2023-04-17 17:28:05 ET
Greystone Logistics, Inc. (GLGI)
Q3 2023 Earnings Conference Call
April 17, 2023, 02:00 PM ET
Company Participants
Brendan Hopkins - Investor Relations
Warren Kruger - Chief Executive Officer
Bill Rahhal - Chief Financial Officer
Conference Call Participants
Anthony Perala - Punch & Associates
Presentation
Operator
Good day, everyone, and welcome to today's Q3 Financial Results. At this time, all participants are in a listen-only mode. [Operator Instructions]
It is now my pleasure to turn the conference over to Brendan Hopkins.
Brendan Hopkins
Thank you. We have a brief safe harbor and then we'll get started. 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 and unknown risks and uncertainties that may cause our actual results 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 Greystone.
Warren Kruger
Thank you, Brendan, so much. I just want to welcome everyone today to the call. We've had a very exciting third quarter, and we'd like to just review that with you. I'll talk - I'll let Bill Rahhal speak more to the numbers today. I just want to talk about the overall business and the health of the business.
We are a - we manufacture 100% recycled plastic shipping pallets, and we do it very, very well. It - we process in our recycling center, probably up to 50 million pounds of plastic a year, we're grinding granulating making BDs out of it that will then, in turn, be injected into our product line. And our product line has - continues to grow. Over the last 6 months, we've added 2 different products of 45X45 nestable that snaps together with a bottom and 48x40 with a flat deck that also is nestable and snaps together with the bottom. These help in transportation for our customers and the 45X45 is a product more for the international shipping business because containers, they like to utilize 45X45 pallet sizes in shipping containers.
We've added a couple of machines that are not operational quite yet. We've put these down in Missouri at a company that we work with hand in glove. They - these 2 - these 3,300-ton machines, we anticipate filling those up over the next few quarters, and it will add significant revenue to our top line. We're excited about that as well.
Our pipeline is very active. Walmart is - continues to be a great customer. We've been producing for them over the next - we'll be producing for them over the next 3 years at one particular facility, and there's a lot of other DCs that are also anticipating putting plastic again [ph]
Our relationship with our large customer, iGPS, which was - is a pallet leasing company, it's - you'll see red wood pallets out in the market, and you'll see blue wooden pallets. And those pallets are rented pallets to industry and our customer iGPS rents plastic pallets out in there.
So if you go out to a Costco and you see a plastic pallet in the utilized. That's most likely we produce that power. So that relationship, we had a little walkie spell [ph] when there was a change of management, and we now have a wonderful relationship. We've gotten through all the concerns, and we are actually over the next 90 to 120 days, we'll produce an extra $5 million worth of product that wasn't anticipated that we will be producing for them.
We are also - this is a nice time to announce that we've just completed the acquisition of an extrusion line that's set up in Indiana, and this extrusion line was to make plastic shipping pallets. Unfortunately, this company, they put in their automated line at the end - right at the end of '19 and was producing a product for Toyota.
However, we all know that COVID affected the world then and it affected them. So we - the company could never get back on its feet. And so we purchased this equipment last week, and I'm excited. It will give us the opportunity to add sizes. We have a customer who's asked us to produce a 96-inch by 48-inch piece. And with injection equipment, our injection molds are 40,000 pounds molds and they cost anywhere from $200,000 to $400,000 and that size of an injection tool is just too much. So we're excited that we'll be able to produce odd-sized product off of this extrusion line. There's some die work we need to do and some preparatory work and so forth. But we have - we've kind of kicked off with a bang and we are excited about that.
Operationally, Marilyn Carter is our General Manager. She's doing a great job for us. Our long-term manager, Ron Schelhaas, is now helping out in our world of working with the Walmarts of the world and the Simplot's and some of our other large customers to help me on the customer service side and on the sales side. So we're excited about that.
We think that Greystone is well positioned to head towards that $100 million mark in the not-too-distant future. The world of plastic pallets just continues to grow. I know it sounds sometimes people with a dinner party will roll their eyes when they ask what I do, but it is an unbelievable part of our culture in America. There are 2 billion pallets out there in the United States moving around right now. And we're happy to be a portion of that in plastic.
So without further ado, because I'm going to open it up to questions later. Brendan, do you mind taking it from here, so Bill can go over the numbers?
Brendan Hopkins
Right. No. Well, I think Bill should get started now.
Bill Rahhal
Okay. Thank you, Warren. It's a pleasure to be able to speak with this investor group. I would like to put a little emphasis first on our balance sheet because I think that's an important word [ph] Greystone is in the platform that is spring - able to spring forward for future growth. And a couple of items that I just want to address, you'll notice if you look at the financial statements, there was about a $5 million - $3 million decline in property, plant and equipment. That's because of the deconsolidation of an entity that was owned by a third party and which was financially interconnected with Greystone.
That terminated this past - during this current fiscal year. And so that equipment now is shown as a right-of-use asset, and you'll see that because we have a long-term lease for those buildings. And you'll see that on the balance sheet. The other thing is that during the fourth quarter, we will be adding about $5 million plus of equipment. And that's - that's part of this equipment that Warren mentioned, that's being installed in Missouri plus the additional equipment that's going to be operational in Indiana.
So - and along with that, we'll be adding about $4.5 million in debt. But that will keep - right now, the company is about 40% equity to total assets, and that will continue through the end of the year because we're expecting a robust fourth quarter to complete the year.
Commenting briefly on the financial statements. Our sales were down for various - variety of reasons, part of it because our customers' availability of product, raw materials to provide to us to be able to manufacture additional pallets and have affected that. But the big bright news is that our gross margin in the third quarter went from 12% in 2022 - February '22 to 17.5% in February 28, 2023. That's a big increase, and that's primarily because the material that we use to build these pallets has resumed back to normal pricing, which was pre-pandemic or pre-shutdown of refineries during the pandemic period.
The other thing is that we also have been able to control our variable costs by reducing our variable costs during this low production point to be able to maintain and improved gross profit margin, and we expect that to continue.
So for the quarter ended February 28, 2023, the income - we had net income of about $3.56 million, which resulted in a profit of $0.13 a share. And that's - those are big numbers. And then for the 9 months, we had a profit of $4.47 million with net income per share for common stock of $0.16. So we feel that Greystone is back on the right track for future growth and to pick up this additional equipment and go for, and I'll turn it back to Warren.
Warren Kruger
Well, Brendan, I want to just - if appropriate, can we just open this up for questions now?
Brendan Hopkins
Sure. Operator, if you're ready, we can start with the questions.
Question-and-Answer Session
Operator
Absolutely. [Operator Instructions] Our first question comes from Anthony Perala. Your line is open.
Anthony Perala
Hi, guys. This is Anthony Perala with Punch & Associates. Thanks for taking my call. Just - and also, I'd just like to say I really appreciate you doing quarterly calls, and I think it's a great way to get the story out there to a broader audience. Well, it looks like an inflection in the business.
First off, if you could just speak a little bit more towards the delays from the larger customers in the quarter? Some more detail around that would be helpful.
Warren Kruger
Sure. There was a freeze and it sounds nutty, but there was a freeze in South Texas in February of '21. And - and it shut down the polyethylene and polypropylene production in the South Texas, which affected things across the country. We compete a lot with poly pipe, like pipe for sewer and so forth. Big bid, the pipe business, is a big, big business. But we have always been a bottom feeder in terms of resin. We like to buy material and then clean it up ourselves, grind it, granulated and deviate [ph] ourselves.
And all of a sudden the - what has been a relatively stable recycled market was flipped on its head. And from February of '21 through August of '22, the recycled cost per pound went up as much as well, from $0.15 to $0.30 a pound. And when you're dealing with a 50-pound product or a 30-pound product or a 17-pound product, your customers like, wow, I'm not going to pay that much for your pallet. So we - some of our sales were affected. It affected us our ability to get out in front of it because we had to go up in pricing, which we did. We had to go up.
And so that affected some of the sales that were going to come on. I think that, that affected Walmart. I think that iGPS also, they were, of course, when they're building millions of pallets a year, and it goes up $0.30 a pound, and it's a 40-pound product. It's a massive amount of extra cost for your raw material. So they held off somewhat as well.
And as Bill mentioned previously, polyethylene pricing has fallen, and it's fallen dramatically because it's finally - we've got production on the polyethylene and polypropylene market, commodities overall are down. And now the recycling world is kind of back in sync. And so we think that our pricing, we're not coming down on our pricing now. So we're seeing the benefit of that of our increased prices earlier and then the fall of our raw materials. I hope that helps with your question.
Anthony Perala
Yes, definitely. And then on the ability to fill up the capacity with the new equipment you're bringing on. You alluded to maybe being a matter of quarters rather than a matter of years. Just kind of wanted to clarify that you see the demand there to be able to fill this new capacity in kind of the 12 to 18 month time frame?
Warren Kruger
Well, I will always be somewhat cautious with customers. I get calls all the time from people saying, I need 500,000 pallets. I need a ride away. Well, the reality is they say those things, but they - it's never immediate. I mean it truly is not. And so you have to be cautious because people say they want something. Well, if we don't have exactly the right tool, our tools, as I mentioned, our tools are 40,000 pounds, they cost somewhere between $200,000 and $400,000 plus a piece and they take 6 to 8 months to produce, not counting the engineering time and the design time and so forth. So a lot of customers will call and just think that out of thin air, you can produce something exactly to their specifications. So that - there's always pause there.
But on the other side of it, the world of renting pallets, the world of leasing pallets, a world of people wanting a consistent product in the automated operation. Everyone has to turn to plastic because - and it's - we see it. The more automation out there, the better for us because wood, I don't care what you say over time, it's the same issues. It's chips, it's parts falling off. It's nuts and wood. It's - nail is popping up. It is the same issue that we've heard for the last 20 years, it's not going away. And that bodes well for our future.
One of the impediments for us in our world is the wood pallet industry and the lobby has done a tremendous job of - with FM and UL dictating that in many instances, plastic pallet must have a fire retardant additive. Well, that's - it's almost illogical because wood burns at a lower temperature than plastic, but that's the - that's what's out there in the risk management world. So a lot of times, we'll deal with someone.
And for example, Costco. Costco says, we want plastic pallet. They've made it a mandate, and they have - they use in their system from their suppliers, millions of pallets, but they want a fire retardant FM approved pallet. Well, that drives up cost. When you put anything in a plastic pallet that might affect the brittleness of the product and so forth.
So those are issues that are real and everyday issues that are barriers to entry in some cases. With Walmart, they don't care. With Miller Brewing, they don't care. With most of our customers, they don't care. But there are specific customers that those things matter.
Anthony Perala
On the fire retardant pallets, you had mentioned on your most recent interview towards the end. Just curious where you at - are at on a progress standpoint on developing one for Greystone?
Warren Kruger
I'm glad you asked that question. We have - I've mentioned our partner in Missouri. They are working with us on a product that's different. It's rather than adding it in the pallet where we're adding it as a part, not putting it into material, but in the corners of the pallet, which releases a fire retardant, call it, almost a bath for the fire. And we're working on that project. Right now, we've got quarter pallet testing, and we're optimistic.
But of course, you have to pass the test and so forth, then there's also the cost associated with it and what's the final cost of any type of - whether you're using a fire retardant additive or a product within your legs, it's - there's costs involved.
So we're still, I would say, I would anticipate probably another 6 months is what I would anticipate. But in the meantime, that's not affecting our demand flow at all. It just will - once we get that past that - cross that Rubicon [ph] we'll be able to really open up the floodgates on production with - once we do get that fire retardant chemical because people, like I said, I mean Costco, they are - they have said they've been a big proponent of plastic pallets, and we're headed that way. We are going to get there.
Anthony Perala
Okay. That's great. I'll jump back in the queue. Thanks for all your answers.
Operator
[Operator Instructions] Our next question comes from Robert Littlehale. Your line is open.
Unidentified Analyst
Good afternoon. Just a quick question for Bill. The acquisition you just announced, how did you finance it?
Bill Rahhal
It was financed with a bank loan through our primary lender. We've worked out - one of the things we did with our primary lender is we've worked out longer-term amortization of our notes, which has really helped our balance sheet and cut back substantially on our current - our funding on an annual basis. And so they stepped up and provided 100% of the funding for that equipment.
Unidentified Analyst
So it is variable?
Bill Rahhal
Say that again?
Unidentified Analyst
It's floating rate?
Bill Rahhal
Yes.
Unidentified Analyst
Okay. What's your current headcount?
Bill Rahhal
Our current headcount is about a little over 200 people total in the company, plus we have about 60 - 50 to 60 contract labors that we employ in the plant to operate.
Unidentified Analyst
Are you still hiring veterans?
Bill Rahhal
Sure. We don't really - I don't think we have any real limitations on who we're hiring, but love to hire veterans. We'd love to get people. As you can imagine, the past 2 years has been a real difficult effort just to try to maintain a few people. So, yes.
Unidentified Analyst
Yes, that was part of the reason for my question in terms of whether you're able to find good people in this environment. Final question for Brendan. Brendan, you're fairly new to the company. What are your plans for the Investor Relations effort for the company?
Brendan Hopkins
Well, I mean I think just getting the basics down, which is making sure that when we have company events, we actually get press releases out, so the - investing public understands. I think that we are making progress, even if there is maybe a quiet tie between releases. So we want to maybe get a little more communicative with our investing public. We also are going to go forward with calls like these where people get to have opportunity for Q&A with management.
And then once we get all that developed and running smoothly and again, this is not 100% been approved by management yet, but I would like to start getting out and doing a little bit more interactive with a fresh crop of people, possibly doing a few investor conferences here and there qualified ones, of which I do believe I know which ones are more qualified than others. So that's kind of the game plan right now.
And as the company expands, and again, you could check with management on this, but I do believe in uplift is in the future for the company. I don't think we can really commit to a time frame on it, but I do believe we qualified now. So hopefully sooner rather than later.
Unidentified Analyst
Final question for Warren. Warren, how was the rate - the dividend rate on the preferred shares calculated quarterly?
Warren Kruger
I could have Bill address that. It's tied to prime and in the early days, just for those that don't know, in the early days, when I was an investor before I was the President. And I've put in which was a million, then two, then three and all of a sudden, I had almost $5 million in cash in the business. And then another Board member and myself, put another $5 million in. So I've put in about $6.5 million and $2.5 million of it was preferred. The rest of it was just went in as - really as common.
And so it was a long road and that preferred was a direct result of just trying to keep the company alive in the early days. And we have - it's got a conversion strike price, I think, about $1.43 or $1.45, maybe $1.50 Bill might be to recall somewhat more so than I can. But at that rate, to answer your specific question is tied to prime. So as prime goes up, it actually benefits us as a preferred. I wish rates would cap out and start coming down, but I don't anticipate - I'm no economist, but I don't anticipate that happening anytime in the short future.
Bill Rahhal
Yes, this is Bill. That conversion rate is $1.5 [ph] a share, which has not been beneficial to the preferred stockholders to be able to consider converting, but the rate is 3.25% [ph] above prime.
Unidentified Analyst
Thank you very much.
Operator
[Operator Instructions] Our next question comes from Joe Russo. Your line is open.
Unidentified Analyst
Hey. Guys. Thanks for holding the call. And appreciate the question. I wanted to ask about the fourth quarter. I think in the interview, Warren, you did last week, you implied a pretty strong ramp for fourth quarter. I think you said something like $65 million to $70 million of revs for fiscal '23.
So maybe just talk about what you're seeing so far in the May quarter. It sounds like you talked about a big order, additional order from iGPS. Maybe give a little bit of color on what that is and if that's repeatable? Thanks.
Warren Kruger
Well, Joe, how are you, by the way? Everything good?
Unidentified Analyst
Yes. I'm doing good. Thanks, Warren.
Warren Kruger
Good. Well, the iGPS relationship, as I mentioned, it was rocky there from about - for about 1.5 years. And it has really been now - it's been fun again, it's like most of our customers, we have fun with our customers, believe it or not. We have good relationships with them. And they enjoy working with us and we generally enjoy working with our customers. And we respond relatively rapidly to them.
iGPS they - for their own benefit, their Board decided that they needed - they were concerned that if there was a tornado or something affected that could - could affect their long-term life. So they put in a plant in Texas, to produce product down there. Well, this industry is tough. It's not for the same good [ph] part. It's a hard business. I've seen so many businesses getting the plastic pallet world they come and go because it's difficult.
Well, iGPS also has - they've had their own share of start-up issues down there. But they do - their customer demand out there is extensive. And they came to us and said, listen, we've got had a machine issue, and can you produce more product for us over the next 90 to 120 days. And we, of course, have the molds available and we have some machine time.
So we - there's always in the manufacturing world, you have to be careful, though. And one of the things that we do, we grind a lot of the broken pallets. So when iGPS, they have millions and millions of millions of pallets out there. Well, when they are broken, they send them back to us. They own that product. So they're sending their raw material back to us in the form of a broken pallet. And so we grind that pallet, we grind, granulated and then we make a BB.
Well, where we are right now in our life, we ordered a pelletizing line that was supposed to be up and operational at the end of last year. But with so many things in the equipment world, they've been - there are delays and so forth. And this morning, I just had a discussion with our gentleman in charge of all equipment, and he's telling me now that most of the equipment has now been delivered and they're starting to put the line together. And that in May, they will really make a lot of progress in May. And I'm hoping by June, we'll have that available.
What does that mean? It means we're limited somewhat with our ability to BB plastic. So that means then we have to go out in the marketplace and pay $0.15 to $0.20 more per pound than we would if we were BB-ing [ph] our own plastic in our own operation.
So my point on that is that iGPS said, hey, we're going to send you a lot more of these recycled plastic pallets. And we've had to temperate somewhat because we just didn't have the BB in capacity. So my point is, as we increase our BB capacity, we will not only help our raw material costs, but we will also help our customers those that need to have their raw material reprocessed and used in their own product. So I anticipate that in the future, this will benefit us as a company as just in a huge amount.
Unidentified Analyst
Got it. No, that's helpful. And in the press release you guys put out this morning, it sounded like you thought that the current strength you're seeing sort of in the fourth quarter would continue into next year. I'm just curious like from your existing larger customers with Walmart and iGPS, some of the beer guys. How much visibility do you kind of have beyond May at this point?
Warren Kruger
Well, as I alluded to earlier, I have had someone reach out to me - let me just start with today. This is how my day goes. We picked up this extrusion equipment last week. The gentleman who will be leading up that product line had a great relationship with Berry Plastics. Well, Berry is a very large operation. And we've done some things for Berry already. Berry, their internal initiative in their company, company-wise, is that if they have a material that needs to be recycled, they want to use their material within their own organization, okay? That's just for their own green initiative.
Well, this morning, we had a call with Berry. And Berry was very excited about the ability for us to process some of their resins that they had and put it back into products for them. So that's the type of thing that it's just every day is like that.
I had a guy called me that I've known for 18 years, and he was at one time President of Chap [ph] and he was also President of iGPS at one time. And he called being he said, hey, listen, I've got an Australian customer who has a contract and they want to produce. And I said we'd be happy, we'd be delighted to do it, what kind of product they want. Is it something that we have, we need to develop.
So all these things it's just every day, there's always something like this. And you're just working on these. And sometimes, they take years to blossom. As I mentioned, I've known this guy for 18 years. I've never really done anything with him. Well, that happened with the original management group of iGPS. I've known them for years, met them, they're South African guys. I met him some time ago. And when they bought the assets of iGPS, they came to me and said, can you produce a product for us.
So some of these things just take years to develop, but there's - in our pipeline, I've been doing this for 20 years. So my pipeline for 20 years, there are people that just - they'll reach out to me on an ongoing basis and say, can you do this? And we believe that there are going to be more of these track and trace cellular units that will be placed in the plastic pallets. We're doing that for a specific customer right now. They can track the temperature, they can track how fast the pallet is going, it's wow.
Now why would people want to do that? Well, if you're in the food business and you put your food, you unload a truck in Las Vegas, it's 115 degrees outside, you don't want that food to be outside very long. Well, the ability for the pallet to monitor that, it just helps the logistics of food companies and pharmaceutical companies. And so we're going to see a lot more of that as the future - in the future.
Unidentified Analyst
Awesome. Last question for me, and I'll ask - some other people ask. But can you just talk a little bit about the Missouri facility. It sounds like you're putting some injection molding equipment down there. Is that someone else's facility, you're just kind of hosting equipment there? Just maybe talk about like what you guys are planning on making down there and what the sort of relationship is, that would be great.
Warren Kruger
Yes. That is someone else's - it is - that's their facility, and we are putting our equipment in there. And we've been doing business with these guys for numerous years, probably, I don't even know 5, 6, 7 years. They produced product for us when we needed them to produce product. They're in the recycling world. We have a - I was just with them 2 weeks ago at a trade show in Chicago. They're wonderful people. They added on to their facility. They put - they have space for ours [ph] with an overhead crane.
And this - and our - if you came to our facilities now in Iowa, we are - we're pretty crowded. I mean we have utilized our space really, really, really well. And so we have to make the decision, do we build another facility? Do we - those are decisions that the Board has to discuss all the time. And because the group Missouri knows us so well and they are great people. We contracted for them to manufacture our product, whatever product we determined that we're going to put in there. They will probably be our - what we call our MVP line, which is - it's for the leasing in that world. It's - you've got fiberglass rods at the top and the bottom. So they're very structurally sound. And we'll - those will probably be the type of product that are produced there.
Unidentified Analyst
Okay. Awesome. I appreciate all the answers. Thank you, guys. Operator?
Operator
Apologies. Our next question comes from Russell Valentine. Your line is open.
Unidentified Analyst
Hi, there. I've been invested with the company before they changed the name to Greystone. So I've been around a while. I always thought would pallets not be as durable as plastic. Plastic we're starting to get and going and all that. But now, the price of the stock just hasn't done a whole lot in the last double-digit years. Today, we saw a double-digit cent earnings per share. Stock was down today.
I don't know when the last broadcast was, you're talking about moving to a different exchange. But when we do that, we have to get a higher price. I hope you're not thinking about reverse splitting. I hope you think about increasing the price with the earnings per share rise? Comments on that.
Warren Kruger
Well, I'm the largest common shareholder out there. And so I'm eating my own cooking. And I will say that those - I originally earlier in this phone call, I think I had $4.7 million. And my - probably my average cost per share in those is probably over $1. And so I'm motivated as well, which is a good thing. And I, too, have been disappointed that we have not been able to climb that pricing on our stock.
And sometimes, I just like - I put my head down years ago and Bill was there and we just said, you know what, let's just put our heads down and let's go out and make money because we knew where the industry was going long term, much like you. I'm no bigger believer than me out there. And we do - when people - other people talk about doing green things, we actually do something in the green world. We take junk. We take plastic that can fill in the landfill, and we convert it and make it to an American-made product.
So I'm very bullish on it. At $0.13 a share, I mean, it's at $0.65. To me, it doesn't make any sense. But I too have to be diversified in my holdings. And I've thought many times, how much rise can [indiscernible] and perhaps I need to, and that's inappropriate statement there. So that's - I'm sorry, I said that.
But the - how much can I - how much more stock can I buy? And so that's where I am is that I, too, have said this is too cheap. I need to go out and buy some more. And I'm hoping that - and hope is not a good strategy. We are going to continue to strive to make money for our shareholders, do good for our customers, our employees and our shareholders. And that I can promise you, and I - but I can't do much to control the price of the stock out there other than to try to do exactly those things I just mentioned.
Unidentified Analyst
Very good. I appreciate it. I appreciate all you've done been riding for many years and look forward to the future. Thank you.
Warren Kruger
Thank you, sir, very, very much. I appreciate it, sir.
Operator
Our next question comes from Anthony Perala. Your line is open.
Anthony Perala
Hey, guys. Just a couple of quick follow-ups. Is the extrusion line included in the $5.3 million of purchase commitments that you guys disclosed in the 10-Q?
Warren Kruger
Yes. Yes, it is.
Anthony Perala
Okay. Excellent. And then on the - just kind of thinking as we move into fiscal 2024, no expansion capital or nothing like the last year, kind of what are your thoughts on maintenance CapEx going forward?
Warren Kruger
Can you address that, Bill?
Bill Rahhal
I can address that. We will - there'll be a little bit of a moratorium. And a lot of it depends on what the outlook is and what comes from all these conversations or solicitations that Warren and our sales team are doing to be able to look for additional customers. These two new pallets will each produce - I'm sorry, these two new machines will each produce up to about 200,000 pallets per year. So that's additional capacity of close to $400,000 per year.
So we will - so we'll have a little bit of a leveling off as far as CapEx need in the short term. But it takes - it took Warren [ph] a year almost a year from the time we ordered these two new machines before they actually were delivered. Actually, it's a little more a year. It's about 18, 15 months. And so getting the equipment right now is a major problem. So we've got to continually be thinking ahead and as we see this pipeline that we have available starting to fill up or we think we have, we'll jump out again and pick up additional things.
But a minimum of 6 months, I don't think we're doing anything. And a lot of it just depends on what the horizon looks like at the end of the 6 months of where we are. But I think we're pretty well set right now to fill up what we got, and that's our major goal. But as we start seeing that being filling up, we will definitely be looking for additional capacity. And we've got additional space available for us in Missouri. So we're not really concerned about space to occupy the equipment. So we're in pretty good shape there.
Anthony Perala
Okay...
Warren Kruger
If I can just step in here and make a follow-up comment on the extrusion line. The extrusion line - the company that they're finally their investors said, just liquidate the equipment. They have spent - they just spent $3 million plus on brand new equipment back right before COVID. And so this equipment we picked up, not only we have the benefit of the research and development over 10 years and we're on the third or fourth generation of this product.
But we picked up equipment that was relatively brand new and we can now for - and I'll give the – Uline is the line is the name of the company that has come to us and said, hey, we want you to produce some different size oddball pallets for us? Can you do that? So we're optimistic about that. I just wanted to clarify that buying that equipment, it was at a discount, and we feel good about that acquisition.
The other thing about capacity, we do have the ability to produce in Mexico. We have a facility down there that we have outsourced some production too, and we will be able to do so in the future. We do have some people down in Mexico that are knocking on a lot of doors, and we have sold some product down in Mexico. And we will not do a full line down there, but we do have a couple of products, a couple of tools down in Mexico that when sales orders come in, we'll be able to produce there.
Anthony Perala
Okay. And then with the execution...
Bill Rahhal
Yes, plus let me just add Warren just that. The Missouri company that we outsource and polished [ph] through, they have capacity that we can probably utilize to some degree as we need to.
Anthony Perala
That's great. On the extrusion line, do they still have the Toyota relationship? Does that come along kind of with the assets that you're buying?
Warren Kruger
Well, what happened with the Toyota relationship. We have - we've only owned this about four week, maybe not even week, like 4 days or something like that. The Toyota relationship, when they finally - when they - the swoon in the auto industry in 2020 because the whole industry shut down. But when it came back, pricing on the raw materials were so high that Toyota says, no, well, you can produce at the price you used - you told us we were going to get it originally. We're not going to pay anything more.
So that - I don't know where we are in terms - I'm not going to do anything. I'm not going to sell something below a margin that will make us happen because we don't need to. And so that's kind of where I am. We have not been back to Toyota, so I don't know the answer to your question specifically. But I do know that based on what I have been told there, the raw material prices went up too high and Toyota just said we're not going to go down that path.
Anthony Perala
Okay. And then last one for me. Just you've talked about the capacity once this equipment in service for revenue being around $100 million. Just kind of curious what margin impact will be as you march towards that capacity level?
Warren Kruger
Well, our fixed cost, the beautiful thing is once we cover our fixed costs, then the dollars that will drop down on it and incremental sales will be substantial. And Bill addressed that earlier on our margin improvement. We anticipate - we want that margin improvement to just keep stepping upward on that double digit towards that 20% and 20% plus area.
Anthony Perala
All right. Thanks for all the answers.
Operator
It appears we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.
Warren Kruger
Well, this is Warren Kruger. I want to thank everyone very much for listening in today. I appreciate it. I appreciate you being a shareholder. If you are a shareholder, and I appreciate you being buying some shares if you're not a shareholder. So thank you, and we're going to work hard for you.
Operator
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Greystone Logistics, Inc. (GLGI) Q3 2023 Earnings Call Transcript