John Franzreb: Good morning, guys, and congratulations on a very good quarter. I’d actually like to start with the guidance. I’m curious whether you’ve started to include JV income in the forward guidance for fiscal 2024, or are you still excluding it in that outlook?
Philip Schlom: On the guidance, we have – as we go forward, we will include that in our 2025 guidance. For the Q4, we’ve included the realized results through the three quarters, but no fourth quarter guidance.
Tom Ferguson: I’ll tell you, John, part of our issue is we’re one month in arrears, and they’re on a calendar year, so we actually have a board meeting with them coming up fairly soon, too, where we’ll get a better feel for how the first part of their calendar year is looking.
John Franzreb: Just curious. I’m curious. I assume your negotiations with the zinc supplies for 2024 are now done. Can you update us with any changes in the pricing outlook, especially with the premiums being such a variable last year? How does that look for the year ahead?
Tom Ferguson: Yes, the premiums have come down. So, yes, we’ve gone through the kickoff of the year negotiations and completed those. So we feel good. One, we feel supply is more secure, which is why we’ve been able to adjust some of the on-yard inventories. So that’s one good thing. Two is the premiums are down, I think, about $0.10. So that’s upside as that starts to flow through our kettles, and, of course, the rest is tied to LME.
John Franzreb: Got it. And regarding Precoat, where do we stand on the pricing realization curve? You had some this quarter, you had some last quarter. Is all the low-hanging fruit gone, or is there still available pricing to be realized there?
Tom Ferguson: Yes, I think, when we’re talking about value pricing, part of it is the mix we focus on and the opportunities that we pursue that tend to be both attractive in terms of long-standing customers and, two, in terms of margin generated on some of those projects. So I’d say we’re still we’re probably in the mid-innings compared to where we’re at on the Metal Coatings side. So there’s still some room. Kurt and the team, they’re highly focused on growing their business profitably, and we feel like we’re having really, really good discussions on that topic now.
John Franzreb: Right. That’s great news. And one last question. I’ll get back into queue. Regarding the Washington facility, should we anticipate startup costs as we start thinking about the revenue recognition and the timing of everything in late 2025, early 2026, or is that a booked revenue that will be immaterial?
David Nark: At this point, it will be a booked revenue that’s immaterial. We will continue to finish the plant on the schedule that we have laid out there, and then we have to get FDA testing so as we can finish the construction in calendar ’24, we’ll start testing the facility. There may be some low revenues associated with that, but it’s immaterial at this point.
John Franzreb: Great. Thanks for taking my questions, and congratulations again.
Tom Ferguson: Thanks, John.
Operator: [Operator Instructions] And our next question will come from Adam Thalhimer of Thompson Davis & Co. Please go ahead.
Adam Thalhimer: Hi, good morning, guys. Great quarter.
Tom Ferguson: Thanks, Adam.
Adam Thalhimer: Quick one on the AVAIL JV. Are we at the point where we should start baking in just a little bit of income every quarter, like maybe something in the million-dollar range?
Tom Ferguson: Yes, we’re to that point. Their accounting and all that is stabilized as they’ve completed their opening books. And I think we will include and give more color, both quantitatively and qualitatively, as we put out the fiscal 2025 guidance. It’s coincidentally, so we’ve got our Board meeting and then their Board meeting, and then hopefully we’ll be able to put some guidance out and give some specific color around what to expect from AVAIL. They basically, we completed the transaction into September in ’22. They went through a full year. I feel real good about it. They’re performing well, and so I am looking forward to be able to have you all include some of that in each quarter.
Adam Thalhimer: Okay. And then, Philip, you referenced a favorable mix in Q3, I think in both segments. I was just curious kind of what that was and if that continues into Q4.
Philip Schlom: The mix is really related to the different products that we’re servicing our customers with, and I think it will continue into the fourth quarter. When you look at our Q3 last year, we had production issues, supply chain issues, and we spent a lot of the fourth quarter into the first quarter last year improving that. I think you’ll see that in the Q4, over Q4 change, that we’ve really improved the operational efficiencies of these businesses.
Adam Thalhimer: Okay. Lastly, are you guys anticipating additional debt pay down in Q4?
Tom Ferguson: We should have some additional debt pay down in Q4.
Adam Thalhimer: Okay. All right. Great.
Philip Schlom: Although there will be a little pressure. All right. Sorry, there will be a little pressure.
Adam Thalhimer: I think it is a seasonally slower quarter for cash flow.
