Olin Corp (OLN) 2004 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Pioneer's Company Announces 2004 results conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we'll conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. As a reminder, this conference is being recorded, Wednesday March 30, 2005. I would now like to turn the conference over to Gary Pittman, Chief Financial Officer. Please go ahead, sir.

Thank you. Glad to see that everyone could join us this afternoon. What I thought I would start with is the disclaimer, as we start out each one of the conference calls. Certain statements that we may make during this teleconference regarding future expectations of Pioneer's business and Pioneer's results of operations, financial conditions, and liquidity, may be regarded as forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements are subject to various risks, including but not limited to Pioneer's high financial leverage, global economic conditions, the demand and prices of our products, Pioneer and industry production volumes, competitive prices, the cyclical nature of the markets for many of our products, and raw materials, effects of Pioneer's results of operations on its debt agreements and other risks and uncertainties. Attention is directed to our form 10-Q and our Annual Report on the form 10-K for 2004, for discussion of such risks and uncertainties. Actual outcomes may vary materially.

Pioneer operates in one industry segment; the production, marketing, and selling of chlor-alkali products, such as chlorine, caustic soda, hydrochloric acid and bleach. Pioneer operates in one geographic area; North America. The companies combined annual capacity for our four chlor-alkali plants is 725,000 ECUs, representing approximately 5% of North America capacity.

At this time, I'd like to turn it over to Mike McGovern, the CEO, to give an overview of the company.

Thanks Gary. There's several items or topics I'd like to talk about. One, I'd like to do a quick look back, talk about the equity offering, the STAR Project, pricing, production, and the real estate we have at Henderson. First, a quick look back. Three years ago, our company was in a crisis environment. We emerged from bankruptcy. We had a major derivative obligation, falling prices, and reduced demand for our products, management team really operated in silos, and too much debt. Now we feel very fortunate today, the derivative issue is resolved, the customer base has been repositioned, and the fixed costs have been significantly reduced.

You know, the outlook for our products, as we sit here today is tight. Debt as been reduced, and we intend to reduce it further this year, and our manager team and staff is very customer driven. As we look to the tomorrow one of our primary focuses our human resources. This includes our management team, our staff, and the composition of our Board. And during the last three years we've added some really competent and capable people to our management. Gary Pittman, who sits here as the CFO, has done an outstanding job. Ron Ciora, who's Vice President of Sales, provided great leadership at the trough and now as we move to all-time high prices. Carl Monticone has joined us as the Controller and is doing an outstanding job. And each of these has made major contributions. We've added some other talented people too.

You know, likewise, we have a goal to add competent and knowledgeable board members. You may recall last year, Chuck Mears joined the board. Chuck brings about 35 years of experience in the chlor-alkali space. Many of those he served in very senior positions. He's clearly made a contribution, and he's really appreciated by the management team and the staff.

Recently, the Board of Directors, and I'm proud to say I'm one of them; we elected Dave Scholes to serve as a director. Scholes has been with us, and he serves -- has served and is serving as Vice President Manufacturing. He has been in chlor-alkali since '76. He has a chemical engineering degree, and an MS chemical engineering from Purdue. And I think Weinstein, our Chairman, summed it up that, you know, Dave's insight into our day-to-day operations and his broad industry trends have been and will be valuable for us. And, you know, I've worked with Dave, and he's participated and assisted heavy in the realignment of the management team, and, you know, reorganizing these -- our efficiency projects. So I want to tell you that the other members of the Board and I welcome Dave to the call. He is with us today, but he drew the short straw, so he's in Dalhousie (ph), as Gary and I are sitting in warm Houston.

Next, I'd like to move to the equity offering. In early December of '04, we were fortunate enough to have a public offering of 1.1 million shares, and we netted 22 million. The net proceeds of this has gone to the repayment of debt.

Next topic is the STAR Project. We've talked at great length about this, and the goal was to improve our efficiency and operating margins. We feel confident that we have taken 11 million out of our cost structure, and we reduced our staff by 128 employees, and we think these are sustainable.

Another topic which is not really part of STAR, but another cost-saving project. In the first quarter of 2005, we moved our bleach facility from Cornwall to Becancour, and this resulted in a reduction of - a net reduction of nine people. We reduced 14 at Cornwall and added five at Becancour, and we think that we can have annual savings of about $1.5 million, and we think that's very positive.

As I move to pricing, we try to display in the K the historical pricing 2002, 2003, and 2004 in the table. As one looks -- if one would look at the table in '04, you can see the market has really improved from the first quarter of 339 to the fourth quarter of 480, and then we laid out the price increases for the chlorine and the caustic that we've implemented during the year. The other aspect we disclosed in the K is that when you take our chlorine and caustic, it's about 1.5 million tons, and we stated in here that we have about 500,000 to 520,000 tons under contract that has caps on it, which impedes the ability to raise the price.

As we move to the fourth quarter of '04, higher average ECU price, netback price was 480, while CMAI, who we've talked about, is an outstanding forecaster in the market, and is an outside consultant. They suggested the market for the Gulf Coast was 640. What we've talked about at great length is they are looking at a spot Gulf Coast sale and what you have to look at is the legacy contracts we've talked about, and the basis differential.

Then we've also disclosed for '05, because we do not forecast, but we're trying to provide information to help each of you, is that our price went from 480 in the fourth quarter to 546 for the first two months of the first quarter. And we've stated in here that we think that the price of ECUs will go up in the first six months in 2005.

As we look at CMAI, in their February 28th forecast, their forecast for the second quarter for ECU is 710. Third quarter, 726. Fourth quarter, 696. First quarter for next year is 664. So their outlook is very strong and a robust market. When we look at production, we've laid out both for Pioneer and the industry that operating at really high rates; 97% for last year. I would note, as we look, when one tries to analyze our production, we were -- purchase of reseller of large sums of caustic in the past. That may be -- or will be tiered back as we move forward in 05, and a lot of that was for specific market that we were serving, and we fulfilled our commitments and those markets. So as we going to 05, we are reducing the level of purchase for resale.

We made a press release and we've disclosed, as we look in the first quarter, in January, we had to reduce the operations of production in Henderson because of weather issues in California and Utah, and we also had some seasonality issue in Becancour, and we've disclosed that that was 9500 tons. You know, when we look at the first quarter, it's imperative that you remember that we had this whether related problem. It's important that you remember in the third quarter that we suggested we had a turnaround, at St. Gabriel, which we've completed, and as we stated in the third quarter, we thought we would lose about 7500 tons of capacity. During the first quarter, I think it's going to be closer to 1000. So as you look at our first quarter, you need to take the 9500 and the eight that we've lost, and a couple, you know, days for bruises and bumps here and there, and we feel confident this will be our lowest level of production next year, but the market is very strong.

On the Henderson property, as we stated before, we've engaged a real estate broker. We continue to sell that. You know, it's dirt, and at this time we don't have anything to report on that. And now I'll turn it back over to Mr. Pittman.

Thank you, Mike. What I'd like to do now is go over the year-end, the 2004 results compared to 2003. For the year ended December 31, 2004, Pioneer reported a net loss 1.2 million, or $0.12 per diluted share compared to net income of 18.2 million, or 1.79 per share for the year ended 12/31/03. Revenues increased by 28.4 million, to 407 million for 2004, as compared to 378 million in 2003.

Revenues from the sale of chlorine and caustic soda increased by 17.2 million, with an increase of approximately 5.9 million, due to the increased ECU netbacks, and an increase of approximately 11 million, due to the increased ECU sell volumes. Increased prices and volumes for our other products also favorably affected the revenues in 2004 by 10.3 million. Our average ECU netback for the year ended 12/31/04 was 393, an increase of approximately 3% from the average netback in 2003 of 382. Our ECU production was 704 tons in 2004 compared to 671,000 tons for the same period in 2003.

Cost of sales product increased by 12.7 million or approximately 4% in 2004, as compared to 2003. The increase was primarily attributable to higher variable cost of 14.2 million, including increased electricity and salt costs of 7 million and 3.8 million respectively, due to higher prices and production volumes, and 3.5 million of the increased costs related to the purchase of caustic soda for resale.

Cost of sales product in 2004 also included increased freight costs of 8.8 million, as a result of higher volumes and fuel surcharges and higher depreciation of approximately 3.9 million, due to a first quarter charge related to the decision to discontinue the chlor-alkali production at the Tacoma facility. The increases were partially offset by lower fixed costs, including a decrease in personnel costs of 3.3 million, as a result of project STAR, and the absence of cost incurred in 2003 for the anode recoating projects and environmental charges of approximately 3.5 million, and 9.3 million respectively. Other company may include certain of these costs and so SG&A costs resulted in a lack of comparables between our gross profits and that reported by other companies.

SG&A expenses of 27.6 million increased by 4.4 million or approximately 19% in 2004, as compared to 2003. This increase, for the most part due to a higher consulting fees of 4.1 million, primarily related to Project STAR, and a 2.4 million increased in employee benefits costs, partially offset by 1.8 million of decreased bad debt expense.

Other items for 2004 increased by 3.6 million, due to the recognition of employee severance and related benefits costs in 2004, of 4 million, related to our restructuring efforts from Project STAR and the realignment of certain Canadian operations. In 2003, other items included 400,000 gained from the early payment of a promissory note. Interest expense was 18.4 million, and 19.1 million in 2004 and 2003 respectively, net of interest income of 106,000 in '04, and 18,000 in '03.

Other expense for 2004 comprised of 2.8 million in currency exchange loss, which resulted from a decline in the rate at which the Canadian dollar-denominated amount were converted into U.S. dollar balances, from a 1.3 exchange rate at 12/31/03 to 1.2 at 12/31/04. For 2003, other expense of 5.8 million also resulted from a decline in the exchange rate from the previous period.

Income tax in 2004 was 2.1 million compared to a tax benefit of 3.3 million in 2003. The 2004 expense resulted primarily from the recording of a valuation allowance against our Canadian capital loss carry-forward, offset by benefit from the net loss of our Canadian operation. The valuation allowance is necessary, since it is now considered unlikely that capital loss carry-forward will be used against future gain.

Our borrowings under the revolver -- what I'd like to do now is go to the fourth quarter 2004 results compared to the third quarter 2004. We reported net income of 4.5 million or $0.41 per diluted share in the fourth quarter of 2004, as compared to net income of 3.9 million or $0.38 per diluted share in the prior quarter in 2004. Revenues for the fourth quarter of 2004 were 115 million, as compared to 105 million for the third quarter of 2004. Our average ECU netback for the fourth quarter of '04 was 480, compared to 409 in the prior quarter of '04. Our ECU production was 174,000 tons in the fourth quarter of '04, as compared to 178,000 tons for the first quarter in 2004.

Cost of sales product for the fourth quarter increased by 2.2 million, as compared to the third quarter of '04, primarily as a result of maintenance expense projects were higher than the prior period. Fourth quarter SG&A expenses were 7.1 million, as compared to 5.3 million in the third quarter of '04. Increased was primarily related to an increase in bad debt expense, and an increase in employee benefits costs.

Other items increased by 400,000 for the fourth quarter, compared to the third quarter '04, as a result of employee severance and related benefits costs associated with our organizational efficiency projects and a transfer of bleach production from Cornwall to Becancour. Other expense net of 1.7 million in the fourth quarter of 2004 reflect current exchange loss compared to currency exchange loss of 1.9 million for the comparable prior quarter in 2004.

Income tax expense in the fourth quarter of '04 was 3.9 million, compared to a tax benefit of 1.2 million in '04. The fourth quarter expense resulted primarily from the recording of a valuation allowance against our Canadian capital loss carry-forward, offset by a benefit from the net loss of our Canadian operations.

At this time I will turn it back over to Mike.

Well, I think we're ready for questions. (inaudible) I think we're ready for questions.

(Operator Instructions) Our first question comes from the line of Jeff Kritschal (ph), from (inaudible). Please proceed.

Hi guys, nice quarter. A question for you here. On Project STAR, you mentioned you realized about $5.7 million of that $11 million total savings. That, and in addition to the additional, I guess one million, or 1.5 million dollars you were talking about with the Canadian facility, can you just tell us a little bit as far as the timing, when we should expect to see that flow-through? I mean is that going to be something you're going to be realizing this quarter or over the course of the year?

This is Mike. Those costs will come through on a monthly basis. It'll just be a reduction of our forward costs. They're not going to be lumpy. And so yes, we'll be realizing those, again, on a -- again, let me break it down. From Cornwall -- move from Cornwall to Becancour, we did that in the first quarter --

Okay.

We incurred some of the costs in the fourth quarter for the severance, under the accounting rules, but the costs to move that will be incurred in the first quarter, but the savings for the STAR Project, they're occurring monthly, and the savings from the Cornwall will start immediately plants up and running, as we run it.

Okay, got you. And then as far as electricity and salt costs going forward, I mean you mentioned the -- your expectations for buying caustic for resale is not going to recur this year. For electricity and salt costs, are those costs increasing at levels commensurate with ECU price increases? Or how should we look at that?

Well, you ask two questions; one on the purchase for resale. Our principle -- where we're backing off purchase for resale is really in the Northwest. We had continued to purchase caustic for resale, under the assumption we were going to start the Tacoma plant backup, but we made the decision not to start it up. We retreated or left that market, and so that's independent of the electricity and the salt. That has to do with the market that we're playing in. Second, as to the electricity and the salt, we'll take the salt first. Salt has gone up for two reasons; one, transportation, and the second is that the foreign is just not competitive right now, particularly the Chilean salt, because the fuel cost has gone up so high, which has allowed the local markets to increase their price. So we are anticipating and they have experienced some increasing costs there. We --

Are the cost increases you're seeing there basically freight increases of 4 to 5%? Or is it something like ECU, where we're seeing echo from, you know, up 10, 15%?

Well, the cost -- the increase in the ECU is much greater than the cost that we're incurring on the variable.

Okay.

We take the salt, electricity -- the salt is increasing, and the electricity, again, know how our plants operate. Becancour and Dalhousie are Hydro, so do they're not subjected to the volatility of natural gas, and when you move down to the south, at St. Gabriel, Henderson, those are highly impacted by the change in natural gas, and given the price cut that we're looking at, we expect some increases there. The other place we expect some increases is on your logistics; all the carriers. Trucking, rail, they're all pushing a fuel surcharge through. So you should expect increase in salt, electricity, and logistics, but the increase in the price that we're receiving for the price of ECU we anticipate will be much greater than those related costs --

How much of the cost savings from Project STAR will have to be realized this year? And you think can offset the increases you're seeing in some of these other things?

Well, if you go back to Project STAR, and hopefully we've disclosed it, the vast majority of those savings are from the reduction of manpower. Those reductions were made, the bulk of them, by June of last year, and all but just one or two for specific reasons, those reductions have been made. So --

Right, I guess what I mean is, you know, if you're seeing increases from salt, electricity, of, you know, X number of dollars, how much of that is going to be covered by the $5.7 million of savings from Project STAR, still to be realized this year?

We don't --

Kind of a rough estimate.

No we can't forecast. Again, if -- I'll have to be very candid. If I could forecast the curve of natural gas, which really drives --

Okay, based on current levels.

That would be forecasting, and we don't do that. What I will tell you is that price of ECU is increasing greater than the price of variable cost. I'm sorry, Gary, did you want to say something?

The only thing I was going to add, Jeff, or Mike, is, Jeff, you know, if you look on page 26 of the 10-K, we disclose the amount that we incurred for our salt, and the amount that we incurred for our power costs, attributable to the ECU. And so you know, you can use whatever -- you know, look at what you think natural gas is going to do, you know, what percentage you think it's going to go, and those would be the numbers you would look at.

Okay.

Jeff, let me try one more time, which may be helpful again. When I was trying to assist with Becancour and Dalhousie being Hydro, you know, that suggests only half of our electricity is subject to these price increases because of the price of natural gas.

Okay.

So, you know, whatever you're assuming, you know, it's only half of our load.

Okay. Your production levels -- so you're going to have -- should we expect Q2 through Q4 to resume back or rebound back to those -- the kind of normalized production amounts, comparable to Q4? It's just Q1 where you're going to have the shut down and obviously the weather impact there. There are no more forecasted shutdowns, I guess is what I'm getting at for the remainder of the year.

Well, here -- let me take that in a couple parts. One in January, as I said, we had the weather and the issue with Becancour, and the turnaround that St. Gabriel. St. Gabriel we do that every two years, okay?

Okay, but there aren't going to be any further turnarounds is what I meant.

I'm sorry, I was getting ready to tell you, at the other plants we those on an annual basis. So Bec, Dalhousie and Henderson will have turnarounds either in the latter part of the third quarter or the first part of the first quarter. And Bec and Henderson, those tend to run about seven days, those turnarounds.

Okay. And then just finally, you know, it looks like you guys are in a position to generate a significant amount of free cash this year, and then in the next year. Can you just kind of take us for your expectations for how you're going to deploy that cash?

Debt reduction.

All for debt reduction? Okay.

Debt reduction.

One thing I may add, given the level of liquidity that we have, the tranche (ph) will require a payment on a quarterly basis that you go through the covenants, that looks at the liquidity and then you go through a calculation of excess cash flow, and so each quarter, the tranche (ph) mechanics of the loan document will require us to make a liquidity payment. We'll go through that calculation on a quarterly basis.

Okay. All right, thank you.

Thank you, how next question comes from the line of Charles Rose from Ardsley Partners. Please proceed.

Good morning, gentlemen. I was at the Goldman Sachs Chemical Day yesterday, and I wanted to ask a question because one of the things that came up from one of your presenters was the issue of potentially buying -- doing some acquisitions. Can you talk about that, Mike, for a minute? Anything out there that makes some sense to you? And what metrics might be appropriate to look at? Because -- and also what type of -- and then coming back into the prior question about cash flow, what would the appropriate level of debt be, in terms of going out two years? Do you want it totally or do you want -- is it sort of -- you sort of look at a debt level of like 100 on may be the normalized EBITA level of maybe 100 or maybe 50 million of normalized EBITA or 60 million of normalized EBITA, so you sort of get to a more two to one ratio in bad times? Is that sort of what you want to be looking like? So you can take the first question about acquisitions and then the second question about what level of debt to EBITA would you like to see.

As far as acquisitions, when you look at our strengths, as far as other chlor-alkali, you know, Vulcan could have been a potential date or mate with us, but Oxy has purchased those. When you look at who's left, you have Olin, PPG, Oxy, Dow, so the possibility of a transaction in the space is unlikely.

What about on the caustic side, not on the chlorine side?

Yes, on that side, it's very unlikely. A place where we could be opportunistic, we do not have anything on the table at this time, is to expand into the bleach. So those that we have not talked about, basically, what you do with the bleach issue take the chlorine and the caustic and you delete the chlorine, and it's used heavily in water and it's a disinfectant. And we're a large player on the West Coast, so there is the possible opportunity to move into Southwest, Southeast, maybe the Northeast, on that. So you know, there could be an opportunity there. A lot of those are privately owned and so there could be some opportunities there.

Are you talking about a relatively small transaction, Mike? Are we talking about like $10 million type of transactions or are we talking about $50 million type of transactions or $100 million transactions?

I would think the fairway would be 10 million to maybe 50. I think it would be in that fairway, but again, since they're family-owned, the matrix they may attempt to use may be -- may preclude us to enter those markets through acquisition. And so if we're precluded from entering through acquisitions, we may need to enter through putting bleach facilities up. So you know, that seems -- that is in our fairway, and that could be a direction, and will be a direction we'll be moving in either to look at acquisitions or just organic growth by, you know, putting the facilities in.

You'd finance them with cash or would you finance them with stock?

Well, it's a function of the buyer, and each transaction we would have to look at. We would like to use some stock would be our preference.

And what about on the debt to EBITA number? Your sort of thinking about getting that to 100 or getting below 100?

Well, you know, at this time, given that we've been sitting here with 200 million, our goal is to generate the cash to pay it down, and so at this point we have not focused on the desired target and picked a specific number, because we just lose in this period of generating the cash. You know, a number that we would be very, very comfortable with would be 100 million.

Right, right.

That would be a number we would the very, very comfortable with, 100 million of debt.

I'm guessing that if you're doing let's say 120, 130 million of EBITDA this year, and during bad times maybe your EBITDA is, I don't know, pick a number, 30, $14 million, maybe and normalized level of EBITDA is somewhere like 50, 60, 70 million, maybe it's 65 million or something like that. And maybe that's valued in the market, I'm guessing -- let's suppose that could be valued at 7 times a normalized level, yet you do about 400 million of enterprise value. And if you get the debt down towards 100 instead of 200, you're looking at $300 million of equity value on roughly 11 million shares. That's sort of where we're going in that direction, and the thing is, if you can use your cash flow to expand the earnings power in the enterprise, maybe that gets you a little more grip in terms of getting a better evaluation over time for the public trading value of the equity. Is that sort of the way to look at this thing?

One of the things I always like about you, Charlie, is most people try to get us to forecast. And what you do is --

(inaudible)

Yes, what you do is you state a really nice business plan, and by getting us to -- to say anything we either confirm or not. You know, you're way too experienced for a guy like me. Let me take some pieces. Really, you always do this, and you're impressive on the way you back door your question. You know, we're very focused. The market's tight --

Right. Everybody knows the market's tight.

The market's tight. We're very focused on the generation of cash and taking the debt level down. You know, the fairway that is open to us is to expand into the bleach, and use those facilities as terminals for caustic, which fits very well in our fairway. You know, with that increased cash flow, and again, we don't forecast, but you know, you do, and you know the space really well. You know, to take the debt down with the cash flow that provides this opportunity to move into these other markets with stock or with some cash, and the bleach, as you know, as we've talked before, doesn't have the volatility as a chlorine molecule, because those are annual bids and so there's less volatility on those. So again, it adds to stabilize the earnings and the cash flow. So you know, I think all I can tell you is you painted an interesting business model. You made some assumptions, and I always appreciate your insights.

Is the -- just one final question. You obviously did the million share offering to try to get that, you know, that first 40, $50 million bolted down, you know, without -- you know, by basically taking advantage of the beginning of the cycle. Would there be an appetite to do some more equity, just to get the balance sheet more tidied up now or you don't need to? Because it looks like you have plenty of cash flow that's more certain going forward.

I can answer that's one more clearly. As we sit here today, and this is always subject to change, is you always have to look at your hand. You know, where things are. As we sit here today, we think the cash flow is going to be robust and strong, and our objective is use the cash flow to pay the debt down, and if we go with any kind of stock issue or anything, right now, it would be event driven. It would be an acquisition or something like that.

Okay, good. Okay, thanks Mike.

Thanks.

Our next question comes from the line of John Leland (ph), from Table Rock (ph). Please go ahead.

Hi Mike and Gary. A couple of questions here. You had mentioned that there is about 422,000 tons of legacy contracts or tons of product subject to legacy pricing contracts, that don't allow for quick price adjustments. Can you give a sense of sort of how much of that applies to caustic, how much applies to chlorine, and also sort of where those contracts are positioned? Are they at Bec? Are they at Henderson? Or are they Louisiana or what?

You know, John, that's a really good question. I don't have, as we sit here, the spread between the caustic and the chlorine. What I can tell you is of the contracts we have on the West Coast, a lot of those feed into the municipals, and those are annual and multiple year bids, so there's more weighting in the West Coast to fixed-price on contracts with caps, just on the nature of who those customers are.

John, this is Gary. One other thing that we may add -- I may add, also, what's Mike's alluding -- or what Mike's talking about on the Munis also, if you notice the disclosure, it talks about the chlorine and caustic molecule are a downstream derivative. A lot of those water treatments, those are multi-year contracts, and they are with Munis, and it could either -- it could also be bleach, something that we're using in the downstream.

Okay. I mean I guess what I'm really asking is -- you know, is a significant portion of this, let's say you know chlorine dedicated that St. Gabriel or is it caustic dedicated in Canada, or you know -- or is it just spread all over the place, that you can't really say?

It's spread all over. The Henderson has the greatest weighting for the -- for its production because of the market it serves, but the rest of it's spread all around.

Okay. Next, with Henderson, can you just give a sense of where the land sale process is? Is it still in the marketing phase or are you negotiating with purchasers, or are you sitting on a letter of intent, or is there an announcement coming shortly for sort or, sort of, where is it?

We're in discussion. We're out marketing, but there are various people talking to us.

Okay. And then lastly --

I'm sorry, that's a very -- again, it's dirt sitting in front of the plant, and you know, you've dealt with dirt before. When you deal with that, you know, you never feel certainty until they sign it and you get the money. And so we're just in discussions with numerous players.

Okay, got it. And then lastly, can you speak to the issue of railcar availability? A few months back, the company indicated that there was some meaningful constraints about getting the railcars back to turnaround before new product shipments. Is that still a constraints? Or was that really just a short-term item that has gone away at this point?

John, I need to ask you a question, to be sure I understand. Are you talking about availability of additional railcars? Or a you talking about the transit time for the railcars?

Isn't one really sort of the other side -- you know, are the two more or less one and the same?

Well first, as far as getting new -- leasing new railcars, that's a real tight market, okay? That's a very tight market, particularly on the chlorine cars, but we think we have an ample number of cars. We think our fleet is the right size, and we look at that on a monthly basis, so as far as our fleet size, you know, we're always rotating in and out in each one of the products. But right now, I would tell you that we're comfortable with the fleet size we have.

As far as the turn, you know, we usually have a seasonal issue coming out of Becancour. Becancour with cold weather, you know, it causes delays. Obviously, that's behind us and that's with the CN, and that's just the weather problem. We move to the West the UP is having some real problems, because its demand is exceeding its capacity, and so our turn times on the West Coast I would tell you probably exceed 20 to 20% of the time that we would think -- or probably UP would think would be a normal turn time, but you know, the UP, one of the real markets they serve is L.A., and that port is just -- you know, it's exploded with the product it's running through, and they're having trouble managing that. And so I tell you on the West Coast, there continue to be some delays on rail time.

Okay. Mike and Gary, thank you very much.

Thank you, our next question comes from the line of Jeff Gates, from Gates Capital Management. Please go ahead.

Hi, I have a couple questions. First of all, in talking about the industry consolidation, can you -- that's what you think your view is on whether or not Pioneer has sort of the scale to the long-term competitive in the business, without getting bigger or does it need to be part of something bigger?

We think we are positioned where we will be a long-term player, and we are very focused on who our customers are, and we are very focused on customers that have service needs, so we can provide the extra service to them. So we do think we're of the size to sustain for the long run.

Okay, a second question is as you have your contracts, that sort of roll-off, that restrict the pricing realization over the next three years, is the nature of new contracts being signed today are in the near-term, I mean our those dashes the market strong enough or is Dow and Oxy getting, you know, upgraded contracts that may be protect the producers more on the downside of the cycle?

Well, you asked a couple questions. First, with the Dow and Oxy, I don't know what they're doing so I cannot comment on them. One of the key things that we are trying to do, which I can speak to, is in our contracts, you know, because of the market conditions, we were forced to sign contracts that had caps with meter releases, and so they were favorable for the buyer, and punitive to us. The market, it has strength behind it, and the contracts we entered into are much more favorable for us then they were in the past, but even when I tell you that, there are some large purchasers that have the -- that have purchasing power that we will never get to the -- you know, to the top of the cycle with them.

Right, but would it be fair to say that the next downturn should be less, you know, and given the same -- you know, I mean in theory only shouldn't the next downturn be a little less severe because if you can get some of these contracts upgraded?

Yes. One of the key things with that is when will these contracts stagger off, and the length that we'll be able to get, and the third part is when the bottom will -- when the trough comes again. So it's trying to align those things up, where you get through the next cycle. As the buyer, if he thinks it's -- you know, if he thinks this is a two or three year run, you know, he's going to try to do two or three years. If he thinks it's a one year he's going to try to do shorter. So conceptually yes, the contracts we enter into today's should be much more favorable for us on the bottom. And again, if you come back, Jeff, one of the things I talked about is that adding bleach capacity and market should be favorable to us, because those markets have less volatility, and that's where we can run chlorine and some of the caustic molecules through.

And one last question. On the 60 acres of surplus land at Henderson, how many of those acres to you have an environmental protection no action letter from -- I guess it would be from Nevada? And that's the first question. The second question is what's the listing price with the real estate broker for the land that's currently being marketed?

Jeff, this is Gary. First of all, we don't have a listing price, so --

How can I make you a bid if you don't have a listing price?

Because we knew, Jeff, that you would ask that question, and until we sold it we didn't want to create an expectation. And the second is -- go-ahead Gary.

How many acres is actually marketable? And do you have a no-action letter?

All of it.

All of it is marketable, and we have a no action on all of it.

Okay. Thank you very much.

Pardon me gentlemen, there are no further questions at this time. I'll turn the call back over to you.

Thank you. Listen, we want to thank everyone for their participation and they're questions. And we look forward to talking to each of you next quarter, and thanks again for calling in. This concludes the conference call.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines and have a great day.