GREYSTONE LOGISTICS, INC. Results of Operations General to All Periods The unaudited consolidated statements includeGreystone Logistics, Inc. , and its two wholly-owned subsidiaries,Greystone Manufacturing, L.L.C. ("GSM") andPlastic Pallet Production, Inc. ("PPP"). Greystone also consolidated the variable interest entity,Greystone Real Estate, L.L.C. ("GRE") throughJuly 29, 2022 at which time a deconsolidation of the entity occurred. All material intercompany accounts and transactions have been eliminated. References to fiscal year 2023 refer to the nine months and three months endedFebruary 28, 2023 . References to fiscal year 2022 refer to the nine months and three months endedFebruary 28, 2022 .
Sales
Greystone's primary focus is to provide quality plastic pallets to its existing customers while continuing its marketing efforts to broaden its customer base. Greystone's existing customers are primarily located inthe United States and engaged in the beverage, pharmaceutical and other industries. Greystone has generated, and plans to continue to generate, interest in its pallets by attending trade shows sponsored by industry segments that would benefit from Greystone's products. Greystone hopes to gain wider product acceptance by marketing the concept that the widespread use of plastic pallets could greatly reduce the destruction of trees on a worldwide basis. Greystone's marketing is conducted through contract distributors, contract sales personnel and its President and other employees. Personnel
Greystone had full-time-equivalents of approximately 189 and 239 full-time
employees and 56 and 80 temporary employees as of
Nine Months Ended
Sales Sales for fiscal year 2023 were$44,633,542 compared to$53,069,648 in fiscal year 2022 for a decrease of$8,436,106 , or 15.9%. The number of pallets sold in fiscal year 2023 decreased by about 24% from the prior period primarily related to sales to two principal customers. However, the average price per pallet sold in fiscal year 2023 increased by about 10% from the prior period. Sales to these two customers may vary by period and the decrease in fiscal year 2023 is not considered indicative of future sales therein. Greystone had three customers which accounted for approximately 71% and 74% of sales in fiscal years 2023 and 2022, respectively. Greystone is not able to predict the future needs of these principal customers and will continue its efforts to grow sales through the addition of new customers developed through Greystone's marketing efforts. Cost of Sales Cost of sales in fiscal year 2023 was$38,590,544 , or 86% of sales, compared to$47,914,061 , or 90% of sales, in fiscal year 2022. The decrease in the ratio of cost of sales to sales in fiscal year 2023 was primarily the result of declines in the cost of raw material coupled with increases in the average price per pallet sold. Management continues to strive for additional reductions in the cost to produce pallets due to anticipated savings from scheduled increases in the capacity for internally refining unprocessed recycled plastic. While production decreases during fiscal year 2023 adversely affected the cost to produce pallets because of Greystone's inflexible fixed costs, management believes that increases in pallet production will assist in further decreases in production costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were$3,918,205 in fiscal year 2023 compared to$4,033,483 in fiscal year 2022 for a decrease of$115,278 . Legal fees decreased by approximately$501,000 from fiscal year 2022 as a result of settlement of an arbitration dispute. However, the decrease in legal expenses was somewhat offset by increases in personnel costs during fiscal year 2023. Other Income (Expenses)
During fiscal year 2023, Greystone received$3,270,424 from theDepartment of Treasury for claims filed pursuant to the Employee Retention Credits ("ERC") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Also in fiscal year 2023, Greystone recognized a gain of$569,997 upon the deconsolidation GRE, a variable interest entity GRE.
During fiscal year 2022, a gain was recognized on the forgiveness of debt plus
accrued interest in the amount of
14 Other income in fiscal year 2023 of$189,914 resulted primarily from interest income related to the payment of the ERC award. Other income in fiscal year 2022 of$35,731 was primarily from gain on sale of equipment and scrap sales.
Interest expense was
Provision for Income Taxes The provision for income taxes was$452,000 and$99,000 in fiscal years 2023 and 2022, respectively. The effective tax rate differs from federal statutory rates principally due to state income taxes, charges or income which have no tax benefit or expense, changes in the valuation allowance, and the basis that net income from GRE is not taxable at the corporate level because GRE is a limited liability company of which Greystone has no equity ownership. Based upon a review of its income tax filing positions, Greystone believes that its positions would be sustained upon an audit by the Internal Revenue Service and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded. Net Income
Greystone recorded net income of
Net Income Attributable to Common Stockholders
The net income attributable to common stockholders (net income less preferred dividends and GRE's net income) for fiscal year 2023 was$4,471,124 , or$0.16 per share, compared$3,044,535 , or$0.11 per share, in fiscal year 2022 primarily for the reasons discussed above.
Three Months Ended
Sales Sales for fiscal year 2023 were$13,578,269 compared to$22,450,682 in fiscal year 2022 for a decrease of$8,872,413 , or 39.5%. The number of pallets sold in fiscal year 2023 decreased approximately 41% from fiscal year 2022 primarily related to sales to two principal customers. However, the average price per pallet sold in fiscal year 2023 increased by about 3% from the comparable prior period. Sales to these two customers may vary by period and the decrease in fiscal year 2023 is not considered indicative of future sales therein. Greystone had three customers which accounted for approximately 65% and 71% of sales in fiscal years 2023 and 2022, respectively. Greystone is not able to predict the future needs of these principal customers and will continue its efforts to grow sales through the addition of new customers developed through Greystone's marketing efforts. Cost of Sales Cost of sales in fiscal year 2023 was$11,220,791 , or 83% of sales, compared to$19,734,155 , or 88% of sales, in fiscal year 2022. The decrease in the ratio of cost of sales to sales in fiscal year 2023 was primarily the result of declines in the cost of raw material coupled with increases in the average price per pallet sold. Management continues to strive for additional reductions in the cost to produce pallets due to anticipated savings from scheduled increases in the capacity for internally refining unprocessed recycled plastic. 15
Selling, General and Administrative Expenses
Selling, general and administrative expenses were$1,606,626 in fiscal year 2023 compared to$1,680,979 in fiscal year 2022 for a decrease of$74,353 . Legal fees decreased by approximately$297,000 from fiscal year 2022 as a result of the settlement of an arbitration dispute. However, the decrease in legal expenses was somewhat offset by increases in personnel costs during fiscal year 2023. Other Income (Expenses)
During fiscal year 2023, Greystone received$3,270,424 from theDepartment of Treasury for claims filed pursuant to the Employee Retention Credits ("ERC") under the CARES Act.
Other income in fiscal year 2023 of
Interest expense was
Provision for Income Taxes The provision for income taxes was$196,000 and$234,000 in fiscal years 2023 and 2022, respectively. The effective tax rate differs from federal statutory rates due principally to state income taxes, charges or income which have no tax benefit or expense, changes in the valuation allowance, and the basis that the net income from GRE is not taxable at the corporate level because GRE is a limited liability company of which Greystone has no equity ownership. Based upon a review of its income tax filing positions, Greystone believes that its positions would be sustained upon an audit by the Internal Revenue Service and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded. Net Income
Greystone recorded net income of
Net Income Attributable to Common Stockholders
The net income attributable to common stockholders (net income less preferred dividends and GRE's net income) for fiscal year 2023 was$3,562,996 , or$0.13 per share, compared$452,458 , or$0.02 per share, in fiscal year 2022 primarily for the reasons discussed above. 16
Liquidity and Capital Resources
A summary of cash flows for the nine months ended
Cash provided by operating activities
Cash used in investing activities
Cash provided by financing activities
The cash provided by operating activities was impacted by the utilization of approximately$5.3 million of customer deposits during the current fiscal year. The cash provided by financing operations included new term loans of approximately$8.7 million for the acquisition of equipment and approximately$1.7 in capital provided by the non-controlling interest to pay off the mortgage loan of GRE.
The contractual obligations of Greystone are as follows:
Less than
Total 1 year 1-3 years 4-5 years ThereafterLong-term debt$ 14,836,974 $ 2,217,304 $ 7,615,931 $ 4,476,510 $ 527,229 Financing lease rents$ 72,436 $ 42,185 $ 30,251 $ - $ - Operating lease rents$ 8,143,459 $ 561,947 $ 1,077,612
$ 1,083,610 $ 5,420,290 Commitments$ 5,317,935 $ 5,317,935 $ - $ - $ - Greystone had a working capital of$3,996,298 as ofFebruary 28, 2023 . To provide for the funding to meet Greystone's operating activities and contractual obligations as ofFebruary 28, 2023 , Greystone will have to continue to produce positive operating results or explore various options including additional long-term debt and equity financing. However, there is no guarantee that Greystone will continue to create positive operating results or be able to raise sufficient capital to meet these obligations. By notice datedMarch 27, 2023 , theDepartment of Treasury notified Greystone of Employee Retention Credits awarded under the CARES Act in the total amount of approximately$1,641,000 due to Greystone for the quarter endedMarch 31, 2021 . Greystone anticipates the receipt of these funds during its fiscal fourth quarter 2023 and plans to use the funds to improve its working capital, reduce debt, and cover portions of our unfinanced commitments. As ofFebruary 28, 2023 , Greystone had commitments for capital expenditures of approximately$5.3 million of which approximately$3.5 million is available under the advancing term loan with IBC, see Note 6 to the consolidated financial statements. A substantial amount of the Greystone's debt financing has resulted primarily from bank notes which are guaranteed by certain officers and directors of Greystone and from loans provided by certain officers and directors of Greystone. Greystone continues to be dependent upon its officers and directors to provide and/or secure additional financing and there is no assurance that its officers and directors will continue to do so. As such, there is no assurance that funding will be available for Greystone to continue operations. Greystone has 50,000 outstanding shares of cumulative 2003 Preferred Stock with a liquidation preference of$5,000,000 and a preferred dividend rate of the prime rate of interest plus 3.25%. Greystone does not anticipate that it will make cash dividend payments to any holders of its common stock unless and until the financial position of Greystone improves through increased revenues, another financing transaction or otherwise. Pursuant to the IBC Loan Agreement, as discussed in Note 6 to the consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed$500,000 per year. 17
Forward Looking Statements and Material Risks
This Quarterly Report on Form 10-Q includes certain statements that may be deemed "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, that address activities, events or developments that Greystone expects, believes or anticipates will or may occur in the future, including decreased costs, timing of manufacturing enhancements, securing financing, the profitability of Greystone, potential sales of pallets or other possible business developments, are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q could be affected by any of the following factors: Greystone's prospects could be affected by changes in availability of raw materials, competition, rapid technological change and new legislation regarding environmental matters; Greystone may not be able to secure additional financing necessary to sustain and grow its operations; and a material portion of Greystone's business is and will be dependent upon a few large customers and there is no assurance that Greystone will be able to retain such customers. These risks and other risks that could affect Greystone's business are more fully described in Greystone's Amended Form 10-K for the fiscal year endedMay 31, 2022 , which was filed onAugust 23, 2022 . Actual results may vary materially from the forward-looking statements. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.
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