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The growing utilization of plastics in industrial and consumer applications, combined with increased consumer awareness surrounding solid waste recycling, has led to an increased demand for recycled plastic resins and products. One of the fastest growing types of collected plastic materials for recycling is polyethylene terephthalate ("PET") from post-consumer beverage and water bottles. Replay Plastics will capitalize on the opportunities in the recycled resin and packaging markets through two main divisions: a Recycling Division and a Packaging Division. The Company will create a PET cleaning and refining plant located in the western United States (all 16 major North American PET recycling plants are currently located in the eastern United States or Canada). Its initial capacity will be 46 million pounds, and it will utilize post-consumer bottle feed stock presently collected in California, Oregon and Washington States, which collect over 200 million pounds per year. The Company will be vertically integrated, and use almost all of its recycled material in its Packaging Division. Any surplus materials (clean flake) produced will be sold to outside companies. The extruded sheet may then be sold to manufacturers, who will thermoform it into high-visibility packaging or use it in other high value added manufacturing operations. The strapping will be sold to companies who ship large packages or pallets, such as the lumber milling industry. The Company currently has commitments available from customers to purchase all of the product produced. MANAGEMENT Ben Braddock, President, has a 30-year history of experience encompassing all aspects of Polymer Raw Material, Plastic Conversion Methods, and Venture Development. He has founded successful ventures in the plastic converting industry, and assisted in the launch of five plastic converting manufacturing plants. Sam McGuire, Executive VP and COO, is a graduate Engineer with over 20 years experience in the post-consumer plastics recycling industry and is the inventor of the primary cleaning & refining technology used in the process for this project. He has received a patent for his technology and has been directly involved in over twenty-five major post consumer plastics recycling projects. Carl R. Smith, CFO, has over 30 years investment and merchant banking and management experience. He has assisted in raising over $500 million and served as board member and/or officer in over 40 public and private companies. FINANCIAL SUMMARY After a four month start-up period to build the recycling and packaging facilities, buy equipment, and incorporate the business, Replay Plastics will begin a quick turnaround of product. Sales will begin in May, and with over $15 Million in sales the first year, we will see a first year net profit of $2.3 Million. The owners are investing $500,000 each, for a total of $1.5 Million, and are securing an $800K long-term loan. The Company is also seeking an investment of $2,700,000 in order to begin operations. These funds will be used for the purchase of one recycling line and one manufacturing line, for the set up of the plant facilities and for working capital. An outside investor providing this amount would receive 48% equity in Replay, and receive an IRR of 69% from simple dividends alone over the next 5 years. At the end of that period, we will consider a public offering of stock or a buy-out by a related business. Recent information on private sales of similar industry companies has indicated that transactions under $25 million have averaged
5.3 ti EB whil t ti i the range of $25-250 million have averaged over 7 times EB . Further details can be found in the Financial Plan, below.
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1.1 Objecti es
1. Sales passing $15 million in first year, $31 million in year 2, growing to $43 million. 2. Gross margin of 35% or more in first year, 45% in second year then 50% or more. 3. Net profit of 13% in year one, then exceeding 20% annually starting in year two.
1.2 Missi
Replay Plastics is a manufacturing company dedicated to converting waste plastic m aterials into commercially viable products, utili ing environmentally friendly recycling and manufacturing methods. We intend to make enough profit to generate a significant return for our investors and to finance continued growth and continued developmentin quality products. We will also maintain a fr iendly, fair, and creative work environment, which respects diversity, new ideas and hard work.
Secure Supply- Contract for supply of post-consumer bottles and post-industrial manufacturing waste for PET raw material feed stock. Marketing - Contractual arrangements for the sale of virtually all initial production.
Replay is confident that it has secured good availability of low cost post-consumer PET bottles (feed stock) derived from post-consumer beverage bottles from California based recycling collectors, and has back up sources identified.
Replay will use a proven, patented technology that was developed by one of its principals for the cleaning and recycling phase. The extrusion division will employ commercially proven technology - the industry is employing unique recycled PET technology which is used by prominent eastern U.S. manufacturers of PET extrusions.
The Industry-wide experience of the Management Team has allowed them to identify markets for the Company's products. Their expertise and reputations have allowed them to obtain commitments for virtually all of the planned initial production.
The markets that have been identified are primarily in the western U.S., which will provide a distinct advantage to the Company because of freight costs and delivery timing.
The Company has assembled a world class management team with proven ability and direct experience in the Company's market segments.
This environmentally-favorable venture provides for the development of technically feasible and economically viable solutions to PET plastic beverage bottle recycling, as well as environmentally aware in-house re-use practices which filter and return nearly all of the process water to the production lines.
The Company may not be able to sell all of its production capability
y
Through the Senior Management's industry-wide contacts, the Company has identified potential customers and received commitments for all of the production potential of the initial facility.
Company Summary
The Company will capitalize on the opportunities in the recycled resin and packaging markets through two main divisions: a Recycling Division and a Packaging Division. Recycling Division Using a patented process, the Company will create a PET cleaning and refining plant located in the western United States; we have chosen this region because all 16 major North American PET recycling plants are currently located in the eastern United States or Canada, despite western states' favorable recycling attitudes among consumers. Its initial annual capacity will be 46 million pounds and it will utilize bottle feed stock from California, Oregon and Washington States, which collect over 200,000,000 pounds per year. The Company will become totally vertically integrated, and use all or almost all of its recycled material in its Packaging Division. Any surplus material produced will be sold to outside companies. Packaging Division We will create a plant (actual facilities to be shared with the Recycling Division) to manufacture extruded plastic roll stock sheet or high-strength strapping, employing state-ofthe-art technology developed to utilize recycled PET resin. The extruded sheet will be primarily sold to thermoformers who will convert it into high visibility packaging, as well as laminators and fabricators. The strapping will be sold to commercial users for use as package or pallet strapping. The Company currently has commitments from customers to purchase all of the initial production capacity. Excess flake will be sold to outside customers.
and profit which might result in a small benefit to him. They have agreed to source all of the equipment possible with no added margin. Replay has concluded that the savings available ou tweigh any other consideration and that we will purchase the cleaning and refining equipment fromCompany A.
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St art-up Fundi ng St art-up Expenses t o Fund St art-up Asset s t o Fund Tot al Fundi ng Requi red Asset s $210,000 $4,790,000 $5,000,000
Non-cash Asset s from St art-up Cash Requi rement s from St art-up Additi onal Cash Rai sed Cash Bal ance on St arti ng Dat e Tot al Asset s Li abiliti es and Capit al Li abiliti es Current Borrowi ng Long-t erm Li abiliti es
$0 $800,000
Account s Payabl e (Out st andi ng Bill s) $0 Ot her Current Li abiliti es (i nt erest -free) $0 Tot al Li abiliti es Capit al Pl anned Invest ment Founders Invest or Additi onal Invest ment Requi rement Tot al Pl anned Invest ment Loss at St art-up (St art-up Expenses) Tot al Capit al Tot al Capit al and Li abiliti es Tot al Fundi ng $1,500,000 $2,700,000 $0 $4,200,000 ($210,000) $3,990,000 $4,790,000 $5,000,000 $800,000
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St art-up Requi rement s St art-up Expenses Legal & Accounti ng St ati onery et c. Consult ant s Lab Equi pment Local Engi neeri ng Mi sc St art up Ot her Tot al St art-up Expenses St art-up Asset s Cash Requi red St art-up Invent ory Ot her Current Asset s Long-t erm Asset s Tot al Asset s Tot al Requi rement s $645,000 $500,000 $25,000 $3,620,000 $4,790,000 $5,00 $50,000 $5,000 $25,000 $50,000 $50,000 $30,000 $0 $210,000
Products
Replay Plastics will utili e two processes in the same facility to produce:
y y y
Cleaned and recycled plastic PET flake (RPET), recovered from post-consumer beverage bottles and manufacturing waste produced by its sheet customers Extruded roll stock sheet PET. Extruded PET high-strength strapping for securing large packages or pallet loads; each using 100% RPET produced in-house
3.3 Sourcing
In excess of 200,000,000 pounds of post-consumer PET beverage bottles are collected and available as feed stock for manufacturers who can re-process this material into commercial products. The Company has excellent relations with the firms and associations that collect and distribute these materials and has been assured that its requirements will be available for the foreseeable future. The Company has entered negotiations with a California based source of post-consumer bottles and is confident that sufficient volumes are available on a contract basis from this source to satisfy its requirements. In addition, the Company intends to purchase production waste from its sheet customers and blend it into its feed stock. Currently, the majority of the post-consumer PET bottles collected in California, Oregon and Washington are exported to China. The Chinese have absorbed the amounts surplus to the use
in North America. Their interest has kept the industry in the position of being able to maintain a steady price range for this bottle stock. A significant percentage of all sales of such bottle stock are managed by Plastics Recycling Corporation of California (PRCC), an industry funded marketing agency which operates similarly to a co-operative. They accept bids from potential buyers on behalf of the firms which act as "consolidators," which accumulate stocks from the smaller, individual bottle-recycling depots. Some amount of the available stocks are regularly bought by recyclers in eastern North America who focus on the carpet manufacturers who use RPET resin in their process, but the high cost of transport from the western U.S. makes eastern sources more desirable. Replay has a good relationship with Company B, one of the larger consolidators in California. Company B has indicated a desire to contract to supply Replay with all of its raw material needs. They prefer to deal with a local consumer such as Replay, rather than the uncertainty and extra preparation requirements of the export market. There are other sources of post-consumer feed stock known to Replay, and we are confident that we will have sufficient materials available for our production needs.
3.4 Technology
Sam McGuire, a key member of our Management team, is one of the original innovators of cleaning and refining technology for post-consumer PET, and we will be utilizing his patented process in our recycling facility. Sam has worked in the establishment and operation of facilities employing similar technologies over the last several years. On the manufacturing side, Management has been an integral part of the advancement of industry practices over the last twenty years or so, and includes in their knowledge base most, if not all, of the state-of-the-art available equipment and manufacturing techniques.
Markets and uses for recycled plastics are rapidly expanding. Plastic containers are being collected at the curb for recycling in nearly 500 communities, representing more than 4 million households. U.S. demand for recycled plastic will continue to expand and new markets will develop as technologies permit the efficient segregation and reprocessing of high-purity resins. Improved quality of resins, environmental issues and higher prices for virgin resin will contribute to growth. Packaging is expected to be the largest market segment for recycled plastics, with sheet and lumber following. Surveys indicate that Americans are increasingly willing to collect and separate discarded packages, foregoing a degree of convenience to make products more disposable, and even paying a premium for a recycled item. Increasingly, communities are refusing to consider incineration until every effort is made first to recycle; public sentiment is strongly in favor of products that can be recycled or are made of recycled materials. In recent years, the household recycling rate of PET bottles has more than doubled to 30% of all PET soft drink bottles sold. In fact, PET's recycling rate is the fastest growing among all beverage containers. The future of PET recycling is even brighter than it has been in the past. PET intrinsic scrap value is second only to aluminium among container materials. The plastics industry has launched a research and development program aimed at increasing PET recycling. According to the U.S. Environmental Protection Agency (EPA), plastic soft drink bottles account for approximately 2% of the solid waste discarded in America. The EPA has set a national goal to recycle 25% of the municipal solid waste stream and the industry is committed to achieving its share of that important goal. The recycling industry intends to accelerate the rate of plastic recycling as part of its commitment to develop solutions to the solid waste problem. Industry analysts have projected that 50% of all PET containers will be recycled by the year 2007. More plastics will be recycled annually than any other recyclable material. Replay believes a significant answer to America's waste problem lies in creating high value, recycled thermoformable sheet and other extruded products for the packaging market. Although more than 200 million pounds of PET post-consumer materials are collected in the western United States each year, there is presently no local cleaning and refining facility converting the bottles into resins suitable for re-manufacturing. Originally, recycled PET (RPET) was used primarily in the carpet fiber industry, which is located along the eastern seaboard. The early development of the RPET industry was therefore focused in the eastern USA, with eastern states adopting the first bottle deposit laws that resulted in collection of post-consumer bottles that can be recycled. Recently, California, Oregon and Washington have adopted bottle deposit programs, and accumulation of recyclable materials in those states has begun. With all of the cleaning and recycling plants and the majority of consumers traditionally located in the eastern part of the country, development of consumers of recycled flake and down-line products, such as film and sheet, has been slow to develop in the West. A strong demand for post-consumer bottles from Asia has prevented the buildup of inventories and reduced the pressure for the collection industry to find or develop western markets. There is currently no independent extrusion plant of recycled polyterephthalate (PET) sheet in the western United States or Canada that services the roll stock requirements of major custom and proprietary formers. With the development of the recycling industry for PET starting in the eastern part of the country, and the preponderance of consumers of sheet there as well, development of independent extrusion facilities using RPET has been slow to
develop. It appears that in order to attract such companies, local sources of RPET would have to available. While there are customers in the West for the products, contracting a supply and shipping it from the East makes the venture unattractive. Our founders recognize that an opportunity exists and propose a vertically integrated conversion facility that will employ state-of-the-art technologies to produce extruded sheet and high strength strapping from 100% recycled PET post-consumer bottle stock, cleaned and refined in our own facility.
Consumers of HDPE in: y California: 73 y Oregon: 10 y Washington: 12 All information is based on industry research,and data provided by the Amer ican Plastics Council.
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Market Anal ysi s Year 1 Pot enti al Cust omers West ern PET Buyers West ern HDPE Buyers Growt h 1% 1% 79 95 80 95 81 95 82 95 83 95 Year 2 Year 3 Year 4 Year 5 CAGR 1.24% 0.00%
Total
0.57%
174
175
176
177
178
0.57%
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Freight is a major cost of operations; proximity to source of supply and markets is crucial. Hauling plastic materials is expensive so entrants will have to consider establishing facilities close to materials and markets. Entrants with existing operations would have to consider new separate facilities in many cases, reducing economies of scale and making management more difficult.
Advance Extrusion, Becker, MN Kama, Pittsburgh, PA Plasti-Shell Packaging, Gonzales, LA Petco, Montreal, Canada Klockner, VA
In a news release dated September 10, 2004, Itec Environmental Group, Inc. announced their intention to open a PET and High Density Polyethelene (HDPE) recycling operation in Riverbank, CA (east of San Francisco). The news release states that the Company's new and yet unproven technology lets it work with bottle streams that others have to reject as too dirty. This Company is familiar to our Management, and is not considered a significant factor in any of our markets.
competitive advantage for its clients. These processes will produce clean, cost-efficient, recycled raw material for manufacturers of thermoform, laminate and other high value-added products, and high strength packaging strapping for shippers of large products and pallets, thereby reducing costs and creating a clear pricing edge among their competitors.
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Chicago, Illinois Louisville, Kentucky Los Angeles, California Vancouver, British Columbia
As stated, Ben Braddock, himself, is a strong marketing individual. Over his 30 years of exper ience in the packaging and converting indust ry he has developed relationships with a number of clients that are buyers of packaging materials. He has consulted to many and has been personally responsible for sourcing raw materials and converted sheet for customers in this industry. Custom formers, extruders, laminators, and end user markets will be called upon by Ben and the sales agent team to promot e and generate demand from those that buy and use RPET packaging materials.
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Sal es Forecast Year 1 Unit S al es Recycl ed Fl ake PET Ext ruded Roll St ock S heet Ext ruded St rappi ng Tot al Unit S al es Unit Pri ces Recycl ed Fl ake PET Ext ruded Roll St ock S heet Ext ruded St rappi ng Sal es Recycl ed Fl ake PET Ext ruded Roll St ock S heet Ext ruded St rappi ng Tot al S al es Di rect Unit Cost s Recycl ed Fl ake PET Ext ruded Roll St ock S heet Ext ruded St rappi ng Di rect Cost of S al es Recycl ed Fl ake PET Ext ruded Roll St ock S heet Ext ruded St rappi ng Subt ot al Di rect Cost of S al es $5,441,404 $3,571,033 $0 $0 $0 $0.27 $0.27 $0.00 $9,240,120 $6,064,018 $0 $0 $0 $0.45 $0.70 $0.00 20,533,600 12,833,900 0 8,341,400 0 0 0 Year 2 Year 3 Year 4 Year 5
28,875,000 46,200,000 46,200,000 46,200,000 46,200,000 Year 1 $0.47 $0.74 $0.95 Year 2 $0.50 $0.77 $1.00 Year 3 $0.52 $0.81 $1.05 Year 4 $0.55 $0.85 $1.10 Year 5
$15,079,100 $31,553,774 $39,169,900 $41,128,395 $43,146,315 Year 1 $0.28 $0.28 $0.28 Year 2 $0.29 $0.29 $0.30 Year 3 $0.31 $0.31 $0.31 Year 4 $0.32 $0.32 $0.33 Year 5
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5.5 Milestones
Because the Company is a start-up, our milestones will surround the establishment of continuing facilities, confirmation of sourcing and sales contracts, equipment acquisition and installation, staffing and training, and initiating production.
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Mil est ones Mil est one Order Equi pment Secure Locati on Secure Orders/Cont ract s Sit e Preparati on Hi re Pl ant M anager Recei ve Equi pment Hi re & Trai n S kill ed Labor Begi n Producti on Hi re & Trai n Unskill ed Labor Inst all Equi pment Tot al s St art Dat e 1/ 2/ 2005 1/ 2/ 2005 1/ 2/ 2005 2/ 1/ 2005 2/ 28/ 2005 2/ 28/ 2005 4/ 15/ 2005 5/ 1/ 2005 4/ 30/ 2005 4/ 1/ 2005 End Dat e 1/ 31/ 2005 1/ 31/ 2005 1/ 31/ 2005 2/ 25/ 2005 3/ 15/ 2005 3/ 31/ 2005 4/ 30/ 2005 5/ 1/ 2005 5/ 15/ 2005 4/ 30/ 2005 $0 n/ a n/ a Budget n/ a n/ a n/ a n/ a n/ a n/ a n/ a Manager Seni or M gmnt Seni or M gmnt Seni or M gmnt Seni or M gmnt Seni or M gmnt Seni or M gmnt Seni or M gmnt Seni or M gmnt Seni or M gmnt Seni or M gmnt Depart ment n/ a n/ a n/ a n/ a n/ a n/ a n/ a Depart ment n/ a n/ a
Personnel Pl an Year 1 Producti on Personnel Shi ft S upervi sor Mai nt ai nence Techs Skill ed Recycl e Pl ant Labor Unskill ed Recycl e Pl ant Labor Ext ruder Operat or (full ti me) Ext ruder Operat or (part ti me) Producti on Assi st ant (full ti me) Producti on Assi st ant (part ti me) Name or Titl e or Group Subt ot al Sal es and Marketi ng Personnel commi ssi on-basi s - see P&L Name or Titl e or Group Subt ot al General and Admi ni st rati ve Personnel Presi dent Vi ce Pres COO CFO Pl ant M anager Account ant Cl erk Cl erk Cl erk Shi pper Recei ver Subt ot al Ot her Personnel Name or titl e Name or titl e Subt ot al Tot al Peopl e Tot al Payroll $0 $0 $0 51 $0 $0 $0 57 $0 $0 $0 69 $0 $0 $0 69 $0 $0 $0 69 $72,000 $67,200 $67,200 $63,000 $29,200 $20,800 $15,600 $0 $27,200 $362,200 $110,000 $100,000 $100,000 $88,200 $45,938 $32,813 $32,813 $32,813 $42,840 $585,417 $121,000 $110,000 $110,000 $92,610 $48,235 $34,454 $34,454 $34,454 $44,982 $630,189 $133,100 $121,000 $121,000 $97,241 $50,647 $36,176 $36,176 $36,176 $47,231 $678,747 $146,410 $133,100 $133,100 $102,103 $53,179 $37,985 $37,985 $37,985 $49,593 $731,440 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $129,169 $116,664 $350,000 $164,066 $87,504 $25,522 $62,504 $18,228 $0 $953,657 $210,000 $183,750 $551,250 $295,513 $206,719 $68,906 $147,656 $49,219 $0 $220,500 $192,938 $578,813 $310,078 $289,406 $96,469 $206,719 $68,906 $0 $231,525 $202,585 $607,754 $325,582 $303,876 $101,292 $217,055 $72,351 $0 $243,101 $212,714 $638,141 $341,861 $319,070 $106,357 $227,908 $75,969 $0 Year 2 Year 3 Year 4 Year 5
Financial Plan
Once the equipment arrives and is installed, production ramps up rather quickly, with sales beginning in the sixth month after funding. Positive cash flow and net profit are achieved within the first year.
y y y y y
Replay has allowed for 30 days to collect receivables due to knowledge and exper ience with customers in the industry. Inventory turnover is predict ed at 12 times, which is extremely conservative. The personnel burden includes contribution by the Company t o employee health care. We have allowed for Accounts Receivable financing of 70% at an interest rate of 12% per annum. It is assumed that additional extrusion lines will be added in the second year, with down payments of 33% at time of order and ba lance paid at time of shipment (see Cash Flow for details). These will be purchased as long-t erm assets out of the cash flows of the business. General annual growth rates of 5% have been assumed on a ll sales prices and material and labor costs.
General Assumpti ons Year 1 Pl an M ont h Current Int erest Rat e 12.00% 1 12.00% 8.00% 30.00% 0 Year 2 2 12.00% 8.00% 30.00% 0 Year 3 3 12.00% 8.00% 30.00% 0 Year 4 4 12.00% 8.00% 30.00% 0 Year 5 5
Long-t erm Int erest Rat e 8.00% Tax Rat e Ot her 30.00% 0
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Break-even Anal ysi s Mont hl y Unit s Break-even Mont hl y Revenue Break-even Assumpti ons: Average Per-Unit Revenue $0.52 715,962 $373,890
Average Per-Unit Vari abl e Cost $0.27 Esti mat ed Mont hl y Fi xed Cost $184,160
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Pro Forma Profit and Loss Year 1 Sal es Di rect Cost of S al es Producti on Payroll Packagi ng Sal es Commi ssi on Tot al Cost of S al es Gross Margi n Gross Margi n % Operati ng Expenses Sal es and Marketi ng Expenses Sal es and Marketi ng Payroll Adverti si ng/ Promoti on Travel Tot al S al es and M arketi ng Expenses Sal es and Marketi ng % General and Admi ni st rati ve Expenses General and Admi ni st rati ve Payroll Sal es and Marketi ng and Ot her Expenses Depreci ati on Payroll Burden Offi ce Equi pment Rent Offi ce S uppli es/ Expense Travel & Ent ert ai nment Leased Vehi cl es Utiliti es Insurance Mi sc Pl ant & M ai nt ai nence Suppli es Ot her Tot al General and Admi ni st rati ve Expenses General and Admi ni st rati ve % Ot her Expenses: Ot her Payroll Mi sc (conti ngency) Prof Fees ( Incl ud l egal & accounti ng) Tot al Ot her Expenses Ot her % Tot al Operati ng Expenses Profit Before Int erest and Taxes EBITDA Int erest Expense Taxes Incurred Net Profit Net Profit/ Sal es $0 $90,661 $300,000 $390,661 2.59% $2,209,918 $3,379,758 $3,621,498 $60,568 $995,757 $2,323,433 15.41% $0 $163,239 $330,000 $493,239 1.56% $3,808,097 $11,352,223 $11,758,215 $54,464 $3,389,328 $7,908,431 25.06% $0 $195,905 $363,000 $558,905 1.43% $4,577,003 $16,747,087 $17,309,995 $48,064 $5,009,707 $11,689,316 29.84% $0 $205,481 $399,300 $604,781 1.47% $4,864,402 $17,602,893 $18,165,801 $41,664 $5,268,369 $12,292,860 29.89% $0 $215,542 $439,230 $654,772 1.52% $5,165,603 $18,317,641 $18,880,549 $35,264 $5,484,713 $12,797,664 29.66% $362,200 $0 $241,740 $394,757 $6,000 $12,000 $16,000 $18,000 $678,560 $24,000 $60,000 $0 $1,813,257 12.02% $585,417 $0 $405,992 $689,529 $6,000 $15,000 $30,000 $25,000 $1,419,920 $25,000 $63,000 $0 $3,264,858 10.35% $630,189 $0 $562,908 $778,205 $8,000 $20,000 $35,000 $30,000 $1,762,646 $25,000 $66,150 $0 $3,918,098 10.00% $678,747 $0 $562,908 $822,230 $8,000 $22,500 $40,000 $30,000 $1,850,778 $25,000 $69,458 $0 $4,109,621 9.99% $731,440 $0 $562,908 $868,968 $8,000 $25,000 $45,000 $30,000 $1,941,584 $25,000 $72,930 $0 $4,310,831 9.99% $0 $6,000 $0 $6,000 0.04% $0 $50,000 $0 $50,000 0.16% $0 $100,000 $0 $100,000 0.26% $0 $150,000 $0 $150,000 0.36% $0 $200,000 $0 $200,000 0.46% $15,079,100 $7,651,875 $953,657 $150,791 $733,102 $9,489,425 $5,589,676 37.07% Year 2 $31,553,774 $12,863,010 $1,713,013 $315,538 $1,501,893 $16,393,454 $15,160,320 48.05% Year 3 $39,169,900 $13,618,605 $1,963,829 $391,699 $1,871,678 $17,845,811 $21,324,090 54.44% Year 4 $41,128,395 $14,222,535 $2,062,020 $411,284 $1,965,261 $18,661,100 $22,467,295 54.63% Year 5 $43,146,315 $15,002,962 $2,165,121 $431,463 $2,063,524 $19,663,071 $23,483,244 54.43%
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Pro Forma Cash Fl ow Year 1 Cash Recei ved Cash from Operati ons Cash S al es Cash from Recei vabl es Subt ot al Cash from Operati ons Additi onal Cash Recei ved Sal es Tax, V AT, HST/ GS T Recei ved New Current Borrowi ng New Ot her Li abiliti es (i nt erest-free) New Long-t erm Li abiliti es Sal es of Ot her Current Asset s Sal es of Long-t erm Asset s New Invest ment Recei ved Subt ot al Cash Recei ved Expendit ures Expendit ures from Operati ons Cash Spendi ng Bill Payment s Subt ot al S pent on Operati ons Additi onal Cash S pent Sal es Tax, V AT, HST/ GS T Pai d Out Pri nci pal Repayment of Current Borrowi ng Ot her Li abiliti es Pri nci pal Repayment $0 $0 $0 $0 $0 $0 $80,000 $0 $3,229,000 $3,000,000 $0 $0 $0 $80,000 $0 $0 $8,000,000 $0 $0 $0 $80,000 $0 $0 $10,000,000 $0 $0 $0 $80,000 $0 $0 $10,000,000 $1,315,857 $9,762,949 $11,078,806 $2,298,430 $20,983,849 $23,282,279 $2,594,018 $24,120,412 $26,714,430 $2,740,767 $25,478,360 $28,219,127 $2,896,561 $26,824,280 $29,720,842 $0 $0 $0 $0 $0 $0 $0 $13,094,219 Year 1 $0 $0 $0 $0 $0 $0 $0 $29,385,192 Year 2 $0 $0 $0 $0 $0 $0 $0 $38,167,380 Year 3 $0 $0 $0 $0 $0 $0 $0 $40,870,596 Year 4 $0 $0 $0 $0 $0 $0 $0 $42,880,693 Year 5 $0 $13,094,219 $13,094,219 $0 $29,385,192 $29,385,192 $0 $38,167,380 $38,167,380 $0 $40,870,596 $40,870,596 $0 $42,880,693 $42,880,693 Year 2 Year 3 Year 4 Year 5
Long-t erm Li abiliti es Pri nci pal Repayment $79,200 Purchase Ot her Current Asset s Purchase Long-t erm Asset s Di vi dends $0 $1,591,000 $0
Pro Forma Bal ance S heet Year 1 Asset s Current Asset s Cash Account s Recei vabl e Invent ory Ot her Current Asset s Tot al Current Asset s Long-t erm Asset s Long-t erm Asset s Accumul at ed Depreci ati on Tot al Long-t erm Asset s Tot al Asset s Li abiliti es and Capit al Current Li abiliti es Account s Payabl e Current Borrowi ng Ot her Current Li abiliti es Subt ot al Current Li abiliti es Long-t erm Li abiliti es Tot al Li abiliti es Pai d-i n Capit al Ret ai ned Earni ngs Earni ngs Tot al Capit al Tot al Li abiliti es and Capit al Net Wort h $1,445,246 $0 $0 $1,445,246 $720,800 $2,166,046 $4,200,000 ($210,000) $2,323,433 $6,313,433 $8,479,479 $6,313,433 $1,749,726 $2,003,345 $0 $0 $0 $0 $2,102,240 $0 $0 $2,102,240 $480,800 $2,583,040 $4,200,000 $711,180 $2,213,914 $0 $0 $2,213,914 $400,800 $2,614,714 $4,200,000 $3,004,040 $5,211,000 $241,740 $4,969,260 $8,479,479 Year 1 $8,440,000 $8,440,000 $647,732 $1,210,640 $8,440,000 $1,773,548 $6,666,452 $8,440,000 $2,336,456 $6,103,544 $990,213 $1,984,881 $510,125 $25,000 $3,510,219 $784,125 $4,157,075 $6,728,544 $5,413,782 $953,302 $25,000 $9,808,396 $5,679,403 $1,000,075 $25,000 Year 2 Year 3 Year 4 Year 5
$7,792,268 $7,229,360
$7,908,431 $11,689,316 $12,292,860 $12,797,664 $11,221,864 $14,911,180 $17,204,040 $20,001,704 $13,612,390 $17,475,325 $19,787,080 $22,616,418 $11,221,864 $14,911,180 $17,204,040 $20,001,704
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business sections into the one facility. Our ratios differ significantly from the rest of the industry because of our ability to use low-cost recycled materials to manufacture our products.
Rati o Anal ysi s Year 1 Sal es Growt h Percent of Tot al Asset s Account s Recei vabl e Invent ory Ot her Current Asset s Tot al Current Asset s Long-t erm Asset s Tot al Asset s Current Li abiliti es Long-t erm Li abiliti es Tot al Li abiliti es Net Wort h Percent of S al es Sal es Gross Margi n 100.00% 37.07% 100.00% 48.05% 22.63% 0.17% 35.98% 100.00% 54.44% 24.36% 0.27% 42.75% 100.00% 54.63% 24.16% 0.38% 42.80% 100.00% 54.43% 24.37% 0.48% 42.45% 100.00% 28.02% 15.89% 0.17% 2.46% 23.41% 6.02% 0.29% 41.40% 58.60% 100.00% 17.04% 8.50% 25.54% 74.46% 30.51% 6.30% 0.18% 42.76% 57.24% 100.00% 12.85% 4.71% 17.56% 82.44% 29.50% 5.20% 0.14% 58.63% 41.37% 100.00% 11.46% 3.21% 14.67% 85.33% 27.36% 4.82% 0.13% 66.31% 33.69% 100.00% 10.62% 2.43% 13.05% 86.95% 25.11% 4.42% 0.11% 73.01% 26.99% 100.00% 9.79% 1.77% 11.56% 88.44% 24.83% 11.53% 32.03% 68.39% 31.61% 100.00% 26.62% 25.26% 51.88% 48.12% 0.00% Year 2 109.26% 24.14% Year 3 5.00% Year 4 4.91% Year 5 Indust ry Profil e 9.27%
Selli ng, General & Admi ni st rati ve Expenses 22.36% Adverti si ng Expenses Profit Before Int erest and Taxes Mai n Rati os Current Qui ck Tot al Debt t o Tot al Asset s Pre-t ax Ret urn on Net Wort h Pre-t ax Ret urn on Asset s Additi onal Rati os Net Profit M argi n Ret urn on Equit y Acti vit y Rati os Account s Recei vabl e Turnover Coll ecti on Days Invent ory Turnover Account s Payabl e Turnover Payment Days Tot al Asset Turnover Debt Rati os Debt t o Net Wort h Current Li ab. t o Li ab. Li qui dit y Rati os Net Worki ng Capit al Int erest Coverage Additi onal Rati os Asset s t o S al es Current Debt/ Tot al Asset s Aci d Test Sal es/ Net Wort h Di vi dend Payout 0.56 17% 0.70 2.39 0.00 $2,064,973 55.80 0.34 0.67 7.60 29 15.76 7.76 27 1.78 15.41% 36.80% 2.43 2.08 25.54% 52.57% 39.14% Year 1 0.04% 22.41%
n.a n.a
0.21 0.73
0.17 0.78
0.15 0.81
0.13 0.85
n.a n.a
$4,070,396 208.44
$8,242,620 348.43
$11,018,388 422.50
$14,298,960 519.44
n.a n.a
approximately at the same time. A second sheet extruder, which will also consume one third of the flake produced, is planned to be added at the end of year one, coming on line mid year two. A third extruder, which is planned to produce high-strength strapping, is expected to come on line late in year two. By the beginning of year three, it is expected that all of the 46,200,000 lbs. of RPET cleaned & recycled annually will be converted into extruded products. Up until this time, excess flake produced will be sold to other extruder companies. The plan assumes a 5% increase in the sales price of all products and a 5% increase in the cost of raw materials and labor in each of years 2 through 5. The result of the above is rapid growth in revenue and profit through year three, and moderate growth in years four and five, assuming no expansion of capacity during that time.