Rayonier Advanced Materials Inc (RYAM) 2014 Q3 法說會逐字稿

Welcome and thank you for joining Rayonier Advanced Materials third quarter 2014 teleconference call.

(Operator Instructions)

Today's conference is being recorded. If you have an objection, please disconnect at this time. I would now like to turn the call over to Beth Johnson, Vice President of Investor Relations and Planning. Thank you. You may begin.

Thank you and good morning. This is Beth Johnson, Vice President of Investor Relations and Planning. Welcome to Rayonier Advanced Materials' investor teleconference covering third-quarter earnings. Our earnings statements and presentation materials were released this morning and are available on our website at rayonieram.com.

I would like to remind you that any presentations we include forward-looking statements made pursuant to the Safe Harbor provision of Federal Securities laws. Our earnings release, as well as our Form 10 registration statement filed with the SEC, lists some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on page 2 of our presentation materials.

Now let me turn it over to Paul Boynton, Chairman, President and CEO. Paul?

Thanks, Beth. Good morning, everyone. Here with me today are several members of our Management team, including Benson Woo, our CFO; Frank Ruperto, our Senior Vice President of Corporate Development and Strategic Planning; John Carr, Corporate Controller; and Tom Benner, our new Senior Vice President of Commercial.

Tom leads our sales and marketing strategic sourcing and R&D groups. He joined us after 24 years with Solvay, where for the past four years he has served as President of their Silica business and we are pleased to have Tom on the team. This is our first full quarter as a stand-alone Company and we're very pleased to share with you our solid third-quarter results. Our facilities performed well. Sales volumes were in line with expectations and we generated a pro forma EBITDA margin of approximately 27%, which is right on track to achieve our full-year guidance.

Now let me turn it over to Benson to walk through more specifics regarding our quarter results, after which I will discuss our outlook as well as our financial and strategic initiatives. Benson?

Thanks, Paul. Let me start by reminding you that all periods prior to the third-quarter are reflective of carve-out accounting treatment. As such, the overall results may not be indicative of the stand-alone Company. However, sales and production costs are comparable between periods.

With this backdrop, let's look at page 3 to review our financial highlights. This morning we reported third-quarter pro forma earnings of $22 million or $0.53 per share. The pro forma adjustments remove one-time separation and legal costs as well as environmental charges from the results.

For the third quarter, sales totaled $254 million, 19% above the second quarter and 12% above the third quarter last year. Pro forma operating income was $46 million for the quarter, 7% higher than the prior quarter and 22% below third quarter 2013. Our variance analyses for pro forma operating income are provided on page 4 of the financial presentation materials.

As you can see, for the sequential quarter, the $3 million improvement in pro forma operating income from $43 million to $46 million was primarily driven by higher sales volumes with an impact of $7 million, due to the timing of customer orders. These volume gains were partly offset by the $5 million impact of lower prices reflecting cellulose specialties mix and helped by a slight improvement in cost. Costs were below prior quarter as lower production expenses, including moderating wood and energy, but were mostly offset from the sale of higher cost inventory.

In comparison to the prior-year periods, pro forma operating income declined $13 million from $59 million to $46 million for the comparable quarter and $86 million from $221 million to $135 million, for the year-to-date nine-month period primarily reflecting lower 2014 sales prices and the timing of customer orders. These impacts are consistent with what we indicated previously, that we expect full-year 2014 cellulose specialty sales volumes to be in line with 2013 volumes and that average pricing will be 7% to 8% below last year. The quarter and year-to-date results also reflect higher wood and energy costs compared to the prior-year period, primarily due to weather and equipment issues in the first half of the year.

As expected, while wood and energy costs have moderated in the third quarter, they remained above last year. Year-to-date results also reflect higher depreciation expense in the first six months of 2014 compared to 2013.

Moving to page 5, we generated $68 million of adjusted free cash flow for the first nine months of the year and ended the third quarter with $252 million of liquidity. As we indicated before, our priority is to reduce debt and strategically grow the business.

Turning now to page 6, the based on year-to-date results and looking into Q4, we reaffirm our previously communicated full-year guidance for the year. [CF fines] will be comparable to last year, $265 million of pro forma EBITDA. Fourth-quarter pricing is anticipated to improve from third-quarter levels due to sales mix and as typical, fourth-quarter cellulose specialty volumes are expected to be above third-quarter volumes.

At this point, let me mention a new initiative. We recognize that we are being challenged by current market dynamics. As a new stand-alone Company, we are reevaluating our cost position to ensure that we are operating as efficiently as possible and are identifying opportunities throughout the Company that will allow us to reduce our cost to preserve and enhance profitability. We will provide more information on this cost initiative in January as part of 2015 guidance. I will now turn the call back over to Paul.

Thanks, Benson. With nearly 0.5 million tons of current production, we are proud to be the global leader in cellulose specialties. We maintain our position because of the quality and consistency of our products, surety of supply, superior technical support, low manufacturing costs and financial strength.

However, being the leader does not insulate us from the realities of the current challenges in the market and, most significantly, oversupply. As we have previously discussed and highlighted on page 7, this situation is being driven by several factors. First, is the expansion of capacity by current participants including our own expansion. Second, week pricing in the commodity viscose market. As viscose prices drop, existing cellulose specialty players who also produce commodity viscose are enticed to shift some of their commodity production into more specialties. Third, the slower demand growth in certain end markets including cigarettes.

Now in response to these market dynamics we are focusing on the following action items as referred to on page 8. First is preserving and enhancing our profitability. We will do this with a relentless focus on running our facilities efficiently and reliably. Reliable operations are low-cost operations. We will also implement broad cost reduction initiatives. We are evaluating our corporate structure and expenses, operational and staffing costs, reliability enhancements to mitigate waste, and capital investment for return projects.

As a small example of the latter, you may have recently read that we entered into a cogeneration power and steam agreement with Chesapeake Utilities Corporation. They will build a confined heat and power plant on our site in Fernandina Beach, Florida. Upon estimated completion of this project in 2016, we expect to realize up to $2 million in annual energy cost savings.

Additionally, in the near per term we will redirect a significant portion of our cellulose specialties expansion capacity to the commodity markets by entering into multiyear contracts for these commodities. This will limit our cellulose specialties capacity for a period of time and provide us with a price premium on our commodity sales.

Second, we will focus on protecting and growing our existing cellulose specialties business by partnering with our customers on innovations to improve the efficiency of their operations and the quality of their products, thereby further enhancing our value proposition to them. As one example, we're working with a key customer on a project aimed at significantly increasing their manufacturing productivity with an ultra-high purity product we're developing for them.

We are also working to actively extend contracts with existing customers as those opportunities present themselves. For example, as we recently reported in an 8-K filing, we have extended a contract with a significant long-term customer. We are pleased to add another year onto an already multiyear contract.

We are also identifying opportunities to place additional cellulose specialty volumes into market segments we believe we're underrepresented. Currently, we have more than a dozen ongoing qualification trials in either ethers or cellulose specialty applications.

Third and finally, we plan to grow the Company by identifying specific opportunities that align with our core competencies. These opportunities include partnerships that leverage our manufacturing operations, co-product streams and R&D capabilities. Further, we are working with our Board and outside resources to evaluate specific areas for acquisition growth in attractive markets that provide a pathway to leadership. We expect this analysis to be completed in the first quarter of 2015.

To sum it up, we understand the realities of the current market and we have dealt with similar dynamics before. We have always responded to such challenges and emerged as a stronger, more profitable entity, and we're actively putting ourselves on that path now. Let me turn it back to Beth to conclude the call.

With that, I'd like to close the formal part of the presentation, but before I turn the call back over to the operator for questions, I want to remind you that we do not comment on the specific terms of contracts with any of our customers. As you likely know, certain changes to material contracts require disclosure per SEC regulations. But in order to maintain the confidentiality that our customers desire, as well as to safeguard competitively sensitive information, we will not provide any additional contract details. Thank you for your understanding. Now let me turn it over to the operator.

(Operator Instructions)

Mike Roxland, Bank of America.

Thanks very much; thanks for taking the questions. Realizing the sensitivity that you have around talking about contracts -- and if you can answer it, great; if you can't, I totally understand. Can you give a sense as to which -- with respect to that contract that got renewed, as to why it was renewed only for one year as opposed to, let's say, three years, which I believe the last contract was renewed for?

Mike, thanks for your question. This is pretty typical. We often renew -- extend contracts for a year at a time, couple years at a time. We've had contracts in the past that were three years that turned into five year-, six year-, seven-year contracts. This is nothing out of the ordinary. It just happens to be the circumstances of this particular contract.

Thanks, Paul, for the color. Can you just comment -- last thing on this contract and I will leave it there. Can you give us a sense of how much tonnage was renewed? Did that customer renew for the exact same exact amount of tonnage, or was there any volume lost or gained, for that matter?

Mike, again, that's one of the sensitive areas we won't share with you at this point in time. We will share all that when we get to -- in total, when we get to our January call.

Got you. Appreciate it, Paul.

Moving on, what's preventing the Company from just indefinitely idling aligned to get the high-end -- the high-alpha pulp market back into balance? Said differently, why is the Company so determined to run every line at full capacity? From my vantage point, I think you would be to the Company's advantage to try to take a line down to get the market -- to get better supply balance in the markets for pricing purposes?

We look at our financial returns on everything we do all the time, Mike. Certainly, our analysis says we are better off running as we are running today. We can take that expansion and redirect that, as we're doing now through multiyear contracts into the commodity markets, and that's actually, again, good return for us. I think, again, good return for our shareholders. We will always look at all our options. But, right now, our best option is to keep running like we are doing today.

Got you. Quickly, two last questions. How do you intend to protect and expand cellulose specialty sales? As you called out in the press release, and also you highlighted in the slide deck, is that -- are you that concerned about sales? Is it more about pricing? What can you do to really generate sales when you're dealing with this type of dynamic where it's extremely competitive, where competitors are at your heels and where pricing is probably the only lever you have to try to maintain volumes?

That's the point we're trying to underscore. It's not a pricing dynamic that we're pushing on here, it's really the value that we offer our customers.

That's really the key part of our initiative here, is to continue to make sure that we're offering a product that does have a differentiated benefit to our customers in the marketplace. And then we highlighted one specific example where we're actually working very closely with the customer to increase their productivity quite significantly through a very unique product that we are developing for them. Again, that's how we're trying to drive that.

But the message is that we're the leader in the market. We are going to continue to differentiate our products. Obviously, we're going to make sure that we stay in this business for the long term, which we clearly will.

Got you. Last question and I will turn it over. One of your customers last week again noted that acetate two on demand is peaking in China. Paul, you actually mentioned that cigarette demand has actually slowed as well, which I think is a little bit of a difference versus the last call.

This customer noted that the slowdown -- yes, it's due in part, partially to a slowing Chinese economy, but it also stated that expects a lower level of acetate tow [to mint] to persist for some time in the future, which to me signals that this could be a secular issue as well. Can you just talk about your expectations for acetate demand and whether they have changed from the 1% to 2% growth you've been expecting? And if there has been a fundamental shift in Chinese demand for cigarettes, why should we expect to see acetate growth revert back to 1% to 2%?

This question started emerging in our last call and we made some comments on it then. We said, Look, we're going to have to do a little more digging and we've done that. The team has been out there; we've talked to all our customers. We've talked to all the tobacco companies, for the most part, to some degree. I wouldn't say all tobacco companies, but many of the tobacco companies just to try to get a better feel for this as well. And I don't think our viewpoint is too different than what you're hearing in the marketplace.

I think if you just took a look at cigarette consumptions -- and we believe from our discussions with most of these tobacco companies, there's been a decline year to date. We're pretty consistent on that viewpoint. With that, China consumption flat, some key markets in Southeast Asia like Vietnam and Indonesia are actually up. Most Western nations, as well as Russia, are down. We can't say whether this is an ongoing trend or not.

We do believe from our discussions with the Chinese, which represents about 40% of stick consumption out there, that they will return to slight growth in 2015 as they readjust their mix to better serve the middle markets, the average consumer. Their combined plan's also to phase out polypropylene, there's still a little bit left of polypropylene in their market, along with their efforts to make filters longer on certain brands. We think that this could put acetate demand, acetate tow demand in China in the coming periods about 1% to 2%. Therefore, we believe that global acetate demand could be in that 0% to 1% in the coming periods.

Therefore, that is different than our 1% to 2% before. We think it could be flat to slightly up. What we are not accounting for in these estimates is the inventory buildup that we have seen in China and I've heard commented on by others. We think that will take most of 2015 to work through that inventory buildup. I can't say at this point how that affects any of our customers or us at this point in time. A lengthy answer, Mike. But, hopefully, I covered it.

You did, Paul. Thanks very much and good luck for the balance of the year and into 2015 as well.

Chip Dillon, Vertical Research Partners.

Good morning, Paul. First question is, you mentioned some of the mitigating steps and I maybe missed some of the details. You mentioned a contract with someone, I guess it's supply, I'm not sure if it was fluff or viscose. Could you elaborate on that a little bit? Since it's a bridge to get you through this time before the markets are big enough for you to sell more of the high-alpha pulps, but can you talk a little bit about that? You mentioned that there was a contract or something you had signed.

Chip, we've always said that we're not going to push our product into the marketplace. We are going to feather it in as the market is ready for that. As such, as we look at the market the way it is today, we said we're going to shift some of our commodity -- some of our product into these commodities areas. With that, we are going to enter into some multiyear contracts to do so.

We also noted that there will be a substantial here amount in the near term. We'll come out with more specifics on that in January. We just want to make sure everybody understands the direction we're going is that we're actually going to tie that line up into contracts here for the near term. That helps our profitability, certainly, against the spot market. In effect, it limits our capacity, as well.

Okay. That's helpful. I know in the past years, you guys have tended to give us guidance on the forward look on cellular specialties prices. I think it's mostly hedged, been -- in the fourth quarter call in late January, early February. Last year you gave us a look in December.

I didn't know, based on how you sensed the negotiations are going this year, when you think you will be in a position to give us an estimate? Maybe even, at this time -- not by contract, of course, but just on an overall average basis, where you see the cellulose specialty prices ending up on average for next year versus this year?

Chip, we almost always give that guidance in our fourth-quarter call in January. Last year was the only exception, we moved that up to December. Otherwise we did that in the January timeframe. Our discussions are good, they're healthy, they're ongoing. I really have no more flavor to add to it at this point.

I understand. You are suggesting you'll probably go back to the old practice and let us know on the fourth-quarter call?

Yes. We'll hear in the fourth quarter, in the January call.

Okay. Lastly, I know last year's guidance was down 7% to 8% and it looks like from the slides that you were down a little over double digits in this third quarter. I know you mentioned the mix issue.

So do you think it'll come back with the mix in the fourth quarter so that you end up in that same range? Or has there been any real surprise there versus what you all were expecting last December for the full year 2014 as a whole?

Yes, for our full year, our guidance was still good at that 7% to 8%. As Benson mentioned, that was just purely a mix in sales and, again, not uncommon. We'll see that net out of that 7% to 8% down for the year.

Okay. One last one. You mentioned that you are going through a review of possibly looking at ways to enhance the Company through acquisitions. I was just curious.

Just given the beginning state of advanced materials with the debt load, and maybe being sensitive to your stock price if equity were to be part of the equation, should all that suggest that what you are looking at would be something that would be an incremental tuck-in type acquisition? Maybe the division of someone, as opposed to a big company? Or should we think in other terms, just given the obvious limitations because of the balance sheet right now?

This is Frank Ruperto. I would tell you that we're in the middle stages of this review and we'll be through with that in the first quarter. As you know, Chip, acquisitions are very opportunistic. So we will have to assess the value that any acquisition would bring to us relative to the size of it.

So, I think from a leverage perspective, obviously, we're focused on adding some good value businesses where we can then go deep in those sectors. But if there was something that came to the fore that was bigger and we had a way that created shareholder value to do that, I think we'd have to think about it and discuss it with our Board.

Got you. Thank you.

Steve Chercover, D.A. Davidson.

Mike, first question is with respect to master limited partnerships. It seems to be all in vogue for anyone who operates a craft pulp mill, and I don't see why you wouldn't be eligible as well. Have you done any preliminary investigation?

We haven't. Frank, if you want to go ahead and --

Sure. We've spent a lot of time with outside resources discussing the MLP situation and opportunities there and it's applicability to us in the near term. Obviously, the Perry Capital letter created a lot of focus on craft paper mills, et cetera.

I think, in general, right now, as we've discussed this with outside experts, as well as discussed this internally, it's probably not the most optimal structure for us in the near-term. That being said, we continue to look at it and will continue to look at it over time because circumstances change. And if we decide that is the way that creates value best for the shareholder base, then we will look very, very hard at it. We have not ignored it. We've spent a lot of time on it. We've discussed it at all levels.

And I think at this point, given our size, given the recent structural change we've just gone through, the spinoff, and given the focus we have on operational excellence and continuing the focus on our business and profitability, it's probably not something that we would do in the near term.

Thanks for that, Frank. And switching gears, earlier this year you thought you were in a position to add approximately 30,000 tons of specialty volume. Obviously, you weren't going to push that into the market. Do you still believe the market's growing at 50,000-odd tons a year and conceivably we could see some volume growth into 2015?

Specifically on 2015 growth, again, we will talk about that in January. Yes, we still believe the market is growing in that range. We said about 45,000 to 50,000 tons. Again, subtracting off, if we say that the acetate side is maybe 0% to 1% versus 1% to 2%, it's maybe slightly below that now, Steve. That's probably the update on our guidance. We certainly see that in ethers and we see it in the other specialty cellulose areas. Decent growth in particularly some key pockets there. We see that opportunity for growth. Again, that's why we're out there working so hard with some of these different trials right now to see if we can't capture some of that growth.

When you talk about your partnership, for instance, with that one company where you are trying to really make their process more efficient, would they need less of your product in the long run if you do that?

No, I don't think so. I think that really helps -- it helps this particular customer. It limits their need for capital investment and expansion in their facility and that's really their interest. They're growing and this gives them a way to grow without adding significant capital.

Okay. Thanks. Final question. On the commodity side, the increase in Q3 realizations. Is that a function of rising prices or better mix or just diminished spot activity?

I'm sorry. On the commodity side, just to make sure -- on volume are you speaking to, Steve?

No, I was looking at the selling prices going from [651 to 699]. I'm reading this graph.

Oh, yes, I think it's a combination of mix and some price improvement out there.

Because, you had to -- I don't want to say bash your way back into the market, but after the Chinese duties, clearly you changed your strategy, so I was just wondering if the relationships are normalizing and it's not just selling spot tonnage.

Yes, again, it's a bit of mix and you see it there. It's absorbed materials and commodity both rising up across the board. We didn't have to bash anybody to get back in the market. But I think things have settled and we saw some good pricing. It's probably just reestablishing where we want to be in the market and who we want to partner with.

Great. Okay. Thank you very much.

Paul Quinn of RBC Capital.

Thanks very much. Good morning, Paul and others. You mentioned the multiyear contracts for commodity DP. Just wondering whether that is also going to apply in the fluff side? And what the difference in margin would be between those two products for you? Good morning, Paul. We said it's for the commodity products in general. Yes, we are including both viscose and absorbent materials in that bucket. Right now, the return on growth of those, it's pretty similar. So it's really a matter of what we think is best to serve us in terms of return, operational efficiencies and everything else. It's probably going to be a combination that may will way a little bit or heavily on the fluff side. It will be definitely both into that mix. Looking at your slide 11 there, where you've got, it looks like, fluff volumes are double that of commodity viscose, is that suggesting that's just a stronger market or is there any margin difference at all right now?

It's a stronger market. There may be some slight margin benefit to be in that market right now, so we focused in on that. Obviously, we've got some very good products that serve that market with some good customer relationships as well. The MOFCOM China duty background also probably helps us focus a little bit outside of that particular market so, again, fluff looks a little more attractive.

Good to see your cost decrease in Q3 here. If you could give us an update as to what you expect in the major cost buckets of fiber, chemicals and electricity going forward. I know Benson's working to come up with an outline as to what the eventual cost bucket could be if you focus on reducing cost now that your volumes are capped on the specialty side, but how material is that cost bucket?

Again, we'll give you details of that cost bucket, as Benson mentioned in our January call. I'm not in the position to provide guidance going forward on the different costs, either.

But as Benson talked about and certainly spoke to, that certainly saw some easing in our wood costs in the third quarter, relative to Q1 and Q2, quite substantially. They're still elevated, Paul, above 2013 but they've come down quite a bit like we thought they would. Obviously we look to see them ease a little bit here in the fourth quarter. But as far as 2015, we'll give you that direction on our best estimates in January.

Okay. Last question I had. You mentioned that dozens of qualification trials in the ethers and other specialty products. How bigger priority is that? Where do you expect to be five years down the road in terms of mix?

We mentioned over a dozen different trials going on right now in those areas. If you look at our market penetration in ethers, for example, which is a good growth area, 4% to 6%, we're probably 7%, 8% of that market. So we're almost insignificant there, and we think there's some great opportunities for us. It's a key priority for our sales and marketing as well as our R&D teams to see if we can't grow that business.

Additionally we are looking into those other cellulose specialty markets that we talked about. Tire cord, filtration and others. We've got some good trials going on there as well. I would think, in five years, you'll see those percentages go up significantly to where we are today.

Great. That's all I had. Best of luck.

Roger Spitz, Banc of America.

Thank you, good morning. In terms of CS filter tow business, do you have a view on whether you're maintaining share or losing share or gaining share? I note that Sateri has been expanding their CS volumes.

Yes. I think we've noted that for the year. We haven't broken it down by share or updated that in any specific way. But for the year, we said our sales, CS sales, will be comparable to the prior year. We are pretty steady-state at this point in time. And if we go out there and adjust anything, we'll adjust it in the coming periods. Overall, I'd say the view should be pretty steady-state on our business.

Okay. I guess it was during the call that it appears to be announced that Sateri just announced that it, apparently, agreed to sell its [ESS] business in China for $620 million, presumably leaving it just with its Brazilian DWP business.

Not to catch you off the cuff, but do you think that that might change the competitive dynamics in either the viscose and/or specialty merchant markets?

Yes, Roger, I don't have a good feel for what that would do. I think those questions are really probably best guided to them and what they are trying to do with that. I'm not too sure.

Understood. Thank you very much.

Daniel Rohr, MorningStar.

Paul, at an Investor Day a few years back, your predecessor remarked that tasters at cigarette companies can distinguish a flavor difference between the acetate tow of one producer and that of another. Would you affirm that statement?

Yes, Daniel, that's what we have been told. I've been in those facilities. I assume it's true. I've heard the same thing.

I'm not a smoker, so I couldn't tell you whether -- it seems to be difficult, but they seem to be pretty well confirmed that they can detect a difference, yes.

If an acetate tow customer wishes to switch to another supplier, does it require approval, either implicitly or explicitly, from the cigarette manufacturer that it's ultimately selling to?

Yes, that's a good question for our customers. I do believe they'll tell you, yes, they typically take it all the way to the end-user. Again, I think the question is probably better for others, but that's our understanding.

Got you; one more. As you assess prospective acquisitions, what sort of hurdle rate do you have in mind with respect to return on invested capital?

We are looking at hurdle rates that are obviously in excess of our cost of capital as we move forward here. I think it's got to be something that is compelling well into the double- digit numbers clear in our cost of capital and providing some incremental return over and above that.

Okay. But to the extent you believe your stock is undervalued -- I don't want to put words in your mouth -- wouldn't the hurdle rate be considerably higher than your cost of capital, since buying back stock would be an alternative?

We look at buying back stock and other alternatives holistically. So, at this point, we've determined that maintaining our strategic flexibility is better than buying back stock in the Company, because we've got to look to grow the Company for long-term shareholder value purposes. It's something that we have to consider, obviously, as we look at all aspects of an acquisition.

Got you. Thanks.

(Operator Instructions)

Bill Hoffman, RBC Capital Markets.

Yes, thanks. I just wonder if you could talk a little bit more about the split that you've got between the fluff and the viscose markets. You talked about entering into some viscose contracts. What about on the fluff side? Do you have any volume targets that you want to put out there in the market really just to give the market some sense of how much your production capacity will grow into those segments?

Daniel, we said that we are going to go pursue contracts on both fluff and the viscose side. We'll do that as we see which we think are better returns for us. In terms of guidance on how much that is, we haven't given that, other than the fact that we said it will be substantial against that new expansion we have. We'll come back and firm that up after we put these contracts into place and we'll talk about that in January.

Thanks. Just with regards to the viscose specific contracts. Could you give us, regionally, where those customers are?

We haven't given any kind of guidance or understanding where those contracts are, so we probably won't expand upon that.

Okay. Thank you. One last question with regards to the move into some of these other end markets, ethers, tore cores, filtration, obviously there's a lot of trialing time, et cetera. Any thoughts on being able to move into commercial production levels in those other segments?

Yes. We have actually picked up some business, even in this year, maybe a small amount, so they can happen any time. These trials didn't start yesterday. Some of these programs we've been working on for more than a couple years now.

That's kind of how this business works. Certainly, we've stepped that up here in the past 12 months. So there's a lot of ongoing efforts and it's hard to say when they all or any will kick in. But certainly, we are positioning ourselves to move forward as soon as possible.

What's the general range in timelines for getting certified to sell into those markets? Is it anywhere from one year to two years? Six months to two years? Any sense of that?

Yes, I can't say there's a general sense. On some customers out there that we've worked with in the past, they can be almost fairly immediate. They can just say let's go ahead and run some trials of the product that we know we've run very successfully in the past.

Others, they may say, yes, we did the trials. It looks good. We'll wait for an opportunity when we think it's appropriate commercially for them to bring it in. Some others, we've just worked with -- and, technically, I can think of an example. It took us five years of trials to get in there. There's a whole range of different things. No, I can't say what is typical.

Okay. Thank you.

At this time, I have no further questions.

This is Beth Johnson. I'd like to thank everyone for joining us. Please contact me with any follow-up questions. Thank you.

Thank you. That does conclude the call for today. You may disconnect your phone lines at this time. [End of transcript]