no specific orders in place for these pallets, except that a company has been testing the 48X40 and is very pleased with the results.
3. Is the new 37x37 beverage pallet for one specific customer or more of a general development of your product portfolio? If it was created for one specific customer, can you tell me who this is? Both. The company does expect an order for these pallets, but there is currently no commitment.
4. For the big wine company order that is to be filled over the next few months, is that a pallet you already have available or a new design?this is a mold which has been in inventory for several years.
5. I see that finished goods inventory has gone up quite a bit. Are you having problems selling product or is this in preparation for some big deliveries coming up soon? I know you will start shipping to the wine customer soon and maybe there's another? Because of the seasonality of a major customer, it is necessary to build inventory during the third quarter to meet the customer’s needs.
6. The 10Q mentions that last year there were some non recurring pallet sales in 2014. Can you explain a bit more about this? What makes this non recurring versus any of your other pallet sales? Perhaps they were part of a test order? The company sold pallets to satisfy a customer’s immediate need. The customer abbreviated its normal testing. There was a problem that occurred with the use of the pallet with manual forklifts. To maintain goodwill and to build customer relations, Greystone agreed to take back the pallets which were recorded into inventory at scrap values.
7. Do you see a market for tolling services outside of Trienda? Unknown at this time, but limited.
8. Are there any plans to further the relationship between Trienda and Greystone? Not at the present time. There is may be synergetic opportunities for certain designs due to the different processes and applications between the two companies.
9. On the new 37x37 beverage pallet from the press release, how does that differ from the 37x37 pallets already advertised on your website? The new design has wider slots to accommodate manual forklifts. Also, the clips that hold the top and bottom together were changed to be less susceptible to breakage.
10. Is the new 37x37 beverage pallet different from the one sold to MC mainly just in the size? Is that just a preference thing with different customers and whatever manufacturing/distribution systems they have in place? MC does not use this size.
I think the new 37x37 pallet is the AB pallet. Of course I don't know for sure and GLGI will not talk about AB so I can't confirm this. We will have to wait and see
I think the non-recurring costs from last year were the test pallet order from AB. Rahhal says there was a problem that occurred with the use of manual forklifts. He also says the 37x37 new pallet is different from their old 37x37 pallet in that it can accommodate manual forklifts. And we know the non-recurring was not from MC because it was listed in their non-MC income.
I wonder if the whole story is this: AB contacts GLGI about a 37x37 pallet and GLGI sends them some. AB finds a problem due to manual forklifts and since GLGI wants the new business, GLGI swallows the costs and designs a new pallet that is good with AB's forklifts. Now the pallet is complete so AB can order production quantities.
The next question to me is what the quantity will be of AB's order. I think AB uses a 32x37 pallet now and I don't know why they would want to switch to a 37x37. MC uses a 40x32. I feel like GLGI must see a good opportunity if they're willing to eat those costs last year but who knows.
And I still wonder why AB wants to use GLGI when they have a 10-15 year relationship with Rehrig. Only thing I can think of is that the Rehrig pallets are recylable but not recycled while the GLGI pallets are both. I know AB has an environmental initiative and perhaps that is driving this whole thing.
Who knows. I am eager to see what happens over the next few quarters now that the new pallets are ready for production order.
